Earnings call transcript Q4 2022

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Burlington Stores Inc. fourth quarter 2022 earnings webcast.

I would now like to turn the call over to David Glick, Group Senior Vice President, Investor Relations and Treasurer. Please go ahead.

David Glick

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

Our presenters Financial today Officer, and are Michael O’Sullivan, Wolfe, EVP our our and Chief Officer. Kristin Chief Executive

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

follows Our copyrighted remarks and the Q&A by that Stores. are Burlington today

materially Remarks for Such or those are in projected call projected concerning include expressly risks certain company’s that this made all are such of results uncertainties expectations, differ in subject to which on the reference. Actual with events, SEC, incorporated from trends, fiscal by and financial and statements. uncertainties. the risks those are strategies, XXXX objectives, and are described future forward-looking that may herein in filings other XX-K results

today’s GAAP expectations are note a measures discuss financial to the discuss results we that release. press non-GAAP operations and the today basis. today continuing are in Reconciliations Please included of we on measures

Now here’s Michael.

Michael O’Sullivan

morning you you Thank Good everyone for David. thank and joining us.

to morning. like cover this would three topics I

we that, fourth to guidance; questions. then XXXX After will details of I outlook. financial I’ll finally, and and offer to quarter will XXXX will will any respond discuss be longer to walk results our some to our term Kristin Firstly, our on the about fourth I quarter hand secondly, our happy guidance, talk through comments our over results; I

year. X%. top Comp our quarter about for was last store QX of on talk This sales sales fourth store growth comparable let’s Okay, results. the X% decreased

press previous more use is we in today today’s stack. have when comp three-year we on done a detail metric defined describing are will in release. our As we geometric calls, trend, This

X% for positive was stack geometric the quarter. three-year Our fourth

prior shared November our year. three-year call, stack to QX on we our geometric for As the was flat

our and a three-year improved quarter January On positive, December. December the growth trend than and a progressed, was sequentially. stronger As sales with basis, comp both January in our one-year basis

there trend. the drivers of that believe were our in improvement We two

we points. of back sharpen so call, morning year these our actions Firstly, am number summarize November a of our in I took last the We detail half to in couple just values. of on to a going some described this

that aggressively focused We quarter faster to The it one, and price in Number and in we plan raising on off markdowns fresh especially turns not last our and drive we the prices. the right to assortment. promotional our time year fourth expanding original became our on this clear consumer values raise we prices. changed was rapidly backed environment Instead, points heavily used receipts existing on sharpened to opening inventory. be

significantly focused and We merchandise. and to strong plans in on receipts The release. receipt businesses later for in Number many incredible also on supply very inventory reserve flowed some stores trend advantage of levels two, we we raised in deals. opportunistic take this strongest open-to-buy off-price was QX able great were environment our and fuel away stronger these goods we these branded to some tucked buys, of especially to the of and

our walked to worked. average and great a and sharper values liked size; actions conversion in they that buys. they words, shoppers in improvement price our branded These when into responded points, customer Shoppers the opening found expanded transaction in values, stores. to other significant led This

the elevated, that headwinds traffic abate. we interpret a started inflation this is particular, lap improvement we as In that of XXXX. early In significant in trend. occurred may sign into also macro the although improvement to in to late an the QX, spike XXXX traffic. This our stronger points still driver saw to second in are We beginning have

on and the about ahead. year move now outlook me for the talk Let

November, we XXXX, will continue said in we As will anticipate fall. the and that in to economy that slow inflation down

across lead the external major inventory to we to diminish overhang could We I activity. have that just expect If promotional should this and less as have Burlington. believe this retail environment the for implications described, three unfolds

First, potentially higher and greater trade-down consumer slowdown the value, economic from some should on create groups. middle focus a income driving activity

tailwind our for size. other grow as and and transaction be should promotions retailers versus could differentiation traffic, Second, value moderate, this conversion a

Third, the to improve last external year. will that we compared expense expect environment

We are seeing already freight rates. with this happen start to

and and results. call the this these in to lapping will year, is and drive factor poorly improvement. an other our hurt We in out, saw expect one to that important is specific trend. executed is mistakes late we Burlington. XXXX, be stronger we one There Obviously Once corrected issues we these this XXXX to in we

major rise impact inflation the ending will year but this unemployment this there inflation household this factors bore moderate are customer, reasons the benefits. could said, In group all ahead. there our XXXX, hurt and headwinds and that why we expanded customer, are of XXXX; the customer remain real the of In the about customer. recognize we that concerned are on particular, uncertainties impact These some the such about of as income but SNAP of brunt in being other that we think core incomes. feel lower potential optimistic with a We

are be potential full believe positive the Putting positive and of all We to we to year sales are X%. in to range this may our guiding these there X% factors range growth managing that upside chase comp together, upside. we business

drive be to margin expect in basis of we XX to range, comp able XXXX. expansion XXX points to this Given

