BURL - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen, and welcome to Burlington Stores Second Quarter Fiscal 2018 Earnings Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be provided at that time. [Operator Instructions] I would now like to turn the conference over to David Glick, Vice President of Investor Relations. Please go ahead.

David Glick

good and operator, you, morning, everyone. Thank everyone’s Burlington’s fiscal appreciate participation results. in discuss to call conference XXXX today’s We second operating quarter

Our Chief Kingsbury, Officer; Tom presenters and today Executive Chief our and Officer Financial Chairman Katz, and Principal. Marc are

We to our call inform this replay no will appear the expressed take not permission. turn may would recorded transcribed, be that I September call over A I this inaccuracies like Tom, available XX, for Before or that call transcripts be in the to call listeners broadcast XXXX. third-parties. until responsibility by without of may of

financial remarks Stores. are risks certain uncertainties. that Remarks statements. Our future the non-GAAP projected subject follows company’s Actual of Burlington this which and today’s described are continuing differ all today press Reconciliations and Please by and discuss incorporated herein expectations materially results filings forward-looking expressly GAAP are note included such discuss results on are today Such projected the call we operations include that concerning by SEC, risks XX-K objectives, Q&A reference. other from are a and XXXX in of in uncertainties results today the the are the measures financial with for we made that in strategies, on those fiscal expectations, to are and that to events, may copyrighted or basis. those in measures trends release.

here’s Now, Tom.

Tom Kingsbury

X.X%, XX% total margin expense We're second of which adjusted results, our strong well resulted momentum and fiscal solid ahead in per share, morning, in increase quarter with gross of Thank in guidance. earnings management in the you, a XXXX, by David. pleased a earnings disciplined to combined everyone. our increase continue increase Good driven with sales

store X.X% of sales X.X%. increase was year's comparable of top last on Our

store sales, most X.X%. as several stack average years including year, comparable of represents we're challenging comparison a quarterly quarter consecutive second of up against our five-year strong The multi-year of the

adjusted the EBIT points, result. driven strategies in We results make executing increased progress and margin to past basis increased continued We sales which significant focused outstanding several the margin, quarter, store our years. remain on EBIT highly that have over by expanding comparable consistent XX the second an

We continue we half of XXXX. into expect the move the momentum to as second fiscal

Turning to highlights sales quarter. comp was quarter growth. positive This of the XXnd our second of consecutive

Our expense XX by gross non-comp guidance sales and our which by driven basis basis deliver share increase outperformance expanded sales. points, EBIT adjusted an our growth earnings exceeded of XX%. management XX XX our helped points, SG&A margin our drove points margin grew in by adjusted our in basis We disciplined our leverage, and basis per total while point new XX combined

specifically August comparable X, XXXX. weeks, As a up increase of the store comparable X, reminder, our the the X.X% versus weeks XX XX calendar weeks XXXX ended lines sales ended August

our We is key the was of new representation to and business. plan stores. the this basis is which comparable our driver manage we believe store of outstanding the sales continue and our A results performance of on most performance accurate

contributed half We end the sales on the XX contributed Our new to stores, the stores first we versus of XX the Based date, in XXXX. strength total new of of new our environment, estate store attractive “R” by pipeline, our recent increase X count. we the current for feel pipeline XX guidance, of our during have and bankruptcy, site remains the to is million guidance XX new X.X%, new includes above XX development our sales relocations we and second which closures. store to stores, stores sales opened year of our XX new strengthened increased as previous non-comp which good new the our Toys high are from of of during new stores point and XXXX the Us stores favorable. store basis and location driven the about XX that Overall, net four XXXX strong performance number This very the availability planned quarter. net store quarter XX. for up to has A of gross in real increasing XXXX opened net very

acquired we and we Us additional quarter, second locations the “R” sites. evaluating several During three are Toys

sportswear, shoes, highlights, performing apparel, our businesses and top baby baby better, men’s to home, active category athletic missy, were beauty, Moving and depot. sportswear,

the consistent Southwest The performed Southeast above performed chain below. the the comped performance, and geographic Northeast Regarding chain. with Midwest West and the average, while

X%. we comp quarter management, inventory to ended with the down Moving store inventories

accelerated a significant However, week as quarter. retail into moved into due shift, July in million XXrd back-to-school receipts calendar we second the XX week the shopping to

this store Excluding an inventories were X% of top year. comparable down acceleration, on back-to-school last decline X% receipt

comparable In quarter, inventory XX% year's improvement. second over addition, course the the on a last store of XX% turnover top of improved strong

impacted be also week will calendar quarter shift. the XXrd third by The

quarter. similar the comp impact of inventory expect end we levels inventories end the a end second at to So, of we at mid-to-high past we're of the fourth quarter, week on down XXrd as store the quarter, Once at third the the we the store be single expect experienced digits. comp shift

