Freight and supply chain pressures hit the bottom line at Burlington Stores in its third quarter ended October 30 despite a double-digit comparable sales gain.
Third-quarter net income was $13.6 million, or 20 cents per diluted share, versus $8 million, or 12 cents per diluted share, in fiscal 2020 and $96.5 million, or $1.44 per diluted share in the pre-COVID-19 pandemic fiscal 2019. Adjusted for one-time events, net income was $92.9 million, or $1.36 per diluted share, versus $19.5 million, or 29 cents per diluted share, in the 2020 quarter and $102.7 million, or $1.53 per diluted share, in the 2019 period.
In the 2021 third quarter, Burlington topped a MarketBeat-published analyst consensus adjusted diluted earnings estimate of $1.27 per share and a sales estimate of $2.25 billion.
Total sales increased to $2.3 billion from $1.66 billion in the year-earlier quarter and $1.77 billion in the 2019 period while total revenues were $2.3 billion versus $1.67 billion in the year-earlier quarter and $1.78 billion in the 2019 period. Third-quarter comparable store sales gained 16% compared to the 2019 third quarter.
In a conference call, Michael O’Sullivan, Burlington CEO, said the current inflationary environment and other macroeconomic factors favored Burlington as consumers subject to such conditions tend to shop down not up, and he added the price difference between an item at Burlington and a similar item in other retail channels has never been greater. He said he expects more promotional pricing and more consolidation in other retail channels, which remains positive for Burlington stores. The company’s revised strategy has favored flexibility, which could aid Burlington in an environment where merchandise availability is spotty due to supply chain issues.
Although supply chain and transportation woes hurt Burlington’s third-quarter results, O’Sullivan said the company actually built its reserve inventory in the period. Burlington was able to make some significant opportunistic buys during the quarter and looks forward to a favorable buying environment as the year ends and other retailers cancel late deliveries.
In announcing third-quarter financials, O’Sullivan said, “We continued to demonstrate our ability to chase the business and deliver great value to our customers. With total sales up 30% in Q3, and up 32% year to date, clearly, we are taking significant market share.
“As predicted, freight and supply chain headwinds pressured margins in Q3. We fully expect these headwinds to moderate over time and, as they do, this should generate very attractive off-price buying opportunities as well as significantly lower expenses,” O’Sullivan continued. “As the economy moves into a more inflationary environment, we think that shoppers will be even more attracted to our great values. Our value differentiation versus most other retailers has grown this year, as they have raised realized prices. If these higher realized prices are sustained then we believe that in the coming quarters we will have the opportunity to drive additional sales, to raise retails or to do both.”
On another note, O’Sullivan said, “This year we have been very excited about the performance of our new stores, especially our smaller prototype. Based on this performance and on the tremendous market share opportunity that we see ahead of us, we have decided to accelerate the pace of our new store opening program.”
O’Sullivan said Burlington plans to open 90 net new stores in 2022 and 100 to 120 net new stores in 2023 in addition to relocating from larger to smaller locations at a pace of around 30 a year. Burlington currently operates about 800 stores.