can margin. believe two within the are we margin on few in but years, we our there As back levels next November, to cautious get to we be said reasons pre-pandemic XXXX

budget means possible. one to was This as our operating Firstly, develop sales. our number as values for and sharp plans priority our drive we keeping XXXX as

to great balanced is to the drive margin, along strong this Given an increase need customers the trend. supply by but pass we expect the our to environment, merchant in value

cautious be to expenses. reason second to relates The

expect in an have to significant year. impact earlier, improve described it As the Kristin specifically might QX full value, environment, more as we freight it merchandise expense higher into opportunistic supply how and and aggressively buys. explain, but is to Also, we predict drives this great sales XXXX, process. we chain rates external typically This more pushed will is the off-price in as but difficult over to incurred expenses expensive difficult

centers years, to and take we been last have actions off-price time. do to our work more For efficient, have make but will more distribution we the work still couple this of and taking

our up sum guidance. me Let XXXX

to to chase the business but if we ready managing and planning positive X% it are are growth, We our to comp stronger. trend is X% support

As for get next pre-pandemic operating back believe margins we margin, operating that the years. can within few we to

XXX planning XX to comp basis on growth. points of are X% For expansion X% XXXX, we to

for I opening would move now talk like to on plans XXXX. new our and store about

well within XX should quality lack the XX lower pleased stores. our this of our XXX continue closures, construction new XX and XXXX, be of We relocations After supply planning stores, than by issues relative to store the locations, to estate performance like very yield net high new we as as reflects gross stores. real open is In format. the new to to and new would industry. especially current we are This

could we said, change. this be situation that about to believe That

drive could a number and retail, Over bricks significant could in be wave and we of the mortar that consolidation next increase high couple that think this in of anticipate XXX believe of there quality a new open that years. we stores will through years, we store can new we we get store net once new such grow to XXX so locations, XXXX, the that our five over following we program the

over hand to make some the level outlook longer comments high Burlington. term I let Before about me Kristin, for

see be are we about factors like longer bullish earlier, As further are to term. two said but we looking particular reasons about in I to I highlight. XXXX, There optimistic that the would out also

full uncertain the price external Firstly, next will few we retail that anticipate difficult remain the and over environment years. for

expect that to off-price traditional this supply ago, consolidation. lead as retailers mentioned We share. a should environment, take strong and may have mortar retailers we moment merchandise opportunity may bricks In major I additional that struggle. believe and, off-price a drive This many to retail

have stronger Secondly, a here transform our ourselves to the two been years, investing Burlington over to we three retailer. into busy business off-price at in last

in we our we capabilities, new be changes prototype to store and For more flexible stores efficient. off-price, more have our merchandising in organization and have be changed and our made major productive to invested example, have we

into acknowledged a so I excited. clear: stronger November, XXXX, sales, in years. into retailer in consolidation initiatives a ourselves believe retailer, dislocation process, a working these direction of firstly we the strategic work in could next that As factors, some very are overall off-price combination of look but transform the are to earnings several of over the We we traditional and potential transformation beyond the off-price stronger we Burlington as are these is significant and drive shareholder value retail, growth and secondly of the

now like turn XXXX would to QX details to Kristin guidance. call provide I to on over our and our results more the

Kristin Wolfe

Thanks Michael good and morning everyone.

quarter. start me Let details fourth some for the financial with additional

while in down X% quarter the Total grew sales were sales comp X%.

geometric positive guidance X%. came range. in our our mentioned, As sales above stack Comp comp Michael three-year was and EPS a adjusted

adjusted guidance EPS was our $X.XX range to which was our above $X.XX, $X.XX. For QX, of

but in decline a in XX.X%, margin XXXX’s by point offset the quarter XXX as decline by primarily discussed point increase versus markdowns driven This The of merchandise was in higher earlier of an moved driven partially gross merchandise The Michael was sharpen margin. XX was improvement points we margin rate rate a a XX.X%. XX basis to fourth basis expense by was our values, basis in call. freight

$XXX of $XXX chain worked primarily intensive higher points true merchandise to by were close-out costs This million increasing higher driven is was labor deleverage as sourcing more quarter million Product to XX percentage a which in fourth We XXXX, process. costs. compared a basis supply the of sales. mix of

supply In expense. trend our and inventory efficient the drove reserve chase to in less and of higher was out addition, chain movement the

by XX a SG&A bonus versus of $XXX driven decreasing million control as sales. $XXX percentage expense million in XXXX, accrual. This was and basis Adjusted was points lower strong a

of XXXX’s the basis to declined Adjusted and deleverage. quarter fourth our XXX XX%, points, adjusted by EBIT EBIT was XXXX. QX margin EBIT basis supply XX freight fourth higher Relative margin, entirely points chain adjusted margin by XXXX than driven quarter

in earnings $X.XX fourth in of $X.XX of $X.XX of $X.XX resulted the diluted share quarter per Adjusted XXXX. per earnings XXXX. were versus QX share All of this versus diluted in

of XX% end the comparable store our above the At were XXXX. inventories quarter,

the below still store inventories also pre-pandemic As so store was design. levels. increase this sales and out our by in as we a our should I the that year season, lean is this too comparable QX, hurt well trend in came inventories reminder, last point our into were spring significant

of At XX% inventory our reserve was the XX% versus our end inventory quarter, of year. total last the

reserve. in have the We are with merchandise and quality the we happy the very of values

