Earnings call transcript Q1 2023

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Burlington Stores, Inc.

First Quarter 2023 Earnings Webcast. I would now like to turn the call over to David Glick, Group SVP, 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 first 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 expressed or will call this permission. Michael, for recorded June would not transcribed, without like be listeners third-parties. be of to XXXX. may broadcast transcripts turn no this to I A inaccuracies We call take the our in replay until of call

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

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

Now here Michael. is

Michael O’Sullivan

and for this us. joining you thank I to morning, Thank morning. topics you, cover like everyone three Good David. would

discuss will quarter Firstly, I our first results.

through respond of quarter over our to guidance. comment will Secondly, I hand After the to Then, outlook. the questions. to and quarter. to walk full that, happy will second And finally, I about on results the I our will our be talk XXXX for details your guidance will we first financial Kristin year

Okay.

sales On sales this XXXX. store store quarter X% represents Let’s X% X%. comp X% to guidance the Comp first about our QX growth geometric increased a stack versus results. our for versus of talk basis,

that believe was this external we started strongly. moment, by two a We in explain factors. driven growth weaker-than-planned very will I As comp quarter the

was our double-digits. mid-March, until up running comp fact, In growth

the As great delivering our improvement This great strong described we well calls, that of price have driven offering we strategy QX and well strong trend on in early we of has assortment, this have values. in the continued last and had expanding points focus brands very the a into opening on seen value momentum couple first have sales since quarter. the

nice strategy. Our merchants and done value a job operators this have executing

external that in our saw in we factors. coincided the The sales with slowdown trend two first quarter

had well year, levels fall timing the ended last quarter, run These last Refunds the tax they the ahead behind early March, of of refunds. year’s to Firstly, in in quarter but off. began is credit and federal tax like for also XXXX programs is that delivery tax reason tax important benefits levels. below main important the tile and vehicle The are income earned the credit. refunds this

income in about sensitive comp refunds hugely experience, are what quarter. to refunds. on estimate tax lower So, tax X is lower cost historic own growth in QX. customers Based we lower us of our point the that This happened

similar very retailers lower that shoppers. income heard commentary probably have from you think I other serve

or were country didn’t In cooler leading thing than temperatures year. happen second happened weather. up across to The important that Easter, the the last weeks was

in well weather quarter, early the mid-March. which store of warm rest versus businesses, the doing Our were in the softened

up of So our tax trend was lower falloff weather that and Easter the sharp to the primary believe summarize, effect in to driver leading refunds we cooler in mid-March. of the compound

Okay.

factors. This and reinforces driven that the more continued in On the the transitory on move recent stack saw slowdown May, that has this half our me we was pickup to and trend. recent a about began month-to-date. mid-March basis, second geometric in April see we a talk Let pickup by of belief external momentum

turn our then managing momentum comp guidance since X% that and is growth range have we may are ready out this able for sustained, If quarter. supply conservative. to trend There guiding and plenty seen business chase the to mid-April chase. X% this remains our it. are merchandise is of operators the to be and And of a second current to strong merchants to and if support We this

and we to as support value We our believe we focused stay look Overall, strategies focus we working. very to QX, to We ahead feel these need are on our on strong this that good. strategies will. and

factors behind described, a we said, in very be recognize and very have I in slowdown the about explainable concerned health environment that believe to we that the QX the saw lower economic income that customer. that factors, we that the uncertain of us. we As now With trend should is attributable ex-transitory remain is and this

it our So, a business cautiously be chase to manage and to ready makes trend. stronger sense

on rest Let me the year. move to the of

March, based on communicated our store drive to expect to growth, in for is growth. XXX points guidance sales And basis we XX comp this of As year expansion. X% comp to for the margin we full X%

we uncertainties, comfortable potential are with risks also plenty We see still We tailwinds. this some but see of guidance. and

Number retailers will but year-over-year trend. we Let that QX industry comp activity, QX year, promotional this prices QX, mistake trends are upside below our two, in Number in in activity up We retail. retail huge on with QX that was be in of help soft last we levels. promotional of still backfired. lower activity me activity mass our many the made three anticipate last year’s drive that have and last down elaborate should taking to promotional inventory This the this higher especially and reported drove think promotional these one, potential tailwinds. likely this year, sales

drive face This significant trend. and retails higher sharpened. number and this Gas there prices the hurt are have next should was them our particular, to and headwinds, that especially a in summer, tailwind unless were And up is our external become the lower. trend. pressure the again, just over customer gas hurt now under back And customer in of prices three, some us, activity for And and I months. should us core much something year, happens those are few that values promotional higher economic our our Our help last this described.

