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Burlington Losses Shape Up Better Than Expected But CEO Warns of ‘A Lot of Risk in Q3’

Burlington Stores Inc. logged mixed earnings and sales as store closures and inventory issues plagued its business in the second quarter.

For the three months ended Aug. 1, the retailer posted an adjusted loss of $37 million, or 56 cents per share, compared with the prior year’s income of $91 million, or earnings of $1.36 per share. Still, EPS beat analysts’ forecasts of a loss of $1.04. Revenues, on the other hand, decreased 39% to $1.01 billion, while market watchers had predicted revenues of $1.11 billion.

According to the company, the decline in its sales and profits were driven by store closures and other coronavirus-related disruptions. In a statement accompanying the report, CEO Michael O’Sullivan explained that the second quarter had “some highs and some lows.”

“The pace of our reopening sales significantly exceeded our expectations, and we turned our aged spring merchandise very rapidly. This enabled us to go back into the market and take advantage of great merchandise availability,” he said. “But we were not able to get these fresh receipts to our stores as quickly as we needed them; our in-store inventories declined and our sales trend fell off dramatically in the back half of June. As we have rebuilt our store inventory levels over the last several weeks, we have seen significant improvement in our sales trend.”

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At its reopened stores, Burlington’s sales fell 14% from the date that they resumed business to the end of the second quarter. Merchandise inventories were $608 million, versus last year’s $824 million — a 26% drop. The chain attributed the fall to faster-than-expected clearance sell-through during the first half of the quarter, restocking delays and “conservative” inventory plans due to changes in consumer demand amid the COVID-19 pandemic.

“We expect our trend to strengthen as we continue to replenish our store inventory levels, but we see a lot of risk in Q3,” O’Sullivan added. “In this uncertain environment, we plan to manage our business conservatively. We have plenty of liquidity, and we will use this to support opportunistic buys of fall merchandise and of pack and hold inventory that we will flow to stores next year.”

At the end of the quarter, Burlington had nearly $1.2 billion in liquidity, including $1.08 billion in unrestricted cash and $120 million available through its asset-based lending facility. (During the three-month period, it repaid $150 million on its $600 million ABL facility, with $250 million outstanding as of the beginning of August.)

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