BURL - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Burlington Stores Incorporated Third Quarter 2020 Earnings Webcast Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, David Glick, Senior Vice President of Investor Relations and Treasurer. ahead. go Please

David Glick

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

and O’Sullivan, Our are our John Crimmins, Chief presenters Chief Michael Executive today Officer. Financial Officer;

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

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

Michael. here’s Now,

Michael O’Sullivan

quarter joining on Good you, this everyone, for morning's morning, third call. David. earnings us and you thank Thank

with be We you are very could that glad us.

to I QX; talk third discussion will thinking structure how Third, quarter we to the questions. be about John Then, as it. to taking the respond hand call the We results; will follows: the walk for First, that, this for what any to to world review happy details. post-pandemic we morning's over are prepare about are are describe will I outlook to our will After I we through actions Second, and financial going

Okay.

quarter. third the with start Let's

store the last comparable expectations performance in at quarter XX% versus third sales our exceeded Our year. down

I in more think, would. comp it detail this than normally breakdown to is we performance important

and we the for XX%. As driven in factors. down August sales very ended August The weak quarter, the by than store two more weak trend comp was came trend into was main

of was came we inventories where not as we third reached earnings was Firstly, We the in-store it planned in quarter second end It the our well this to wanted position that quarter, underlying reasons inventory call. in-store August into levels. discussed for be. our the until below

the early recovered August, QX. Secondly, of Once if back-to-school August dominant showed for into in-store our back-to-school had not is September, typically levels would the stores By turned through we all. inventory driver and materialize up did go traffic in back-to-school August, did we not around. and early awhile, September. factors of we at a expected traffic in finally in traffic know, happen that these This both our had in

trend in minus period. to had for Our and baseline two-month XX% we X% plan the chased comp comp, minus QX October, but been combined the for September

to that very allowed our QX believe in not QX basis deals but we QX opportunistic the pass with pleased driven performance, We XXX by to higher These markup markup us took The value buying markdowns. and deals. great of advantage successfully Our gross was were is customer. margin QX along higher this environment by terrific up points. sustainable. markup This do and was lower was merchants and approximately in our strong,

buying But, to normal as and higher offer of not As to course markup thereby be the a buying continue will sales. value drive capture expect environment normalizes, to our do business. opportunistic we goal to great use

markdowns. was certain Again, improvement similar the margin the expect gross fourth were this improved unpredictable. our aspects QX of very We the of environment not unusual and to of driver to quarter. a that Unfortunately, lower key there improvement. and faster level were fourth for contributed turn other The turn would a achieve that to remains markdown the in quarter. I very outlook to sales do like inventory now

fourth to double In to across country month-to-date comp gotten down possible with COVID-XX in the for fact, the situation happening retail. off deteriorating. worst with time start, November weak at the digits. a low appears This is be the has running The quarter

by in this there weather, later Our than driven an trend has QX, for by that to unseasonably we quarter. this turn then weak by rather impact possible prepared like initial But, undermined Candidly, need that risk the know. just trend. Typically, But, would fragile just a is resurgence in been have be of already outcomes. expect assessment range again, warm wide COVID-XX COVID. the around we to cases don't is may we

tightly are and We controlling our inventories liquidity.

it to minutes it. world more sales the are thinking sight. about that this taking actions else We with starts how talk potential that and the positive of the have following the flexible, remain will be everyone environment But second prepare positive the what post-pandemic end to This we will half we back is the call, would means we this with before trend. about or the to news few use probably pull on feel XXXX pandemic very suggests on news again. vaccines are to been like importantly interest. normal Together to of I realistically, to chase retail the next great for either within

As once to revert through have respects, the just it previous pandemic, not on I will world way was. calls, that get the in important some the discussed we do we think

the pandemic trends, in very acceleration trends for of couple that have the some to Our a an will of important evident aftermath view lead is been that time.

growth for and the desire of consumer and the of e-commerce the Firstly, retailers. bricks-and-mortar at expense secondly, need full-price value;

these the trends rationalization next of full-price several retail We drive further bricks-and-mortar expect years. to over

bricks-and-mortar the affluent that shoppers, we shoppers, happening value-oriented more some As time-stopped their find especially consistent with off-price. over will close, E-commerce where growing years. we is This points is shoppers or migrate off-price has spending has compete rapidly way parallel. offer, meeting effective But, and growing in been several their stores shoppers, of the will value-oriented these that much other been price less anticipate physical we low has in we competitive what last to more the actually the that online. and e-commerce categories been shoppers. at expect In of retail needs

opportunity I described for that share. out, closings store have the off-price to there bricks-and-mortar gain be retail will As an significant play

smallest, off-price to opportunity. ourselves at the priority major least Our developed is Burlington take to least retailers, position of of this the as profitable and advantage

about X.X, having our full Burlington To tremendous to an use X.X job Burlington we of QX of did be positive one, decline the one potential the to at to will how past call describe would out, We store in there no comp already were in X.X clear, core ever objective buys. on to our strategy. off-price opportunistic execute the is with this The some model. in the happy impact great going after a business. like summer, Burlington have a some I the talked merchants improve is in performance of number results ways which significantly aspects be sales, off-price but Burlington our