So we we good remains that based The these tailwinds, our value, very with year full focus guidance. feel on strong environment are well very supply about we on believe our and positioned.

uncertainty, our that might outlook to remarks recognize of and the focused are In full understand all near-term drivers this QX we year. how the have on the deliberately the and trying retail. unfold the morning, QX We performance across economic year investors given for

talk would strong these Burlington in level a So interest appropriately, that like drivers. about performance initiatives. our for moment a to near-term of With X.X there said, is I

a to program couple the as more last to value greater focus a pandemic the years, great a ourselves nimble into its at have efficient been transform comprehensive Over much aftermath, delivering have of we and off-price with on even dealing Burlington our and flexible, been pursuing business, shoppers. with we

cover say We going am that in are progress. our of pleased I not lot a but very to let with this me depth today,

have of supply chain changes improvements in and made a estate. We and and buying lot real planning stores,

In today one have initiatives, to doing about merchandising. we these upcoming the for is say will calls, quarterly been have work callout but in the more I

we years, few the this Over significantly have organization. last grown

in we merchandising also to been all support and levels tremendous and great new at leverage within. and this parallel, talent. we processes from systems talent have promoted developing In and and We brought this have investing talent data tools, in Internally, and and and Merchandising flexibility up-to-date we designed planning respond and X.X intelligence. through refer to transform capabilities, to visibility greater program business to actionable our is as clearer trends it enabling buying to have providing

to capabilities just begun these organization. have We rolling many new the of out

We execution several are the merchants over are drive the next consistent excited to years. these impact ability on and especially excited that have about our more performance will and improved and the

would outlook over to more call who like details quarter Kristin? well to for QX full on as the year. results I Now, first and will turn Kristin, our share financial as our the

Kristin Wolfe

you, morning comparable were on up in while and everyone. Thank I Total financial were sales up the QX. start XX%, sales some store will quarter with details Michael additional X%. good

comp headwinds, cooler are If Michael are temporary abate We weaker into as they to growth. tax headwinds should move with second QX we we by and that this right, believe lower outcome. But and weather. are had the comp planned We we as and driven said, these stronger disappointed quarter. then external was refunds guided in our

margin slowdown in points markdowns, merchandise The offset decrease point point than gross the XXX XXXX’s margin by first was rate the basis the decrease by higher rate turn in during saw expense versus basis quarter were driven of sudden trend which margins. in was lower that which of merchandise XX%. This QX XX was we an driven quarter. a driven XX.X%, This XXX basis increase in a in by more freight

a as Adjusted percentage higher of the our deleverage. the XXXX. in points costs. million protection our the million a driven XX below Product and buying decreasing was as quarter sourcing EBIT of of by primarily of versus percentage lower primarily XXXX, first $XXX in guidance, EBIT guidance. to this SG&A were costs basis XXXX, million XXX $XXX lower sales was of due quarter represented than costs points sales, higher XX increasing the sales, $XXX $XXX majority million X.X%, basis versus Adjusted was points store-related versus asset margin low of basis the Adjusted margin first end

in the this lower To QX. higher sum to markdowns up, margin and the lower-than-planned lower-than-planned of And sales expansion operating drove SG&A our leverage. led

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

on sales store planned, basis. by the quarter, lower XX% slightly driven At plans. end and we of in-store the comp than inventories by comp This a again, increased approximately is our had higher

now of our versus end a inventory comp the XX% last year reserve store of in-store reference, last of flat QX, at of basis. inventories our to At As end point are a XX% on inventory the represented May, year.

our reminder, ahead chase release. reserve up buying about compared that XX% use opportunities This significantly of a of much our later are making reserve fact levels, we and XXXX. since the with greater history, is pre-pandemic to still hold off-price reflects As inventory for

store opened stores, the our bringing During end quarter new included first X the openings quarter, store X XX XXX or we the to new of closures. This at relocations count stores. and net

outlook for and Now fiscal second turn full will year the XXXX our for the to I quarter.

X% to comp which to outlook on an This QX consistent margin our adjusted $X.XX X%. up sales EPS reiterating full to outlook, up of margin to EBIT and increase Based and includes our expect our outlook this adjusted we sales XXX comp guidance, is the are we sales on in of year This still call range a outlook March. earnings We sales to $X. by provided translates points. XX basis with

the $X.XX As week. from EPS a XXrd reminder, includes of this

X% of plus to reasons the and result X%. to planning QX XX for guidance Michael up quarter, guiding to of This of are XXXX. In to would plus expansion second of the $X.XX margin This we second XX versus earlier, quarter comp a operating for $X.XX. translates points to the detailed in EPS up basis increase

For basis XXX to XX% to year. X% increase comp X%. XX% in the back this store compared range of an outlook fiscal assumes of half and $X.XX EBIT to to sales plus last of increase of to plus margins the XXXX, XXX points EPS $X.XX, to

now call over Michael. turn I to will the back

Michael O’Sullivan

Thank you, Kristin.

