Burlington Stores, Inc. (NYSE: BURL), a nationally recognized
off-price retailer of high-quality, branded apparel, footwear,
accessories, and merchandise for the home at everyday low prices,
today announced its results for the second quarter ended July 29,
2023.
Michael O’Sullivan, CEO, stated, “Our comparable store sales
growth for the second quarter was 4%, which was at the high end of
our guidance range, while margin and earnings performance were
significantly ahead of our guidance. Our strategies to deliver
great value to our customers are working, and we have been helped
in the execution of these strategies by very strong availability of
great off-price merchandise.”
He continued, “Looking at the spring season as a whole, it is
clear that the lower-income shopper, our core customer, is still
under significant economic pressure. Based on the underlying
year-to-date comp trend we are narrowing our full-year comparable
store sales guidance to a range of 3% to 4% versus 2022. It is
possible that the trend will strengthen in the back half of the
year, and if it does, then we are confident that we can chase
it.”
Mr. O’Sullivan continued, “Compared to our peers, we have a huge
opportunity to expand our store count. We also have potential to
improve our sales productivity and individual store economics with
our smaller store prototype. Over the past several months there has
been an opening up in the supply of great real estate locations,
driven by retail bankruptcies. We are very pleased that we have
recently been able to acquire the leases to 62 former Bed Bath
& Beyond stores. These locations together with the broader
loosening of real estate supply should significantly strengthen our
new store and relocation pipeline for 2024 and potentially
beyond.”
Fiscal 2023 Second Quarter Operating
Results (for the 13-week period ended July 29, 2023, compared with
the 13-week period ended July 30, 2022)
- Total
sales increased 9% compared to the second quarter of
Fiscal 2022 to $2,170 million, while comparable store sales
increased 4% compared to the second quarter of Fiscal 2022.
- Gross
margin rate as a percentage of net sales was 41.7% vs.
38.9% for the second quarter of Fiscal 2022, an increase of 280
basis points. Merchandise margin improved by 150 basis points and
freight expense improved 130 basis points.
- Product
sourcing costs, which are included in selling, general and
administrative expenses (SG&A), were $183 million vs. $157
million in the second quarter of Fiscal 2022. Product sourcing
costs include the costs of processing goods through our supply
chain and buying costs.
-
SG&A was 35.7% as a percentage of net sales
vs. 34.6% in the second quarter of Fiscal 2022, higher by 110 basis
points. Adjusted SG&A was 27.0% as a
percentage of net sales vs. 26.1% in the second quarter of Fiscal
2022, an increase of 90 basis points.
- The effective
tax rate was 26.4% vs. 25.0% in the second quarter of
Fiscal 2022. The Adjusted Effective Tax Rate was
25.6% vs. 25.1% in the second quarter of Fiscal 2022.
- Net
income was $31 million, or $0.47 per share vs. $12
million, or $0.18 per share for the second quarter of Fiscal 2022.
Adjusted Net Income was $39 million, or $0.60 per
share, vs. $23 million, or $0.35 per share for the second quarter
of Fiscal 2022; this Adjusted Net Income included $1.8 million, or
$0.03 per share, of expense related to recently acquired leases
from Bed Bath & Beyond.
- Diluted
weighted average shares outstanding amounted to 65.0
million during the quarter compared with 66.0 million during the
second quarter of Fiscal 2022.
- Adjusted
EBITDA was $141 million vs. $111 million in the second
quarter of Fiscal 2022, an increase of 90 basis points as a
percentage of sales. Adjusted EBIT was $68 million
vs. $43 million in the second quarter of Fiscal 2022, an increase
of 100 basis points as a percentage of sales.
First Six Months of Fiscal 2023
Results
- Total sales increased
10% compared to the first six months of Fiscal 2022. Net income
increased 126% compared to the same period in Fiscal 2022 to $64
million, or $0.98 per share vs. $0.42 per share in the prior
period. Adjusted EBIT increased by $53 million compared to the
first six months of Fiscal 2022, to $154 million, an increase of
100 basis points as a percentage of sales. Adjusted Net Income of
$94 million increased 59% vs. the prior period, while Adjusted EPS
was $1.44 vs. $0.89 in the prior period, an increase of 62%.
Inventory
- Merchandise
inventories were $1,162 million vs. $1,267 million at the end of
the second quarter of Fiscal 2022, an 8% decrease, while comparable
store inventories increased 1% compared to the second quarter of
Fiscal 2022. Reserve inventory was 45% of total inventory at the
end of the second quarter of Fiscal 2023 compared to 52% at the end
of the second quarter of Fiscal 2022. Reserve inventory is largely
composed of merchandise that is purchased opportunistically and
that will be sent to stores in future months or next season.