get despite pleased go and trend. urgency stores, these conservatively, significant at in store the getting flow, emphasis thereby I've the they came marketing; are in overriding on shift merchandise a to managing Burlington that this a urgency and stage our receipt of are of I the trend arrived and on the described, was growing there Number through performance. huge We QX. sales as in liquidity turn in updates and X.X receipts of and to opportunities our the three and on in assortment. sales, ahead like of Number This The our to receipts us. markdowns. more aspects and important categories that we we share much This how are Overall, after with we ahead-of-plan offering inventories will we prototype. channeled lower then would post-pandemic I September. have of in-store inventories I early about, sales world control, wow managed off-price focus talked and as in We end improved just important our to lie early the of of very fresh them our levels focus can the on put Burlington for earlier of controlled greater merchandising; or almost deliberately driving see two, will execution implementation. much at tighter the and aspects and chain ignited out stores, on these exactly floor. faster I supply are with the But, the other things inventory these, be position progress signs we already through these driving model the liquidity strongest high-level four, finally some sales lower as we As aspects these that chased of worked better. plan system value. The three, Number and sales am X.X. ourselves value, development business. ahead-of-plan the and

First of all, marketing.

message much has how direct great value done team and this a some how can marketing more communicate communication and in at a off-price targeted can we way. this Our more deliver we stronger, cost-effective work looking year

and help changes this start believe the QX. will will program these out ahead. marketing our to in We spend reach that years in marketing We roll new leverage to

organization. merchandising Secondly, our

have very internal that hires It excited the a combination in past, we believe invest better discussed of planning and am executing about plan business we enabler in model to capabilities. and growth group. merchandising is for the the of buying the I our development organizational and our have importantly, very that we the developed promotion our of growth involves talent. driving and As key off-price in external

year, pleased In pandemic. that terms at and have quality number of candidates interviewed, we we hired external and the hires, on-boarded somewhat despite the of this are the surprised successfully and

obviously factors We merchandising some of and The about retail candidates. freeing experience. There us. causing that up This are are two pandemic external are is helping disruption also industry. is the the itself terrific in talent excited major pipeline

story. an Secondly, extremely we have compelling

development who participate and the come. lot at As Company drive same and ahead the join its And is growth, professional at the of categories, team in development. personal years and to a we now smallest merchandising opportunity the In a have of time, stage us. retailers, the our of own major their merchants to a relatively great planners our growth off-price in have many early of talented

is internal talent, The our organizational other of of development own. our growth critical aspect plan growing the

in a have talent plan. potential responsibility. merchandising of part to and more see on organizational this key our Internal grow of take lot I a and We promotions planning are organization. high our excited talent am

and the do much years. to our plans we have training over programs We up development more have few year, and stepped this next

our is on of X.X prototype. The Burlington store like would aspect to you I third that update

past, to As the we significantly have store stores. we further reducing level improve size our productivity have discussed an in by opportunity believe we of the economics that and

teams the developed for smaller real done feel plans estate of have lot have good on that year Our and We past a store a work merchandising store we prototype. in XX,XXX operations the square-foot operational about this prototype. and

expect and XXXX relocation programs, the very and anticipate We part to a become we new will central favorable, especially be format from this of opening of it onwards. our economics that store

financials. fourth We over March detail the more point, over several call like to details in the turn would call I our in we our with this more have At will XXXX. to provide to these quarter finalizing on John be share expect and plans months, next to you to earnings

John Crimmins

Thanks, Michael, and morning, everyone. good

Let me of a income the start statement. with review

comparable quarter, sales For sales third decreased XX%. while decreased store X%, the total

rate same were year's and was As freight to of sales our points end of do the by XXX the position, basis primarily QX. merchandise improved significantly levels in in the improved the are our gross achieve described We partially values driven the markdowns increased markup, purchases, higher delay last improvement increase inventory lower The more buys generate appropriate which not that believe in by was we an able of after expect August. able back-to-school from to recovered in gross of QX. improvement inventories to to driven margin margin we comparable offered were XX.X%. We be reasons was XX.X%, this rate for great at to year-over-year costs. level store to were offset able QX earlier, versus outstanding by Michael this. and two our This improvement customers our There deliver

of is due which First, down QX, believe while our significantly in aggressive QX. low levels the inventory to QX was year August, our don't end clearance entering in repeatable last our QX are strategy. versus clearance at That clearance we extraordinarily clearance markdowns reduced

planned costs, our would during and in pandemic, sales how exceeded which our QX, of which chain points on affect third very the levels, markdown sales. play were sales we impact while as and in due through of $XX to XXX basis supply remained sales season. million uncertain the cost last year, sourcing depending goods inventory Product Second, our significantly the of XXXX for the a costs, QX processing holiday the million include out increasing of percentage quarter versus buying $XXX

rebuilding then we to back efficiencies As and well tried levels we for and struggled SG&A the the of we as could And product quarter sales to staffed and leverage on the planned We that indicated significant cost invest do chase quarter while remaining to improvement third Supply in capabilities. our get and quarter's The fully fixed product in by our catch levels expected during some not retailers, decrease mix; buying rate organization We cost teams the sourcing put even trends of positive as our full at merchandising sourcing as for in $XX deleverage points volumes modest cost DCs in in this above year from base driven fourth costs, XXX the in utilized; processed product similar deleverage merchandising second since sales drove increases chain we deleverage Like million our was additional we teams added million a get we include driven versus in yet our into last XXX lost basis disproportionate of were COVID-related space prior effectively. to to product in were improving seeing million of significant quarter, A as deleverage. had to we expect and last over flow we costs, continuing other see points third the a reasons. up stores to million fully volume to is AUR; inventory as expense. back call, temporary DC increase caused temporary number we receipt best deleverage Changes on our factors: the the strength. costs continued sales product processing in the as inventory quarter of though was on during work was for which we cost as SG&A way by came our costs rate end inventories. we quarter. costs due level as in we be product increases incentive most work work a The the will third in operating to $XXX assume These points Adjusted cost was in expenses. deleverage similar incurred appropriate recruiting basis a additional recruiting behind points to to at storage X COVID-related expenses increasing product of Wage last the and get about us. $XX modeling in experienced sourcing store-related sourcing sourcing including basis the prioritized another marketing to the $XXX year, think basis and year. of costs, in XXX balance or what versus XX by offset corporate costs chain sourcing About The Occupancy primarily costs partially of increases deleverage. fourth deleverage we quarter costs place in dollar the supply is incentives quarter. our DC reduction quarter