we questions, some like call today’s I summarize Before up from open points the key to call. to would

that by cooler Firstly, strength that specifically, experienced the that X weakening in the in weather driven especially now believe and QX Easter. refunds to factors early the March was But we quarter. our trend up tax are saw we lower external we with given behind the us, disappointed leading of that are results, we

very feel that we the we our have good value by to strong and Secondly, and underlying recent on our seen focus in strategies our business. customers, about we trend our are encouraged delivering

we to in guidance. cautious turns out being than are to QX, the but are We be are sales planning face if how stronger we trend ready

our full uncertainty, customer, see And health remain year of but of plenty economic we we the the with We see some lastly, potential concerned we tailwinds. guidance. remain and low-income comfortable about also

over would for to the questions. turn call point, like operator to your I the this At

Operator

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

Matthew Boss

morning. Great. Thanks and good

horizon? could stores? Michael, the your the additional around signs concern customer continued in the you on trade-down you’re elaborate So consumer And of provide any commentary you cited Do on low-income think your you do see remarks? you a that any or seeing in some improvement

Michael O’Sullivan

has it the Good for but you question. The shopper major offer. said And driver for a That repeating. customer bears historically, needs we morning, growth. our core lower-income Thank is low-income before, Matt. value the customer that this a We’ve likes us. been and of

program a prices, then roller they The low-income to federal last from swallowed back and earth general been on the inflation drove spending. food Now over consumer as And income. stimulus coaster couple last a prices, surge disposable has gas up in of down their crashed year, XXXX. their really years, in

on a been improvement So we government the the we was, defaulting has that do, unless next that its XXXX, are for since there question actually, major early your over federal headwind clearly shutting on economic customer And pressure on economic the lower-income on the a customer of see us. horizon? do We major any is debt. there factors a pressure the the couple ease down shock like or think several months. And could

what in happened Let just me QX. with start

major remarks, on to we lower was faced shoppers. of that One as a described headwinds impact lower-income tax in huge the QX the I which, in refunds, tend have

snap And it’s are reduced benefits There Now that as we to persist. some abate like out move that season. impact refund going headwinds true. are tax should of

lower dollar is with compared refunds, impact small. tax the of these So fairly

drives The household of a could of months, that, are anniversarying few this higher a proportion that over that I to other likely last event were sensitive tailwind lower help is costs the prices now again, it very prices. lower-income gas represent and seems summer. them prices we’re significantly high tend in unless some remarks. their is gas be summer to and spending. The they year. positive that customer next than Those the up, become mentioned going could last factor the higher back this to Gas major prepared

other that we’re that And move want about which overstate are your do support to up this, careful but seeing trade-down would there part a me I question, some, it, is I customer. evidence be the Now to let’s trade-down to let the of think call yes, I data not on offer stores. that. our pieces in to early And customer of of two

in. low are that that we based been in, is trade the growth the worth down with years. reflects over located the pattern stage that household we’ve Firstly, it’s our when of rest they higher it income that economic seen we way, performance that stores and area that the by look our upon And seeing with to by incomes of that, to are see at areas historical the complete the profile of chain. our in that of the we’re are reverse stores noting reversal And that many And may that, income the driven be stores Historically, believe just moderate shopper. suggests we has trade households. we’re cycle starting a outperforming

stores. of price softest. branded the we’re evidence more want great Again, merchandise. our at inside trade especially that strength for look strength middle down as we’re opening assortment, early on you deal about, at are Clearly, customer into shoppers when values. points our think reasons the Secondly, the price you’d we the price to strength But expect, points, also need at those of the appreciates points. seeing talked we’re seeing It’s that that coming higher may seeing the or all price our be points we’ve higher

tailwinds. into others headwinds evidence in have early around seeing guess uncertainties. long but this the it there a income our that the pressure. up coming we think up, down sum there a answer, consumer sum may that economic in months, customer is some I’d we of are that I The under see risks And affected will and some be for recognize also But is saying, abate we even grounds some I’d we’re stores. trade turn believe may We turn by shopper big optimism. and lower huge that So separately,

Matthew Boss

operating Great. margin. second And your quarter follow-up Kristin, to then, on

margin explain? back comp that front your you achieving there based margins any more expansion rationale be and the up lower drivers to Are implied plan? but is this the the cited, this the expected. on are the on just the of drivers makes And than to confidence What half. sense guide So now than half in

Kristin Wolfe

question. Thanks morning, the for Matt. Good

expect plus leverage we’re points XX freight. merchandise X% quarter, points expenses. particularly this versus settlements should marketing modeling margin expansion. second continue be growth quarter, insurance and timing main depend two timing and year. to freight more of lapping do lower favorable in worth basis These from plus quarter the the of margin lower really margin on comp ocean quarter comes a about merchandise in estate course, one-time The second of operating expenses benefit to from X% collectively There QX the and some XX last will but built for last to in sales So costs the guiding We second our transitory in into basis freight, certain and of to higher margin XX operating expenses. lower quarter. and include from sources: and of are sales the some some guidance. headwinds year second includes are margin real And gains These

