Burlington Stores Inc (BURL) 2004 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Burlington Coat Factory's second-quarter earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded Friday, January 9, 2004. I would now like to turn the conference over to Robert LaPenta, Jr. Vice President and Chief Accounting Officer of Burlington Coat Factory. Please go ahead, sir.

Thank you. 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 understate to publicly update or revise it's forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied will not be realized. I will first cover results of the second quarter ended November 29, 2003. Following these comments we will be available to answer your questions.

Per-share results. During the three months ended November 29, 2003, net income was 61 cents per share, compared with net income of 93 cents per share a year ago. Sales. During the second quarter ended November 29, 2003, net sales were 789.6 million compared with net sales of 782.8 million for the prior year second quarter. Sales increased in total 9/10 of 1 percent. Comparative store sales decreased 5.9 percent for the same second period. Comparative store sales in the quarter increased 3.5 percent in September, decreased 15 percent in October, and decreased 4.9 percent in November.

Other income. During the quarter, other income decreased .8 million from last year's second quarter. This decrease was due to other miscellaneous income which in last year's first-quarter had .2 million in gain from disposal of assets in connection with their store closings. Compared with this year's second quarter that had .7 million in losses from disposal of assets in connection with store closings. Offsetting this .9 change in miscellaneous income were increases in rental income from our lease departments.

Cost of sales. During the quarter, cost of sales was 61.9 percent of sales compared with 60.7 percent for the same period last year. This increase was primarily the result of increases in markdown related expenses, increases in freight, and increases in sales discounts.

Selling and administrative expenses. During the quarter, selling and administrative expenses increased 11.7 million to 241.9 million. Increase in selling and administrative expenses in the quarter reflects the additional store expenses of 11 stores not open at last year's second-quarter and the opening of the Edgewater Park distribution facility which added one million in selling and administrative expenses for this quarter. As a percentage of net sales, selling and administrative expenses were 30.6 percent of sales compared with 29.4 percent of sales for the same period last year.

The increase in selling and administrative expenses as a percentage of sales for the quarter and the six months ended November 29, 2003, is primarily related to increases in occupancy-related expenses as a percentage of sales caused by the comparative store sales decreases during these corresponding periods. During the second quarter, depreciation expense increased 2.3 million to 20.1 million compared with last year's fiscal second quarter. This increase in depreciation is due to increased levels of fixed assets related to stores opened, relocated and remodeled in fiscal year 2003 and to the new distribution center.

Interest expense. During the second quarter, interest expense increased 1.1 million to a total of 1.7 million compared with last year's second-quarter. Interest expense increased primarily to the $100 million of Senior Notes issued this September. Income tax. The income tax rate was 38.7 percent compared to 37.8 percent during the prior year. Balance sheet review. The stated values are rounded to nearest million dollars.

Inventory. Merchandise inventories at November 29, 2003, were 790.9 million, a 4.2 percent increase over last year's inventory level of 759 million. Same-store inventories were down 3.1 percent at the end of November with coat inventories down 3.8 percent.

Book value. The company's book value at the end of the current second quarter is 797.3 million, or $17.81 a share. Compared with this time last year of 747.3 million, or $16.80 per share. During the six months ended November 29, 2003, the Company opened 13 Burlington coat factory stores and two free-standing MJM Designer Shoe Stores. An additional three Burlington coat factory stores were relocated during the current fiscal year to locations within the same trading market. Three store locations previously operated as the Decelle stores were converted to Burlington coat factory stores. The Company expects to open an additional six Burlington coat factory stores and three MJM Designer Shoe Stores during the remainder of the current fiscal year.

In addition, two locations previously operated as the Decelle stores are expected to be converted to Cohoes Fashion stores. We will now be available to answer your questions. Monroe Milstein, President and Chief Executive Officer, Andrew Milstein, Executive Vice President and Executive Merchandising Manager, Stephen Milstein, Executive Vice President and General Merchandising Manager and myself are available to answer your questions.

(OPERATOR INSTRUCTIONS) Kelly Cheng (ph) at Lehman Brothers.

Hi guys. This is Kelly Cheng calling in for Jeff Black. Just looking at the gross margin, it kind of appears that you may have taken some price cuts to move more inventory, but the (indiscernible) interests (indiscernible) favorably as you might have hoped. I was just wondering in your view, to what degree do you think this is perhaps a merchandise mix issue, or perhaps a price competitive issue? I'm sorry, any color on that would be very helpful. Thanks.

It was primarily price competitive issue.

Do you think that the pricing environment has changed?

Right now, we are in clearance mode. It's hard to say whether the pricing, all of our competitors are reducing merchandise for clearance. It's hard to judge at this point. We've got to be able to tell going into March, February and March.

Okay. Great. Thanks.

(OPERATOR INSTRUCTIONS) Mr. LaPenta, there are no further questions at this time. Please continue with your presentation or closing remarks.

If there are no further questions, we thank you for participating on the conference call. If you think of something later, we can be reached here at the office. Thank you.

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.