Why Is Burlington Stores (BURL) Down 3.1% Since Last Earnings Report?
A month has gone by since the last earnings report for Burlington Stores (BURL). Shares have lost about 3.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Burlington Stores due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Burlington Stores Beats on Q2 Earnings, Raises View
Burlington Stores, Inc. reported better-than-expected second-quarter fiscal 2019 results, wherein both the top and the bottom line improved year over year. Further, the company witnessed sturdy comparable store sales performance. Notably, results came ahead of management’s expectations. Cumulatively, these prompted the company to raise fiscal 2019 view.
The company delivered second-quarter adjusted earnings of $1.36 per share that surpassed the Zacks Consensus Estimate of $1.15, after reporting in-line results in the preceding quarter. Notably, earnings improved 18.3% from the prior-year quarter reported figure buoyed by higher net sales.
Net sales advanced 10.5% year over year to $1,656.4 million, and came ahead of the consensus estimate of $1,629 million, marking the second straight quarter of positive surprise. New and non-comparable stores contributed $115 million to sales. Other revenue came in at $5.7 million, down 7.4% year over year.
Meanwhile, comparable store sales rose 3.8% in the reported quarter compared with increase of 2.9% in the year-ago period and 0.1% in the preceding quarter. This was the 26th successive quarter of comparable store sales growth. Burlington Stores had projected comparable store sales growth of 1-2% for the quarter under review.
Gross margin remained flat at 41.4%. We note that an increase of 30 basis points in merchandise margin was offset by deleverage of 30 basis points in freight costs. Management expects freight costs to increase 20 basis points during fiscal 2019.
Adjusted SG&A expenses, as a percentage of sales, declined 30 basis points to 26.6% due to leverage on fixed expenses on the back of robust sales increase, effective cost management and profit improvement endeavors.
Adjusted operating income grew 12.8% to $118.2 million, while adjusted operating margin, as a percentage of sales, expanded 10 basis points to 7.1%.
During the reported quarter, Burlington Stores opened 10 new stores, relocated one store and shuttered two stores. The company concluded the quarter with 691 stores. In fiscal 2019, the company plans to introduce 75 new stores, and relocate or shutter about 25, thereby projecting 50 net new stores for the fiscal. The company plans to remodel 28 stores during the fiscal year.
Other Financial Aspects
Burlington Stores ended the reported quarter with cash and cash equivalents of $97.2 million, long-term debt of $1,079.8 million and shareholders’ equity of $315.1 million. Net capital expenditures incurred during first six months of fiscal 2019 were $141 million. For fiscal 2019, the company projects net capital expenditures of roughly $310 million.
During the quarter, the company bought back 300,742 shares for $51 million. At the end of the reported quarter, the company still had $124 million remaining under its share buyback program. The company’s board of directors approved an additional $400 million share repurchase program to be executed through August 2021.
Based on the quarterly performance, Burlington Stores now envisions fiscal 2019 adjusted earnings in the range of $7.14-$7.22 per share, suggesting an improvement over $6.44 reported in the prior year.
Management now expects total sales to increase in the band of 8.8-9.3% with comparable store sales projected to improve 2-2.5%. The company had witnessed comparable store sales growth of 3.2% in fiscal 2018.
Management anticipates adjusted operating margin to be flat to up 10 basis points year over year. Further, Burlington Stores projects interest expenses of approximately $52 million for the fiscal year.
The company had earlier guided total sales increase of 8.5-9.2% and adjusted earnings in the range of $6.93-$7.01 per share.
The company expects third-quarter total sales to increase 8.5-9.5%. Comparable store sales are anticipated to improve 2-3% compared with 4.4% increase registered in the year-ago period. The company now forecasts adjusted earnings of $1.37-$1.41 per share, which is up from the prior-year quarter reported figure of $1.21.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 5.52% due to these changes.
At this time, Burlington Stores has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Burlington Stores has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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