Burlington Stores Faces Challenges Amid Missed Q4 Expectations

Burlington Stores' Stock Response to Q4 Forecast

Burlington Stores (NYSE: BURL) recently faced a notable decline in its stock, with shares dropping more than 6% in premarket trading. This reaction came after the company announced a fourth-quarter outlook that fell short of market expectations for both earnings and comparable sales growth.

Third Quarter Performance Analysis

In the third quarter of fiscal 2024, Burlington Stores reported earnings per share (EPS) of $1.55, exceeding the analysts' average estimate of $1.54. During this period, the retailer achieved revenue of $2.53 billion, slightly missing the consensus forecast of $2.55 billion.

Improved Gross Margin

Notably, the company saw an improvement in its gross margin, rising to 43.9% compared to 43.2% the previous year, also surpassing the predicted margin of 43.8%. Michael O’Sullivan, CEO of Burlington Stores, commented on the performance, saying, “Our third-quarter comp trend started out very strongly, but then warmer temperatures from mid-September slowed our sales momentum.”

Sales Trends Observed

He further noted that excluding certain categories, comparable sales growth in the third quarter remained at 4%, indicating steady underlying sales trends consistent with what the company had experienced since March.

Fourth Quarter Expectations

Looking ahead, Burlington has projected its adjusted EPS for the upcoming fourth quarter, concluding on February 1, 2025, to be in the range of $3.55 to $3.75. This forecast is below the consensus estimate of $3.78, which contributes to concerns surrounding the company’s performance.

Sales Growth Projections

Total sales are expected to rise by 5% to 7%, while comparable store sales are anticipated to grow between 0% and 2%. This guidance is below the consensus expectation of a 2.21% increase in comparable sales, which may raise red flags among investors.

Margin and Tax Rate Expectations

Moreover, Burlington anticipates a decline in adjusted EBIT margin by 50 to 80 basis points year-over-year, with an effective tax rate projected at around 26%.

Full Fiscal Year Outlook

For the full fiscal year 2024, Burlington is forecasting EPS to range between $7.76 and $7.96, which is closely aligned with the consensus estimate of $7.92. The company expects its total sales to grow between 9% and 10%, building on a previous 10% increase for the fiscal year ended January 27, 2024.

Comparable Store Sales Projections

This year-long growth projection assumes an approximate 2% increase in comparable store sales, following a 4% growth experienced in the prior year. Additionally, Burlington anticipates an expansion of its adjusted EBIT margin by 60 to 70 basis points.

Frequently Asked Questions

What caused the recent decline in Burlington Stores' stock?

The decline was primarily due to the company's Q4 earnings forecast missing market expectations, resulting in premarket trading drops.

What were Burlington Stores' earnings per share for Q3?

Burlington reported an earnings per share (EPS) of $1.55 for the third quarter, slightly exceeding analysts' expectations.

How are sales trends affecting Burlington's performance?

Warmer temperatures in mid-September resulted in slower sales momentum, impacting overall performance despite a positive underlying sales trend.

What are Burlington Stores' projections for Q4 earnings?

The company projects adjusted EPS to be between $3.55 and $3.75, which is lower than the consensus estimate of $3.78.

What are the sales growth expectations for the full fiscal year?

Burlington expects total sales to grow by 9% to 10% for the full fiscal year 2024, with a projected comparable store sales increase of about 2%.

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