Liquidity and Debt
- The Company ended
the second quarter of Fiscal 2023 with $1,340 million in liquidity,
comprised of $521 million in unrestricted cash and $819 million in
availability on its ABL facility.
- The Company ended
the second quarter with $1,362 million in outstanding total debt,
including $942 million on its Term Loan facility, $397 million in
Convertible Notes, and no borrowings on its ABL facility.
Common Stock Repurchases
- During the second quarter of Fiscal
2023 the Company repurchased 154,358 shares of its common stock
under its share repurchase program for $26 million. As of the end
of the second quarter of Fiscal 2023, the Company had $270 million
remaining on its current share repurchase program authorization,
which may be executed through February 2024. On August 15, 2023,
the Company’s Board of Directors authorized the repurchase of up to
an additional $500 million of common stock, which is authorized to
be executed through August 2025.
OutlookFor the full
Fiscal Year 2023 (the 53-weeks ending February 3, 2024), the
Company now expects:
- Total sales to increase approximately
11% to 12%, which includes approximately 2% from the 53rd week, on
top of a 7% decrease in Fiscal 2022; this assumes comparable store
sales will increase in the range of 3% to 4%, on top of the 13%
decrease during Fiscal 2022;
- Capital expenditures, net of landlord
allowances, to be approximately $560 million;
- To open 70-80 net new stores;
- Depreciation and amortization,
exclusive of favorable lease costs, to be approximately $310
million;
- Adjusted EBIT margin to increase 60 to
80 basis points versus last year; this adjusted EBIT margin
increase includes approximately $21 million of expected incremental
expenses associated with the recently acquired Bed Bath &
Beyond leases. Excluding these incremental expenses, adjusted EBIT
margin is expected to increase 80 to 100 basis points versus last
year;
- Net interest expense to be
approximately $60 million;
- An effective tax rate of approximately
26%; and
- Adjusted EPS to be in the range of
$5.37 to $5.67, which includes $0.23 of expected incremental
expenses associated with the recently acquired Bed Bath &
Beyond leases and an expected benefit from the 53rd week of
approximately $0.05. Excluding the incremental expenses, adjusted
EPS is expected to be in the range of $5.60 to $5.90. This compares
to Fiscal 2022 diluted EPS of $3.49 and Adjusted EPS of $4.26.
For the third quarter of Fiscal 2023
(the 13 weeks ending October 28, 2023), the Company
expects:
- Total sales to increase in the range of
13% to 15%; this assumes comparable store sales will increase in
the range of 5% to 7% versus the third quarter of Fiscal 2022;
- Adjusted EBIT margin to increase 130 to
180 basis points versus the third quarter of Fiscal 2022; this EBIT
margin increase includes approximately $10 million of expected
incremental expenses associated with the recently acquired Bed Bath
& Beyond leases. Excluding these expenses, adjusted EBIT margin
is expected to increase 170 to 220 basis points;
- An effective tax rate of approximately
26%; and
- Adjusted EPS in the range of $0.86 to
$1.01, as compared to $0.26 in diluted EPS and $0.43 in Adjusted
EPS last year. This includes $0.11 per share of expected
incremental expenses associated with the recently acquired Bed Bath
& Beyond leases. Excluding these expenses, adjusted EPS is
expected to be in the range of $0.97 to $1.12.
The Company has not presented a quantitative reconciliation of
the forward-looking non-GAAP financial measures set out above to
their most comparable GAAP financial measures because it would
require the Company to create estimated ranges on a GAAP basis,
which would entail unreasonable effort. Adjustments required to
reconcile forward-looking non-GAAP measures cannot be predicted
with reasonable certainty but may include, among others, costs
related to debt amendments, loss on extinguishment of debt, and
impairment charges, as well as the tax effect of such items. Some
or all of those adjustments could be significant.
Note Regarding Non-GAAP Financial
Measures
The foregoing discussion of the Company’s operating results
includes references to Adjusted SG&A, Adjusted EBITDA, Adjusted
Net Income, Adjusted Earnings per Share (or Adjusted EPS), Adjusted
EBIT (or Operating Margin), and Adjusted Effective Tax Rate. The
Company believes these supplemental measures are useful in
evaluating the performance of our business and provide greater
transparency into our results of operations. In particular, we
believe that excluding certain items that may vary substantially in
frequency and magnitude from what we consider to be our core
operating results are useful supplemental measures that assist
investors and management in evaluating our ability to generate
earnings and leverage sales, and to more readily compare core
operating results between past and future periods. These non-GAAP
financial measures are defined and reconciled to the most
comparable GAAP measures later in this document.
