Burlington Stores(BURL) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4, the company achieved a comp store sales increase of 2% on a 13-week basis, exceeding guidance of -2% to flat [28] - Total sales growth for the quarter was 9%, higher than the guidance of 5% to 7%, driven by higher comp store sales and the addition of $138 million from the 53rd week [42] - For the full year 2023, total sales grew by 10$3.69, significantly above the guidance range of $3.10 to$3.25 [14] - The adjusted EBIT margin for Q4 was 11.1%, 110 basis points higher than the previous year, exceeding guidance [44] Business Line Data and Key Metrics Changes - The company opened 80 net new stores in 2023, with a total of 1,007 stores at the end of Q4 [6][32] - Comp sales growth for the full year was driven by a mix of recognizable brands and strong performance in holiday categories [30] - Clearance merchandise comp selling was down double digits, but regular priced merchandise comp sales were up 4% [31] Market Data and Key Metrics Changes - The lower-income customer segment showed improvement, responding well to value offerings, which helped underpin comp growth in Q4 [29] - The company noted that trade-down shoppers, particularly higher-income customers, contributed to comp growth [30][96] Company Strategy and Development Direction - The company aims for total sales growth of 9% to 11% in 2024, driven by 100 net new stores and comp growth of 0% to 2% [7][48] - The long-term goal is to grow total sales to approximately $16 billion and operating income to about$1.6 billion over the next five years [39][79] - The company plans to open approximately 140 gross new stores in 2024, with a focus on high-quality locations [65][91] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the economic outlook for 2024, citing uncertainty in consumer behavior and external factors [4][82] - The company is optimistic about the long-term growth potential, particularly in the off-price retail sector, and plans to enhance execution strategies [69][125] - Management acknowledged the need to offer stronger values to attract trade-down shoppers and improve overall performance [11][78] Other Important Information - The company ended Q4 with approximately $1.6 billion in total liquidity, including$925 million in cash [45] - Share repurchases totaled $103 million in Q4, with$500 million remaining on the buyback authorization [46][132] - The gross margin rate for Q4 was 42.6%, an increase of 190 basis points compared to last year, driven by lower markdowns and freight expenses [71] Q&A Session Summary Question: Can you elaborate on the rationale behind your 2024 comp sales guidance? - Management indicated that the guidance is based on a cautious approach, allowing flexibility to react to market conditions, with a historical average comp growth target of mid-single digits over the next five years [52][54] Question: What are the drivers of margin improvement in 2024? - The primary drivers include higher merchandise margins, lower freight expenses, and supply chain efficiencies, with expectations of EBIT margin expansion of 10 to 50 basis points [85][115] Question: How do department store closures impact your business? - Management noted that closures of brick-and-mortar competitors typically benefit the company by increasing traffic, although the impact varies by retailer and location [145] Question: What is the outlook for the low-income consumer? - Management believes the situation for low-income consumers has improved compared to last year, but recovery will take time due to ongoing inflationary pressures [147]