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Burlington Beats Wall Street Estimate in Q3, Raises FY16 Outlook

Burlington shares (BURL) surged more than 14 percent Tuesday morning after the off-price retailer reported third-quarter earnings that crushed analysts’ expectations.

Sales at established stores rose 3.7% in the three months ended Oct. 29, compared to a 2.8% increase in the same period a year ago, and Burlington’s 15th straight quarter of positive comparable store sales. Net sales gained 9.1% to $1.34 billion from $1.2 billion. In addition, the company’s net income jumped 114.4% to $32.4 million or 45 cents per diluted share (51 cents per share on an adjusted basis).

Analysts polled by Thomson Reuters had expected 33 cents per share on $1.32 billion in revenue.

The off-price roll shows no signs of slowing: TJX Companies posted a 7 percent increase in net sales and a 5 percent increase in comps in Q3, while revenue rose 11 percent at Ross Stores thanks to a 7 percent gain in same-store sales.

“We are very pleased with our third quarter results, which exceeded our sales and earnings guidance, continuing our strong momentum from the first half of the year,” stated Tom Kingsbury, Burlington’s chief executive officer. “Our ability to execute our off-price model by delivering fresh product, compelling value and sought-after brands continues to serve us well.”

Gross margin expanded by 140 basis points to 41.2%. That increase was driven by strong merchandise margins, which more than offset a 20-basis point increase in product sourcing costs. Meanwhile, merchandise inventories were $822.5 million, down from $934 million a year ago, attributed to a comparable store inventory decrease of 8 percent. In addition, pack-and-hold stock represented 12 percent of inventory at the end of the third quarter, versus 14 percent last year.

To that end, Burlington raised its full-year outlook. The company expects net sales to increase in the range of 8.4% to 8.7%, up from previous guidance of 7.8% to 8.3%. Comps are also projected to rise between 3.9% and 4.2%, compared to the previously anticipated 3.6% to 4.1% increase, while adjusted net income per share is expected to be in the range of $3.11 to $3.15.

Burlington operated 592 stores in 45 states and Puerto Rico as of Oct. 29. The company expects to have opened 25 new stores by the end of the fiscal year. Its stock is up more than 97 percent year-to-date.