In the mix as increased higher expanded the given and addition, the supply we potentially key as puts points. really are we’ve closeout well price opening the Those lower margin. also have AURs on takes as chain quarter of true merchandise second costs

do gross on the from transitory addition, on in freight the comp, fixed fall. occupancy fall. not leverage the QX margin to should like in expenses back from margin expect the in higher the in we our noted XXX question. than XXX increase Like the in store and points. assumes half, of sales to X% in This to guidance ‘XX, noted your plus plus expect basis you’ve is QX, adjusted as both facing half we’re we merchandise leverage first For higher depending And and fiscal EBIT to I margins higher expenses have And we of comp lower fall sales the costs. X% that

the these in feel we factors, good light second of guidance. about overall, half So

Matthew Boss

luck. of Best color. Great

Michael O’Sullivan

Thanks, Matt.

Operator

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

Lorraine Hutchinson

in you that little weakness sales in to this could you activity you Good a trend whether your promotional second retail on the you. in in the hurt and quarter the first mentioned may lead second Can sales morning. Thank the across the quarter? elaborate more quarter. this believe Michael,

Michael O’Sullivan

the in saw also question. for discretionary think Lorraine. traffic trend morning, actually, likely retailers. that – slowdown Good March by experienced other in most We Thanks we we realized was in the and the that

coming spring want some of as We the merchandise Retailers lead into activity is spring that make the sales some now. to promotional numbers that’s versus for receipts. being to think their anticipate I reported. through we four we likely where will further clear get the and are are increased season, to way softness in

part we kind just process, to a natural expected of business, have reflected of course just similar headwind We the promotional and guidance. headwind those for of be compete from should course, promotions any to of we’ve in clearance normal Now really think that we just regard us, what as they are we environment. but QX in able are and adequately higher experienced would and fine our this pre-pandemic,

between significant. And large we’re they backed situation or Burlington, had retail last retailers were demand contrast this that prices. to But time that many at a There with let me clear. up was and that year, Last all we much with year. together were inventory this supply more the at imbalance when came raising

better retailers And better are we’re lower much mean promotions widespread. secondly, we think activity, were than this a external fast this should much So shape, but in values. position terms at some much to and year, less our they Burlington of most last are forward promotional in shape expecting own yes, cleaner are And year. in we

quarters, like And hard over described, been worked very I’ve the focused As This very we’ve at something well point, sharpen is our feel this we we’re values. on. we last positioned. to few

QX, that guidance. up, our factored yes, on pick believe and sales this that in we the So that we be all promotions to QX but anticipate – adequately into to expect we’ve impact should trend we’ve limited, sum up we our

Lorraine Hutchinson

availability of will talked year. update My do this, is about some have store stores Is to been of think an real of new these Last estate? any especially your on the Thanks. XX the second have to you question goal impact this there quarter, that you a opening light retail plans. XX new in of bankruptcies about announced,

Michael O’Sullivan

that you described March, a year. question. to quarter the our That’s Again, you gross to In in Once not closures, XXXX. expect But this for answer openings number. and our call relocations you changed. new number, of get has for thank in XX plan XXX stores XX the pull the fourth that this we number to of open stores net to out we XX new short is

think Now to these impact a and The on typically is locations. your likely the complicated of take store time. attractive have bankruptcies a bankruptcy point about can process retail on bankruptcies, significant availability we long are new out yes,

our So But it’s specific. new bankruptcies hard that these get will pipeline. store confident to strengthen we’re

expansion stores. older, We relocation and of ambitious more for program the tired of and store have an of network our less our some the productive

the our So the real this new retail upon going over program help Many very this time, most today stores next we pipeline, productive have once point will a Sports us strong has is is really Linens of ‘n store experience and I estate "R" final Authority, City, that bankruptcies. think pipeline execute store Circuit The new Toys lot to a that make stronger Us, team Things. to successful on to several dealing of a years. with

for or and is going that those. of we best assessing emerge evaluating that locations stores a or created these of then up, negotiating economics and after point the of carved from with suitability the Sears Kmart bankruptcies lot have from Some were potential My of experience locations. our in team a types

Lorraine Hutchinson

Thank you.

