In an age where retailers are relying more and more on e-commerce and less on brick and mortar, off-price retailer Burlington has announced that it will be doing just the opposite. During Burlington’s recent Q4 conference call, CEO Michael O’Sullivan outlined the company’s new retail strategy, which includes cutting back on inventory and reducing its online presence.
O’Sullivan told investors Thursday that despite Bulington’s promising 10.5% total sales increase and 15% increase in adjusted earnings per share in the fourth quarter, the company is “still a long way from [its] full potential as a business” and that it remains “significantly behind relevant benchmarks.”
O’Sullivan and Burlington’s executive team believe that pursuing and leveraging a more aggressive off-price model will help the company get back on track and stand out amongst its competitors.
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Part of this plan includes drastically reducing inventory levels, which will require buyers to react even more quickly to real-time customer purchasing data in order to get new, relevant merchandise on the floor faster. “We have already begun to reduce inventory levels,” said O’Sullivan. “Our goal is to make every hanger count.” At the beginning of February, Burlington comp store inventory levels were down 15% compared to 2019.
The new inventory strategy will be implemented on a departmental level — if data shows customers require more beauty, the inventory will increase to reflect this need, while if women’s fashion isn’t performing as well, its inventory levels will decrease. O’Sullivan says the strategy should “lead to higher sales, faster turns and lower markdowns.”
Along with a shift in inventory strategy, Burlington has also decided to cut back on its e-commerce presence. Online sales only represent about 0.5% of the retailer’s total sales, which O’Sullivan attributes to the satisfaction of shopping off-price in person. “In our business, which is a moderate off-price business, the nature of the treasure hunt and the average price point that we operate at mean that brick-and-mortar stores have a significant, competitive and economic advantage over e-commerce,” he said. Stepping back from e-commerce will allow Burlington to focus on in-store sales growth and store expansion.
O’Sullivan noted that the reduction of inventory will start to have a beneficial impact in 2020, while more long term changes like its diminishing online presence will show the most results in 2021 and 2022.