Burlington Stores Inc (BURL) 2014 Q1 法說會逐字稿

Good morning, and welcome to Burlington Stores first quarter FY14 earnings conference call. The call will begin with prepared comments by management followed by a question-and-answer session. (Operator Instructions) Please note, today's call is being recorded. I would now like to turn the conference over to Bob LaPenta, Burlington's Treasurer. Please go ahead, sir.

Thank you, operator, and good morning, everyone. We appreciate everyone's participation in today's conference call to discuss Burlington's first quarter FY14 operating results. Our presenters today are Tom Kingsbury, our Chairman and Chief Executive Officer; and Todd Weyhrich, our Chief Financial Officer.

Tom will begin with a brief overview of the quarters financial results and discuss some recent developments while providing a discussion of our ongoing transformation. Todd will then review our financial results and future outlook in more detail before we open the call for questions. This call may not be transcribed, recorded or broadcast without our express permission. A replay of the call will be available for seven days.

Remarks made on this call concerning future expectations, events, strategies, objectives, trends, or projected financial results are forward-looking statements and are subject to certain risks and uncertainties. Actual results or events may differ materially from those that are projected in such forward-looking statements.

Such risks and uncertainties include those that are described in the Company's S-1, and in our other filings with the SEC, all of which are expressly incorporated herein by reference. Now I'll turn the call over to Tom.

Thank you, Bob, and good morning, everyone. Thank you for joining us today. Let me begin by saying that I'm extremely pleased with our performance in the first quarter, as our momentum from 2013 continued with a solid start to 2014. We delivered a strong performance on both our top and bottom line, as we executed all three of our growth strategies driving comparable store sales growth, continuing to grow our store base, and expanding operating margins.

Our 2.7% increase in comparable store sales and our strong growth in adjusted EPS is a direct result of the continued improvement in the execution of our off-price model in what continues to be a challenging retail environment. In addition, we are pleased to report the following accomplishments during the quarter.

We completed our first follow-on equity offering expanding our shareholder base, redeemed an additional $58 million of our 9% Holdco Notes, reduced comparable store inventories by 11%, improved comparable store turnover by 15%, opened two new stores bringing our total store count to 523, and finally, we entered the second quarter with significant open-to-buy liquidity to take advantage of the great buying opportunities we see in the marketplace.

Later, Todd will take you through the details on our first quarter 2014 financials and our 2014 full year and second quarter guidance. Our strong comparable store sales growth for the quarter was on top of a 3.4% increase in the prior year. We experienced strong performances in key businesses that cater to our core female customer such as missy sportswear, dresses and suits, and ladies shoes. In addition, our mens, housewares and luggage businesses outperformed the Company average.

We were able to achieve these results with improved execution of our off-price model. This includes having substantial liquidity to take advantage of the great in-season buying opportunities, continuing to expand our vendor and brand base and improving our merchandise localization. By geographic region, the West, Northeast and Southwest outperformed and we were weaker in the Midwest and the Southeast.

The continued growth in the quality and quantity of our vendor base has helped fuel this strong performance. We clearly see more opportunities to grow our vendor and brand base and improve the variety of styles and mix we offer our customer. Our new West Coast buying office is already helping us open new vendors and brands in a number of product categories. We continue to increase our better and best receipt unit penetration with increases coming from most businesses. We also increase our branded receipt units.

This resulted in improvements to our assortments and contributed to our continued strong performance during the quarter. I'd like to provide an update on a few other initiatives that positively impacted all of our regions and categories. We continue to make progress in terms of tailoring our assortments across brands, lifestyles, sizes, and climate. For example, we improved the timing of our seasonal product deliveries by region, allowing us to improve and getting the right products to the right locations at the right time.

We are looking forward to the continued benefits localization will have on our results. Inventory management continues to be an important initiative in driving comp performance and we continued to make great strides on this front during the quarter. We are very pleased with the level and currency of our inventories at the end of the first quarter as our comparable store inventory level decreased 11% versus last year, with our comparable store inventory turnover improving by 15%.

In addition, the level of aged inventory continued to decrease versus last year. All of these metrics have helped us in improving the freshness on our selling floors, which we are focused on providing to our customers every day. At the end of the quarter, pack and hold inventory represented approximately 23% of our total inventory versus 19% last year. As we have stated before, we do not set targets for inventory levels for pack and hold product as our buys are opportunistic and dependent on the availability of highly desirable branded product or key seasonal merchandise at strong values.

