Burlington Stores (BURL, Financial) saw its shares climb to one-year highs, fueled by impressive Q4 results, including top and bottom-line beats, notable comparable sales growth, and optimistic future guidance. This performance comes in the wake of satisfactory reports from peers TJX and Ross Stores, with Burlington capitalizing on their less favorable FY25 earnings forecasts to position itself ahead.
Key highlights from Burlington's Q4 performance include:
- A 2% growth in comparable sales, surpassing the expected range of -2% to 0%, and a 13.9% year-over-year increase in revenue to $3.13 billion, marking a trend of accelerating growth.
- Management attributes the strong results to easing disinflation, benefiting Burlington's core lower-income customers, and successful efforts to attract higher-income shoppers looking for value.
- Despite a decline in clearance merchandise sales, regular-priced items saw a 4% increase in comparable sales, contributing to a 140 basis point improvement in merchandise margins year-over-year and a significant 24.7% rise in adjusted EPS to $3.69.
- With continued positive trends, Burlington projects an adjusted EPS of $7.00-7.60 for the year, revenue growth of 9-11%, and comparable sales growth of 0-2%, alongside an anticipated expansion in adjusted operating margins by 10-50 basis points.
- The company reaffirms its long-term financial goals, aiming for low double-digit annual revenue growth, mid-single-digit average comparable sales growth, and operating margins reaching 10% over the next five years.
Burlington's strategy to cater to higher-income shoppers, initiated in early 2022 amidst rising inflation, has involved offering a greater mix of recognizable brands and improved assortments. While acknowledging the need for more aggressive actions, these strategies have bolstered comparable sales despite challenges faced by its core customer base.
Looking ahead, Burlington aims to further expand its higher-income shopper base, focusing on outperforming its conservative FY25 comparable sales guidance. This approach positions Burlington for continued stock performance growth.