levels, to our inventory a as old, drove on buying quarter. our the XX customers. very was in are metric, total higher meaningfully for stores inventory and once than as versus pleased that significantly a maintaining inventory year is aged be freshness received again, our team and the and we year Once percent XX at planning fresh days last to and was our a The we than and inventory to our declined favorable, our assortment of extensive XX% ago. inventory amazing exciting less days environment merchandising XX% of at the with again customers. as assortments continue that down older Pack focus we end Our aged continues values deliver second hold

authorization, to XX quarter million common of date. quarter, we the during second we bring new Directors the million XXX had next share At share authorization. months. XXX the Board second million XXXX, repurchase as expected end XX of year the a repurchased the continue XXX remaining on to value be shareholders We August million existing to stock our and which over repurchase to XX, On is completed approved our of

which increasing update expanding, me our strategic be comparable optimizing let long-term on margins. our growth; operating continue focusing and you Now, sales and modernizing, to priorities, on store driving fleet; store our

continuing growth, building our improving we marketing underlying existing the for comparable store and particular First, to engage new both to with off-price as remain. initiatives Enhancing assortments, the businesses, are customers. on of customers ensure to with regard our driving sales on our our continue improve execution and underpenetrated model store strategies experience focus to we our

that makes of home, company approach business still again make Our our continue business, excellent is demonstrate to build holiday progress a our in particularly to represents we a long-term opportunity. quarter significant strategic second for sensitive, With key which less once regard and categories key this results important we underpenetrated category home These weather progress, to largest as and we particularly growth the categories, seasons. foundation fall continue our which to helping growth growing sustainable are some beauty. making expand us that disproportionately

of a level and we We XXXX time. we expect level penetration achieve our of to believe penetration expand [ph] over total XX% can the upon of XX% sales

that see presence home categories highly have and we recognizable of national XXXX for key and brands Specifically, several have in expand to still second and the the in more targeted new we half underdeveloped opportunity of beyond. growth

continued a its and Our multi-year second we beauty the category to business in growth strong driver. be momentum quarter expect this

brands and seek to continue the of categories new will breadth assortments. our We and enhance

average penetration which strategy, Missy quarter. beauty XX% sales potential well key remains outperformed our below our driver Ladies’ penetration be once again addition, a in the and In second an opportunity, element remains our gift significant XX% the holiday will apparel as upcoming juniors as of the as in active well important remains sportswear goal. better season. of a chain

to focus calls. continue heritage on last earnings the discussed of on our sales We businesses our apparel we few trend in ladies’ some have that in improving

ultimately our availability in grow quality our We of to opportunity. do vendor the we expect number that desire believe increase supplier relationships, in Burlington. focus specialization and few businesses. vendor community will as capitalize approximately our deepen the the team, the In merchandising we addition, driven SVP with to to base, of the add and process will to and continuously time categories our new grow we necessary onboarding expand by next penetration strong over new maturation the brands product carry significant into expand underdeveloped this apparel weeks add and XXXX ladies’ the on of and We complete to and

merchandising team. favorable carried the momentum buying receipt better through terms best and and Our of environment by XXXX, of the in branded expansion our continued driven and the penetration second quarter of increased

strategy. Turning she we is. anchored recall to from We're multichannel see with to to digital our the These and our are also brand campaign, shop. marketing positive high testimonial in Burlington customer successful initiatives, we with TV wherever our investments, connecting pleased our see activities intent which the continue from returns results generates engagement

year faster demographics, the appeal to The old in growing composition to customer XX of is than In terms in by base. of XX the the consumers. range brand younger customer our see customers trends demonstrating age of we're encouraged group, any our proportion we new our of

notably fastest In groups loyal the from the growing customers addition, US, come the of the demographic consumer. most most our Hispanic are many that in here

we experience business year, refined our be drive right the trends our Looking mix to we to are our and the of continues customers a growth get back to initiative in the key capitalize positioned us. media these have store and on we believe front for the of half Improving to to forward. insights message

fleet, in which We completed remodel fourth make another the be modernizing to balance end continue stores, store on strides early the XX quarter. of XXXX, the XX third in we quarter, as the with of track expected be significant completed are to by to will our

growth our store fleet. The is second initiative expanding

openings number real we're we’re that number estate three from to discussed number XX the given XX recent new attributed purchased will we stores of increasing of stores earlier, increase XX net auction out opening bankruptcy new the Us the XXXX environment, to range XX is As in to a of XX process. “R” to and from gross of sites of Toys The partially the stores. higher favorable store

of the retailer national operated plus in at a Puerto second quarter. Rico, the stores XX end are We we yet, only operates XXX states that

As XXX Point process utilized ago, the you XXXX was model get first evident close sales C more have key second versus the could yet to of in presented underwriting Having Point XXXX We our affords at update heard performance and this evaluate the selection to to strong EBIT this strategy. analysis, a us in us opportunities our are again gives quarter. Three that that our the a stores before, identify refresh is foundation key confidence been C strategic that of With tool new goal identify approach potential estate our great quickly able Point ability driving to us This dynamic us. our locations we believe real and tool to has of many even we’re C the time. new and can potential to comfortably over reach locations. of we years end store of XXXX, stores. refresh store that

XX the combined, In Given we stores This XXXX will increase brand stores new in in remodels XXXX last our standard in openings XXX store combined of year. to will by will translate new number standard. new years, by an our of the acceleration number our in stores in stores. increase of brand another just result with this gross increased and XXXX, openings XXX have two store in stores versus

would of the new expect rate years, Looking of be remodels, at to a brand majority in our current we openings our store significant out five stores and standard.

