Burlington Stores Inc (BURL) 2005 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Burlington Coat Factory second quarter sales and net income in December sales 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 Thursday, January 6th, 2005. I would now like to turn the conference over to Robert LaPenta, Jr., Vice President, Chief Accounting Officer and Treasurer 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 undertake to publicly update or revise its 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 27, 2004. Following these comments, we will be available to answer your questions.

Per share results. During the 3 months ended November 27, 2004, net income was 93 cents per share compared with net income of 62 cents per share a year ago. Net income for the 3 months ended December -- November 29, 2003, included a net loss from discontinued operations of 720,000 or 2 cents per share.

Sales. During the second quarter ended November 27, 2004, net sales were 875.7 million, compared with sales of 786.7 million for the prior year second quarter. Sales increased 11.3% for the quarter. Comparative store sales increased 4.8% for the same period. By month, comparative store sales decreased 1.3% in September, increased 12.1% in October and increased 3.9% in November.

Other income. During the quarter, other income increased 5.7 million from last year's second quarter. This increase was due in part to a $4 million increase in nonrecurring income, a 0.5 million increase in rent income, a $0.5 million increase in investment income, and a $0.4 million increase in layaway fees.

Cost of sales. During the quarter, cost of sales were 62% of sales, compared with 61.9% for the same period last year. This increase was primarily the result of increases in markdown-related expenses and, to a lesser extent, a decrease in the initial markup.

Selling and administrative expenses. During the quarter, selling and administrative expenses increased 13.3 million to 253.4 million. The increase in selling and administrative expenses in the quarter reflects the additional store expenses of 16 stores not open at the end of last year's second quarter and the opening of the Edgewater Park distribution facility, which added 2.8 million to selling and administrative expenses for this quarter. As a percentage of net sales, selling and administrative expenses were 28.9% of sales compared with 30.5% for the same period last year. The percentage decrease reflects, as a percentage of -- the percentage decrease reflects decreases as a percentage of sales in payroll, occupancy charges and advertising.

Depreciation expense. During the second quarter, depreciation expenses increased 2.6 million to 22.5 million compared with last year's second fiscal quarter. This increase in depreciation is due to increased levels of fixed assets related to stores opened, relocated and remodeled in fiscal year 2004 and first half of fiscal 2005 and to the new distribution center.

Interest expense. During the second quarter, interest expense increased 80,000 to 1.8 million, compared with last year's second quarter.

Income taxes. The income tax rate was 39.1% compared to 38.7% from the prior year.

Balance sheet review. The stated values are rounded to the nearest million dollars. Merchandise inventories at November 27, 2004, were 880 million, an 11.2% increase over last year's level of 790.9 million. Same-store inventories were up 4% with code inventories up 6%.

Book value. The Company's book value at the end of the current second quarter is 877.4 million or $19.65 per share, compared with this time last year of 797.3 million or $17.89 per share. During the 6 months ended November 27, 2004, the Company opened 6 Burlington Coat Factory stores, 3 free-standing MJM Designer Shoe stores and 1 Super Baby Depot store. An additional 3 Burlington Coat Factory stores were relocated during the current fiscal year to locations within the same trading market. 2 store locations previously operated as Decelle stores were converted to Cohoes Fashion Stores. The Company anticipates opening an additional 4 Burlington Coat Factory stores, 1 more MJM Designer Shoe store and 1 more Super Baby Depot store during the remainder of current fiscal year 2005. In addition, 2 stores are expected to be relocated to new locations within the same trading market.

Available now to answer questions are Monroe G. Milstein, Chairman of the Board, President and Chief Executive Officer; Mark Nesci, Chief Operating Officer; Andrew Milstein, Executive Vice President and Executive Merchandising Manager; and Ilyse Cohen, Women's Senior Divisional Merchandising Manager; and Steven Koster, Men's Senior Divisional Merchandising Manager; and myself. Operator, we're ready for questions.

(OPERATOR INSTRUCTIONS) One moment, please, for the first question. The first question comes from the line of Blaine Marter (ph) with Lobe Partners. Please proceed with your question.

Hi, guys. Nice quarter. I wonder if you could give us an outlook for Christmas and the recent weather trends have been quite volatile. It's hot, now it's raining and what your thoughts are going into the new calendar year.

Well, we reported in the press release that December sales were up 16.2%, which included a comp store increase of 10.1% for the month of December. So it was a very strong Christmas and a month of December for us.