Michael O’Sullivan

Lorraine. Thanks,

Operator

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

Ike Boruchow

Michael, do Kristin, any signs do be Are any availability. you seeing guess, of in a Hi, that this And big first then last have off-price Clearly, question, It’s merchandise merchandise. way? really guess, any Kristin. you for may David. I I just strong quarters. concerns? been pretty have couple on for morning. I picture the tightening follow-up good Hi,

Michael O’Sullivan

that is headline The availability remains Ike. exceptionally morning, of Good the off-price strong. merchandise

changed. I of the retail the late in supply. this with constraints. availability the inventory, And they last because the placed I XXXX, say much. to year, just buys. have and those haven’t When huge half was supply – had would great any real I they we Last also very some making that mainly a I back tightening and that back been have good. of merchants really would facing of retailers Our vendors main say the is When difference chain contrast year, were wash ordered originally drivers too orders may delays industry was seen

So a they and time orders, into then built a course, up cushion once. everything supply as have chain showed unraveled, all volume at those constraints the of

So there was far too much supply in the back half of XXXX.

This off-price we’re it’s plenty seeing still year, other But words, outcome. spring, I this time, seeing similar of a availability. we’re different. In this think

driven still off-price too demand. the customers it supply, The think channel. have this, sales merchandise I And trends softened. because pulling being into been great we’re seeing much still by back, coming by too of it’s driven little

the whatever for us Now is thing the in key this and cause, control root to the manage environment, buying process.

the get we very, So very deals. best

not about worried availability right We’re now. really

We’re control. focused on

make sure It in extremely currency and environment, buy rack every are to that valuable absolutely be an is know liquidity. our need buyers to there. deserves the this that to open we Our on hanger

Ike Boruchow

QX Kristin, on especially particular and conversion, in saw you. I dig QX? comp in size you of Got love ticket on transaction you some comp the could follow-up what for it. characteristics, then to maybe the growth, expectations And would Thank traffic kind a into price, components and average of color just

Kristin Wolfe

and lower in quarter the the biggest by external the this trend drop-off of more is mid-March. the buy the It units the modestly. Ike. within driven this were And drivers meaningfully strong then In mid-March. our more. resonating was our first supports started hypothesis morning, external in factors. transaction. for macro anything Again, happening into Typically, in not per strong It’s first decelerated that she’s Good really stores. comp she Once Thanks supports are the higher data but driven traffic to our buying comes traffic she conversion the likely by of up that comp and traffic consumer. is store, were quarter, factors driver question. belief The weakening primary higher values with

points. our AUR This AUR of the down our opening reflects quarter, was For expanding modestly. price strategy lower

We pressure and as on down our into this and does we’ve our our supply expect year values, expenses, to somewhat throughout start mentioned, chain lower guidance. be the focus I we built as AUR AUR this

Ike Boruchow

much. so Thanks Great.

Michael O’Sullivan

Thanks, Ike.

Operator

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

line open go ahead. please is Your

Michael O’Sullivan

John to you are question. next the let’s go there? Operator,

Operator

Alex comes from go Straton ahead. Morgan Our Please Stanley. next of question line from the

Alex Straton

year. for Michael so Thanks on much sounds assortment first with like for were strategies My of one updates Kristin, some provide changed making than you that. has maybe what Could do just have investments organization? my and Definitely on some additional a color organization. the really last you buying you’re question. also on I level taking Great. execution happier is the the and maybe buying for of it you’re in after the the follow-up

Michael O’Sullivan

our time refocusing our our tearing half redirecting I of spent we of drivers of customer. sharper Good performance apart and a morning, strategies the deliver to Alex. much the feel assortment then. the last that strategies shared Thanks the on for to In the significant. value and we’ve sales the we’ve the lot If calls, good back trend year, time progress that I pursuing. mid-March, the about and very very, question. stronger in and of details previous improvement quite made since On frame October was between look we’ve been some at

our to the out need level, high just expansion of price the customer. seen – opening we’ve a points at these focused really call significant a So on

that to trade the customer. a Secondly, a recognizable focus on sort or of once after go deal brands

stronger shifting back lastly, liquidity approach to much more And to then trending businesses. businesses. Thirdly, to pulling on ruthless more a approach aggressive training a a weaker

against well feel we’ve like those overall, So I strategies. executed

focused, focused, very stay to need we we and will. Now

overall we or we the price although always shouldn’t are some of that with pleased be other The that’s for high. business we we That’s opportunities we made will a the make always buy areas have level nature buy is or too point make There in. mistakes to we’re that make there execution, where is the a improvement. a at

them. I culturally, up Now important. I And then at good we’re learning mistakes very recognizing correcting from investing our that very, very at and think that’s to and think Burlington,

step and investments grown our But we’ve the let planning address years, in last made organization. back take and this me about question organization. buying significantly we’ve In your a few

is about bigger within. promoted it at in than and from brought was XX% We’ve headcount great XXXX. merchandising all we’ve Our tremendous levels, talent in talent

in remarks, systems that been the and tools, headcount and we’ve As I merchandising investing support growth, prepared new talent. processes with in this in developing parallel and leverage to mentioned

been Merchandising especially to processes our is like, buying actionable transform and intelligence. to are X.X would to to really very of buying the to Merchandising rolling I This all support designed regard visibility capabilities many X.X. that in-season planning Burlington to somewhat store capabilities, with provide the say, the to trends. merchants organization. data responsiveness and business visibility those to program supported out and greater Now of at up-to-date that respond Historically, systems have tools, have and to trends year, rigid, flexibility we new and and clearer enable the to planning department

capabilities extremely over the the to very merchants have I next those impact performance few driving in about are We and going of in years. excited. the And improved that remarks, are the are have said as terms execution excited

merchandising but a with ahead from – away and the a performed of take quarters, are we have upside of think us. message of last how answer over is So, merchant organization the still lot pleased has that, main yes, couple my of to opportunity we we lot our