We focused increase priority, our continuing margin. on growth also third our operating to remain

points, approximately Over we Year our increased of additional expanded operating basis year. per XX operating basis XX our by last points the XXX an has margin years, to basis margin points. date, five average an

can continue a we While margin point we to XXX are very have believe operating we our continue basis to peers, believe versus close. which to gap progress, XXX we pleased we with this

will active the last over to that maintaining culture the execute an Going years, all disciplined fixed costs, increasing inventory five deployed SG&A markdowns, with remaining sales forward, across management leverage optimizing same improvement profit we we've areas. strategies total and

detail. Now, financial more second to like over and review outlook turn performance the our in to I'd call Marc updated quarter Marc? to

Marc Katz

by Thanks, everyone. Thank consecutive us We second you ended recording joining sales. quarter comparable for positive quarter Tom morning, good store and today. XXnd our the of

adjusted stores increase In in from and which we strong earnings addition, adjusted achieved XX% a EBIT in contribution new combined delivered and share. non-comp per margin, expansion

of July review XX XXXX, for XXXX. the X, turn the are weeks will weeks ended week statement. I results August the ended income Due fiscal XX XXrd a in Next, to XXXX versus to reported the XX, our

All comparable fiscal August the this of which weeks which calendar of basis, similar XX XXXX X, our sales, we on on weeks, versus the exception are store results a with basis reported XXXX. comparing ended X, XX shifted the report weeks ended August are

For last quarter, X.X% year’s sales sales comparable of increased second top total and X.X% on the increased X.X% increase. store

contributed quarter. in for New XX stores second million non-comp incremental an and sales the

comparable QX driven Our in traffic units sales per slightly. and store while conversion were by AUR performance transaction, was increases both and up

traffic in last the XX of increases out seen have XX We quarters.

issues. Puerto still the stores of four of end weather the related due closed in were As XXXX second quarter, Rico to

the by expected last increase gross reopen rate QX end negatively gross a to freight points. one store slightly rate higher margin more impacted expect by the and XX.X%, stores The points markdown XXXX. final the reopen store is by driven the lower was an quarter, third of rate higher of than basis by costs, versus XX in IMU, year, basis the offsetting and to of end We two margin XX which

to expect up approximately year. points XX freight basis We continue the for be to

the continue and/or a this by combination product half results offset margin with higher margin first lower the be to costs plan. merchandise of we year, able gross in demonstrated versus As of sourcing original our the pressure to

with quarter, took [ph] second year. versus line in stores shortage the stores year’s last during only XXX During XXX we last in quarter, inventories physical results second with

amortization, were XX sourcing stores include the a as as buying the from are our with increase refreshed actual in our exclusive derived federal to on we amount higher and state store tax second June, the adjusted of year. liabilities, by percent half law. of effective cost was state New is hand income deferred of inventoried and Product systems to laws. where processing share were inventory several changes Jersey approximately of and costs, benefits million supply late for revaluation for the XX to leverage chain of XX.X%. changes flat and continue second believe amortization points for quarter, tax quarter Jersey, sourcing basis We resulting into margin In having point last from New gross the costs favorable driving of net our which disciplined The at growth, tax approximately increased goods headquarters SG&A quarter. in heading The the driven June rate points rate statutory through expansion was Adjusted product which rates, by was million by Sales million expense These tax corporate once XX.X%, of less accounting management, the of compensation their in for the reduction XX expense to rate XXXX, million. SG&A, X XX in and of led costs, million. in driven than expense, to percentage second XX second sales. corporate XX the lease XXX which us sales. year year��s net effective plan. an results Depreciation or increased tax based expense a quarter, our basis to last XX% the lower made than more located, is the as delivered XX.X% EBIT leverage interest again improvement was primarily tax

on effect significant tax a on impact deferred trigger our going first second quarter. anticipated, issued tax While some contemplated not was this Jersey recorded that in have the our million for call. of changes law of liabilities of QX rate changes tax the not forward, did to a reduction expense state income item The our net changes quarter guidance so we in a tax resulted we in the don't of $X these state expect the effective revaluation New were

tax Excluding XX% these last increase second net the deferred effective this a in for be quarter revaluation liabilities, impact versus of of million, XX.X%. tax the adjusted of income the Combined, XX the year. rate would resulted adjusted

the Excluding impact versus net year. was adjusted million, XX income a of increase tax deferred revaluation liabilities, the XX% of last

to shareholders through return program. value our We continue repurchase share to our

stock XXX,XXX authorization had our was XX approved million million. remaining approximately of the that quarter, in August XXXX. million the the At end XXX for on we of repurchase we During repurchased XXX second shares quarter, share

pleased share XXXX, Tom Directors August are on mentioned million next Board XX we new repurchase complete authorization approved earlier, XX, that we of As the XXX to expect months. our a that over

year. per All of $X.XX Adjusted $X.XX year. resulted earnings last of $X.XX versus share last $X.XX in this earnings per share versus were