From time to time when discussing its comparable store sales
trends, the Company references its geometric stack, which is
defined as a stacked comparable sales growth rate that accounts for
the compounding of comparable store sales from Fiscal 2019 to
Fiscal 2023.
Second Quarter 2023 Conference Call
The Company will hold a conference call on August 24, 2023 at
8:30 a.m. ET to discuss the Company’s second quarter results. The
U.S. toll free dial-in for the conference call is 1-800-715-9871
(passcode: 6156875) and the international dial-in number is
1-646-307-1963. A live webcast of the conference call will also be
available on the investor relations page of the company’s website
at www.burlingtoninvestors.com.
For those unable to participate in the conference call, a replay
will be available after the conclusion of the call on August 24,
2023 beginning at 11:30 a.m. ET through August 31, 2023 at 11:59
p.m. ET. The U.S. toll-free replay dial-in number is 1-800-700-2030
and the international replay dial-in number is 1-609-800-9909. The
replay passcode is 6156875.
About Burlington Stores, Inc.
Burlington Stores, Inc., headquartered in New Jersey, is a
nationally recognized off-price retailer with Fiscal 2022 net sales
of $8.7 billion. The Company is a Fortune 500 company and its
common stock is traded on the New York Stock Exchange under the
ticker symbol “BURL.” The Company operated 939 stores as of the end
of the second quarter of Fiscal 2023, in 46 states and Puerto Rico,
principally under the name Burlington Stores. The Company’s stores
offer an extensive selection of in-season, fashion-focused
merchandise at up to 60% off other retailers’ prices, including
women’s ready-to-wear apparel, menswear, youth apparel, baby,
beauty, footwear, accessories, home, toys, gifts and coats.
For more information about the Company, visit
www.burlington.com.
Investor Relations Contacts: David J. Glick
Daniel Delrosario 855-973-8445
Info@BurlingtonInvestors.com
Allison Malkin ICR, Inc. 203-682-8225
Safe Harbor for Forward-Looking and Cautionary
Statements This release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. All statements other than statements of
historical fact included in this release, including those about our
long-term prospects, the effects of our Burlington 2.0 initiatives,
the economic environment, expected sales trend and market share and
supply chain plans, as well as statements describing our outlook
for future periods, are forward-looking statements. Forward-looking
statements discuss our current expectations and projections
relating to our financial condition, results of operations, plans,
objectives, future performance and business. You can identify
forward-looking statements by the fact that they do not relate
strictly to historical or current facts. We do not undertake to
publicly update or revise our forward-looking statements, except as
required by law, even if experience or future changes make it clear
that any projected results expressed or implied in such statements
will not be realized. If we do update one or more forward-looking
statements, no inference should be made that we will make
additional updates with respect to those or other forward-looking
statements. All forward-looking statements are subject to risks and
uncertainties that may cause actual events or results to differ
materially from those we expected, including general economic
conditions, such as inflation, and the domestic and international
political situation and the related impact on consumer confidence
and spending; the impact of the COVID-19 pandemic and actions taken
to slow its spread and the related impacts on economic activity,
financial markets, labor markets and the global supply chain;
competitive factors, including pricing and promotional activities
of major competitors and an increase in competition within the
markets in which we compete; seasonal fluctuations in our net
sales, operating income and inventory levels; the reduction in
traffic to, or the closing of, the other destination retailers in
the shopping areas where our stores are located; our ability to
identify changing consumer preferences and demand; unseasonable
weather conditions caused by climate change or otherwise adversely
impacting demand; natural and man-made disasters, including fire,
snow and ice storms, flood, hail, hurricanes and earthquakes; our
ability to successfully implement one or more of our strategic
initiatives and growth plans; our ability to execute our
opportunistic buying and inventory management process; the
availability of desirable store locations on suitable terms; the
availability, selection and purchasing of attractive merchandise on
favorable terms; our ability to attract, train and retain quality
employees and temporary personnel in appropriate numbers; labor
costs and our ability to manage a large workforce; the solvency of
parties with whom we do business and their willingness to perform
their obligations to us; import risks, including tax and trade
policies, tariffs and government regulations; domestic and
international events affecting the delivery of merchandise to our
stores; unforeseen cyber-related problems or attacks;
payment-related risks; our ability to effectively generate
sufficient levels of customer awareness and traffic through our
advertising and marketing programs; damage to our corporate
reputation or brand; issues with merchandise safety and shrinkage;
lack of or insufficient insurance coverage; the impact of current
and future laws and the interpretation of such laws; the impact of
increasingly rigorous privacy and data security regulations; any
unforeseen material loss or casualty or the existence of adverse
litigation; use of social media in violation of applicable laws and
regulations; our substantial level of indebtedness and related
debt-service obligations; consequences of the failure to comply
with covenants in our debt agreements; possible conversion of our
2.25% Convertible Notes due 2025; the availability of adequate
financing; and each of the factors that may be described from time
to time in our filings with the U.S. Securities and Exchange
Commission. For each of these factors, the Company claims the
protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995,
as amended.
