3. Burlington Stores, Inc. (NYSE:BURL)
Number of Hedge Fund Holders In Q2 2024: 42
Average Analyst EPS % Revision: 13.2%
Burlington Stores, Inc. (NYSE:BURL) is an off price retailer headquartered in Burlington, New Jersey. The firm’s shares are up by 32% year to date, with the growth coming on the back of a 21% jump at the tail end of May following its first quarter earnings. Burlington Stores, Inc. (NYSE:BURL)’s shares soared because the firm managed to heftily grow its margins in Q1. Margins are a key part of any retailer’s hypothesis, as they indicate business efficiency and operational advantages for companies that can sell products only for a small premium over their cost. During Q1, Burlington Stores, Inc. (NYSE:BURL)’s Merchandise margins jumped by 90 basis points while the gross margin grew by 1.2 percentage points. Simultaneously, the firm’s revenue jumped by 11% to $2.36 billion while the margin improvements and other benefits led its net income to more than double to $78.5 million. The margin improvements are important for Burlington Stores, Inc. (NYSE:BURL) as they are part of its strategy to optimize the supply chain. It followed up with strong margins performance in Q2 when gross margins jumped by 1.1% and surpassed analyst estimates by 0.3 percentage points.
During the Q2 2024 earnings call, Burlington Stores, Inc. (NYSE:BURL)’s management provided vital details for its supply chain efficiencies:
“We continue to be pleased by the faster-than-expected progress we’re making in driving productivity gains and cost savings in supply chain. As we shared in the prepared remarks, supply chain leveraged 60 basis points in Q2. And this was despite the start-up of a new distribution center in the second quarter and the receipt shift that we talked about from Q1 into Q2, we referenced this on last quarter’s call. We do have a number of productivity initiatives. These are more within the four wall process improvements that streamline our DC operations, reduce touches, reduce steps, reduce time to process and ultimately save labor dollars in the DC, and we’re harvesting these savings a little bit faster than we’d originally planned.
On previous calls, we had described supply chain productivity improvement as driving potentially 100 basis points of the 400 basis points of margin improvement we laid out last year in our long-range model. And we’ll see how the rest of this year plays out, but expect supply chain to continue to drive leverage in the back half. And in getting to the second part of your question, longer term, probably beyond the long-range model we’ve laid out, we do have an opportunity to drive incremental leverage as we modernize our supply chain with new larger, much more automated DCs that we expect to open. As I mentioned, we recently opened a new DC this year and we have another much larger DC under construction, which we expect to open in 2026. And with these new DCs, we have an opportunity to design DCs for off-price and with much, much more automation.”