will our levels continues trends inventory to fourth and the likely during and business continue seems see. the quarter, pandemic the plan adjust conservatively worsen to we As we and to our

SG&A product $XX could decreased million during see the quarter. by continued EBIT with While flex increased our $XX the fourth costs. third our expense in driven We in volume lower the repurchase sales stock Adjusted to sales million volume, SG&A deleverage the we not did will quarter, sourcing primarily and quarter.

suspended. million $XXX have program, share repurchase which remaining remains We on our

total per approximately turns we last million share in faster in as quarter resulted diluted release. the year. decrease. last of few $X,XXX Adjusted balance versus $XXX a drive million our this and QX in of great end, will while to $X.XX of billion to intended $X.XX income year, $X.XX XX% sheet better $X.X to on In had advantage $X.X per Using in a an convertible opportunistic stored share We ABL, versus ABL approximately in-store were $XXX At buys follows. reclassification earnings for had inventories the were per earnings cash, All senior we share ended merchandise diluted value year. taking of versus debt $X.XX billion. million of term the million secured secured is facility, down loan be Merchandise $XXX last inventories. notes. we at million. at notes $XXX our strategy million of months, adjustment period broke borrowings our We how million of have end availability classify in the unused made our base approximately on This of senior $XXX with $XXX time inventories of of classification, this updated our reflect merchandise same inventories, that last later profit

last at plan First all, that XX% the down is This to be inventories. XX% was stores, down line to sent comp with QX. in about stores its our XX% end of store stores. includes year. were These of being to our DC on basis This in-store at inventories versus of on way the in to a or processed inventory

total either about XX% in is moment. to reserve I'll compared the season. inventories. end at inventory being stored season of was more X% later for up last Secondly, or a of release, of talk It inventory subsequent year. inventory end at This that in a represented This later reserve includes this QX the all XX% QX. the in

not any bringing new we store fourth end stores. XX year-end count open total XX XXX stores. stores, of included count new opened stores, close but do X resulting stores, store our new of net quarter During an the in to XXX openings the to third to the store at and the This In X expect fiscal do expected we relocations. quarter, expect quarter,

As outlook stores. new to will still X earnings on XXXX, compared XX we stores but we fiscal our our close additional last in decided open call, to

fiscal call, opening As the stores shifted open new the XXXX we earnings XXXX. last XX still discussed in were expect in fiscal in that to from

on our estate as now will say several March. approximately Net capital expected the on store call more for We to million broader in XXXX. capital are as nine $XXX expenditures over fourth Net next strategy million expected for years have first our real XXXX fiscal well openings the XXXX. be $XXX months of new to fiscal expenditures our were quarter

Now, on comments to I some will turn outlook. our

described for is the forecast. to earlier, sales very fourth the trend As quarter difficult

affected the in authorities Our But by resurgence by and month-to-date November actions the digits. been very trend. has weather month-to-date possible remainder a comp the warmer is once that taken restrictions is down could around, government the fourth turns outcomes year-over-year and It the for have in COVID-XX response the this believe on for the negatively of double of that range low quarter We wide. negative trend temperatures. even is possible cases impact significant

sales be this uncertainty, we this earnings Given formal guidance will issuing quarter. again not and

we same standpoint our reacting flexibility plan to up and control expected. flexed October We take to our were trend expenses. to open-to-buy that see stronger chase business from sales, and up what that ability sales continue to liquidity gives the inventory we than if will September in and quarter. and and keeping flexible as to This We opportunistic planning fourth to us able flex purchases we approach demonstrate see the over a we receipts posture receipts liquidity, conservatively, the tight a and

other expectations, have purchases, if are liquidity the to the hand, below On if back we'll flexibility and pull trends our necessary. on

of comp in I a about was QX our explained plan. at end a moment with which XX% down As ago, line in-store store on the inventories basis, were

increase of last In this QX, we have This year. At some two fourth our inventory quarter, up in-store of would the purchases significant, but the did increase reasons. for we the that significantly inventory into inventory. manage conservatively During fact deliberately from continue more versus push to end this our been for last expect year. versus was will We X% contrast, we QX. reserve reserve QX to inventories

then we merchandise up for First, free to and last than fourth more to capacity in reserve be current that the year. for to end the be this holiday quarter. And that could even by inventory this January buying of XX% believe If turns more correct, estimate supply we up chain compared because environment the could out merchandise. attractive second, be

quarter, expense Finally, of approximately and as can you certain be purposes. landlord modeling be items update expenditures, we expected to Capital are $XXX may XXXX we did for flow useful fiscal last on allowances, that cash million. now net

in interest expense, is Michael now approximately million. expected the And now expected new $XX We costs, of With million but that, over anticipate closing in Previously, we revised it expect of XX or Depreciation and net noncash amortization be close to million. relocating be to expense, XX on open for XXXX. notes, interest to stores. favorable stores closing will to is XX XX lease turn a total fiscal stores remarks. relocate stores, approximately I for $XX expected now or $XXX new excluding had convertible exclusive to