BURLINGTON STORES, INC.CONDENSED
CONSOLIDATED STATEMENTS OF
INCOME(unaudited) (All amounts in
thousands, except per share data) |
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
July 29, |
|
|
July 30, |
|
|
July 29, |
|
|
July 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
2,170,445 |
|
|
$ |
1,983,889 |
|
|
$ |
4,303,239 |
|
|
$ |
3,909,532 |
|
Other revenue |
|
|
4,362 |
|
|
|
4,052 |
|
|
|
8,524 |
|
|
|
8,101 |
|
Total revenue |
|
|
2,174,807 |
|
|
|
1,987,941 |
|
|
|
4,311,763 |
|
|
|
3,917,633 |
|
COSTS AND
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
1,266,210 |
|
|
|
1,211,268 |
|
|
|
2,497,856 |
|
|
|
2,348,214 |
|
Selling, general and
administrative expenses |
|
|
775,285 |
|
|
|
685,504 |
|
|
|
1,530,913 |
|
|
|
1,365,831 |
|
Costs related to debt
amendments |
|
|
97 |
|
|
|
— |
|
|
|
97 |
|
|
|
— |
|
Depreciation and
amortization |
|
|
73,133 |
|
|
|
67,970 |
|
|
|
143,662 |
|
|
|
134,274 |
|
Impairment charges -
long-lived assets |
|
|
4,709 |
|
|
|
4,415 |
|
|
|
5,552 |
|
|
|
6,958 |
|
Other income - net |
|
|
(6,165 |
) |
|
|
(12,608 |
) |
|
|
(15,163 |
) |
|
|
(16,005 |
) |
Loss on extinguishment of
debt |
|
|
— |
|
|
|
— |
|
|
|
24,644 |
|
|
|
14,657 |
|
Interest expense |
|
|
19,545 |
|
|
|
15,435 |
|
|
|
38,890 |
|
|
|
30,041 |
|
Total costs and expenses |
|
|
2,132,814 |
|
|
|
1,971,984 |
|
|
|
4,226,451 |
|
|
|
3,883,970 |
|
Income before income
tax expense |
|
|
41,993 |
|
|
|
15,957 |
|
|
|
85,312 |
|
|
|
33,663 |
|
Income tax expense |
|
|
11,101 |
|
|
|
3,991 |
|
|
|
21,672 |
|
|
|
5,524 |
|
Net income |
|
$ |
30,892 |
|
|
$ |
11,966 |
|
|
$ |
63,640 |
|
|
$ |
28,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common
share |
|
$ |
0.47 |
|
|
$ |
0.18 |
|
|
$ |
0.98 |
|
|
$ |
0.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
- diluted |
|
|
65,039 |
|
|
|
65,962 |
|
|
|
65,141 |
|
|
|
66,304 |
|
BURLINGTON STORES, INC.CONDENSED
CONSOLIDATED BALANCE
SHEETS(unaudited)(All amounts in
thousands) |
|
|
|
|
|
July 29, |
|
|
January 28, |
|
|
July 30, |
|
|
|
2023 |
|
|
2023 |
|
|
2022 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
520,974 |
|
|
$ |
872,623 |
|
|
$ |
454,985 |
|
Restricted cash and cash
equivalents |
|
|
— |
|
|
|
6,582 |
|
|
|
6,582 |
|
Accounts receivable—net |
|
|
80,742 |
|
|
|
71,091 |
|
|
|
70,858 |
|
Merchandise inventories |
|
|
1,161,523 |
|
|
|
1,181,982 |
|
|
|
1,266,696 |
|
Assets held for disposal |
|
|
5,120 |
|
|
|
19,823 |
|
|
|
1,933 |
|
Prepaid and other current
assets |
|
|
148,711 |
|
|
|
131,691 |
|
|
|
135,049 |
|
Total current assets |
|
|
1,917,070 |
|
|
|
2,283,792 |
|
|
|
1,936,103 |
|
Property and
equipment—net |
|
|
1,699,469 |
|
|
|
1,668,005 |
|
|
|
1,609,302 |
|
Operating lease assets |
|
|
2,925,595 |
|
|
|
2,945,932 |
|
|
|
2,831,932 |
|
Goodwill and intangible
assets—net |
|
|
285,064 |
|
|
|
285,064 |
|
|
|
285,064 |
|
Deferred tax assets |
|
|
2,925 |
|
|
|
3,205 |
|
|
|
3,689 |
|
Other assets |
|
|
85,415 |
|
|
|
83,599 |
|
|
|
67,271 |
|
Total
assets |
|
$ |
6,915,538 |
|
|
$ |
7,269,597 |
|
|
$ |
6,733,361 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
773,494 |
|
|
$ |
955,793 |
|
|
$ |
800,742 |
|
Current operating lease
liabilities |
|
|
400,266 |
|
|
|
401,111 |
|
|
|
375,294 |
|
Other current liabilities |
|
|
456,075 |
|
|
|
541,413 |
|
|
|
418,427 |
|
Current maturities of long
term debt |
|
|
13,867 |
|
|
|
13,634 |
|
|
|
14,587 |
|
Total current liabilities |
|
|
1,643,702 |
|
