Riding the enduring “treasure-hunt” appeal of off-price shopping, Burlington Stores Inc. posted strong second-quarter results and continues on a quest to surpass 1,000 units.
Confidence in the expansion potential was renewed Thursday, when the off-price chain raised its outlook for the year and reported that net profit for the quarter ended July 30 increased 87.1 percent to $20.4 million, from $ 10.9 million in the year-ago period.
Net sales increased 9.7 percent to $1.26 billion from $1.14 billion. That gain included a 5.4 percent increase in comparable-store sales, as well as an increase of $51.8 million from new and non-comparable stores. There was also a 40-basis-point improvement in gross margin to 39.6 percent.
The company expects net sales for the year to increase in the range of 7.8 to 8.3 percent while comparable-store sales are seen increasing between 3.6 and 4.1 percent. At the end of the first quarter, the company had projected net sales to increase 7.1 to 7.6 percent and comp-store sales to rise 3 to 3.5 percent.
Burlington has posted 14 consecutive quarters of positive comps. Last quarter, better and moderate misses’ sportswear, home, beauty, youth apparel, athletic and men’s shoes and Baby Depot were among the leading areas.
“We feel very confident we can have 1,000 stores. At what pace? It all depends on what’s out there,” Thomas Kingsbury, chairman and chief executive officer of the $5 billion-plus chain, told WWD.
Kingsbury said the company has identified more than 400 possible locations for stores across the country. “There is a lot of white space. We still have opportunities in almost every market,” Kingsbury said, adding the focus remains on operating stores primarily in strip centers. While the average store is 77,000 square feet in size, this year, stores have been opening at 51,000 square feet on average. The company expects to have 592 stores by the end of the year.
On the merchandise front, Burlington is striving to pump up its home and beauty businesses, where the company thinks it’s underpenetrated compared to the competition.
“Home has been a big opportunity for us for a long time,” Kingsbury said, noting that it represents 11 percent of volume, down from 9 percent a year ago. “The opportunity in home is really broad-based. We are doing really well in home decor….Beauty is another business we really weren’t in for many, many years. We have decided to really go after it.” In the fourth quarter of last year, the fragrance business was brought in-house, from being leased. “That has helped us. It’s been a very nice plus, ” Kingsbury said.
The company also sees potential to grow certain categories within women’s apparel such as special sizes and ath-leisure, though overall Kingsbury sees a reduction in apparel inventory going forward.
Through the store, “We’ve really worked hard at reducing comp-store inventory levels over the last eight years. We’ve taken out over half the inventory. We are doing more with less and working hard on product selection. It’s quality, not quantity.”
Women’s apparel accounts for 24 percent of the business, while at comparable companies, the percentage is around 30 percent. Last quarter, comparable-store inventory decreased 7 percent and turnover improved 15 percent, the company said.
Asked what differentiates Burlington from the competition, Kingsbury cited the Baby Depot section, which includes strollers, cribs and other products; outerwear, and special occasion and dress-up for the family.
The company is steadily remodeling stores — 11 this year. Remodels involve improved lighting, changing aisle configurations, new carpeting, cleaning up dressing rooms and bathrooms, and sometimes shrinking the box. “It’s not a huge investment, but we want the environment to be nice and for shoppers to have the best experience. But the stores should reflect our off-price roots. We don’t really want to have a fancy store. We just want to give great values.” Burlington advertises up to 75 percent off regular retail prices.
Asked if the off-price sector is becoming a mature business, with the growth of TJ Maxx, Saks Off 5th, Nordstrom Rack, Bloomingdale’s Outlets and the recent launch of Macy’s Backstage, Kingsbury replied, “Based on the results I have seen, it appears that there are two preferred shopping channels — really online and of-price. I don’t feel off-price is a mature business. We are going to have nice growth in the future. There’s room for all of us. We all sort of track different customers with different demographics.”