Excluding revaluation were the beat between operating outperformance and the end $X.XX $X.XX accounting tax This our top true to based was $X.XX $X.XX compensation. per higher share the per result represents expected earnings beat of $X.XX. a on guidance. of share for liabilities, $X.XX deferred from impact a versus than impact The due split adjusted share

of billion at balance our and to million our leverage XX, We term availability debt had million ratio debt end, total in sheet, to the our times. approximately XXX paid EBITDA on borrowings XX cash, a Turning we loan, outstanding XXXX, X.X period million. on XXX amount quarter had ABL of of On in and with million adjusted June X.X ended XXX down XXX unused to credit bringing we million. our

lower able XXX Given proceeds in the to ABL. advantage XXX on term were which on plus the term to with on we of spread million the plus LIBOR versus spread excess over LIBOR take pay facility, the we on able paid from our points points. basis basis $XXX our of higher that ABL, We LIBOR loan that reduction loan availability fund our were we therefore

our given strong pay of expect the second fiscal by on half ABL XXX that down million We flow. cash year, the to end the

ABL the June XXXX we XXXX, transaction a of XXXX. to to June from maturity August in the extend completed of Finally,

is effective of our an million swap at XXX XXXX. of As interest through a premium loan reminder, XXX LIBOR the term of million fixed X.XX%, including on outstanding the rate May

hedging interest Given XXXX. of we rate the environment, beyond current continue to evaluate May will options

relatively expense. continued continue on quarter, We notch as corporate were credit leverage second rating ratio, we optimize the structure, grade. strong usage to interest we have our pleased below believe reducing while upgraded and improving capital profile rating our performance, our one Moody's BaX, low to during to investment decreasing recognized that credit opportunities Given our ABL the agencies simultaneously our

turnover to rating outlook at million on was raised corporate on calendar was & the of XX% grade Poor’s Merchandise school of back In the primarily new addition, hold rating inventory to since end of inventories of Pack BBB- last impact week XXX the timing. quarter, Standard receipts XX XX% positive. improved our debt by second compared school were the second to XXXX This XXXX opened Comparable investment store to inventory last an versus secured XXX BB quarter back stable million to second for the its driven year. to inventory upgraded year. XX% well inventory XXXX of quarter inventory due related and the from and as increase shift acceleration net total in fiscal stores as XXrd the was down quarter second store while X%. to comparable fiscal of

receipt were back the down school X%. inventories acceleration, to Excluding store comparable

XX of million, net the million significantly provided and that we for once income. prior flow driven quarter by first of expenditures XX were were fiscal XXX year. very aged again XXX the second was half by Net million In versus the the addition, older operations XXXX. down increased to higher inventory days end pleased at capital Cash

XXX the period five with and new quarter, the ending store, stores During opened relocated one stores. we

XX XX or new resulting XX fiscal for XXXX. stores now fiscal relocate expect gross we open stores in new For close stores, and net to XXXX,

included sourcing XX X.X%, markdown store performance, increase last percentage our total on In first last versus more year, points due sales than higher rose shifted rate sales lower margin year. higher of the year. was gain XX.X%, X Product which comparable and of half date approximately sales increase X% costs IMU, the of XX.X% in store and to basis following sales of half terms basis of basis freight points primarily first an Gross a as last a representing year comparable a versus of offset cost. were higher to a

lease profit Adjusted As of to driven point sales, decreased in sourcing net EBIT basis a XX to to X to increase amortization, expense to tax deferred net million rate for of an our mainly The was management Expense tax percentage million. exclusive increased was XX.X%. of exclusive XX.X%, costs, points Depreciation accounting million increased law. the of to first rate tax driven tax or reduction impact XX favorable active rate effective million, and revaluation by improvement XX by the culture. and rates, in and million The statutory interest resulting increased expense X Jersey and SG&A, XX.X%. half disciplined for the improved basis leverage by million amortization XX of by XXX from XX% recent state liabilities, changes of adjusted the share compensation XXXX. federal based representing New tax expense, product XX effective

tax last Excluding a XXX impact XXX income adjusted the net effective improved million adjusted income XXX of XX.X%. last net versus this an of adjusted an Combined, year. tax rate revaluation in liabilities, resulted and increase of million year of the of of income net versus deferred XX% to million, the

deferred of Diluted earnings were XXX $X.XX versus Diluted liabilities, up million, per XX% the $X.XX was tax $X.XX last versus the revaluation year. share share per of net last net earnings income adjusted last Excluding year. adjusted year. were impact versus $X.XX

diluted of per versus share earnings adjusted impact up of $X.XX, liabilities, revaluation year. the the were deferred XX% tax Excluding last