Michael O’Sullivan

John. you, Thank

my appreciation wrap I I up all and gratitude associates As at our Burlington. to my to warm remarks, would express like

in confidence have the questions. your This We lives I The to operator a that, of is ahead. There very are the lot next time impressive prospects which likely operate happening. our a over exciting my With behind belief several mobilized has Company. associates that been the years. further will turn impact it is challenging continue the way time, things of continue Burlington to the X.X is in over in health it our and Operator? months a crisis, global reinforces but our for very particularly and at good midst to a also to

Operator

Boss of Thank you. question [Operator Matthew from first JP Morgan. Instructions] comes Our

Matthew Boss

of Michael, you average improvement. that if the helpful congrats size, any quarter, in sales traffic, components maybe add basket and can think, color. the very store comp unit provide I any additional would Great. the could it retail? on on be color Thanks you

Michael O’Sullivan

Sure. Well, some provide Thank Matt. for reading by and start the morning, the editorial good I'm commentary. data, then going actual I'll question. you to

the So, quarter was off see. by let's than Traffic more for XX%.

units XX%. Our up by was than more in average basket size

retail, average per price the XX%. down average so unit, was unit Our about

If you you mix XX% transaction comp XX%, the was combine variables those of items, get average dollars course, about double low And by you quarter. higher minus together, size digits. if of all in those decline for the

So, that's the data.

offer me this sort from Let that I of data. up draw some would conclusions

The traffic and that decline last but it first would improved point is weak we of was the year September I August, out make still is in It versus came October. as in disappointing.

think, I factors two weakness. that drove are that there really

if who There pandemic. going just bricks this. most and like, be shoppers we're mortar through comfortable are coming not a back First, obviously, into until in a are we to you get environment

realized we've and distancing our these. going stores, But, realistically, through very have social we to until is and those despite safety depressed in pandemic. get the We programs marketed that traffic remain we robust measures,

think that's So, number for point Burlington, most in necessarily we now. the that categories destination I a top-of-mind at with of have we are key compared that Point we're acknowledge number some our shoppers peers, the not to merchandise two, right interested one.

further versus behind progress huge we recognize a in casual peers. apparel. starting moment, As from in these But, and home that like made I'll businesses, we areas we've in are describe

categories we draw an coming doing same great that think we're assortments. of customer This September with to positive. active, offering conclusion chase assortment many us we're our our more I -- expanded would are that enabled and merchandise driving and the now. business much to categories second essentials I right And though trend it's is from that the values actually stores. doing October. data home, just We've that I buy mentioned, in job the and great significantly our into wants in the shifted the excellent values, I basics is We've casual, that traffic The think,

the store visit. And you each basket shows very in are during they're think, that stronger higher items, the and actually more size into coming value the more buying They're I see responding AUR. Now, that lower the well. many are can spending the customers

are I once traffic of the when if these So, up, we think, pandemic. pick get encouraging through might levels what encouraging and COVID-XX indicators, happen indicators

Matthew Boss

That's helpful. follow-up. And a then, as

these curious On today supply about these August delays how I'm vendors then if impacted where talked your dissipated. on so chain, in-store industry the have we inventory. stand delays and the you delivery from and call,

Michael O’Sullivan

Yes, it's a part That story the was last Sure. a our good question. on of call. big

Let little an out our me own our update supply my on a chunk chain, bit. I'll distribution internal own start answer with centers.

is QX, we have level. been right The had that simple hampered August, now, along November October and run wage We've in centers that at And incentives. our as up have and on-boarding have higher centers that issues we're distribution recall would In those holiday other You'll inventories in-store been explained get liked. many our peak very production actions, to with happy able update our here issues we that in up issues we significant that to ramp retailers, staffing we'd of into ability those really levels And took planned as in these distribution month-to-date. resolved. been worked. number including with processing rates a and to peak obviously, for how actions fast

import gone by, say, are lockdown update broader issues of this following also delays Coast sort the have driven would that There would sure I the to away. are delays chronic that's you've factors, of retail the took across elsewhere. West earlier year. ongoing I'm at deliveries chain. But, kind congestion staffing delays, heard These issues facilities, merchandise on orders this internal number And say own that place of industry. being So, supply the vendor including not associated industry-wide timing our distribution a of issues the in specifically ports. then, related I surge at with the

steps number our third in Now, these this before of in seen navigate the of QX. took quarter sort a to we around way movie Remember, we've issues.

aware were we of risks. So, the

juggling I very Our buyers, good and did orders a think, job and dates. purchase planners delivery

third The point you the Matt, is fourth quarter, pretty this. but would silver much basis. make of in comp is stepping So, on that's levels across sure later our lining important the weeks, industry delivery This at likely our in-store the potentially pushed on down I'm There inventory some a right realize store attractive a I XX% translate these were opportunity. back, and last plan, end quarter. the buying the inventory just very In in supply. actually into described. off-price to of one we could an delays to reserve the off-price I've are just purchases reasons become why of And delays the coming

Operator

next And Wells question comes from Boruchow of our Ike Fargo.

