Burlington stores, inc. announces second quarter and first half fiscal 2016 results, exceeding prior guidance; raises fiscal year 2016 outlook

Burlington, n.j.--(business wire)--burlington stores, inc. (nyse: burl), a nationally recognized off-price retailer of high-quality, branded apparel at everyday low prices, today announced its results for the second quarter and six months ended july 30, 2016. tom kingsbury, chief executive officer stated, “we are very pleased to report second quarter results that included a 9.7% increase in net sales, a 5.4% increase in comparable store sales and a 130 basis point expansion in adjusted ebitda margin. these results were driven by the continued improvement in the execution of our off-price operating model. our consistently strong performance has also enabled us to take advantage of favorable interest rates resulting in the re-pricing of our term loan on july 29, 2016. we believe we are well positioned for the fall season and remain focused on delivering great value, relevant brands, fresh product and an improved store experience for our customers every day. i would like to thank our store and corporate teams for these results.” fiscal 2016 second quarter operating results (for the 13 week period ended july 30, 2016 compared with the 13 week period ended august 1, 2015): net sales increased 9.7%, or $110.8 million, to $1,255.1 million. this increase includes a 5.4% increase in comparable store sales, as well as an increase of $51.8 million from new and non-comparable stores. our 5.4% comparable store sales increase is on top of a 5.6% increase in the second quarter of fiscal 2015. gross margin improved 40 basis points to 39.6% during the fiscal 2016 second quarter. this more than offset a 15 basis point increase in product sourcing costs, which are included in selling, general and administrative expenses (sg&a). sg&a, less product sourcing costs, as a percentage of net sales was 27.3%, representing approximately 110 basis points of improvement compared with last year. this improvement was driven by greater leverage in store payroll, occupancy, utilities and includes a reversal of previously recorded benefits related expenses. the effective tax rate was 37.6% compared with 41.4% last year, primarily related to a decrease in our state tax rate and an increase in federal hiring credits. net income increased 87.1% to $20.4 million, or $0.28 per diluted share. adjusted net income increased 90.1% to $28.2 million, or $0.39 per share vs. $0.19 per share last year. fully diluted shares outstanding were 72.0 million compared with 76.5 million last year, primarily driven by the repurchase of 4.8 million shares since the end of the 2015 second quarter. adjusted ebitda increased 31.4%, or $23.7 million, to $99.1 million. sales growth, sg&a leverage and gross margin expansion led to a 130 basis point expansion in adjusted ebitda as a percentage of net sales. fiscal 2016 first half operating results (for the 26 week period ended july 30, 2016 compared with the 26 week period ended august 1, 2015): net sales increased 9.0%, or $210.4 million, to $2,537.7 million. this increase includes a 4.9% increase in comparable store sales, as well as an increase of $104.4 million from new and non-comparable stores. our 4.9% comparable store sales increase is on top of a 3.1% increase in the first half of fiscal 2015. gross margin expanded by 40 basis points to 39.9% from 39.5%. this more than offset a 15 basis point increase in product sourcing costs which are included in sg&a. sg&a, less product sourcing costs, as a percentage of net sales was 27.0% vs. 27.8% last year. the 80 basis point improvement was driven by increased leverage in store occupancy, marketing and store payroll. the effective tax rate was 37.6% compared with 39.0% last year, primarily related to a decrease in our state tax rate and an increase in federal hiring credits. net income increased 58.2% to $57.9 million, or $0.80 per diluted share. adjusted net income was $69.9 million vs. $46.1 million, or $0.97 per diluted share vs. $0.60 last year. fully diluted shares outstanding were 72.2 million compared with 76.5 million shares last year, primarily driven by repurchase of 4.8 million shares since the end of the 2015 second quarter. adjusted ebitda increased 24.4%, or $43.2 million, to $220.1 million. the 110 basis point expansion in adjusted ebitda as a percent of net sales was driven by sales growth coupled with sg&a leverage and gross margin expansion. inventory merchandise inventories were $745.0 million vs. $802.3 million last year, primarily driven by a comparable store inventory decrease of 7%. pack and hold inventory represented 27% of inventory at quarter end vs. 28% last year. share repurchase activity during the second quarter, we invested $25 million of cash to repurchase 390,814 shares of our common stock ending the period with approximately $125 million remaining on its share repurchase authorization. debt repricing on july 29, 2016, the company completed the repricing of its senior secured term loan facility (the term loan facility), which, among other things, reduced the applicable interest rate margins from 2.25% to 1.75%, in the case of prime rate loans, and from 3.25% to 2.75% in the case of libor loans, with the libor floor being reduced from 1.00% to 0.75%. as a result of this transaction, the company recognized a non-cash loss on the extinguishment of debt of $3.8 million and incurred fees of $1.3 million, which were recorded in the line items “loss on extinguishment of debt” and “costs related to debt amendments and secondary offering,” respectively, in the condensed consolidated statements of operations. full year fiscal 2016 and third quarter 2016 outlook the company is raising its full year fiscal 2016 outlook based on its strong first half performance and positive outlook for the remainder of the year, including a reduction of interest expense associated with the re-pricing of the term loan facility. the company notes that given changes in share count, simple addition of its quarterly adjusted net income per share will not round to the full fiscal year. for the full fiscal year 2016 (the 52 weeks ending january 28, 2017), the company expects: net sales to increase in the range of 7.8% to 8.3%; comparable store sales to increase between 3.6% to 4.1%; interest expense of approximately $59 million reflecting the term loan facility repricing; adjusted net income per share in the range of $2.92 to $2.96, which reflects an increase in incentive compensation expense of $0.02 per share driven by operating performance above the company’s