Q3 delivers strong gains for Burlington Stores

Burlington, N.J. – Off-price retailer Burlington Stores entered the fourth quarter with the wind at its back.

Third quarter sales climbed 12% to $2.285 billion. Comp was up 6%, driven by both traffic and conversion. While Burlington saw higher units per transaction, those were offset by lower AURs. As a result, the average transaction size was relatively flat.

“The lower-income customer who was really struggling in 2022 has stabilized and is starting to show some signs of improvement,” CEO Michael O’Sullivan said during a recent Q3 call with investors.

At the same time, Burlington has picked up some trade-down business – although not quite as much as it had expected at the beginning of the year.

Burlington’s trade-down shoppers have been gravitating to parts of the accessories, home and ladies apparel businesses, he said. To service those moderate- to higher-income consumers, the company has increased the proportion of better goods in its assortment and added more recognizable brands.

“They’re more of a ‘want a deal’ rather than a ‘need a deal’ shopper. I would say that that customer has definitely contributed to our 5% comp growth year-to-date,” said O’Sullivan.

Although November is off to a “solid” start, he noted that Burlington is up against its toughest multi-year comparisons in Q4 – “and the external environment is uncertain.”

But the preliminary outlook for next year is bullish.

“Right now, our 2024 working assumption is for total sales growth of approximately 11% vs. 2023. This is driven by our expectations for 2% comp sales growth plus 100 net new store openings,” he added.

Gross margin rate as a percentage of net sales was 43.2% vs. 41.2% for the third quarter, up 200 basis points. Merchandise margin improved by 150 basis points and freight expense improved 50 basis points.

The company ended Q3 with $1.44 billion in liquidity, comprised of $616 million in unrestricted cash and $824 million in availability on its ABL facility.

During the analyst call, Burlington also laid out an aggressive 5-year growth plan that aims to grow sales by 60%.

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