Burlington Stores Inc (BURL) 2002 Q3 法說會逐字稿

Welcome to the Burlington Coat Factory third quarter results conference call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the one, followed by the four on your telephone.

As a reminder, this conference is being recorded Friday, March 22, 2002.

I would now like to turn the conference over to Mr. Robert LaPenta, Jr., Vice President, Controller, and Chief Accounting Officer of Burlington Coat Factory. Please go ahead, sir.

Good morning.

Statements made in this conference that are forward-looking involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially are the following - deviation of actual from projected sales and earnings, the company's ability to maintain selling margins, general economic conditions, changes in projected store openings, weather patterns, the company's ability to control costs and expenses, and other factors that may be described in the company's filings with the Securities and Exchange Commission.

The company does not undertake to publicly update or revise its forward-looking statements, even if experience or future changes make it clear that any projected results, express or implied, will not be realized.

I will first cover results of the third quarter ended March 2, 2002. Following these comments, we will be available to answer your questions.

Per share results - during the three months ended March 2, 2002, net income was 84 cents per share compared with net income of 82 cents per share for the three months ended March 3, 2001.

Sales - net sales for the third quarter ended March 2, 2002 were 779,820,000 compared with sales of 722,713,000 for the prior third quarter ended March 3, 2001. Comparative store sales for the quarter decreased 0.4 percent. Comparative store sales decreased 3.4 percent during December, they increased 2.4 percent in January and they increased 4.9 percent in February. Comparative store sales of coats decreased 17 percent during the quarter, due primarily to warm weather, particularly in the first three weeks of December. Offsetting the weaker outwear sales during the quarter, the weighted average comparative store sales of all other departments increased 6.1 percent.

Cost of sales. During the third quarter, the cost of sales was 64.6 percent of sales, compared with 65.2 percent for the same period last year. The decrease was primarily due to a decrease in markdowns in all of our non-outerwear departments, compared with the prior year.

Selling and administrative expenses. During the third quarter, selling and administrative expenses were 26.8 percent of sales, compare with 26.4 percent for the same period last year. The increase as a percentage of sales, primarily reflects the decline in comparative store sales of .4 percent during the quarter.

Income taxes. The income tax rate for this year's, and last year's third quarter was 37.6 percent. Balance sheet review. The stated values are rounded to the nearest million dollars.

Cash and cash equivalent. Short-term investments and long-term investments were 126.9 million as of March 2nd, 2002, compared with 128.2 million as of March 3rd, 2001. Merchandise inventories were 573.9 million as of March 2nd 2002, a 5.9 percent increase from last year. Inventory is up in part to 18 additional stores this year, over last year, and to higher outwear inventories of 27.9 percent on a comparative store basis, compared with March 3rd, 2001 last year.

Offsetting these higher inventory numbers in outerwear, is a comparative store decline in all other department merchandise inventories of 6.2 percent on a weighted average basis. Long-term debt was 8.8 million as of March 2nd, 2002, compared with 7.6 million a year ago. Stockholders equity was 713.3 million, or $16.06 a share, book value at March 2nd, 2002.

Store growth. At the end of the third quarter, the company operated 312 stores in 42 states, with a total gross square footage of 24,044,000 square feet. The company opened 17 stores and relocated 17 stores and relocated seven additional stores in the first nine months of fiscal 2002.

The company has opened three and relocated one additional Burlington store in the - in the beginning of this fourth quarter of this fiscal year and plans to open nine additional MGM Designer Shoe stores in the fourth quarter of this year as well. We will now be available to answer your questions. Monroe Milstein, President and Chief Executive Officer, Steven Milstein, Executive Vice President and General Merchandising Manager, Andrew Milstein, Executive Vice President and Executive Merchandising Manager, , Vice President, Real Estate, , Vice President of Store Operations, and myself are all available to answer your questions.

Ladies and gentlemen, if you wish to register your question for today's question-and-answer session, you will need to press the one, followed by the four, on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your polling request, you may do so by pressing the one, followed by the three. If you're using a speakerphone, please pick up you handset before entering your request. One moment for the first question. Once again, ladies and gentlemen, if you do have a question, please press the one, followed by the four, at this time.

Gentlemen, I'm showing no questions at this time. Please continue.

I'm sorry. We do have a question from , a private investor. Please go ahead.

Hi. Good morning, gentlemen.

Good morning.

On MGM, the first question is - there's a relatively small sample out there now, but you see some kind of potential. At what point do you have a large enough sample to determine that this is a go to run across the country with this or you cut your losses on it?

Well, Andy, go ahead. Why don't you answer that question?

Well, I was open seven more today. And we'll see how they go, but the first - the first one is meeting expectations and we plan on opening at least 14 in the fall. Now, if these turn out to be below our expectations, obviously, we could always modify our plan.

What are your expectations?

I don't know if we want to - do we want to give out that?

We plan to make a lot of money on it.

OK. The other question is what differentiates that store from, say, the shoe carnivals out there, your competition, et cetera?

I'm going to tell you about the MGM - Mr. just reminded me that we basically have not taken a lot of risk in opening these stores. In most cases, it was excess real estate that we had. So this is a good way to test it and see how it goes, you know, before - you know, before we sign - we start signing long-term leases.

I mean we've seen - we've been very happy with the shoe results that we've seen in the Burlington boxes where we've added shoe stores in just about every store that had the capacity to have one, we've put a shoe department within the Burlington stores and it's been a big plus for our business.

We had an opportunity to take a store and experiment this past year with this freestanding concept, and we're optimistic. It's only one store. The store economics have got to make sense to continue doing it, and that's the reason to open nine more stores and to continue to test the concept. It - we're still testing. You know, we're still looking to see how it can improve, but if it continues to work and continue to be successful, we feel this is an avenue that we can grow this shoe business over and above, you know, the - by just growing a Burlington boxes.