expectations in the first half of the year, compared to the company’s prior guidance of $2.68 to $2.78, utilizing a fully diluted share count of approximately 72.1 million shares, as compared with $2.31 in fiscal 2015; adjusted ebitda margin expansion to increase 50 to 60 basis points; and to open 25 net new stores. for the third quarter of fiscal 2016 (the 13 weeks ending october 29, 2016), the company expects: net sales to increase in the range of 7.1% to 8.1%; comparable store sales to increase in the range of 2.5% to 3.5%; and adjusted net income per share in the range of $0.30 to $0.32, which reflects an increase in incentive compensation expense of $0.01 per share driven by operating performance above the company’s expectations in the first half of the year, utilizing a fully diluted share count of approximately 72.0 million shares, as compared to $0.25 last year. the company has provided non-gaap guidance as set out above. this does not reflect the impact of potential future non-gaap adjustments on gaap net income or gaap diluted net income per share because the need for some of these adjustments, and their impact, cannot be predicted with reasonable certainty. the adjustments that cannot be predicted with reasonable certainty include, but are not limited to, costs related to debt amendments, secondary offerings, loss on extinguishment of debt, and impairment charges as well as the tax effect of such items. note regarding non-gaap financial measures the foregoing discussion includes references to adjusted ebitda, adjusted net income, and adjusted net income per share. the company believes these measures are useful in evaluating the operating performance of the business and for comparing its results to that of other retailers. these non-gaap financial measures are defined and reconciled to the most comparable gaap measure later in this document. second quarter 2016 conference call the company will hold a conference call on thursday, august 25, 2016 at 8:30 a.m. eastern time to discuss the company’s second quarter results. the u.s. toll free dial-in for the conference call is 1-877-407-0789 and the international dial-in number is 1-201-689-8562. 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 earnings call on august 25, 2016 through september 7, 2016. the u.s. toll-free replay dial-in number is 1-877-870-5176 and the international replay dial-in number is 1-858-384-5517. the replay passcode is 13643375. additionally, a replay of the call will be available on the investor relations page of the company's website at www.burlingtoninvestors.com. investors and others should note that burlington stores currently announces material information using sec filings, press releases, public conference calls and webcasts. in the future, burlington stores will continue to use these channels to distribute material information about the company, and may also utilize its website and/or various social media sites to communicate important information about the company, key personnel, new brands and services, trends, new marketing campaigns, corporate initiatives and other matters. information that the company posts on its website or on social media channels could be deemed material; therefore, the company encourages investors, the media, our customers, business partners and others interested in burlington stores to review the information posted on its website, as well as the following social media channels: facebook (https://www.facebook.com/burlingtoncoatfactory/) and twitter (https://twitter.com/burlington). any updates to the list of social media channels the company may use to communicate material information will be posted on the investor relations page of the company's website at www.burlingtoninvestors.com. participation in goldman sachs annual global retailing conference the company is scheduled to participate in the 23rd annual goldman sachs global retailing conference, to be held at the plaza hotel in new york city, on thursday, september 8, 2016. tom kingsbury, chairman, president and chief executive officer, marc katz, executive vice president and chief financial officer and robert lapenta, jr., treasurer will host a fireside chat presentation at 1:40 p.m. eastern time. the fireside chat presentation will be webcast live at the company's investor relations web site, www.burlingtoninvestors.com. an archived webcast will be available after the conclusion of the presentation. about burlington stores, inc. burlington stores, inc., headquartered in new jersey, is a nationally recognized off-price retailer with fiscal 2015 revenue of $5.1 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 operates 570 stores, inclusive of an internet store, in 45 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 65% off other retailers' prices, including women’s ready-to-wear apparel, menswear, youth apparel, baby, beauty, footwear, accessories, home and coats. for more information about the company, visit www.burlingtonstores.com. 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 (exchange act). all statements other than statements of historical fact included in this release 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 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 results to differ materially from those we expected, including competition in the retail industry, seasonality of our business, adverse weather conditions, changes in consumer preferences and consumer spending patterns, import risks, inflation, general economic conditions, our ability to implement our strategy, our substantial level of indebtedness and related debt-service obligations, restrictions imposed by covenants in our debt agreements, availability of adequate financing, our dependence on vendors for our merchandise, events affecting the delivery of merchandise to our stores, existence of adverse litigation and risks, availability of desirable locations on suitable terms and other factors that may be described from time to time in our filings with the securities and exchange commission (sec). 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 operations (unaudited) (all amounts in thousands) burlington stores, inc. condensed consolidated balance sheets (unaudited) (all amounts in thousands) burlington stores, inc. condensed consolidated statements of cash flows (unaudited) (all amounts in thousands) reconciliation of non-gaap financial measures (unaudited) (amounts in thousands except per share data) adjusted net income, adjusted net income per share, adjusted ebitda and adjusted tax expense 10,900
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