The week before Christmas and the week after Christmas was fantastic. What's going to be in the future, we're not that smart. But beginning of the week, we're watching the newspapers and the TV. It was astonishing how (INDISCERNIBLE) were still coming out. Apparel sales were all negative and all the stores were doing terrible for the quarter, but especially apparel stores and the only one exception could be the higher-priced stores. We tried to analyze it in a nonscientific way. I interviewed many customers. Many of them said to us they were ordinarily bored by Saks, by Nordstroms, by Lord and Taylor and Macy's and coming to Burlington because nobody could compare with Burlington on the better fashions and the prices. So, by planning to have additional stock, do additional business and we're very happy that it happened.

Okay. And, Bob, where do you think the capital expenditures will come in this year? Will they be about equal to last year?

I think we will be less than last year. Store openings won't be as high. I think we will probably come in somewhere in the 115 to 130 range.

Okay. And you'll generate some nice cash flow even after building out your store base. Might you increase the dividend? Or have you bought any stock back in the open market?

Most of the things are under consideration. You are the gentleman who was ejected at the last meeting.

Perhaps. I'm greedy that way.

We think it has merit, particularly now and we'll go into further discussions on it. But it's definitely something that can be done and I took your advice last time and we discussed it and maybe sooner than later, we'll act on it.

That'd be great. Listen, thanks a lot. The stores look great. The only store that was Stamford, Connecticut. I know it's a new store, but I think they were having some health problems when I was doing my store check. That would be the only store. But other than that, they look great. Thanks, guys.

When you say health problems, tell us what you experienced.

There was some long lines at checkouts the day after Christmas and the return lines, there was just long lines. I was talking to a manager. Apparently he said they had a health problem.

All right, well, we appreciate your criticism and we will look into it.

Thanks, guys.

Thank you. Ladies and gentlemen, as a reminder, to register for a question, please press the 1 followed by the 4 on your telephone. The next question comes from the line of Jodi Kukerman (ph) with Lehman Brothers. Please proceed with your question.

Hi, how are you?

Hi, Jodi.

Hi. I'm calling on behalf of Jeff Black. And congratulations on a good quarter. We had a couple of questions for you. I know you talked about what you expected for the remainder of this year in terms of store growth. Can you give us any color on the next year? I know in some of your previous calls you said that some years you've opened as little as 5 stores and as many as 30. And we're just trying to get a sense of your growth for the next few years going forward.

Yes, in the case of Burlington stores, we're -- our goal is to do at least 15 to 20 in 2006.

Okay.

And in addition to that, at least, approximately half a dozen of the MJM stores.

And that's in '06?

Yes. '06.

Fiscal '06.

Right. Okay. And can you give us any light on how outerwear did versus sportswear? I know that many of our retailers said that they've been having a tough time with outerwear and I was wondering if you could give us a bit of color on that.

Our sales were wonderful because of our superior rackage. We were able to pick up on re-order styles early on. Even though much of the goods today are made overseas, we were able to jump on it and reorder heavily early. And we did so good in outerwear that we reordered our best numbers to come in in the next 2 to 6 weeks. So, we are optimistic on the future and we're moving forward. We've captured more and more of the bargain plates. We have a bigger share of the outerwear market than we ever had before.

We've also done -- did well in sportswear. We had double-digit increases in sportswear in the quarter.

Okay.

And I don't know if you want to just add anything in particular.

We've had a lot of trends this season that have been great. We've been able to get back into.

Uh-huh.

It's been done very well with ponchos and boucle and furs, trims, and we expect a lot of that to continue into the spring.

Yeah, in terms of merchandise, do you see any key items or any key trends emerging thus far for the spring season?

Yes, but we don't like to reveal it publicly. We don't want to help out our competitors.

But you're feeling pretty good going into spring?

Feeling very good but as we say, we can't predict the future.

And last question. I know you mentioned an increase in markdowns and markdown-related expenses. Is there any other color you can shed on that?

It just -- we're doing our due diligence. We are focused on keeping our inventories clean and we're just reacting, you know, as quickly as we can to areas where we think, you know. Markdowns are taken every week. It's just an ongoing part of the business.

Uh-huh.

And, you know, we're just trying to stay ahead of the curve.

Great, thank you very much.

Thank you. Ladies and gentlemen, as a reminder, to register for a question, please press the 1 followed by the 4 on your telephone. It appears at this time that there are no further questions.

Okay. In that case, thank you very much. We'll conclude this conference. And if anybody has a question that they think of later, they can call Monroe or myself here at the corporate office. Thank you.

Thank you, ladies and gentlemen. That concludes the conference call for today. We thank you for your participation and ask that you please disconnect your line. Thank you and have a great day.