In we no quarter, the stores, stores. count of the XX the store new at our closings. net new to opened store relocations, end included fourth quarter openings, XX XXX bringing and This five

stores year, closing new adding new our we while the stores and stores opened full For relocating XX fleet. XXX four net XX to stores,

our I will now results. on move XXXX discuss full to year

sales XX%. decreased decreased sales and comp store Total X%

stack three-year was Our geometric comp flat.

Our de-levered by and XXX by XX operating full by margin year the basis by versus points decreased margin de-levered product de-levered Merchandise by basis basis contracted freight XXXX. points, points. SG&A XXX costs basis for points, adjusted points, XXX year basis full XXX sourcing

now guidance. Let’s XXXX move to

sales XX%. an impact XXrd XXXX we total of the X% in For XX% growth to the year, approximately range week. the to expect related includes This fiscal

our X% sales XX last XXX points store and to comp to for versus range expect X% to year. in fiscal EBIT increase XXXX, to We the of basis adjusted increase margin

an Capital the allowances of in guidance $XXX increase adjusted XX% approximately be landlord includes contribution $X.XX to of expected range This adjusted of results million. XXrd expenditures to per earnings week. net outlook $X.XX expected in from $X, the is to share an EPS of XX%. This

the For we XX%. sales range increase sales assumed of are XXXX, to total XX% to the between expect X% Comp store in first growth X%. quarter and of

$X.XX. the in of adjusted expecting results an in are increase EBIT EPS points $X.XX over of XXXX, quarter to margins the adjusted first range of XXX basis in range We to outlook which the to XXX

turn now back call will to the Michael. I

Michael O’Sullivan

Kristin. you Thank

We to our move by points an but of QX. morning. on key let we that in have a the was saw specifically that we environment. recap and value sequential this sharper Before improvement this in better We partly driven our the execution, significant improvement in driven questions, focus also partly external sales me some by believe covered trend

are outlook We about the optimistic XXXX. for

our business managing we to comp We are X% and growth, trend planning is to if positive but chase ready X% are stronger. for the sales

points expect X% growth, Our margin to of achieve we XXX number On XXXX is drive sales XX one to priority to basis sales. X% expansion. in to comp

Longer few disruption that business. will term see our dislocation about beyond XXXX, we retail. the years prospects next are and across anticipate significant for excited the We

Burlington stronger forward should opportunities help the off-price transformation We retailer, take this of may into advantage of the with us present. this are pushing and a to disruption

With that, for your turn like questions. would the call now I over to

Operator

[Operator instructions]

comes Our first from Morgan. line JP of proceed. the Please Matthew question Boss from

Matthew Boss

congrats XXXX your should on to there’s any can about a and comp great how to we Thanks Maybe guidance, think the I additional commentary you X% range, or whether there on have comp provide on is this a range? Then quarter. first potential upside that follow-up. X%

Michael O’Sullivan

Thanks for Matt. morning Good question. the

comp I was there would points three guidance, main As that reference used. we developed say that our XXXX we

with basis comp we data looked have low so drag our multi-year annual at comparisons. expected the that business the that first won’t looked at would the a numbers, a and all one-year, four-year I before own we we our was growth a compared digit through then point. but Firstly, you pandemic, that reference on we single the two-year, historically

Secondly, our we looked peers. at off-price

comp inferior to was last year Our performance theirs. significantly

recognize we mistakes by that repeat in know Now, made and we execution. we XXXX, it year was to don’t significant last driven demographics, been in that differences in by we certainly We may but driven differences have also believe customer that mistakes. those intend partially

the Thirdly, recent most point, is you that our we if looked reference trend. like, at third

sales were levels. comp QX ahead Our of X% XXXX

to will words, guide levels; that with comp XXXX XXXX sales Our ahead be implies guide other this of is comp consistent year QX. X% our in X%

is I running our our in of us that quarter-to-date comp that guidance, point that QX confidence and ahead is trend data our gives offer other trend though, up, One additional guidance. would

XXXX. I’ve that of and play important how know there of will don’t our it’s there. lot the XXXX Now, uncertainty unknowns just out for that There’s achievable, to economic reference are various that points uncertainty suggest guidance a in described that but out comp add we is

manage said is I then that’s okay. sales flexibly, business trend I’d I be recognize up guess we’re if setting if we we the an sum If by that there appropriate comp our that before can so think exact know science, our guidance we higher there I’ve chase our in ready not but stronger, think we is it. trend, is may we it to upside, is, chase guidance and but saying business

Matthew Boss

XX to are X% remarks, margin expansion Great, the a of on to thanks. maybe basis think you think just to What of In range. XXX forecast about prepared Then I follow-up well? as points key comp your guidance. X% margin again, operating expansion, drivers cited to potential is that way this the upside on and there a

Kristin Wolfe

Hi Matt, morning. the for good Thanks question.