|
|
1,911,951 |
|
|
|
1,609,050 |
|
Long term debt |
|
|
1,347,727 |
|
|
|
1,462,072 |
|
|
|
1,472,197 |
|
Long term operating lease
liabilities |
|
|
2,801,058 |
|
|
|
2,825,292 |
|
|
|
2,724,053 |
|
Other liabilities |
|
|
70,771 |
|
|
|
69,386 |
|
|
|
69,563 |
|
Deferred tax liabilities |
|
|
226,421 |
|
|
|
205,991 |
|
|
|
224,621 |
|
Stockholders’ equity |
|
|
825,859 |
|
|
|
794,905 |
|
|
|
633,877 |
|
Total liabilities and
stockholders’ equity |
|
$ |
6,915,538 |
|
|
$ |
7,269,597 |
|
|
$ |
6,733,361 |
|
BURLINGTON STORES, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (All amounts in
thousands) |
|
|
|
|
|
Six Months Ended |
|
|
|
July 29, |
|
|
July 30, |
|
|
|
2023 |
|
|
2022 |
|
OPERATING
ACTIVITIES |
|
|
|
|
|
|
Net income |
|
$ |
63,640 |
|
|
$ |
28,139 |
|
Adjustments to reconcile net
income to net cash used in operating activities |
|
|
|
|
|
|
Depreciation and amortization |
|
|
143,662 |
|
|
|
134,274 |
|
Deferred income taxes |
|
|
18,001 |
|
|
|
(1,804 |
) |
Loss on extinguishment of debt |
|
|
24,644 |
|
|
|
14,657 |
|
Non-cash stock compensation expense |
|
|
36,147 |
|
|
|
33,878 |
|
Non-cash lease expense |
|
|
(2,993 |
) |
|
|
(343 |
) |
Cash received from landlord allowances |
|
|
4,540 |
|
|
|
9,116 |
|
Changes in assets and
liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
|
(9,774 |
) |
|
|
(16,908 |
) |
Merchandise inventories |
|
|
20,460 |
|
|
|
(245,687 |
) |
Accounts payable |
|
|
(183,775 |
) |
|
|
(283,861 |
) |
Other current assets and liabilities |
|
|
(89,853 |
) |
|
|
164,063 |
|
Long term assets and liabilities |
|
|
1,368 |
|
|
|
(287 |
) |
Other operating
activities |
|
|
3,759 |
|
|
|
11,901 |
|
Net cash provided by
(used in) operating activities |
|
|
29,826 |
|
|
|
(152,862 |
) |
INVESTING
ACTIVITIES |
|
|
|
|
|
|
Cash paid for property and
equipment |
|
|
(184,752 |
) |
|
|
(208,776 |
) |
Lease acquisition costs |
|
|
(6,737 |
) |
|
|
(943 |
) |
Proceeds from sale of property
and equipment and assets held for sale |
|
|
13,831 |
|
|
|
23,324 |
|
Net cash used in
investing activities |
|
|
(177,658 |
) |
|
|
(186,395 |
) |
FINANCING
ACTIVITIES |
|
|
|
|
|
|
Principal payment on long term
debt—Convertible Notes |
|
|
(133,724 |
) |
|
|
(78,236 |
) |
Purchase of treasury
shares |
|
|
(88,056 |
) |
|
|
(212,721 |
) |
Other financing
activities |
|
|
11,381 |
|
|
|
(5,892 |
) |
Net cash used in
financing activities |
|
|
(210,399 |
) |
|
|
(296,849 |
) |
(Decrease) in cash, cash
equivalents, restricted cash and restricted cash equivalents |
|
|
(358,231 |
) |
|
|
(636,106 |
) |
Cash, cash equivalents,
restricted cash and restricted cash equivalents at beginning of
period |
|
|
879,205 |
|
|
|
1,097,673 |
|
Cash, cash
equivalents, restricted cash and restricted cash equivalents at end
of period |
|
$ |
520,974 |
|
|
$ |
461,567 |
|
|
|
|
|
|
|
|
|
|
Reconciliation of Non-GAAP Financial
Measures(Unaudited)(Amounts in thousands, except per share
data)
The following tables calculate the Company’s Adjusted Net
Income, Adjusted EPS, Adjusted EBITDA, Adjusted EBIT, Adjusted
SG&A and Adjusted Effective Tax Rate, all of which are
considered non-GAAP financial measures. Generally, a non-GAAP
financial measure is a numerical measure of a company’s
performance, financial position or cash flows that either excludes
or includes amounts that are not normally excluded or included in
the most directly comparable measure calculated and presented in
accordance with GAAP.