XX.X XX.X year. outstanding versus fully diluted last Our was million shares million shares

Now, updated will turn I our to outlook.

adjusted effective our adjusted tax in week. year's XXrd XXXX, store XXX X% of balance expects allowances, in be now XXXX increase share for updated XX half EPS, to in XX X.X% expansion XX year, XXX strong shifted total week margin to fiscal results lease basis XXXX X% approximately be range range the basis in be XX% on impact full per in of store estimated shifted we excluding to XX.X% sales of points. the to Comparable top accounting the over guidance range to growth Capital now as sales Interest tax net now to representing first revaluation XX% of to of million. increase. earnings of to comparable exclusive XXXX XX% Adjusted share and rate increase in the Based of amortization the XX.X% million. an a million based the approximate XXXX, excluding EPS a XXXX $X.XX. resulting of reform, are XX this XX%. expect expense the approximately to company Depreciation expenditures, liabilities, deferred EBIT favorable $X.XX, the of to fiscal compared approximately amortization, tax and fiscal of the to landlord year of comparable of sales For the of expected X.X% to compensation for the the to XXXX to on $X.XX fiscal last range of of $X.XX X.X% adjusted and And on increase performance, $X.XX.

the range For the of year. Effective to tax range in $X.XX be a in and X%. XXXX, third to share adjusted basis increase XX% X% earnings between the shifted to to of we of per of XX%. on expected last to $X rate share quarter compared sales $X.XX and total expect per growth sales XX% approximately store Comparable

to With XX%. turn and compensation, over reform remarks. I EPS the to will impact that, Tom estimated of of tax XX% for closing be XXXX we adjusted growth for share expect to based the in Excluding accounting it range the

Tom Kingsbury

of value our capitalize on our and increasingly results this great plans rapidly performance store us demonstrate the to growth laser our we remain the and the focused the strong ability our beyond. chain and Operator? once for remain thank our to quarter our our call to summary, the In the in and With store, off-price This bring well of above styles We business customers and to the believe that, of consistent model changing shareholders. second Marc. our agility foundation second like the to expectations model. value results. contributions positions call. Again, confident and increase through portion half I'd results brands, our Thanks, corporate and continue turn to drove expansion supply We our operating solid retail refining of to landscape. us operator enable for expect outlook our more again to continued teams initiatives to to implementation and XXXX and over question-and-answer the I’d their like quarter on begin

Operator

first Our line of the with Matthew Instructions] comes [Operator from Boss question JPMorgan.

Matthew Boss

Tom, in share historically, strong if lateral a that back look seen from based retailers, very five So, basis. relative said, XQ than on has guess been more I some quarter, especially have a your we've any comps if can in are improvements you on you And other on years, better your today? could more any you businesses performed seeing color that performance this particularly those so, businesses maybe view. quarter,

Tom Kingsbury

strongest our the mentioned, Matt, second quarter historically has quarter. As been you

five the that that fair some Candidly, what's a a we say time, we question, and of be said, with have stack is satisfied X.X%. I comp With X.X% year on think would X.X%. most left table. on fact, of to five I average stack understand of average business year In may our it's the certainly driving the top

comps at did every back Looking have was in the we very quarter, month. May strong. positive

quarter. in softened a and strong off trends June in Our third improved trend our I'm the in as we're and start pleased August in July, with to

with why apparel of the business in coupled content issues heritage our we in businesses in ladies’ sales did that a of in some results. some it some terms led That issues slowed impacted negatively receipt self-inflicted to June, softer division flow In few big have June.

July. issues As starting in I and receipt stated we the before, through content worked

the in exception improved July issues, businesses trend have continues the with sales August. Hopefully, softened to improved All in have and helped, Our content one of flow in area. due receipt and improve that June, to the

Matthew Boss

walk Q-o-Q margin of did you up. beat [ph] expectation? called how versus great. of Could expectation? guess, you operational upside guess I play gross That's your into think versus the we components just maybe that follow $X.XX a us Yeah. I out, just through the that Marc, about as your

Marc Katz

Matt. Yeah. Sure,

to due from beat our -- true $X.XX $X.XX the and really high operating on guidance tax and $X.XX that a end had break our We outperformance correct. You're down came from rate. does based

able reform around So go were here, -- mean, I internally Matt. too through we to tax

many in based not New through other and So, folks, that. Jersey, went

that on So takeaways. due on to on of to XX. deferred due to tax revaluation that became worth give those the that, you law us, changes state anticipate cut $X.XX, we was reform this two a liabilities won't some again, through The the for that was compensation our really tax in big the tax effective New taxes guidance. color that tax our forward, in this Jersey higher really June piece effective $X.XX from is, a we don't was one-time benefit material change rate. $X.XX One share-based going of was in see But to $X.XX second really but