You’re XXXX, freight three XX of that On X% modeling the This guiding growth, points margin, as merchandise XXX XX% leverage we’re basis XX% higher expansion. you said, expenses. lower comes operating really to a from to margin to fixed growth X% includes for the that full costs, sources: main on X% comp sales total growth, right we’re - to week. year XXrd X% comp and

speak each items. of to Let these me quickly

believe environment, Michael this sales, number margin; see to the should values one strong be our and in merchandise said some remarks, mean but customers. to along On increase margin, prepared off-price will given is as passing the we in our we year merchandise drive to extremely goal that able

not other do we increase this words, increase. in in expect merchandise we’re while maximize to margin, intending So an

sales growth. Our is to prioritize intent comp

expenses. freight lower the is mentioned I item second The

part against and of up lower year, especially expect from We’re the extraordinarily the see QX costs we in freight high QX. to particularly last in freight and expenses first year,

like source store third of leverage occupancy. fixed margin on the expansion expenses, The is

we’re sales, will reason Of yet comp depend is why line. the which the level on focused this top another course, on some of of

limited guidance. in These improvement given include chain also There plan. less or true mix the into built headwinds hit increased that supply that and also our we assuming merchandise comp, of close-out resetting incentive XXXX our are of

I’d we XXXX, be merchandise might recognize sales. from greater lower specific sales, that strategy slightly want values unfolds, is could the line drive expenses. item this year year the our and means but which be may a margin We in For so on to year stay sharpen drive like there further on the flexible, fixed times overriding leverage to guidance, our we depending drive how to reason to is need away to

the the come these recap, depend margin how and will to XXX on achieve environment basis XX to will operating leverage points on To merchandise believe this sources: retail unfolds each from to comp margin, the three expect on X% of and expenses, of competitive from expansion. we this X% fixed store growth, We year. primary really contribution but freight

Operator

from line question next of Our Please proceed. Fargo. Wells from Ike Boruchow the comes

Jesse Sobelson

improved on just questions. Ike. I this everyone, of your on couple in Sobelson Congratulations Jesse for morning Good QX. a trend have is

Firstly, for you I in described wondering whether am follow-up merchandising trend are back that November now the means the a and I improved Kristin. mistakes have you, behind that

Michael O’Sullivan

Good morning Jesse.

that I do by share those describing execution areas. start that as three think internal to into that I post much was If and to say performance to as me question, our our the I last answer mistakes fell I hate year. mortem, main to contributed specific this, mistakes would let

and first undermined delays, our in on-hand our year, up of year we Like and the of and uncertain those with conservatively inventory inventory levels meant that into year on other really experienced just we a as backfired trend. given receipt conservative we sales into the inventory and coming came little many Firstly, first last retailers quarter those - last XXXX, significant stores, deliberately volatility this ago, the too environment ended quarter in certainly planned is us. we that levels and delays

raising the at would we I wrong, then going to The well, we’re we prices. prices, we and reluctant that, but into to to reluctant summer second about XXXX, is Many ourselves the XXXX, back we into We half back XXXX were were think thing time of up maybe up as to should happen plans came were said, we into XXXX, and retailers to added in retails. so kind really in do say talking other higher retails the start questioned pushing of maybe our year. I push

of prices. our go in across not higher inflation time core on activity with Now with that a the just retrospect, impact raising and retail, to good was the customer promotional

those As we that season, we unwind began realized full to got into we and increases. the

Now, our we It hurt would say. should especially that sooner, in but--anyway. QX, have I done sales,

in business, the some responding good buying, the across Thirdly, reacting those those shifts a interested didn’t do we in XXXX our enough that merchandise job there was types of customer and in and huge trends to was and shifts.

were Those that ran we believe into in on of last the last we We and worked that the that would issues in behind categories think made into year, those fourth is significantly the the and trend mistakes our and sharpened a of say the we those all and are most customer and assortment big shifted we really three stronger correct quarter. question buckets I and tactical think to level, believe answer to yes, I we receipt year, our inventory we us. issues to values paid changes contributed our we the interested buying, off your

do step strategic and our in I you call answering just bigger on mistakes, just like, and context. a your take want though, this back in November. a to put maybe further, I about in a those bit little bit talked a little go question if

heavily we’ve rolling few to talent our hired our understand tools we’re lot merchants. to a Since merchandising developed our tremendous we’ve particular many and been we’ve important we’ve new last to and it’s promoted over many, in think years, and transform or for processes strengthen out invested capabilities. the XXXX, I that doing business,

now than bigger is headcount XXXX. of in XX% terms it team was buying Our about in

assembled you merchant reports. and to, ingredients We experienced and improved win - catch-up. key playing moved processes fast tools, had know and tremendous off-price that very buying how merchandising off-price, we’ve the planning leadership, talent, so in buying very new all is We’ve - we we’re training

work gel, to acknowledge the that next the in process. is in success view to made drive a in growth our Now, I and as have this over XXXX investments mistakes going they my few are but years, we those demonstrate

our I’m be need really to to performance towards than move we year-end, with pleased did faster we our turned consistency year. corrected mistakes greater but last that around and and able we

Jesse Sobelson

Okay, Thanks for the there. great. detail

example you comp you. for is more have and detail Can takes question for QX, second the Kristin. provide on any puts My incentive impact Thank what for margin the did on quarter?

