Burlington easily beat Wall Street estimates for the second quarter as earnings and comparable sales grew, but the off-price retailer reported tariffs had an impact on the home business.
Net income was $94.2 million, or $1.47 per diluted share versus $73.8 million, or $1.15 per diluted share, in the year-prior quarter. Adjusted for one-time events, net income was $110 million, or $1.72 per diluted share, versus $80 million, or $1.24 per diluted share, in the period a year earlier, the company pointed out. The adjusted net income figures for the two periods exclude $8 million and $2 million of expenses, respectively, net of tax, associated with bankruptcy acquired leases.
An analyst consensus estimate offered by Zacks Investment Research had Burlington posting earnings of $1.27 per diluted share and revenues of $2.64 billion.
Comparable sales increased 5% in the quarter year over year, the company noted. Net sales were $2.7 billion and net revenue was $2.71 billion versus $2.46 billion and $2.47 billion in the year-before period.
Burlington raised its full-year adjusted EPS guidance to a range of $9.19 to $9.59 versus $8.70 to $9.30 previously.
Michael O’Sullivan, Burlington CEO, said in a conference call that tariffs impacted the company in the second quarter, with home among the segments in which its sources of supply took a hit. As a result, home comped below the chain average.
“There are some merchandise categories, for example, decorative bedding, cookware and toys, where there are very few alternative sources of supply outside of China,” O’Sullivan said. “In these merchandise categories, the interruption in imports in April and May impacted inventory levels across the retail industry in the second quarter. These categories were a drag on the sales trend in our home business during the quarter.”
O’Sullivan added the company has taken a wait-and-see position on pricing at mid-year, pausing to see what final tariffs will be and how competitors respond to duties once they become more settled. He said guidance assumed Burlington would be able to offset most, but not all, tariff pressure using tools such as merchandise mix.
In announcing the financial results, O’Sullivan said, “We are pleased with our exceptional performance in the second quarter. Comparable store sales increased 5%, which was on top of 5% comparable store sales growth in the second quarter of last year. We also saw very strong margin and earnings performance. Adjusted EBIT margin increased 120 basis points, while adjusted EPS grew 39% versus the second quarter of last year. This was a high-quality earnings beat driven by ahead of plan sales, higher merchandise margin, lower freight expense and leverage on SG&A expenses.”
O’Sullivan affirmed second-quarter strength prompted Burlington to raise its full-year earnings outlook.
“As for sales, consistent with our off-price playbook, we are maintaining our previously issued guidance for 0% to 2% comp growth in the third and fourth quarters,” he said. “The third quarter is off to a solid start, and as is our practice, we will manage our business conservatively and be ready to chase. We see a clear link between our very strong second quarter sales and earnings results, and the key Burlington 2.0 strategies. We are excited because these initiatives are in the early stages of their potential impact, which we believe will grow over time and will drive our longer-term performance.”