I at this that a we throughout pretty and think are the vest options have year before it's exercised varying Matt. prices wide then we've range, that mentioned strike and

So, it's number us difficult a estimate. to for

our So guide. that higher than was original $X.XX

terms really sales came the margin of In $X.XX our beat, rate. it from gross and total

XX at a and we driver the high-end I full lower clearly higher lower than being a basis level a higher encountered points almost markdown that points you're came Matt, guide. rate. sales was delivered look expansion we basis slightly they aged total there, rate, again, and of The company, XX mostly the gross inventory Once margin. of XX mentioned another key right, in hiccups, I Tom the record than total our turnover XX%, XX%. where days merchandising had but from some know team when have comp a higher IMU, anticipated. were delivered so gross And And delivered they of Our improvement rate point store did to low almost markdown older few just businesses margin our was up better the

Operator

question next Fargo. comes from with Wells Boruchow Our Ike

Lauren Frasch

Frasch Toys My some Lauren is “R” about color This Ike. is Tom. real business. a closings business perspective? closings impacting but clarity addressed may be additional give the store be may estate from on you for last you. I have Could Thank or Us about category you a your your the us impacting how how for a question know on thought the you call, more might I bit now this

Tom Kingsbury

I'm glad you asked that Lauren. Thanks, question.

category called business. depot is quarter outperforming of as out terms that second performances, baby was In this an straight the

Given business, in first apparel as quarter, are the The at track out feel we top on in right quarter. seeing liquidation Us the we’ve availability. the does the this been the “R” second we the Toys time. called improvement as said disruption right we category after baby we in Also, create product

are and So the do already there baby a grabs, toys. . and we customer potential for as opportunity well are known well differentiator hard apparel as us which as for, for and that for We and see for product for fortunately goods is up a growth we a us, businesses this business knows positioned.

that being Authority In “R” like could with evolve real the time. addition type the sales over as us to unfolds, fluid, liquidation, process Sports potential Us present Toys a opportunity. This appear it it and situation, of does dynamic a situation opportunity, estate will is a

Part afford we will selective sites to pipeline be meet we attributed in more continue increase our that Us can XXXX far, of we sites stores three net we’ve real auction. to as the as on strong XX looking XX and locations increase could to we believe so focus count, XXXX, new the overall, XX standards. and “R” to our stores bankruptcy in our exceed this XXXX. and But from high estate at XX. that gross can the and or our availability recently Toys open are XX adding several from purchased did in three new purchased quality So, out to bankruptcy is and underwriting stores mentioned to store and raising mentioned we're We we of

well, So, helping now definitely in could Us it the and think help will us things that be progressing future. we relative “R” us far, are the Toys liquidation, to so and

Operator

Greenberger with question comes Kimberly next Our Stanley. Morgan from

Kimberly Greenberger

I'm issue? -- follow flow see any with Great. on happened Thank better I than comments environment, a comments the freight the you can wondering just an any capacity wondering us so Tom, have think terms then that's of would buying issues. if improvement Do color earlier might if much. seeing what your helpful? we here Good of you at expected. up Was on issue buyer in morning. own? about had Is And And just issue? if margin that the I'm very, came that in you you. quarter that better certainly the you flow be have -- very supply you secondarily, a your as you're said result, this you that the merchandise Thank

Tom Kingsbury

been of product, better. never Availability Okay.

not As I’ve said issue. many, dealers it better down better And every an many more times, just get to and the – we we turned and day then seems it's accept.

in wasn’t areas, flow the it As supply. those particular far because goes, there wasn't as receipt

aggressive We in first went goods. had was really and the bought it. to, a good It we relative we we good a acknowledged get back, really areas more receipts back big we sought, May weren’t we business. Okay. few enough to these more had with into We quarter,

And feel into start quarter And to stores, the the we good the around goods about as third turn our as mentioned, in to our business we soon started July. overall. got I

to in to it in month But tried probably was it needle too what we It anything a goods more we I marketplace. of wasn't really much mentioned, was to the plenty business really There's it something we about was thread the the did of and the as So, with slowdown again, in -- June. did ourselves. do resulted it not availability. in

Kimberly Greenberger

Excellent color. Thank you.

paid is follow a loan. if there Maybe, up Just a just And think of for you further down chance. about can you debt? XXX Marc. term you of repayment saw talk I for plans quick the your that

Unidentified Company Representative

I that is can This one. Bob. take

of years with renewed off loan term to the first, XXX But we in XXXX. the end million we five out June, So, given the for low paid on ABL, our the the ABL out of usage interest our by the we completely manage rate. flow But expect it be of to of really the cash ABL, to half the given which second end the was the in year ABL year. of more

thing We expense rate have do rising just interest in rate a And just – felt interest the manage to the environment. to term on loan. could it one it's we we this interest lower more was compared ABL

at flow. debt both down look we'll cash paying forward, Going and share repurchase with free

rise, accretive rates down interest As to be debt. more it'll pay

forward. We quarter anything. be every it's something of certainly it's do But, and into we'll guidance, any we’ll build looking going update any that we if guidance So that possible. don't our of at