Kristin Wolfe

thanks morning the for Good question. Jesse,

But results, that as and and comp in not as pleased our the those trend the during for was noted, was strong that on higher primarily incremental momentum expenses. as sales quarter to that we’re typical is fourth quarter particularly store the our continued and Overall, chain with built February. improvement due flow-through us, supply you sales into

where more markdowns sourcing than the of as gross lower At which margin moved points improvement offsetting much look chain supply you at which to our XX slightly de-leverage. basis a level, we expected, noted. values, expected by was of did higher high basis to as sharpen was we Michael cost as driven Product than points XXX merchandise pretty margins, more combination somewhat of due we de-lever primarily was freight

on and negative is XX Now comp the year, points quarter. SG&A would flat fourth control that still adjusted expense leverage last SG&A, in adjustment, given quarter rate comp - basis been fairly the incentive the which have adjusted to strong the the excluding -

Jesse Sobelson

Great.

Operator

the of of Please from proceed. America. Bank line question comes Lorraine Hutchinson from next Our

Lorraine Hutchinson

Thanks, supply and drove unfavorable. should how going called expenses out we about good morning. chain remarks, Kristin, these in you What as think forward? the costs this, prepared

Kristin Wolfe

have Good few higher to thanks the Burlington chain two for that morning at last Lorraine, years. factors out the contributed separate like costs different I’d to supply question. over

stay; and of of driven, chains not The DC supply volatility then global continue rates, to chain these in savings supply have to the delays particularly we be have to which to are faced efficient. chain some as retailers, This we first normalize, we but inflation supply and over to of unit lower so and wage there’s average believe piece those less in course be last drive able caused here distribution should costs, few is Other retails, years, here. externally the center unique some higher efficiencies conditions with wage pressures, higher is similar there’s our global call higher a been expect should costs costs we likely significant Burlington. especially and operations that big

second specific more on really supply to factor the chain But Burlington. is

as few much of the now buy mix We last true proportion shift a mix goods the of process buy in even in extreme took much higher Over buys. off-price these and changed of opportunistic of buy and business. buys years, to These type we’ve a more higher in was DCs. QX fantastic advantage have complex that type our more we are this off-price deals, work content our in

We supply as the took are chase the also inventory heavily of drove in so expenses factors advantage utilized our and those reserve quarter QX. that we buys trend, in opportunistic chain the up to

we not true than of was to fourth be though we as forward, merchandise As it may a mix off-price historically, expect we maintain do extreme as higher have it look the in quarter.

The point chain. supply opportunity here have to we is make in we know final

do. to work have We

are flexible, efficient of but off-price mind, to these originally the distribution work and and the not in systems, optimized and off-price, hard there few to we’re the chain in have were more supply our going years, changes Our with to time. do to are make working some actions take more processes really centers, so more take designed never were here, more we that last

Lorraine Hutchinson

further the into will the like impact sounds and it Michael, how availability you year, business? will we then move and very merchandise environment been has think happen the strong. do buying as What that to Thanks,

Michael O’Sullivan

five, job merchandise to take say been Lorraine. availability as that very we’ve so have off-price the that over good would able say of reported the also controlled of deals. I great months, I liquidity, advantage sure and has We’ve availability. six into Good really well. that would strong made elsewhere been I I a think that last done merchants heard our that think really leaning we’ve some we’ve morning

clear, In the too a equals to coincided began in bottlenecks then and finally see Not much and the weakening environment surge in transportation we period. that strong across buying XXXX, surge in off-price with as difficult year demand in happened. to what’s to consumer demand availability, surprisingly, started supply, has so went been as supply that’s not early a understand it’s too Now, why supply that retail off-price on. little

are about there I’d couple other make supply. a merchandise that But like to points

third very to has largest vendors. new hard off-price environment excess given over up the the to few them to partner help as move worked and with existing supply inventory deepen this vendors vendors and us Firstly, relationships open the months. with retailer, to We’ve last resources opportunity

Our buyers strategically over have been - us to very responsive on I to to valuable very, been longer and very and very going vendors, new that are those we’ve relationships think expanded be focused term. the

issues hadn’t may over - XXXX. seen mid-XXXX that coming pandemic continues There have was to past. expectation the plenty like supply possible over the fairly the constrained last look think how availability point demand second at the months. has out The the been off-price two-year into slows Those six availability those chain over between strong make mid if return we how times of last to soften. is it’s a longer the the well that XXXX, driven global our remain is before. aberration were down period just seen time really that is and We likely period, I the six strong this When supply to think The and real strong real normal. you to not early of we’ve supply constraints herald in months, aberration is that merchandise to is it buying a economy by during environment been especially