Adjusted Net Income is defined as net income, exclusive of the
following items, if applicable: (i) net favorable lease costs; (ii)
loss on extinguishment of debt; (iii) costs related to debt
amendments; (iv) impairment charges; (v) amounts related to certain
litigation matters; and (vi) other unusual, non-recurring or
extraordinary expenses, losses, charges or gains, all of which are
tax effected to arrive at Adjusted Net Income.
Adjusted EPS is defined as Adjusted Net Income divided by the
diluted weighted average shares outstanding, as defined in the
table below.
Adjusted EBITDA is defined as net income, exclusive of the
following items, if applicable: (i) interest expense; (ii) interest
income; (iii) loss on extinguishment of debt; (iv) costs related to
debt amendments; (v) income tax expense; (vi) depreciation and
amortization; (vii) net favorable lease costs; (viii) impairment
charges; (ix) amounts related to certain litigation matters; and
(x) other unusual, non-recurring or extraordinary expenses, losses,
charges or gains.
Adjusted EBIT (or Adjusted Operating Margin) is defined as net
income, exclusive of the following items, if applicable: (i)
interest expense; (ii) interest income; (iii) loss on
extinguishment of debt; (iv) costs related to debt amendments; (v)
income tax expense; (vi) impairment charges; (vii) net favorable
lease costs; (viii) amounts related to certain litigation matters;
and (ix) other unusual, non-recurring or extraordinary expenses,
losses, charges or gains.
Adjusted SG&A is defined as SG&A less product sourcing
costs, favorable lease costs and amounts related to certain
litigation matters.
Adjusted Effective Tax Rate is defined as the GAAP effective tax
rate less the tax effect of the reconciling items to arrive at
Adjusted Net Income (footnote (g) in the table below).
The Company presents Adjusted Net Income, Adjusted EPS, Adjusted
EBITDA, Adjusted EBIT, Adjusted SG&A and Adjusted Effective Tax
Rate, because it believes they are useful supplemental measures in
evaluating the performance of the Company’s business and provide
greater transparency into the results of operations. In particular,
the Company believes that excluding certain items that may vary
substantially in frequency and magnitude from what the Company
considers to be its core operating results are useful supplemental
measures that assist investors and management in evaluating the
Company’s ability to generate earnings and leverage sales, and to
more readily compare core operating results between past and future
periods.
The Company believes that these non-GAAP measures provide
investors helpful information with respect to the Company’s
operations and financial condition. Other companies in the retail
industry may calculate these non-GAAP measures differently such
that the Company’s calculation may not be directly comparable.