Operator

John comes from Our with Cowen. Kernan next question

John Kernan

do Marc, four Does you’re at margin line. square perspective think those some prototypes? related the seeing wall have XX,XXX leverage from are the this both and store store on nice this with perspective? is foot productivity new new the the in update cost producing, a format to I anything store, format new on a sales store that and any

Marc Katz

Sure, John.

with, basis points we'd through X% your were our algorithm, QX. in obviously flow We basis give SG&A with like flow on I another each start me our will, we Let a XX at leverage then and think, first. XX SG&A performance point thereafter, pleased very Typically, you to comp points. if

house. a X.X, – stores the nice get that. the a much to did it it both well was as organization was the back that in front at so would to certainly our XX. with on improvements, I was job very So our point as the of tremendous efficiency involved house They of

was a our and that total efforts as really to leverage from reduce picture, stores pleased also costs did obviously. energy we a not costs We we that some new just in marketing store But get well. nice very benefited with were

It's going was just that the really as not still forward, far are please, an we always This same algorithm. changing our outperformance. quoted. As we've

store stores, of sales EBIT a In and point an from very I productivity, John, mean, happy view. of terms new both we're new with our margin

that that our and sales XX plan basis we non-comp of stores. our the was You performance by new driven could and see exceeded really total in by points QX

update happy year of we give, very pleased cohorts store at performance. happy with the two that still we'll well end that So but new as and with our the year. typically We'll very the be

John Kernan

on about on in inventory the as we basis in total sheet And the store head the comp just one into quick follow terms up, and half balance of growth. how a the year-over-year of both should we year back think

Marc Katz

Yeah.

QX, So this what mentioned, think shifting. to that other we is we where all week back we for comp get see have words, our that week accelerate end to as inventories similar something due We at shift somewhere in QX. we QX the store the probably QX. year. will the store In comp we'll we probably in when to think XXrd receipts then more inventories, of But Tom saw – down into nonevent really again, to that will XXrd a of becomes were similar

digits. give QX certainly going and ahead So, forward, and typically starting store down to single that we expect, inventories that's of we mid would in comp that metric high

you're acceleration cost you John, of opposed at the the about end the XX% that That stores talked up up as percent even were a too, up. XX, inventory think to was was out our far and new about I was being was we though dollars QX, as As if driver. net versus that and a big really XX XX, driver back the XX hold and pack the

with that inventory. pack So of was remainder about X% being stay short the

that’s allocation goods use really So we we in goods into depth. reserve and to again, that more flow bring technique our DC put item that monitor and we an our in, locations

Operator

of America. Hutchinson comes Lorraine next Our Bank with question from

Lorraine Hutchinson

to simply might changes of the the or that chain. wanted other expanded smaller layout any Is new there outperformance or attributable that I are rest on the to follow-up the be to success and presentation size stores. the of the

Tom Kingsbury

better mentioned really we opportunity of new really the prepared performing Well, I my because feel when that understand review It go Point that C we feel in that’s I remarks, to site us. process every through our really think as strategy helped have. I the we're and in gives really single stores we the us

feel a there's for or so looking going are available, out, not XX,XXX because XX,XXX square also box. We boxes the helpful smaller small. are also, that more We're that more sites foot the boxes --

a box. obviously at looking We’re smaller

out we helped category. us that's better that feel in that’s stores our a terms assortments really best us continuously to And, lot in And continually helped and we of the fine the tune also. So, also. adding new

in on more our our worked new because hard sites really the and So availability terms it's Point, C assortments of size then we've the really the of and stores.

Operator

question next with Advisory Dana from Telsey Our Group. comes Telsey

Dana Telsey

And you the new with what you processes you're trends, in that issues How in changes? On there the are through of uptick since ladies’ freight putting that buyers, flow an apparel the the are seeing you that seeing you had made you. new in And progress you business, Thank seeing there is women's mentioned, cost heritage is the are place? year? business the freight receipt freight costs? balance that terms of

Marc Katz

think Okay. freight question start and I'll Tom. Dana, with flip the over it I to then

that hit we're going headwind We of So contract basis freight probably end to point that the was QX point represent and in and year freight the in QX, XX think points basis at for rate increases based in year. will we're really on [ph] XX basis QX. XX seeing that's freight and costs headwind

that been well. to or product And higher margins. offset merch offset to lower been fall costs with able it. Fortunately, we will do in then as look either obviously to sourcing able We've we've it