Alex Straton

and inventory more so Kristin That’s Thanks on specifically Maybe reserve. much. super one for helpful.

Thanks I think all think compares last year, of about being the end year. inventory or at to that that should concerned general? think XX% that we in reserve so said a the I and last about quarter, or be at of Should lot. we was about how you XX% inventory below it

Kristin Wolfe

Good It’s a good morning Alex. question.

data. me let a contextualize inventory offer to few So, the points

First, we we we inventory year than were more under in stores our have last year. last inventory had as

However, if you compare quarter to down XXXX, our store are inventories comp first about actually XX%.

still and are our versus we running leaner turning So, baseline. faster XXXX

up season. or that next holding is reserve We great buy buys we Secondly, are until made the opportunistically. the season reserve of

have. receipt delays there that goods earlier year, at we a depending here than of typically had some normally of level the fluctuate to So, some brought note. Last reserve that’s But the time would we we we the on supply. in experienced, given will carry important is any factor

Now, this the reserve a are reserve on and little pressure that delays downward of us, these levels. putting receipt is up freeing some capacity behind

So, opportunistic might the more of relative year. lower last is reflection year, our point of the down buying of than I last a our XX% at and up XX% in a And important that year, it’s the off-price trend great assuming and on opportunities made, this to our structural merchandise the reserve QX, slightly we is rather implication levels really on were just supply levels shift the represents higher finishing environment. about a really our buying reflection continue this to great the were to than of reserve level reserve, focused reserve of as see business still lastly, And are about buys. pre-pandemic. we that end strategic or are reiterate than they more This

Alex Straton

Thanks Good a lot. luck.

Kristin Wolfe

Thanks Alex.

Operator

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

John Kernan

couple a have I David, and Kristin, Michael, of morning. for Good Kristin. questions Alright.

margin merch Firstly, in on the QX.

down given focus I Just share margin of lower I points. can and that only little basis any the you in suppose Are sales more merch merch a XX slowdown performance? am terms margin there was surprised other on drivers the AURs,

Kristin Wolfe

merch markup see want to specific turning the buying questions. really were our we breakdown, values Thanks last prepared also our to environment, by saw noting XXXX. well stores strong early year our John. margin levels we our quarter, Good markdown did in the internal to described still the year-over-year the markdown XXXX. and our our in want for were are last the do share morning higher and our due customers. during that get the it’s due under will below strong too were faster plan low while I on while in markdowns to artificially sales was year, worth along is as the and to remarks. But inventory to markdowns in we this higher recall below I this inventoried year passing that our last you XXXX change than that because trend And the merchandise quarter levels while still driven margin Overall, much was the And don’t year relative higher

to great good exiting deliver think position So, positioned about appropriate, quarter. it’s We the value. we inventory are our and feel well we seasonally

John Kernan

add think of How there Got you rest it. Maybe recapture freight, can year, any SG&A? favorability. of we in color both shifting other margin freight the to I this? and XXX Is on points the think should basis about margin gross on

Kristin Wolfe

Great.

you about So, basis last this And as of the ‘XX, QX than QX But we year, of of the basis costs than primary of QX points freight expenses higher you ‘XX know, put in to XXX as This quarter external QX freight freight rates points XXXX. were the have deleverage. points in are half perspective, than favorability, freight first more in recaptured lower are higher XXX basis XXX than is was about of moderating, ‘XX, particularly noted. driver ocean which XXXX. freight. this The

softening to take and Our domestic freight of and renegotiate worked both teams our for really freight have hard advantage contracts freight. ocean market a

the And continued primarily that’s much fewer year. leverage rates rates year, along lower costs the the drive domestic of so for back will freight improved benefiting of surcharges, of the expect in ocean year, the we balance due while freight half improved first to the with half

is guidance. on we spring, are modestly working inbound contracting actively freight and several and outbound addition, our had rates are in and process our processes through transportation our initiatives In this into forecasted, And efficiency. drive optimize came focused transportation that built we than finally, this better to

John Kernan

you. Thank Alright.