Our expanded retail store base also contributed to our growth in the quarter, delivering a $40 million increase in sales from new and non-comparable stores. We remain pleased with the performance of the stores we opened in 2013 and the two new stores opened in the quarter. We are excited about our approved deals for 2014 which span from coast to coast. We remain confident in our plans to open approximately 25 stores in 2014 and beyond and continue to believe that we have significant white space for growth to 1,000 stores over the long term.

As I indicated earlier, we are extremely pleased with our execution and performance in the first quarter. I would now like to turn the call over to Todd to provide more color on our financial results and expectations for the remainder of the year. Todd?

Thanks, Tom, and good morning, everyone. Thank you for joining us today. As Tom mentioned, we were very pleased with the quarter, as we delivered a comp store sales increase of 2.7% and a total sales increase of 5.9%. Our comparable store sales were positive in February, and March and April's combined performance was even stronger.

Our gross margin rate was 38.1%, an increase of 80 basis points versus last year. This is directly correlated with the lower level of aged inventory that we began this year with versus last year. Accordingly, we took fewer markdowns in the quarter to clear Fall goods. This improvement more than offset a 30-basis-point increase in product sourcing costs, which include costs to process goods through our supply chain and buying costs which are in selling and administrative expenses.

We expect a more normalized markdown rate in subsequent quarters. As a percentage of net sales, selling and administrative expenses exclusive of advisory fees increased 10 basis points to 30.8%. As anticipated, the Company experienced increases in product sourcing costs, as well as slight deleveraging on store occupancy costs. This was offset by positive leverage from other expenses primarily store payroll.

The quarter also benefited from approximately 15 to 20 basis points in expenses that will shift to the second quarter. I will discuss our expectations for the remainder of the year in a few minutes. Adjusted EBITDA increased by 16.1%, or $12.8 million, to $92.3 million, representing a 70-basis-point increase in rate for the quarter. Depreciation and amortization expense, exclusive of net favorable lease amortization, decreased by $0.5 million to $34.6 million.

Interest expense decreased $7.8 million to $26.6 million driven by interest savings related to the principal payments on the Company's Holdco Notes of $221.8 million in November of 2013 and $58 million in April of 2014, as well as interest savings on the Company's term loan as a result of the May 2013 refinancing. Additionally, we made principal payments of $40.5 million on the term loan over the past 12 months. Our adjusted income tax expense was $12.5 million compared to $4 million last year.

The adjusted effective tax rate was 40.2% versus 39.6% last year. The increase in the rate is the result of work opportunity tax credits realized last year that were not available in the current quarter. Combined, this resulted in an increase in adjusted net income of $12.5 million, over 200%, to $18.6 million for the quarter compared to last year. Pro forma diluted adjusted net income per share increased to $0.25 versus $0.08 last year, and our pro forma weighted average diluted shares outstanding was 75.5 million shares versus 72.4 million shares last year.

Turning to our balance sheet. At the end of the quarter, we had $70 million in cash, no borrowings on our ABL, and have availability in excess of $500 million. Our debt totaled $1.367 billion reflecting the $58 million Holdco Notes redeemed on April 4 and a $4 million pay down of the term loan.

In connection with these transactions, we recorded a loss on extinguishment of debt of $3.7 million, which is not included in adjusted net income. Merchandise inventories were $708 million versus $727 million at the end of the first quarter last year. Ending inventory included approximately $162 million related to pack and hold purchases versus approximately $137 million last year, representing 23% of inventory versus 19% last year.

Comparable store inventory decreased 11% compared with the end of the first quarter last year. As Tom mentioned, our comparable store inventory turnover improved by 15%. Accounts payable decreased $55 million to $576 million versus the end of the first quarter last year, representing 73 days of accounts payable outstanding reflective of our normal payment terms for inventory. For the quarter, we had a net decrease in cash of $64 million.

Cash flow from operations provided $47 million which was offset by $46 million in cash spent for capital expenditures and cash used in financing activities of $65 million, primarily to redeem Holdco Notes of $58 million. Now I would like to spend a few minutes to update you on our expectations for the remainder of the year. We continue to believe we will deliver top and bottom line growth for the year consistent with our previous guidance.