Tom Kingsbury

We've apparel strong business. and obviously as and newness very But, consistently. has came far because receipt off seen As been processes. first as on we quarter some we’re work better able ladies’ with the is mentioned, progress organization wasn't continue our I We've and in it of the to issues, we our got a of obviously the all results. of in out correct Again of I active strong before. May as learned performance the heritage it really and in good the new some in trend goods the August reacted -- have candidly better we was it's should just got we to and strong in a in faster from we very terms start. to business sales did – and July that faster and mentioned more and aggressively, than lot July

time. we’re over XX adding the our team. more improve to specialization One ladies’ Vice apparel which brings will business of experience of that the added who things a ladies’ and did ladies’ Senior think we apparel really about, second we've We really by apparel President leadership excited off-price years of

So we're that. excited about

Operator

Our William with Blair. comes Daniel next Hofkin question from

Daniel Hofkin

the commentary a little a I regarding of quarters. bit that's chain differences, think, a to I the think, Just, know for been you but few I bit, alluded average kind Midwest. little regional any below

Just curious first my driving significant chain? the that delta if that So that’s anything as is question. as is

Marc Katz

Yes.

an the that performing on chain. a said very to the really West under-performed. around. view, and outperformed and you're of And we northeast territory view area the the So we right. in territory the looking from southwest the in turn It's and of point Southeast we're we're focused as with point from Midwest a that with It's line

Daniel Hofkin

of you general. fourth -- can for gifting? then would mentioned and think you or And for categories you of in Any any one plans sizable a in on I I beauty for opportunity color that's quarter know other terms holiday be the gifting just Okay. incremental share your

Tom Kingsbury

better. we've you get had like mentioned Sure. feel categories beauty the strong really three good for We gifting. business, very four now better overall. gifting the we to business, the And continue Overall, naturals the we're court where and a about are gift or years of press. results But business as growing home full it’s

the in the an front in it terms stores, gifting store see you season silver of overall. also Not the the in gold you'll see of front you'll area in but advantage being be bigger see the it when fourth the you to We're home impressed caps and stores go our of I quarter of in gift presentation take all holiday store. the in colors in very into even throughout only and adding opportunity and end to the our more overall, apparel of overall. apparel red think

quarter successful can to forward another very and it’s fourth de-weather looking we gifting in business. that we're So another way our

David Glick

please. question more one for time have we Operator,

Operator

will gentlemen, be and Ladies Canada. from Brian sir. Yes, Bank Tunick our of Royal question with final

Brian Tunick

categories is SG&A guess gross very delta break predicated be that Tom, Maybe can on you total net that XXX from store? maybe, of or a the kind about the comp businesses how and second in business. your basis peer or talk do out home rest merchandise versus point that the and XXX between what on space little opportunity, to versus the talk Two beauty these the and much. questions. Thank where margins would And you and you out about the One is on? of more store sales question growth that maybe could I coming margin what

Tom Kingsbury

the Marc, take I’ll can the second. first Okay. you take one.

very We feel increase to going of all, footprint. we're as to it’s be business that. Most expand of on the kind good First those have. that based think will in areas come areas. I the to obviously really remarks. the And prepared important home and continues growth about our the we beauty space mentioned from the strong of apparel We really the

We that probably apparel. will would the feel in our in can We faster turn shrink our those. of we areas really even company where be

it will from that. So, come

the pretty depot, that’s many, goes, board. about across a The comparable baby times area margins is talked far we’ve obviously the many before. as little As only less margins which are

it's So comparable.

off-price, and could you're model margins tools of good off-price use the area whatever execute store be the the talking all you If your in in about.

Marc Katz

just buying I through But guided that. within years. year value. rooted our by a and continues XX terms margin at to of of to with five X.X at expanded last I probably evenly believe basis that's that sales, We our Off-price is mean years, of XXXX, terms the game points. for between another a look opportunity, the taking higher we get and in operating deployed going Brian, [indiscernible] this model where term in at able to to morning margin plan on game same be this a after I we've obviously, margins goals, as and XX comp leverage is last year in occupancy X.X. gross XXXX we've five to so full start terms that in exact from we gross to XXX take look go plan long it margin, Brian split and we SG&A pretty can. be the be our We that see that cost

balance result delivering down So, while believe mid digits a going margin, to to continue and comp delivering our markdown going to in single inventories we're to turns we're But lower to to gross that's continue value always going rate. incremental store to plan we our faster and customers. high

As there. far make to what we objective going you to and to profit one as and and and improvement did teams goal number SG&A this sales goes, what our saw continue of we're do quarter support do I we think for our continue all

those of be to going it's we’ll the leverage areas. both forward. So But same the more plan comps, clearly, game in higher going get with

Operator

Mr. back now turn remarks. to the like for to I’d you. over conference closing Thank Kingsbury

Tom Kingsbury

everyone for us results. today. Hope look to great Thank you third quarter with a Thanks joining Labor forward We we speaking weekend. Day report has when you.

Operator

for Thank conclude Thank today's and you. that conference. does your gentlemen, participation. Ladies you

Have disconnect. now may a day. You wonderful

Burlington Stores (BURL) 30 Aug 182018 Q2 Earnings call transcript