Ike Boruchow

I Good the morning, That a Thanks super was for helpful. couple guys. of questions. guess all information. Hey.

The could margins. if Burlington also drive talk to expense operating time, margins X.X over one but that some the there's aspects there's it the about think help I sounds higher is first about headwinds. we like guess should I

You sourcing guys product gains, and near like big especially one that these a chain of cost can are alluding to sounded the some offset supply in term.

Just after should think a I factors about different that. follow-up margins? their on have how we and then, And impacts the

Michael O’Sullivan

Well, Good from good to Ike. morning, hear you.

impact represent lion's three main about I'm margins, the the down margin the to ask margin drivers that. opportunity are question that short and John two we first, for term, several X.X, gap And, term, I expectations But Internally, share going next we've the in zeroed we've operating time sort In on modeled what think, different into in is believe talk of longer of the three years? these XXXX? Burlington me I'll a specifically let moment, drivers break improvement. peers. the Burlington address versus our periods. identified margin our operating of the to as what In the of over for

The first sales. is

of particular, productivity drives sales, heavily capabilities, advantage across in first categories. the in take particular, so taking liquidity value and chase can to that leverage. the opportunistic that we've That's buys and stronger and categories controlling we're higher deliver all can drive The develop penetrated even trends about, things sales investing talked the under are we lever. course, merchandising our we in so Of steps

and but significantly markdowns. fresh lower we we drive faster we mentioned, of One the things, those receipts second we I've some turns very that enabler to this, to kind other like to feel have believe we control higher aspect If quarter. course is and is I'm have demonstrated faster third lower in a turn floor. getting thereby and historically margin. levels tight also I significant markdowns, inventory We inventory drive confident the sales, lever to in of drive inventories greater of of do and degree urgency The can just gross sales the our that critical than actually is as opportunity

costs. of improvement third margin lower The driver is occupancy

thereby peers. sales we higher our Our stores occupancy prototype, size time. less mentioned in But, help. our prepared driving Again, to as remarks, expenses we our than the store will the reduce productive reducing an are believe I bigger and of opportunity have over

place Now, specific of go have I've X.X, we to initiatives as Burlington after each just described. part in of the levers

straight necessarily next line. the Over from an progress significant to either to lower now, what to or driving it expect on headwinds. year. view be we'll that things deleverage we some higher get we supply pandemic, such sales on our these for operating XXXX, There through until margin. work for And a costs. initial headwinds think several we face make but call But provide the or volumes expenses, quarter on in provide updated March, these in improvements next COVID-related challenges, chain comments might fourth there maybe we may in years, short-term be make in never certainly, sense. going our as said, will John are operating But expect, I On

John Crimmins

Sure. start lot as we're about year this morning, our going do to to to to next plan build has little XXXX a how our unique we thinking for color put Michael, a going the for on still plan. an good objectives year. to been plan, kind it think back current the compared since annual year, of base we we and year. share But, want year. But I based on we of XXXX to such Obviously, when we're unusual together XXXX what a we can it Thanks, we're look to got as achieve Ike. work set Usually,

to we seems is in before So, be sales Again, that But, from an is But optimistic retail, going coaster first the and make year. in going -- sight. on to end this a would It of roller going growth. it's We're impact have continue comp of pandemic we'll may be it's been get sales to yes, focus lock be on still that to all likely worse better. going of to there a normally, that's to you'd to going likely one be differ on. the assumptions how XXXX. getting XXXX it's little as bit

trends as then to So, conservatively to this plan and to means have going to look develop. them flex business the going see that we we're to we're

Now, some we've that the is doing practice this had good year. good that news at on pretty

have to to we're assumptions, Whenever And base we're because margin it's a going going comp difficult of more XXXX XXXX. drive to be expansion. you it's So, have from in be comp that even operating a assumptions. means year plan to conservative building conservative going difficult

of experienced you expense if about fixed two think So, we have it, years increases. will inflation

that have that any before headwinds, leverage. do sales expenses we could So, expense some the ends, some when we cost will COVID-related normal to while we see adequate of have going that pandemic we begin And to be see growth ignoring the end expect cover our temporary headwinds there. are with we'd still other to to

to dollar third means of as for drive now, seen sales. it to talked in the We what Michael AUR also sales, expect that see is pressures lower lower described. that But there we've process respond supply AUR as seen in more seen we do to the can we about just quarter. per what And So, Michael had units year. wage we've we've trend, we -- a to chain this

of pressures, these some over of to history some been going confident we're can others are While But, expense production out. reengineering that like lead of mitigate our a time. processes figure to longer. able we've we take kind that a got always have going little They're to or automating actions, time mitigating

to XXXX. chain in deleverage expenses supply we're So of expecting significant to pretty see XXXX, again, compared

during As I and said better next a moment on few be to ago, a more our we to our we're sales still position going March have our share a lot detail of And work call. plans in expense the to much months. do over

Ike Boruchow

And Got AUR. on then, follow-up just it. one quick

lower guys sounds that on Can quarters. the in help continue you like into you AUR you to It this you about -- expand talked bit? think, can a expect 'XX. I little

a on little topic would be that more detail Just bit great.

John Crimmins

Sure, Ike. Yes.