Lorraine Hutchinson

you. Thank

Operator

line Please from from question John the next Our proceed. of Kernan TD Cowen. comes

John Kernan

Good morning Kristin, David. Michael,

years. to you’d for XXXX talk that is levels? to back question X.X% just getting to few just get Previously, I back First said have within the after follow-up on next a the you operating long term operating margin thought you margin. path just that. you’ve of the those Can

Michael O’Sullivan

Yes, good a morning question. That’s good John.

we comments financial multi-year we some plan and operating interim and question, in that range and plan, update through have to get on how illustrate provide will let up XXXX, forecast to and we that margin. plan but for an through about first; have long offer include to a our in operating of credibility, to are get things we try to XXXX be Once update might for thinking margin. your answer the what kind that me Frankly,

data. the with start I’ll

Our was XXXX XXX below XXXX operating margin in levels. basis our points

You buckets. can four components, main break four variance that out into main

inventory margin higher margin and XX in - mix than XXXX driven impacted basis to points and very as off-price was that XXXX. was we higher in margin had meant was in The that in was merchandise merchandise sharpen said, that by turns. merchandise and merchandise faster XXXX, about of really much actually environment Firstly, our it faster, a that we negatively and now, XXXX, promotional, values,

not merchant everyone, confuse fell was XX set we our XXX We we look margin over fact, points that and next back upside about In of to XXXX up levels. XXXX we but the XXXX, points actually in at versus versus margin believe it closer to although basis basis XXXX. to numbers get think the years, opportunity have couple there’s of by and an to

want we Now about how in and near emphasized careful that. go aggressively term we the after very be that this said, Kristin point, to

sort As margin. in to than that’s to we’ve XXXX of really on Anyway, said variance priority this the is maximize first our rather versus driver XXXX. of call, drive sales

in variance and freight increase XXX points was margin external of expenses share lion’s driver rates. by higher Those were XXXX, expense. freight XXXX than higher that was basis XXXX second driven The versus the of

next and some we’re as proportion of as we of that. that we to mentioned of expect deleverage in years, normalize recover rates freight see starting Now, couple a significant to the earlier,

those expenses. higher source XXX variance in third versus chain XXXX, is basis of Again, worse. supply points were The XXXX

but off-price, expenses more a to higher cautious chain been believe becoming as we said moment economy shift as some and will more that factors timing and centers, and supply begin address going we and to of business could global the flows costs versus distribution become to our XXXX, a in normalize, supply fully more may turnover expect take the costs. driven we some of little longer those those and a the costs believe As chains by being ago, slowing two in to we’re because predictable dampen have that in our Kristin bit there, labor reliable, savings receipt drive it’s

source XXXX, of operating margin other variance call fourth going I’m The expenses. all since to

includes flat top why can surprise, those our it’s expenses fixed expenses, the XXXX is sales can by drive a of other actually more versus a drive fixed greater deleverage we more That another on the expenses. efficiency, about those sales, is on basis result deleverage in That that’s XXXX. store not like more in we have by Now, but comp savings line. priority to The the de-levered reason occupancy. of flat been driven leverage fixed where XX business than the all expenses especially comp, XXXX a offset points three-year areas essentially some bucket so period, see over we’ve

on as number to expenses I some the one, number outlined, higher focus margins in guess guess year a number back the may leverage; recede; three, back of rates higher we’ve freight likely last those answer sales next chain external efficiencies merchant reasons is the to components: to to of but, a couple supply I little to environment that take margin time. path our bring we’re for XXXX lower one of four normalize bit my starting place, higher highly as promotional of especially see in four, drive sales, begins have main number to happen; and XXXX, two, years,

point. we me one sort question XXXX how get up of finish was margins. to back with Let will you just final The asked

beyond destination. The premise margin the lower XXXX that margins levels. good just X.X feel outlined, we can I’ve can Now, we we drive believe key that XXXX but still is we of regard about We as our Burlington operating don’t inventory levers final By smaller and margin above operating versus thereby to drive historic start stronger and our with off-price our we peers. store believe all format. those can in gap close things, the a doing levels levels drive we productivity sales

John Kernan

That’s lot a great Thank color, of and you. detail Michael.

should end think there last I guess levels the may January provide how about inventory year, have can of been under-inventoried get additional Is a but up amount we last and versus Kristin, further you inventory any levels at decent XXXX? we you into on were commentary as inventory, spring.

