Burlington Stores on Wednesday reported that third quarter total sales rose 13.7% to $1.6 billion, with newer stores contributing an incremental $128 million. Comparable store sales in the quarter rose 4.4% year over year, on top of last year’s 3.1% comp rise, according to a company press release.
Net income in the quarter rose 71% over the prior-year quarter to $77 million, and adjusted net income rose 70% to $83 million, the company also said. Adjusted earnings before interest and taxes rose 29% or $26 million above the third quarter last year to $115 million. The 80 basis point expansion in that margin “was primarily driven by strong sales growth, disciplined expense management, and increased merchandise margins,” the company said.
Gross margin expanded by approximately 20 basis points over last year’s levels to 42.4%, on top of last year’s 100 basis point increase, the company said. A 40 basis point increase in merchandise margin more than offset the negative 20 basis points from higher freight costs, the company said. Product sourcing costs were also about 20 basis points higher than the same quarter last year, the company said.
One way to fight rising freight costs, which are plaguing most retailers these days, is to fuel net income by 70%, a feat that helped give Burlington Stores shares a boost on Wall Street Wednesday morning.
The company also raised its guidance for the year, saying it now expects total sales to rise between 10.9% and 11.2%, (excluding the 53rd week impact in 2017), and store comps to rise between 3.4% and 3.7%, assuming a shifted store comp rise in the range of 2% to 3% for the fourth quarter.
The off-pricer also said it expects to open 46 net new stores next year, joining rivals in the space among the few retail companies expanding their brick-and-mortar footprints. The retail model, which takes on excess inventory, including some dazzling items that shoppers flock to them to find, has proven to endure in good economic times and bad.
Apparel retailers these days may be suffering from inventory excesses that could keep the likes of Burlington, Ross and TJX Companies well-supplied. “Inventory isn’t as clean as it seems,” Instinet analyst Simeon Siegel said in a note emailed to Retail Dive. “Since summer, we’ve noted [that, with] excess inventory shifted to off-pricers.”