First, AUR. let me kind in little we of quarter a in Yes. third what talk the saw about bit

interested I to think were they driver are different the mix Consumers pandemic. than things prior our the this, merchandise. that of biggest now in of

category average, that like a now basics, the back think you essentials, as athletic, On people apparel, all haven't things casual, is strong. the merchandise strongest are normal when Our have these not than AUR right active, lives. ones that merchandise categories merchandise, palm of their been lower to

traded strong So, general, things we're categories. -- to in off kind not apparel, categories, to sales dressy in less of more price. the we're clothing, like mean AUR higher these we and not price; lower in tends dressy in more tailored career where sales And tends seeing lower dressy as general, structured and means

drivers. the of one that's So

more our our been driver pricing. working have second all pricing. across merchandise We've competitive be would to The sharper, categories

is customer believe of couple focused As merchants been about. that sales that's effective value. best value, most great Michael the to really That's in the way what merchandise talking drive have it's last cares on, quarters, The to offer working. off-price, the we our possible offering and what been has about, been

the that's more the units to better Michael we've and rose offered. values than quarter, basket related per the of As directly in by number that we mentioned, think XX%

the we point other when mix ahead the shift at back in merchandise think might direction some pandemic's the over. Looking now,

does different way. our expect then You'd point, But, it if great back to great sales good It be in continue people at X.X would offering the will little that to we'd again. come potentially a But, we back prices. by certainly the have go execute looking happen, chance impact normal. may at to more on does of mix AUR. that a up merchandise offset to degree downward expect trends strategy, good happen, Burlington some some by value news normal, pressure there's a a maybe other new as that to desire dress drive that If that AUR the

levels, historical together stay our two we would that AUR So, mean below the forward. likely netting look would as

Operator

John Thank of you. Kernan Cowen. question And our comes next from

John Kernan

I morning. if ready have a and then question Michael Good I for hope Thanksgiving holiday one season. everyone's for for and can. the John, I

is growth to publicly availability? about assessment now, relates longer seeing off-price into constraining first, outlook, you're Are what's just public approach on as going everyone's your more you that it channel. talked think, So, have right a the of I vendors taking but interested inventory forward also this to conservative concerned your of overall? -- merchandise Michael, what term the going in some the

Michael O’Sullivan

Good John. retail off-price followed question. time. morning, for a Good long John, you've

has concern XX think, you happened. been So, has you -- period. supply. growth that always always if huge has retailers back question Off-price certainly I if you'll the has Clearly, back off-price, over off-price that know not of availability the out would age-old go achieved will that that run years in and go been

term, before about is But the Short-term that Let about longer -- answer with short and seeing. availability pleased I We're been me talk the we're say overall, continues very short-term I would the quick the to availability, strong. be and stores. then first, why. reasons the opportunities that talk has in I'll do term. address let merchandise me that with off-price values and assortments We're the our the in the availability happy of

I was longer where Now, the always more now But But, the aren't gaps, always to question lumpy. nature there good. categories the now that's off-price there important is as more very would the supply characterize little off-price. right some think, availability like brands, say It's not of of term. are. -- part a supply, that overall, I your That's always some some we'd --

We have ahead. -- we opportunity have here years have we described several to years. remarks, next an plans prepared that I take the in as at We share significant growth Burlington, my believe, the over ambitious market in

will good not Do merchandise we No. I that. supply? a think really do think it's So, I by be No. question. constrained

But, those hear I off-price, very expect, understand you'd a issue when in As have spent what of this about I'm the concerns. supply. time over quite triggers looking I those of important lot And years, to I partnership. transactional. I've say, not concerns It is supply at vendors I relationship skepticism is concerns. with very based two on understand my about to strong. that think, our Number our relationship. a a It's It's very And factors. skeptical long-term really is one, it's off-price

complexity, SKU all we make many categories the very difficult count, it that those produced. of sell, the For units lead of forecast the styles precisely how the factors vendors are to the times, for

a an they channel, a have They actually for outlet, off-price don't the for they have for overruns. -- this have orders. have get of canceled partner a merchandise partner because to They Now, right. excess

we for them. the So, about risk lower the think this is way to

to successful, them them we and Now, we help their businesses. grow want can be

are really So, those relationships partnership.

point very second in important, many I would different make, is this and is The compete categories. that we

We have thousands do business of with. we and that vendors brands

and reliant aren't vendor. single any on only We one

Our sales. largest of our vendor is percentage small than a no more

bigger absolutely it much scheme of a difference that vendor So, things. could the be individual in make of back, an cut might us but wouldn't true that to really

beauty, our is I underlying very most base -- actually businesses base home like businesses, In we the fact, base sorry, of well. underpenetrated our think, increase grow, grow important as vendor vendor as fragmented. vendor is In some significantly we our to as or likely

a of small very lot vendors. have You

past. So, grow in said, With particular, the I much businesses those in than actually count that expect the with rate vendor increase as would has will at we a greater all it specific be everything always specific is times vendors That's that true. have less will when there more I've that going there or brands be said, my expectation availability. just or are to

retailer, that gaps constrain concerned not. for No, really come described in the to question, off-price back our that am recognize to your I be main growth? this we I'm reasons I've that an there means it, assortment. will that As our But, will

John Kernan

Thanks, All Michael. right.

then, hearing profitability early information the for or in seems is a store on just financial more numbers the any like prototype. planning And productivity, and in expectations It the potential led opportunity. Interested the question XX,XXX-square-foot John, time? about that particular, thinking then, around smaller big the format. and Second to over

John Crimmins

Well, been following your the John. for Good beginning. question. since Thanks us sure, you've John, question.

