Burlington Stores, Inc. (BURL – Free Report) announced lower-than-expected results for the first quarter of fiscal 2022. The higher result and net result compare unfavorably to the respective quarterly results of the prior fiscal year. Margins were also soft in the current quarter.
Quarterly performance was primarily impacted by lower inventory levels and weak sales, including competitive trends in May similar to April. Additionally, inflationary pressures with higher supply chain costs and high transportation costs weighed on BURL’s results during the quarter.
Over the past six months, the stock has fallen 25.8%, wider than the industry’s 19.2% drop.
Overview of headlines
Burlington Stores generated adjusted earnings of 54 cents per share, lagging Zacks’ consensus estimate of 64 cents. In addition, net income fell from $2.59 per share recorded a year ago.
Total revenue of $1,929.7 million fell 12% from the reported figure last fiscal year. Net sales decreased 12.1% from the first quarter of fiscal 2021 to $1,925.6 million, while other income increased 53.8% to 4 millions of dollars. Zacks’ consensus estimate was higher at $2,013 million for the quarter under review.
Earnings fell 18% from the fourth-quarter fiscal 2019 reading. Lower store inventory drove the decline.
Gross margin was 41% in the reported quarter, down 230 basis points (bps) from actual in the first quarter of fiscal 2021. Commodity margins were down 80 basis points and transportation costs increased by 150 basis points.
General and administrative expenses adjusted as a rate of sales were 26.7%, up 300 basis points from actual in the first quarter of fiscal 2022. Product supply costs included in General and administrative expenses were $157 million, compared to $141 million in the first quarter of fiscal 2022. Product sourcing costs represent expenses for processing goods through the supply chain and costs of purchase. Higher supply chain costs primarily caused deleveraging.
Adjusted EBITDA decreased 57.3% from the first quarter FY2021 count to $125 million. As a rate of sales, the metric fell 690 basis points. Adjusted EBIT was $59.1 million, down 75.2% from the first quarter FY2021 reading. Adjusted EBIT margin fell 780 basis points from at the end of the first quarter of fiscal 2021.
Other financial aspects
These Burlington stores currently ranked Zacks No. 4 (selling) ended the quarter with cash and cash equivalents of $627.1 million, long-term debt of $1,474.9 million and shareholders’ equity. of $716.2 million. BURL ended the fiscal first quarter with $1,225 million in liquidity, including $627 million in unrestricted liquidity and $598 million available under its ABL facility.
Burlington Stores ended the quarter with total debt outstanding of $1,489 million, including $949 million under its term loan facility, $508 million in convertible notes and no borrowings under its ABL facility.
Merchandise inventory was $1,257.1 million, up 64% from the first-quarter fiscal 2021 count. Same-store inventory was up 2% from the same level. quarter of fiscal 2021. Reserve inventory was 50% of total inventory at the end of the current quarter.
Burlington Stores repurchased 512,905 shares for $99 million under its stock repurchase plan during the fiscal first quarter. As of April 30, 2022, BURL had $551 million remaining under share buyback authorizations.
During the quarter under review, BURL opened 26 net new stores, bringing the total number of stores to 866. This included 33 store openings and seven relocations or closures. For fiscal 2022, management intends to open 120 stores, adding 90 net new stores. It aims to relocate or close 30 stores in the aforementioned period.
For fiscal 2022, management expects capital expenditures, net of owner allowances, of approximately $730 million.
Management has released guidance for the second quarter and fiscal 2022. Compensation is expected to fall in the 6-9% range in fiscal 2022 from a 15% increase in fiscal 2021. For In fiscal 2022, adjusted EBIT margin is expected to decline 130 to 200 bps of tax count while adjusted earnings per share is expected to be in the range of $6.00 to $7.00 compared to adjusted earnings per share of 8 $.41 recorded last year.
For the back half of the full year, management expects offset store sales to be in the negative 2% to 3% range, with an expectation that fiscal fourth quarter offset sales will be stronger than the third fiscal quarter level.
For the second fiscal quarter, comps are expected to decline 13-15%. Adjusted EBIT margin is expected to contract 610 to 670 basis points from last year’s quarterly reading, while adjusted earnings per share is expected in the range of 18 to 31 cents, indicating a decline of $1.50 on a GAAP basis and $1.94 on a non-GAAP basis recorded in the prior year. The decline in margins was primarily due to high transportation costs, supply chain expenses and an SG&A deleveraging due to lower comparison store sales.
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