For the full year, we continue to expect our comparable store sales to increase between 2% to 3% for each quarter and for the full year. We opened three stores in the Spring, two were opened in the first quarter, one store opened in May, and one store closed in May, as planned. We expect to open 23 stores in the Fall. This range of comp store sales and store opening expectations imply a total sales growth rate of 5.8% to 6.8%.

Timing of our store openings is often driven by our opportunistic approach to site selection. Many of the sites we open transition from other retailers and require landlord delivery of the site, at times including site improvements. Accordingly, the timing of delivery can deviate from our expectations. We continue to focus on our pipeline of deals and plan to move toward a more balanced split between first half and second half openings in future years.

We expect that our gross margin rate will be somewhat higher than last year for the full year as we continue to evolve the execution of our buying model. We also expect that our product sourcing costs will increase, but at a lesser rate, as we continue to invest in the supply chain to process the goods bought more opportunistically, and in the merchandising organization to support the needs of the growing vendor base. We expect that we will continue to pass the same great values on to our customers.

SG&A is expected to delever modestly driven primarily by the product sourcing costs discussed earlier. Store occupancy costs are also expected to delever, but will be offset in part by store payroll leveraging. As I indicated earlier, we did have some expense timing shifts from the first quarter to the second quarter. Our results to date and expectations for the remainder of the year remain in line with our initial expectations, and we continue to expect adjusted EBITDA margin to expand 10 to 20 basis points.

We expect interest expense to be approximately $103 million and we anticipate a tax rate of approximately 40%. We expect pro forma adjusted fully diluted EPS of between $1.25 and $1.35 per share using an estimated 75.5 million weighted average shares outstanding. We expect 2014 net capital expenditures of approximately $180 million net of $40 million of landlord allowances. This includes approximately $75 million for store expenditures and approximately $35 million to support continued distribution facility enhancements.

We expect to use the remaining capital to support information technology and other initiatives, including approximately $40 million related to the construction of our new corporate headquarters. We will continue to utilize free cash flow to pay down debt when available. As we move towards our call date of February 15, 2015 on our senior unsecured notes, we will be evaluating all opportunities related to those notes, as well as continue to consider other potential changes to our capital structure.

We plan to take advantage of opportunities that may become available to reduce cash interest expense and simplify our capital structure. We continue to expect depreciation and amortization expense to be approximately $145 million for the full year. For the second quarter ending August 3, 2014, we expect comparable store sales to increase 2% to 3%. Total net sales are expected to increase in the range of 5% to 6%. Gross margin rate is expected to expand by 20 to 40 basis points, and product sourcing costs are expected to delever by similar rates during the quarter.

As mentioned earlier, we are expecting deleverage in occupancy, as well as in store payroll and a few other corporate G&A areas. We expect adjusted EBITDA margin rate to contract by 10 to 20 basis points for the quarter, and to have an adjusted loss per share in the range of $0.12 to $0.09 compared to a loss of $0.18 last year. Accordingly, the expected Spring performance is very much in line with our initial expectations.

The expectations are for a first half comp sales increase of 2% to 3%, a gross margin rate improvement of 40 to 50 basis points, deleverage from product sourcing cost of 25 to 35 basis points, adjusted EBITDA margin expansion of 20 to 30 basis points, and an adjusted net income per fully diluted share of $0.13 to $0.16. I will now turn the call back over to Tom.

Thanks, Todd. Again, I'd like to reiterate how pleased we are with our performance in Q1 and our start for FY14. We've done a lot of great work over the past few years refining our model and putting the systems and processes in place to drive growth and improve performance, and we are in the early stages of realizing the benefits of these initiatives.

We remain very confident in our ability to continue to transform Burlington into a leading off-price retailer and are excited about the opportunities we see for 2014. We ended the quarter with very lean inventories and great liquidity which positions us to take advantage of the many great deals on fashion, branded merchandise we see in the marketplace.

Before we conclude our prepared remarks, I'd like to reaffirm our full year expectations with no adjustments to our original guidance. We continue to believe that we will deliver 2% to 3% increases incomparable store sales in each quarter of 2014, we'll open 25 net new stores, and have an adjusted EBITDA expansion of 10 to 20 basis points. In closing, I'd like to thank our store and corporate teams for their hard work that made this performance possible. This concludes our prepared remarks, so let me turn it back over to the operator to start the Q&A session.