OK. One final question for you is that your outerwear that was 27 percent for the quarter, increasing ...

Inventory at the end of the third quarter ...

... inventory is up 27 percent.

All outerwear.

All outerwear - yes.

all out - how are you guys sitting, like, right today or as close to today as you have data on?

Well, it's comparable. I would say it's - it hasn't dropped much in the two weeks or the three weeks since the end of the quarter.

What we find with the outerwear - 80 percent of outerwear styles are staple styles that are year-after-year. And what I've learned is when a customer doesn't want something, price will not move it. So right now, people are thinking spring. We're doing very well with spring. And the bad styles we have marked down, and the replenishment styles - the styles that we'll go back into for next year will be held and for next year.

OK. How about your buying going into spring - summer? How is that looking? Opportunities out there?

opportunities out there. There's not massive excess like we saw in the fall, but there are always opportunities.

We've had - we've had no problem with off-price goods when we needed it.

Just from your personal standpoint, how do you compare this winter in terms of how you've done grading yourself as opposed to, like, the warm winter in '98, I believe it was?

I believe in 98, we - our inventories at the end of the season were much higher. And that we were much more cautious, and we cut off our buying earlier. But still we were caught with more inventory. I feel we're in control, and we'll do fine next year. We're making many of our buys for fall 2002 right now, and we're adjusting our buys - we're buying a little less, because we're coming in a little higher inventory, so we're buying a little less upfront.

OK. Next in terms of coats, but your other departments, you're still fairly confident from just seeing same-store sales numbers, etc cetera?

Well the other departments have - in the third quarter did very well.

Right.

In fact, it was the strength of the other departments that really carried the quarter for us. In spite of the soft outerwear numbers. So, you know their inventories are in good shape as of the end of third quarter, and, you know we're hopeful that the momentum will continue.

I think in the past - so you're going back to '98, or before that even, if it was a bad coat year, it'd be bad for sports wear and for men's and for childrenswear, cause people didn't realize to the extent they realize now that we - you know, the strength of these other departments. And they kind of fed off the coat traffic. Where now people come in to buy sports wear, they'll come in to buy menswear or childrenswear. So they're able to have good seasons even when it's warm.

You think that ...

... when it was warm we wouldn't have the traffic in the store.

Yeah, the whole store would suffer.

Yeah.

Yeah. So you think your advertising the nationwide, you know ad campaigns, have been paying off?

The world knows we're a full line value department store today. And the world is, the world has gotten the message. And we're still sending that message out, and it's a continued message. The other thing is we continue to strive to increase our inventory stock turns. So there's a ...

Right.

... continued drive within the company to improve our turns, and hope - therefore hopefully on margins.

Very good. All right, well thank you very much gentlemen.

Welcome.

Thank you.

Ladies and gentlemen, if there are any additional questions, please press the one, followed by the four at this time. Our next question comes from with . Please go ahead.

Well, definitely want to congratulate you on getting through such a difficult period. Getting through it so well. You say that customers are realizing that you're more than just coats, which you've demonstrated with all other departments. How, for example, has Baby Depot been doing, and especially the sportswear departments?

Baby Depot has been good - has been consistent. It's been showing increases and might - I look it for the season, not quarter.

Yeah. For the quarter, Baby Depot was up two percent. Sportswear was up over 12 percent, double digit.

Wow. What about shoes?

Shoes was up 15.7 percent.

Comp stores.

These are all comp store numbers. So, and, you know, that's one of the reasons we had, despite the decrease in comps, our gross margins were up and the gross margins were up on the strength on a lot of these departments that typically have fashion risk and, you know, their markdowns were way down because of their real strong sell through this quarter.

Yeah. Our inventory was lower this year in the other departments, which we felt helped sales because I think we were a little heavy, in the past, and the store was less shoppable. So, we think it would help sales and it also helped our markdown situations because the inventory was lower when the sales were higher. There was a lot less left to mark down at the end of the season.

The other department that's been real strong is kids - youth area - is up 9.6 percent in the quarter. And that's also - we've seen the decrease in markdowns in that area, as well, from the strength - their strength in sales.

When you say youth, tell him what you mean by youth.

Clothing - all the children's clothing, including outerwear.

Pardon me?

What ?

size 16, right? 16.

Yeah. It's for - basically, for two-year olds to about 14, 15-year olds.

Well, that's really very impressive. We're up to the Easter season. How are you going about making sure that you continue to perform well for Easter? And how important is Easter to your current quarter?

Easter is - has significant impact on sales. Right now, business looks like we're, comping weeks before Easter, there's a shift in the Easter calendar. This happens to us every year. And the final results we will not know until the end of the month of April because we have to add the two months together ...

Right.

... because Easter has moved from April to March this year.

What are you doing in terms of developing the business, promoting the business, marketing, differently than a year ago, if anything?

Well, we have - continue to have a nationwide circular that's - we send out about 18 million pieces on a nationwide circular. Sixteen-page color circulars, telling about all our dress up departments. We have a television campaign nationwide. And a network TV , all emphasizing Easter dress ups.

Well, just keep the ball rolling. Congratulations, again.

Thanks .

Ladies and gentlemen, if there are any additional questions, please press the one, followed by the four.

Gentlemen, I'm showing no further questions. Please continue.

OK, if there's no further questions - Monroe, do you have any closing comments ?

Well, it's just another good example of how this company has accomplished diversification. We're still the largest coat people in the country. Despite a very bad coat year, we're still making good money. I'm very proud of the fine team and the organization that's accomplished this.

OK, so that concludes our conference call for today. If there's any questions or anybody requires additional information, they can contact me at extension 1216.

And happy holidays to everyone.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.