Kristin Wolfe

John. Thanks

Operator

go line question ahead. Gordon Chuck next from Haskett. Our Please from comes Grom the of

Chuck Grom

some Burlington real other us prepared chain morning. if Good X.X, in Michael, your you this was wondering I merchandising can updates us Thanks all an aspects you on of for remarks. update Hey. fronts. you touched on on supply and morning. estate color could give I some wonder give the if

Michael O’Sullivan

Sure.

me headlines supply X.X So, in good into with will some it the been I some have chain. provide Yes, real Burlington initiatives. Chuck. of estate stores, sort break morning, let and terms progress we of making

doing line well in done is certain our years to make expand few over off-price of to at level, things we the well last terms doing back based to the And is chase upon model sales if or in footwear, to very able have be to lot home, pull areas important etcetera. also expand top but operations, the home footwear within of a in also So, stores store assortment, to stores a more It’s flexible. trends.

We have getting out also of receipts had on focus lot to a the floor.

Let’s years multiple our over last during make sure efficient. been very we the introduced couple the And we in a get to possible. And that’s rapid new time market has been as out processes labor stores more the where way of a receipts all tough. have make

had So, all we facing headwinds of have labor those in of make to sort terms changes while availability.

help tools We of improved drive consistency in systems have and developing been to and number also stores. efficiency a

which important Now, And be upgrades, are have very half those longer some systems back won’t obviously, probably the year, year. systems going us, to of the we out slightly I lead in till improvements, be those to probably of time. this most going are piloting but think a of to next important roll

So, we of made progress. a lot have

stores. real been to in Then what we estate, We things. on have I we of do a new lot have able stores. with very move happy to done so am

store new opening our up smaller our new ramped program with a focus have We prototype. store on

stores. of very XX net to the that I And are happy stores to to over economics the remarks, my up year, last this have relative that’s new us years. the and of ramp allowed prototype in said as open XX number couple expect with of We new we

we from the like seeing and year. bankruptcies Now, more we give that the we more, from will will we we that would XXXX, the on in to obviously, end and the and closer to have bankruptcies we to availability updates are hope will opportunity open some get us more. provide retail see But of to as XXXX open of

chain. on chain to we and finish are number a in of flexibility supply things have been working There supply our that up with Let increase me efficiency.

there we in working efficiency in actions are large also and receipt has tough. able tough. we are processes, market, in systems especially have on a has been etcetera. But execute been have environment have taking, there of the others to where things longer been things warehouses to we again, shift example, have that distribution making that of work and those that But have volatility short-term, schedules an number changes or the frankly, And some been lead labor for automation. like a Now adjustments made areas time, which centers

those but we can chain more happy are lot the again, our like feel So, we on have I do there and progress focused opportunities. made, with a teams supply is very

happy made take But sort fast. the that overall made an really look feel few on up made a sort back because off-price let But changes I last And when Burlington I the are that effective they mistakes. to have me we have organization, with step I make years. of assessment. environment very across given external have the like couple X.X I progress success our especially of the in have with the see we going moved am us in to that, the drive that some years. of are we So, can sum going a retailer, more next and and we much of initiatives,

Chuck Grom

Kristin. then comps basis can the of confidence in follow-up of the and here just missing margins? particularly us and back after That’s fourth quarter? sequencing my in you is degree then out first I and of And quarter half the Could very your some up of XXX And your the helpful. in third but on talk numbers for on said Thank help about points both over you. XXX quarter? EBIT, you a basis you margins think sequencing the both points, comps guide,

Michael O’Sullivan

then expense Kristin You the I that into don’t know two. I let’s with can Why will confidence. address – start margin start break outlook. And and question what, Chuck, maybe – let sales the me

though our guidance. crisis, first We we even I can that think our one, of see comp, sort three triangulate a So, things Number But point, that us of could on comp would our allowed – – this lots disappointed things that year us of are know in QX, what sort few the There back recession, uncertain. all, just government year were have I are in there there etcetera. confidence we particular a sales, in very we shutdowns, give of banking that we is we at given were well, on really that full with happen, this guidance. things X%. recognized environment half say reported we to

X% is to guidance year full our X%. Now,

remarks, I headwinds. think driven reasons by described the in we For the was X% that transitory that, partly

impact, strip tax out we it think refund have just the X%. would you been If

guidance quarter just again, direction first the trend, upon So like comp are based of to hit X% to X%. we moving right year the we in full our feel

we from ahead Second that last when X% we here, to was look X% thing up like year. feel against to triangulate things are on some we

anniversarying the now mass fall, promotional very, activity some control particular, from really and terms throughout the onwards in of the much high mass shape mid-QX that negative things the of are summer inventories. In retail from in happened are very into their year. We last retailers in better

