Dive Brief:
- Burlington Stores reported Thursday that its first quarter sales grew 5% from the year-ago period to $1.3 billion, driven mostly by an increase in new and otherwise non-comparable stores. Comparable store sales for the off-price retailer grew by 0.5%.
- Burlington’s net income increased nearly 40% to $52.4 million, or 73 cents per diluted share. That beat analyst expectations of 70 cents per share, according to MarketWatch data. Executives credited the increase to sales growth, better margins and share repurchases since last year.
- For the year, Burlington’s management team expects total sales to grow by between 7.3% and 8.1% and comparable store sales to increase between 2% and 3%. The company also expects to open a total of 30 stores and spend $200 million in capital expenditures.
Dive Insight:
Burlington is among the off-price retailers that continue to expand and bolster their sales while mall-based retailers flounder, retrench or die off entirely.
Off-price retailers have tapped into a growing appetite among American shoppers for a low-price and convenient shopping experience. “What we are seeing in many cases is a tradeoff from a higher, regular priced business to the off-price business because that is where the consumer mindset is at this point in time," Michael Brown, a partner in the retail practice of A.T. Kearney, told Retail Dive earlier this year. "There is a downscaling in price point that these organizations are able to get, while they try to create a differentiated environment that the customer would still shop.”
CEO Tom Kingsbury said in a statement that Burlington’s sales had been hurt in February by delayed tax refunds but that momentum picked up in March and April. May, he added, was “off to a solid start.” Helping the company’s bottom line was a 10-basis-point improvement in its product sourcing costs as a percentage of sales. The company also reduced its marketing expenses, business insurance costs and utilities.
Like other off-price retailers, Burlington is looking to grow its store base. The company currently has 592 units and ultimately plans to expand to 1,000 by filling in white space in both existing and new markets. It opened 25 new stores in 2016 and will add another 30 units in 2017.
Burlington has been making efforts to boost its presence in favorable categories and localize its offerings. “We see great opportunities on all areas of the business, but specifically, we have increased our focus on home, beauty and ladies apparel,” Kingsbury said on a conference call last year.
Burlington also stands to benefit from the woes of department stores. Burlington Coat Factory, which has 47 stores within five miles of a Macy’s slated for closure, will be a prime beneficiary of Macy’s plans to shutter some 100 stores, according to a CNBC report. The extra sales alone could lead to a 15 cent bump in earnings.
As department stores look to off-price units to buoy sales, the main stores and their off-price counterparts may struggle to differentiate themselves. “In some cases, the price point is getting too close, and the customer is not going to see the value of its off-price channel,” Brown said. “These players run the risk of cannibalizing their own sales.”
