Burlington Stores Inc. (BURL, Financial) reported a 49% jump in earnings for the fourth quarter on the back of strong holiday sales that grew an overall 4.6% compared to the expected 3.8%. The company logged adjusted earnings of $1.43 per share for the quarter on net income of $108.9 million, beating the consensus estimate as well as Burlington’s own guidance of $1.30-$1.32 a share. However, the company projected a somewhat subdued outlook for fiscal 2016. Following the results, the Burlington shares hit an intraday high of $59.78 but dropped to $58.59 during after-hours trading.
Growth in comparable-store sales spurs revenue
Burlington reported 11.3% growth in revenues to $1.46 billion for the fourth quarter, beating the company’s own guidance of 9.6%-10.1% growth. The discount retailer saw 6.7% rise in comparable-store sales during the quarter, up from the year-ago quarter’s 4%, while non-comparable and new stores contributed revenues of $66.9 million. Burlington’s adjusted pre-tax earnings for the quarter grew 15.6% to $225.1 million, expanding by 60 basis points, while gross margin expanded by 50 basis points year-over-year to 42.2%, partially offset by an increase of 40 basis points product sourcing expenses.
For the full fiscal 2015, Burlington saw 8.7% growth in revenue to $48.14 billion. While comparable-store sales grew 4.9% compared to the previous fiscal, revenue generated at non-comparable and new stores stood at $185.2 million. The company’s gross margin improved by 60 basis points to 39.7%, while it logged adjusted pre-tax earnings of $448.1 million, up 16.8% compared to the previous fiscal. Burlington reported EPS of $1.83 per share on adjusted net income of $138.6 million for the fiscal compared to EPS of $0.95 per share on adjusted net income of $70.2 million in FY2014.
Burlington competes with businesses such as Bed Bath & Beyond (BBBY, Financial), Ross Stores Inc. (ROST, Financial) and The TJX Companies Inc. (TJX, Financial) in the discounted apparel and home goods retail market. The company currently operates 503 stores across 44 states in the U.S. and in Puerto Rico.
Outlook for FY2016
Burlington also revealed its guidance for fiscal 2016. The company, which expects to open 25 new outlets in the new fiscal, projected 6%-7% increase in revenues, while comparable-store sales are expected to grow by 2%-3%. The company also foresees adjusted net income in the $2.15-$2.25 a share range for 2016. Investors are somewhat disappointed with the company’s subdued outlook, which falls short of the consensus estimate of $2.26 a share in adjusted net income and an 8% revenue growth for the fiscal.
For the first quarter of FY2016, Burlington projected net sales and comparable-store sales to grow at roughly the same rate as for the full fiscal, while it foresees adjusted net income in the $0.36-$0.40 a share range compared to the year-ago quarter’s $0.25 a share. Again, the figures fall short of consensus estimates that had pegged net income at $0.41 a share.
Final thoughts
While Burlington posted strong revenue and earnings for Q4 2015 on the back of robust holiday season sales, the company also improved its full fiscal results on every count compared to 2014. Although the discount retailer’s feeble EPS growth and conservative outlook for 2016 has resulted in some investor disappointment, experts foresee the company’s earnings grow at an average annual rate of 21%-31% over the next 5 years. Consequently the Burlington stock currently carries a "buy" guidance.