So, and we think promotional activity, will are we level of help the us. not same that expecting

now. were that other higher are I higher The much we thing summer, That gas in prices. remarks, anniversarying, than is prices last mentioned they gas the are

that long thing and on guidance stay full last the year over they second And move are our the year. mistakes quarter in from to year. we against that the use the X% we we as prices for And up made be to to last X% as triangulate third decision quarter gas the own will of in then raise as that particular, where we months, of tailwind. third was retails sort So, we few next a think that are,

fourth we call, us. especially really quarter that our like on and described, As third quarter we feel hurts

shape in value. much are stronger much, better much on We focus now,

plenty I let I But on X% guidance the – the of at Kristin, our over to we feel to of X% comp. But me answer, to out think that. again, comment pretty back beginning aspects So to said is about it year just good of will my the full there uncertainty of we go margin pass there. what

Kristin Wolfe

Sure.

back on year, noted, increase for but ‘XX XXX of merchandise fall, basis And – points margins EBIT we freight in side – the the freight planned the also are costs, higher Lower the for the gross you both higher and of we expect to first the points. particularly to margins, as do half costs. half So, the half back lower fiscal XXX basis margins similar to of domestic year.

addition, should hurt we we fixed that In in us sales QX, leverage we comp, fall, planning And the expenses expenses that given we on the like transitory fall. in obviously the don’t have – occupancy. for the are

So, the those margins big for takes the are the puts side. fall on and

Chuck Grom

Okay. color. Thank Great. Helpful you.

Michael O’Sullivan

Chuck. Thanks

Operator

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

Mark Altschwager

quick Good performance Thanks. And morning. would you. then major your retailers? you relative how assess follow-up. Thank Curious this quarter the a I other have off-price to

Michael O’Sullivan

in Sure. Well, we thank like by feel we start that you, think are our business. Mark. A good lucky me question, I let saying

long full We potential very have a in for demonstrate two business off-price the looks what’s time. analogs, successful that if been possible, like, companies Companies, what that you have like.

course, demographics of Now of our customers. between there the core it to when comes are differences of especially us, each

have customer size, particular, They urban, pressure. and major be been customer. ethnicity, over been family we the that tends driver they lower-income, more core of many again. But will customer, a past under in year, this severe growth love over younger, years, higher economic to our Our has skew larger

And off-price and business. like. larger we retailers are say, I the between if difference The other less would mature, the major other that, us are we is newer to off-price you

and Our off-price executing model refining been peers have the for decades.

look, That’s the our invest. off-price is lack execution. compared haven’t them, why are that systems place Burlington We that’s of be, to relative I whole an That’s exciting to place and shows to why here. executive is in why a here. business. team exciting to maturity – And we processes the sometimes latecomer am our in up But

in We retailers. retail to several happens, years. share We smallest, over drive and believe of a take and our channel productive least off-price the And we as Burlington off-price we to continue will tremendous profitability. the major profitable are but that opportunity least the like at feel have growth next the sales

but sure, think longer outlook is the the exciting. term very has last yes, So its very, for had year challenges we

Mark Altschwager

you some frame perhaps of other And broaden opportunity to and attraction Can been with theme have demographics of shoppers up has the there Thank among competitors. you you. a reach? your younger Burlington’s

Michael O’Sullivan

Yes.

it’s question. good think a very I

the shoppers. on start me Let younger

peers. to compared always had of to have customers department a compared also stronger We younger our off-price share but stores,

and into Our the walk can assortment younger. you customer – stores, the base when you – our see physically

said obviously, kids tend have are talked tend this the the our of – over be that a long-term a kids strength stronger aren’t segments, tend right and economic – the for are to those have over States. where about an only tend We struggling They And to earlier, in more consumers we more United the just cycle, long-term, are are be segments income. They they demographic urban. are, young not in of younger. they ethnic, the strengthen. given penetration to I fact of have they juniors, Burlington, demographics they morning be to business, shoppers Those the to lower as attractive we men’s core set be have now. that that’s the growing But

effectively the store to segment of that different and ethnic, even other core of there we even range a we order a Burlington, are the though to in goal me be Are – range get for which the Let to we to part areas. stores, need our other operate described expand large younger, is be – though still the urban more I locations a second in expand to operate your wide of can that’s group just etcetera, we need question. to our of X,XXX able able long-term population, and demographics, in attract broaden demographics, to

what to to demographic broader wanted is and would number to of appeal that in we things I customer. are do do therefore, our a are say not customer, by a a a but the improve our there to only assortment sort of So, store of doing – customization need business to

next But good pretty need that it’s something the definitely ability that work do aware feel were time. on I to over several over that we we So, to about years. our

Operator

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

Michael O’Sullivan

Let by Stores. today. your to We forward everyone Thank talking in thanking August your this to interest for late again on results. to call in quarter look me second Burlington you for close discuss you time our

Operator

Thank and you this Thank call. does you. participation. conclude gentlemen, for your Ladies today’s

You disconnect. may now

Burlington Stores (BURL) 25 May 232023 Q1 Earnings call transcript