The following table shows the Company’s reconciliation of net
income to Adjusted Net Income and Adjusted EPS for the periods
indicated:
|
|
(unaudited) |
|
|
|
(in thousands, except per share data) |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
July 29, |
|
|
July 30, |
|
|
July 29, |
|
|
July 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Reconciliation of net
income to Adjusted Net Income: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
30,892 |
|
|
$ |
11,966 |
|
|
$ |
63,640 |
|
|
$ |
28,139 |
|
Net favorable lease costs (a) |
|
|
3,979 |
|
|
|
4,769 |
|
|
|
8,042 |
|
|
|
9,471 |
|
Loss on extinguishment of debt (b) |
|
|
— |
|
|
|
— |
|
|
|
24,644 |
|
|
|
14,657 |
|
Costs related to debt amendments (c) |
|
|
97 |
|
|
|
— |
|
|
|
97 |
|
|
|
— |
|
Impairment charges - long-lived assets |
|
|
4,709 |
|
|
|
4,415 |
|
|
|
5,552 |
|
|
|
6,958 |
|
Litigation matters (d) |
|
|
1,500 |
|
|
|
5,500 |
|
|
|
1,500 |
|
|
|
10,500 |
|
Tax effect (e) |
|
|
(2,305 |
) |
|
|
(3,702 |
) |
|
|
(9,605 |
) |
|
|
(10,719 |
) |
Adjusted Net Income |
|
$ |
38,872 |
|
|
$ |
22,948 |
|
|
$ |
93,870 |
|
|
$ |
59,006 |
|
Diluted weighted average shares outstanding (f) |
|
|
65,039 |
|
|
|
65,962 |
|
|
|
65,141 |
|
|
|
66,304 |
|
Adjusted Earnings per Share |
|
$ |
0.60 |
|
|
$ |
0.35 |
|
|
$ |
1.44 |
|
|
$ |
0.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the Company’s reconciliation of net
income to Adjusted EBITDA for the periods indicated:
|
|
(unaudited) |
|
|
|
(in thousands) |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
July 29, |
|
|
July 30, |
|
|
July 29, |
|
|
July 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Reconciliation of net
income to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
30,892 |
|
|
$ |
11,966 |
|
|
$ |
63,640 |
|
|
$ |
28,139 |
|
Interest expense |
|
|
19,545 |
|
|
|
15,435 |
|
|
|
38,890 |
|
|
|
30,041 |
|
Interest income |
|
|
(4,115 |
) |
|
|
(3,463 |
) |
|
|
(9,573 |
) |
|
|
(3,582 |
) |
Net favorable lease costs (a) |
|
|
3,979 |
|
|
|
4,769 |
|
|
|
8,042 |
|
|
|
9,471 |
|
Loss on extinguishment of debt (b) |
|
|
— |
|
|
|
— |
|
|
|
24,644 |
|
|
|
14,657 |
|
Costs related to debt amendments (c) |
|
|
97 |
|
|
|
— |
|
|
|
97 |
|
|
|
— |
|
Impairment charges - long-lived assets |
|
|
4,709 |
|
|
|
4,415 |
|
|
|
5,552 |
|
|
|
6,958 |
|
Litigation matters (d) |
|
|
1,500 |
|
|
|
5,500 |
|
|
|
1,500 |
|
|
|
10,500 |
|
Depreciation and amortization |
|
|
73,133 |
|
|
|
67,970 |
|
|
|
143,662 |
|
|
|
134,274 |
|
Income tax expense |
|
|
11,101 |
|
|
|
3,991 |
|
|
|
21,672 |
|
|
|
5,524 |
|
Adjusted EBITDA |
|
$ |
140,841 |
|
|
$ |
110,583 |
|
|
$ |
298,126 |
|
|
$ |
235,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the Company’s reconciliation of net
income to Adjusted EBIT for the periods indicated:
|
|
(unaudited) |
|
|
|
(in thousands) |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
July 29, |
|
|
July 30, |
|
|
July 29, |
|
|
July 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Reconciliation of net
income to Adjusted EBIT: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
30,892 |
|
|
$ |
11,966 |
|
|
$ |
63,640 |
|
|
$ |
28,139 |
|
Interest expense |
|
|
19,545 |
|
|
|
15,435 |
|
|
|
38,890 |
|
|
|
30,041 |
|
Interest income |
|
|
(4,115 |
) |
|
|
(3,463 |
) |
|
|
(9,573 |
) |
|
|
(3,582 |
) |
Net favorable lease costs (a) |
|
|
3,979 |
|
|
|
4,769 |
|
|
|
8,042 |
|
|
|
9,471 |
|
Loss on extinguishment of debt (b) |
|
|
— |
|
|
|
— |
|
|
|
24,644 |
|
|
|
14,657 |
|
Costs related to debt amendments (c) |
|
|
97 |
|
|
|
— |
|
|
|
97 |
|
|
|
— |
|
Impairment charges - long-lived assets |
|
|
4,709 |
|
|
|
4,415 |
|
|
|
5,552 |
|
|
|
6,958 |
|
Litigation matters (d) |
|
|
1,500 |
|
|
|
5,500 |
|
|
|
1,500 |
|
|
|
10,500 |
|
Income tax expense |
|
|
11,101 |
|
|
|
3,991 |
|
|
|
21,672 |
|
|
|
5,524 |
|
Adjusted EBIT |
|
$ |
67,708 |
|
|
