Off-price retail company Burlington Stores (NYSE:BURL) beat Wall Street’s revenue expectations in Q4 CY2024, with sales up 4.8% year on year to $3.28 billion. On the other hand, next quarter’s revenue guidance of $2.50 billion was less impressive, coming in 4.3% below analysts’ estimates. Its non-GAAP profit of $4.07 per share was 8% above analysts’ consensus estimates.
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Burlington (BURL) Q4 CY2024 Highlights:
- Revenue: $3.28 billion vs analyst estimates of $3.25 billion (4.8% year-on-year growth, 0.9% beat)
- Adjusted EPS: $4.07 vs analyst estimates of $3.77 (8% beat)
- Adjusted EBITDA: $451 million vs analyst estimates of $433.9 million (13.8% margin, 3.9% beat)
- Revenue Guidance for Q1 CY2025 is $2.50 billion at the midpoint, below analyst estimates of $2.62 billion
- Adjusted EPS guidance for the upcoming financial year 2025 is $9 at the midpoint, missing analyst estimates by 4.5%
- Free Cash Flow Margin: 5.8%, down from 13.1% in the same quarter last year
- Locations: 1,108 at quarter end, up from 1,007 in the same quarter last year
- Same-Store Sales rose 6% year on year (2% in the same quarter last year)
- Market Capitalization: $14.88 billion
Michael O’Sullivan, CEO, stated, “We are pleased with our strong performance in the fourth quarter. Comparable store sales increased 6%. This growth was driven by deliberate strategies that were well executed by our merchants, supply chain and stores teams. The fourth quarter demonstrated the merits of Burlington 2.0 and the strength of our off-price business model.”
Company Overview
Founded in 1972 as a discount coat and outerwear retailer, Burlington Stores (NYSE:BURL) is now an off-price retailer that has broadened into general apparel, footwear, and home goods.
Discount Retailer
Discount retailers understand that many shoppers love a good deal, and they focus on providing excellent value to shoppers by selling general merchandise at major discounts. They can do this because of unique purchasing, procurement, and pricing strategies that involve scouring the market for trendy goods or buying excess inventory from manufacturers and other retailers. They then turn around and sell these snacks, paper towels, toys, clothes, and myriad other products at highly enticing prices. Despite the unique draw and lure of discounts, these discount retailers must also contend with the secular headwinds of online shopping and challenged retail foot traffic in places like suburban strip malls.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.
With $10.63 billion in revenue over the past 12 months, Burlington is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.
As you can see below, Burlington’s sales grew at a mediocre 7.9% compounded annual growth rate over the last five years (we compare to 2019 to normalize for COVID-19 impacts), but to its credit, it opened new stores and increased sales at existing, established locations.
This quarter, Burlington reported modest year-on-year revenue growth of 4.8% but beat Wall Street’s estimates by 0.9%. Company management is currently guiding for a 6% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 9.7% over the next 12 months, an acceleration versus the last five years. This projection is eye-popping for a company of its scale and suggests its newer products will catalyze better top-line performance.
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Store Performance
Number of Stores
A retailer’s store count influences how much it can sell and how quickly revenue can grow.
Burlington operated 1,108 locations in the latest quarter. It has opened new stores at a rapid clip over the last two years, averaging 9.7% annual growth, much faster than the broader consumer retail sector. This gives it a chance to become a large, scaled business over time.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
Same-Store Sales
The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales gives us insight into this topic because it measures organic growth for a retailer's e-commerce platform and brick-and-mortar shops that have existed for at least a year.
Burlington’s demand has been spectacular for a retailer over the last two years. On average, the company has increased its same-store sales by an impressive 3.7% per year. This performance suggests its rollout of new stores is beneficial for shareholders. We like this backdrop because it gives Burlington multiple ways to win: revenue growth can come from new stores, e-commerce, or increased foot traffic and higher sales per customer at existing locations.
In the latest quarter, Burlington’s same-store sales rose 6% year on year. This growth was an acceleration from its historical levels, which is always an encouraging sign.
Key Takeaways from Burlington’s Q4 Results
We enjoyed seeing Burlington beat analysts’ profit and EPS expectations this quarter. On the other hand, its full-year EPS guidance fell short of Wall Street’s estimates. Overall, this was a mixed quarter, but expectations were likely low given concerns about overall consumer health and very uneven quarterly results from retail peers. The stock traded up 8.5% to $257.66 immediately after reporting.
Is Burlington an attractive investment opportunity at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