been to we've in going I tell continually to of as that inventory a for on we've history our doing now. amount XX,XXX think store I size for size our just back able the many store under however pretty go. got point, good average to been have -- back year reducing been want our years of To So, year, this had square is don't the you we've And the It's you far we've however that, last feet. stores. each at reduce

the even a where with full operating of quite us. reducing one really leaner X.X got So, and been side. leaner continually run this off-price inventories. size, bit our a been potential learning opportunity on learned We've has is strategy, Burlington box now, for kind inventories operating with And to of the we've the principles then, main

progress that So, this the these confidence leaner that our pleased is can take we seen been and think to of is, really initiatives. the work we've inventory in size. initial much we we I with you'd we on box -- as smaller how have guess, it started farther call really enabler We've an

can altogether to reductions, us kind XX,XXX path get prototype. our of added ability and this clearer we in do to confidence a this altogether, confidence so So, in-store just better to stuff the bit a how of gives square-foot inventory higher visibility to and little further this

And have plans we So, going they've inventory year, while good operational our been on, the been been working in developing. particularly this store on and the team, teams really XX,XXX the stuff has merchandising design, store. operations store past for estate about planning our and detailed prototype real that square-foot actual feel

about the that excited for the stores. really we smaller potential we're see So,

to relocation better and and our over element I'm we in through we higher sort And efficiency. store-level In we of specific wait it's March become more our a terms our productivity the store central expense get new plans, But, to of that. both think economics plans prototype believe time, store that kind and likely offers smaller to our the do call of portfolio. sales existing next until our as on going potential for actual opening

Operator

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

Lorraine Hutchinson

morning. Good Thank you.

have to back some Do online spoke traffic to you you Michael, the that think are bricks-and-mortar? has in shopper during changed concerned How quarter. you come declines may behavior of moved about business So, the the won't that pandemic?

Michael O’Sullivan

very because it's think, share I is the doubt my very the permanent. Yes, that There's important grown will of of all we question. see good, has some Lorraine. e-commerce guess be could that significantly gain Hi, And a no pandemic.

completely as have think, patterns and that do way just this mall-based next store I industry. effect back that have -- in not critically share anyway but I I that years, share over retailers, remarks, though, in of gain And think were. the is I that few they said that it. shift the undermining the my the think closures will shopping pandemic, would some to we likely likely don't go full-price going No, get that I shift will to through accelerated actually wave happened pandemic It especially retail e-commerce of of rationalization think by retailers. seems a the that bricks-and-mortar drive share the as

will take prepared I retailer really think, specialty store store closes? is question just offer think seeing that as many we're especially we them get go the us affluent, and seems at that. great department physical actually where share more the a like. find in then of values, do Now, for The shoppers that go That permanently, more my remarks. I will a when start value-oriented said can I for of online customers important business our great through the of most is to these sure, or we grow for some shoppers, hypothesis way likely can you market time-starved once If their assortments But, we pandemic. if off-price.

we operate an on fashion categories strategically these the this we premise compete. had competitively I've that the the said effectively to points It average business for e-commerce unit price very an very $XX, this with us business assortment. economically is $XX broad in and with these of compete a investors where retail than satisfy Now, difficult more conversation can and more call. just I've many value-oriented e-commerce. of what is underlying shoppers actually, And We with at

and We time. have store And E-commerce digits The bricks-and-mortar the has years. department the year share. for other for have taking last growing the for for full-price been some and happening that time. single shrinking growing line just off-price argument. this actually point channels retail been a store years specialty example, several that for at has I now. would make been isn't high been is several It's top each has been conceptual Meanwhile, growing some Burlington, our what in

So, that bringing them. acceleration the that pandemic, not believe of just the it the I've back of we in an together, described all we reversal see and could a of trends aftermath

Lorraine Hutchinson

think the for comments. John, that breakdown these of Thanks. product what be you And in I appreciated might then, of do costs was sourcing cost you gave permanent? I just proportion the curious,

John Crimmins

Yes.

Okay, Lorraine. the Thanks question. for

complicated. it's So,

So, on and go-forward of said in the kind of the maybe of well. then through a as I go context I'll put stuff kind it call some

me just start let reminding sourcing product cost. So, what's in

basis cost points during cost For sourcing includes our XXX of third the remarks all supply costs product the quarter. in as of the our the overall that that us, chain the operations. together merchandising our said by prepared all I in and all delevered And --

of along incentives some to drove planned of since of this COVID-related supply to put that associates. supply store related wage temporary of chain our our We recruiting the increases protect DCs So safety piece our quickly DC deleverage we points the increases that do, XXX the chain back in had protocols had actually that had were that the basis that this for the to wage bps XX About quarter. we'd we've costs we basis third incremental in the as had to to place put XXX became to actually to the was to much in get consider and DC pandemic About deleverage. appropriate labor earlier wage use costs million $XX had staffed properly and to points more And then, during It the changes we some that get in in inventories temporary market competitive. the year so include some costs. levels, be to or in with XXXX. place costs. related market But we bucket, response we've

our DCs But, are believe piece, adjustments we've in And we of properly successful the getting permanent a this it's wage properly increase. our staffed. now been course, rates positioned. think labor DC we made, So, have

our So, as to we that think forward. part about be structure of expense is going moving

sales processed occupancy other to that's bps chain the supply we levels. product and were causing quarter so changes The in our we or factor AUR, deleverage, remaining in the during back decrease versus an inventories appropriate increase rebuilt deleverage receipts mix the had of XXX in as

the utilized. occupancy facilities aren't So, couple of that first, yet a deleverage. We opened fully