$ |
42,613 |
|
|
$ |
154,464 |
|
|
$ |
101,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the Company’s reconciliation of
SG&A to Adjusted SG&A for the periods indicated:
|
|
(unaudited) |
|
|
|
(in thousands) |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
July 29, |
|
|
July 30, |
|
|
July 29, |
|
|
July 30, |
|
Reconciliation of
SG&A to Adjusted SG&A: |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
SG&A |
|
$ |
775,285 |
|
|
$ |
685,504 |
|
|
$ |
1,530,913 |
|
|
$ |
1,365,831 |
|
Net favorable lease costs (a) |
|
|
(3,979 |
) |
|
|
(4,769 |
) |
|
|
(8,042 |
) |
|
|
(9,471 |
) |
Product sourcing costs |
|
|
(182,867 |
) |
|
|
(156,751 |
) |
|
|
(369,793 |
) |
|
|
(313,554 |
) |
Litigation matters (d) |
|
|
(1,500 |
) |
|
|
(5,500 |
) |
|
|
(1,500 |
) |
|
|
(10,500 |
) |
Adjusted SG&A |
|
$ |
586,939 |
|
|
$ |
518,484 |
|
|
$ |
1,151,578 |
|
|
$ |
1,032,306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the reconciliation of the Company’s
effective tax rates on a GAAP basis to the Adjusted Effective Tax
Rates for the periods indicated:
|
|
(unaudited) |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
July 29, |
|
|
July 30, |
|
|
July 29, |
|
|
July 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Effective tax rate on a GAAP basis |
|
|
26.4 |
% |
|
|
25.0 |
% |
|
|
25.4 |
% |
|
|
16.4 |
% |
Adjustments to arrive at Adjusted Effective Tax Rate (g) |
|
|
(0.8 |
) |
|
|
0.1 |
|
|
|
(0.4 |
) |
|
|
5.2 |
|
Adjusted Effective Tax Rate |
|
|
25.6 |
% |
|
|
25.1 |
% |
|
|
25.0 |
% |
|
|
21.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the Company’s reconciliation of net
income to Adjusted Net Income for the prior period Adjusted EPS
amounts used in this press release for the periods indicated:
|
|
(unaudited) |
|
|
|
(in thousands, except per share data) |
|
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
|
|
October 29, 2022 |
|
|
January 28, 2023 |
|
Reconciliation of net
income to Adjusted Net Income: |
|
|
|
|
|
|
Net income |
|
$ |
16,783 |
|
|
$ |
230,123 |
|
Net favorable lease costs (a) |
|
|
4,791 |
|
|
|
18,591 |
|
Loss on extinguishment of debt (b) |
|
|
— |
|
|
|
14,657 |
|
Impairment charges |
|
|
10,599 |
|
|
|
21,402 |
|
Litigation matters (d) |
|
|
— |
|
|
|
10,500 |
|
Tax effect (e) |
|
|
(4,148 |
) |
|
|
(14,503 |
) |
Adjusted Net Income |
|
$ |
28,025 |
|
|
$ |
280,770 |
|
Diluted weighted average shares outstanding (f) |
|
|
65,504 |
|
|
|
65,901 |
|
Adjusted Earnings per Share |
|
$ |
0.43 |
|
|
$ |
4.26 |
|
|
|
|
|
|
|
|
|
|
(a) Net favorable lease costs represents the non-cash expense
associated with favorable and unfavorable leases that were recorded
as a result of purchase accounting related to the April 13, 2006
Bain Capital acquisition of Burlington Coat Factory Warehouse
Corporation. These expenses are recorded in the line item “Selling,
general and administrative expenses” in our Condensed Consolidated
Statements of Income.(b) Amounts relate to the partial repurchases
of the Convertible Notes in the first quarter of Fiscal 2023 and
the first quarter of Fiscal 2022.(c) Amounts relate to the Term
Loan Credit Agreement amendment in the second quarter of Fiscal
2023 changing from Adjusted LIBOR Rate to the Adjusted Term SOFR
Rate.(d) Represents amounts charged for certain litigation
matters.(e) Tax effect is calculated based on the effective tax
rates (before discrete items) for the respective periods, adjusted
for the tax effect for the impact of items (a) through (d).(f)
Diluted weighted average shares outstanding starts with basic
shares outstanding and adds back any potentially dilutive
securities outstanding during the period.(g) Adjustments for items
excluded from Adjusted Net Income. These items have been described
in the table above reconciling GAAP net income to Adjusted Net
Income.
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