Kristin Wolfe

XX% were comparable you’re think at inventories January, under-inventoried means up at QX. the noted down and levels. pre-pandemic for when comp the end store of our end to last I so Good we of the this right and we the thanks last for were question, were Michael Jesse’s year end year, as and Yes, morning time responded compounding, - these John, store question. versus XX% our you at inventories still this numbers adjust QX At well XXXX, are you below of

April, to Last were where with there coming this inventories inventories disruptions below April they receipt that’s described March quarter situation to as that store well the in-store inventories in we inventory needed be, more into increased month Michael recovered, and be year, should XXXX, delays the year. our and in earlier. but year, that our they variations will comparable but increase, we by rest plus meant of QX line February combination of by our - sales may into driving deliberately and conservative as sales but significant through had similar year, as levels move This last we XX% get and inventory the in plans be undermined and this be what’s

we expanded this right advantage of with store let about That of deals, of in over we is and away. sense ability moment make to This buy, great enabler and of stores A Michael off-price years, was more to ago, inventories, even us flow shift does how last key terms the couple that talk reserve take described become our not how quickly we’ve a inventory. opportunistic inventories. provides merchandise to use type the reserve merchandise but to the on me of

branded trend our have We the this the great about sales reflects have this was found. of the it year, XXXX, content our end dollar deal reserve our last buys the this significantly feel in At should buyers we terms and reserve, inventory and help in values very us than good and as higher year.

John Kernan

Got it.

Operator

next question Baird. Our proceed. Mark Altschwager from line comes of Please the from

Mark Altschwager

the morning. see improvement. to the and great Appreciate question, Good

delivered just February, Are underlying behavior? the continued shifts any any drove have in quarter, the and follow-up. that particular have into quick consumer a sales fourth categories then January I and trends upside you the as there and that in Thanks, you’re seeing

Michael O’Sullivan

our that’s focus towards was know, businesses. across in of last the so in we I quarter across important and go actually the value, back particular about to strategies I a Good saw turned terms think accessories improvement, saw fairly improvement fourth better, it’s because--you and out the we businesses performers. the through across the broad-based why that that’s morning and that year, Everything our got whole, did month-to-month our think call strongest businesses. categories, all were that when think really we Mark. of would mainly half footwear and in for I on we the back key But all say as of I happened merchandising I that businesses, QX all sequential Yes, think improvement the our major

Mark Altschwager

Thank Thank the indications you previously. store How currently are could can you. opening availability plans, or than more to with you. XXXX? respect seeing and expecting you Then bit had think that hearing than signaled a stores quickly increases, do new as ramp you’re through you lower you increase availability any

Michael O’Sullivan

Sure.

rigorous. is process fairly estate real Our

or hundreds look to our a sites hurdles year of that and hurdles, team potential fairly real months, evaluating and that and in We XX locations. sites having to we strong there being we on the XX are XX a and pretty in to I next very new are have as high. locations the believe look our of build return rigorous terms a estate We at net store pipeline up available are strong store like to for for open and investment our beat we the ahead, accretive new EBIT have, that meet process identifying say,

stores hurdles would we it’s XX, but remarks, even a XX or out, say opportunity. But hit number. that As to we’d see we’re openings, store had to I where Ideally, further we the going little next I XX said with is not our net XX months. would another obviously but lower to outlook the look a than more for the like that’s XX to open or if the new in significant we new like, and to locations, important that’s compromise

wave of over retailers. few a there wave slightly As That pre-pandemic next my retail happening I think kind in happened years, mentioned sales and the and dampened mortar by and the we down. be think in last then rollercoaster retailer I of and years, that the remarks, consolidation it’s was going bricks among that’s up then in three margins terms of could been

additional may think back I consolidation. as to get things normalize, retail we

store probably productive this, the Sports on us. City most were that’s and retail new and an source realize but Now, in why the reason stores. closing locations new from or Authority or or Us going for most of retailers if bankruptcies, investors focusing I’m opportunities consolidation, our other Many other comes Things; drive formerly there’s retail and I us, in opportunities Circuit biggest R real locations of increase then to Linens Toys words, store estate for opening think

Mark Altschwager

Thanks for all the color.

Michael O’Sullivan

Thank you.

Operator

proceed. the Our Adrienne comes from Please Barclays. next line question from Yih of

Adrienne Yih

Great.

see congratulations. me the It’s my great progress. Let add to

January and and my asked, to and outlook clearly like the so there. then but traffic it converting been television of XXXX, most prime seems time did notice strategy is is advertising just stores, a questions wondering aggressive to the in driving within quick Michael, I February have thought pretty what a return quarter-to-date. for it I’m the

that the QX, much. stay on that long short Kristin intra-season for more is QX, more reserve that is Then so - winter-to-winter? deployed or stay Thank inventory, be can you

Michael O’Sullivan

more stores. question, value about the that think If going our resonate on XXXX. conscious, I to to much to that and going the really that marketing and I economy be traffic going slow to into then speak enhance to In coming programs. further consumer we’re the really is and them excited in value going very going right think is our years, we’ve marketing with moving our help last is say, the hitting message our value would marketing few down we’re to Adrienne, is to is really we harder a advertising, message been to the that

can’t business the the think that the Now, disappoint store, into important I comes do our in thing is customer them. most we when

about to have value I less We have would summer, the said asked and the me you if I’m store, confident in that. last have

really much marketing, for is in the able compelling, the work we store, I store to into us feel in drive our what to we if traffic As like offer well and more into more think going we’re is have I XXXX. move XXXX, to

Kristin Wolfe

measures. measure also really the penetration, question inventory, then of reserve about values content values content short reserve I about we And branded of the and so It’s really all the stay feel good we reserve. feel and of it the in noted, pack-and-hold, a and those and the good wow our on percent from of certainly mix terms on your as in we

Adrienne Yih

much so thanks and helpful, best Very of luck.