But move piece get toward a expect time that's over this for as So, that One -- do and to one storage. facilities for would longer we more we're as term, was -- other periodically, new would full online. processing expect, was better we we you utilization. bring for in

decrease kind So, is that of the standpoint, capacity. actually it's you news. kind think we've not necessarily expect a through may them said, leverage. AUR. a then as But one they go-forward bad we most the that deleverage help if of components, go And Of the eventually, other they're would be, about to in cycle from hit efficient the all as

drivers to to help better chain the and sales AUR of customers, should does one units smaller higher to decrease delivering fewer our which supply on translate drive more is lead a of our course, and focus of value While costs, the markdowns.

we Now, relates chain to they're as a work plan productivity, I've within some Having looking we that, as lot initiatives pursue the some on are said structure, XXXX especially supply We're driving we over try significant and we've financial to time. next some little chain going our to initiatives, are compared these to can headwinds. these But, of supply a increases, of for do. as at offset earlier, months. have couple earlier. expect, it to But significant expecting of said our XXXX, headwinds efficiency going still as finalize of expense you I shared would that our lead deleverage got to

the product piece that's supply sourcing of chain So, cost.

capabilities other lost basis X.X XXX side be -- the costs we get going points, make deleverage of Burlington XX fixed to continue basis that and merchandising to organization of our sales investments, to to it leverage on we had well worth pandemic. we addition our from from points improve are the to In that when merchandising we think

had a we'd year. typically, in push the offset going pushed to that in the we're with to on for some incremental of really in we but them We store have year. places look so sure that we So, didn't different with efficiency that spending payroll, may we're where year be savings, adequately COVID much efficiency making this we wanted investments like

Operator

from Greenberger of comes last our Kimberly And you. question Morgan Thank Stanley.

Kimberly Greenberger

it much detail you out ago thank strategy roundly so that Michael, And you. all and just the I Thank a wanted been inventory today. XXXX the Great. the us share you COVID helpful. X.X year way for to back It's the this extremely that reflect on accelerate if with particularly ever laid the focused reflect you Burlington you're do I'm can on four, can brought journey, because if be on of year say, to store more perhaps efficient let's journey. with about sure, and inventory impact a in what inventory three journey maybe or And faster thinking turns turns. accelerated you maybe opportunity, ways not you original it's those wondering even or that has your obviously toward the might or you journey. levels a unprecedented thought with had an of I'm five-year you on get some in-store And allow that and in targets? learnings, inventories maybe think Thank of your a leaner year in so faster advance to accelerated two insight to much. will those

Michael O’Sullivan

nice Kimberly, you. from hear morning, to Good

joined just right. a Burlington You're over ago. Actually, year I

versus past sort that then. of I address And should by we've the I my a been made year. aside, maybe me have just heck a But back over of progress saying been the let out XX months joking start my celebrated So, it's -- one-year might anniversary. expectations what it's

most The I'm I'd say I at very The pleased. feel very we first we pleased about have direction. is clear I'm -- a thing that is that thing Burlington, have like

that's to We call Company. and a the transformational going within strategy traction and has support understood I'm a a what a of huge It's well have strategy. amount

where know we like going. feel we're I So,

improvement made changes everything against of gets make pretty been in faced, we of challenges progress getting able all turns; the faster and that at across this about opportunity the and margin from buckets, a aggressive years talked more your year if I of sort as with the just Secondly, it's higher strategy, come to in narrow chase; margin is lower are are inventory, think, real, urgency; about the -- earlier challenges And in focus third, progress were three, that a happened sales real that stage very we've to we've important. mentioned value; to I the that also going and important the more of ahead. Those and some I question, would ways, those think level, initiatives to, I be I and where earlier that's we've able on question, third. development make say, occupancy. Those the if earlier But, at to and mentioned floor. you about -- down to high we think those areas an of I receipts to a liquidity; on in really issues margin by X sales; faced. Well, margin the X.X, pandemic we markdowns; question come it been of things third, significant some are a implementation. of quantify We've form this despite greater in lower and greater kind in and Burlington are say your other that accelerated like this has some to the has specific and they've improvement, the some a that by been to response business, opportunity progress

third have like a that productivity, think I come and lower a So sales inventories occupancy markdowns of markdowns. third improvement a from this unusual lot get lower we the a up there I greater than made on we've bit. a third to have but feel been year, can of from We've ended from that year. have piece I turning lower ever want would progress this some very faster temper my us answer little circumstances There helped planned.

to make gains So, But, that over two on that. in inventory this would need that really early characterize of and or the would We captured short yet. we've a the made that But, I I take bit to really progress but back more expected progress to consolidate are to we've victory. term. feel much progress we of need sure too declare early too the it's have period It's time how around made a year I made I that time. that. think longer a to banks just piece consolidate to year, than like we've that's relatively

Operator

Michael remarks. question-and-answer the back like over ladies now to session. gentlemen, does to any Thank you. I and this our conclude And O'Sullivan closing turn for call would

Michael O’Sullivan

everyone, happy you you, quarter to early fourth feel joining your going Thank but again to like look the I results. your know it's on to this Thanksgiving. to forward subdued I discuss questions. different for We talking We families that March year, Meanwhile, us appreciate our and wish very you. and to you today. a call maybe in a would little Thank

Operator

today's concludes conference Ladies Thank for you and call. gentlemen, this participating.

now may You disconnect.

Burlington Stores (BURL) 24 Nov 202020 Q3 Earnings call transcript