Operator

Our Please proceed. final from Haskett. comes Chuck question from Gordon Grom

Chuck Grom

much. execution. thanks Hey, very Great

the one increased the still know you’ve place or is now upgrading question team over years, the if on I a lot is and in I’m a organization good curious few the past team. and My buying you talent new capabilities. are

Thank we learning you. As the curve the about adding a so of over should many improved benefits of profitability and how a sales natural next new to given think team, there’s the to follow-up, facet years? from couple that employees

Michael O’Sullivan

Chuck. Sure, morning Thanks question. good for the

comments, merchandising investment earlier over our the last Yes, as I ramped mentioned in organization up in really we’ve three years. the

raw is than Just that now was about XX% in our headcount, bigger it headcount numbers XXXX. merchandising the are our

where XX% in onion it’s a back the There that’s newness, a the growing in it’s some our of business lot businesses, investment that, headcount every lot some business. fastest so not peel that’s lot opportunity are especially of growth the where and newness, higher you if XX%, businesses on higher was actually, a Now organization. less, of than obviously

add actually years three what we should that with Now I it’s pretty ago. consistent had said

on ago, it’s three years, and worked similar about years call merchant that a next like said the headcount think have by would for I increased of would the we three probably this that’s kind way XX% out. have year a I

some big some will, we and business our the of in we not areas where - certainly pivot lifting opportunistically say forward-looking most for happened. To is terms a that that, the I already talent there’s now that merchant add would team us. the expansion heavy won’t expanding but being we minute, to has of behind our increase, to opportunity of for see say just big That’s

of like me headcount last in just because off-price about more merchandising and we’ve and feel move organization definitely we headcount ever principles our in I than the past. from main few into added had talk how away Let the leaned operates, so we’ve the years,

I turning maybe We’re - that liquidity sales but much did chasing we much to we’re doing aggressively, things opportunistically all now. we’re greater the them say couple into we’ve years. tools historically peers have, past having off-price and more and the would been of leaned much over extent more the controlling we’re we’re much faster, tightly, buying a inventory But that that that being processes our without necessarily we’ve addressing

out next capabilities, I XX able do the and developing that been them in feel going of out sales in many two the next of like merchandising tools, those is over and for the XX, we’ll to we’ve that asset come off-price think yet months, this I’m rolling We’ve we’re of reports, growth We’ve margin growth years. started over more merchandising. to of us. terms investment to dividends and we’ve drive a be a should strategic those. lot rolling built out, pay that’s we I very that so made roll them dividend in there’s confident

Chuck Grom

of investments the years. guess, what leverage left, over - done what’s you that the technology a couple Michael, the to key buying team added because ingredient, just I think able on part have quick as touch the of and can you follow-up, I that’s being a you’ve past

Michael O’Sullivan

pretty joined systems walk antiquated I that was Yes, it’s those They’d been Burlington, found case. lots much What and going configured very absolutely a What that in right, hadn’t at been with and Burlington, approach I to nervous more buying. of was systems actually of were that to wasn’t mind. find, in up-to-date. Chuck. pre-planned with sort the configured find I I was I store necessarily systems though, When off-price did that department

our last need and different different at path aspects planning three the processes we’ve and systems, generate What to configure years that’s the drives so the we’ve we systems that look really but our done business, those buying the reports, it also those really that how drives processes of on. over for change is been

the bring we to as of in that say, have. haven’t the new tear been had old about reconfiguring more It’s Thankfully, sort and systems systems. systems we out I

take obviously sort to say, all was Now to what are step you work and a to of so right, was needs, us now. you trying lot of a to have that back do required, understand requirements, requirements there business that do, we have that’s let’s behind user business our well, but

organization. and across We’re are at we planning new out actually new the rolling processes the stage tools, where buying

Operator

the over would to remarks. like to I closing now turn for Michael call O’Sullivan

Michael O’Sullivan

forward your thanking quarter Burlington interest discuss to you May Let results. everyone to me by our in call in this fiscal first to for really look again Stores. We talking close on

time Thank your you for today.

Operator

call. Thank does your participation. you ladies for Thank today’s This you and gentlemen. conclude

You may now disconnect.

Burlington Stores (BURL) 2 Mar 232022 Q4 Earnings call transcript