Thank you. (Operator Instructions) Our first question today comes from Paul Lejuez from Wells Fargo. Please proceed with your question.

Thanks, guys. Inventory per store was down significantly this quarter. Just wondering how we should think about that in future quarters as we move throughout the year?

And also, just curious on the pack and hold product, as that has increased as a percent of your total inventory investment, what are you seeing from that product in recent quarters? How has it performed, is it generating the sales that you had planned, and has it been accretive to your gross margin? Thanks.

Okay, this is Tom, I'll take that one. One of our objectives is to have faster inventory turns. We've been working on that now for many, many years and we've seen a lot of really good progress there. We really feel that we can operate with less inventory, so we're going to continue to have less inventory, comparative store inventory, for the foreseeable future.

We just really think it's important, improving our selectivity in terms of product, our sell-throughs by week are better. There's a lot of benefits that go with that. As far as pack and hold goes, we're seeing really good deals out there, a lot of great branded goods. When there's disruption in the marketplace, it always benefits us in terms of what's out there for us to select.

We're very, very encouraged by the performance of our pack and hold, and that's one reason why it's at the level that it currently is right now is because it is working, and from a gross margin perspective it is accretive. Some of our best performing products and it's a very strong gross margin contributor overall. That's why we're focused on it. And it's everything we want to do, it's great brands at great prices. So we're going to continue to stay focused on it.

Thanks guys, good luck.

Thank you.

Thank you. Our next question today is coming from Brian Tunick from JPMorgan. Please proceed with your question.

Hi, this is [Veda Moynak] filling in for Brian. Thanks for taking our question. I guess we first wanted to ask about, could the gross margin expansion opportunities, the 80 basis points of margin this quarter, you said, was due to improved execution. It seems like it's driven by mix shift and improved full price selling. So for the rest of the year, I wanted to see if there was a reason why we should not expect similar improvements given now you're a better operator of the off-price model?

I'll take that one, too, and if you want to weigh in, Todd, you can. First of all, the reason why we did so well in gross margin in the first quarter is what Todd articulated, the fact that we came out of the Fall season much cleaner than we did the prior year. A lot of the markdowns that we take in the first quarter are in February and that's really addressing any kind of Fall residual inventory we have.

And that's where the biggest reduction came. So by the time we got into March and April, the markdowns were more normalized versus the prior year. So we feel that the gross margin, as Todd articulated, will be accretive or over last year, but at a more normalized rate just because we feel the first quarter, based on what I just said in terms of less Fall product, really we had a big benefit. You want to --

I think that covers it.

Thanks, that's very helpful. And then we want to also ask about the pack and hold inventory, with the contents you have in that pack and hold inventory which quarters for the rest of the year should benefit most, I guess, with the flow-through rates?

Well, pack and hold is really a moving target in terms of availability of goods, but, candidly, we really feel that we're going to benefit from pack and hold throughout the entire year. We're really, again, there's a lot of great deals out there, we're taking advantage of them, and we feel that the flow of goods are going to continue throughout the year. And we have our buyers searching for pack and hold product every single week. So based on the current performance and how important it is relative to the overall off-price model, we're going to continue to focus on it and just keep building on it.

Great, thanks, best of luck.

Thank you.

Thank you. Our next question today is coming from John Morris from BMO Capital Markets. Please proceed with your question.

Thanks, congratulations, everybody. First wanted to ask, with the concentration that you have in the Northeast were your stores affected by weather? I'm wondering, if given the strength of the performance, if it could have actually even been better? So wondering if you did see any kind of a weather impact, and if so, approximately how much in terms of points of comp?

And then, also just wanted to get a little bit of color on some of the category performance, particularly home category, and maybe anymore additional color you have on womens? You had a quick comment on it but, obviously, that's been an area of initiative, as well, so just want to get a little more color on that? Thanks.

Hi, John. I'll take this one, too. It's Tom. First of all, the Northeast did well overall. But we're like all of the other retailers, especially in February, there was a headwind in terms of the weather in the Northeast, and in the Midwest, and in the Southeast.

So our performance was good in February, but our performance got better in March and April. So, yes, we had a headwind as everyone else did, because of store closures. We really haven't articulated what kind of impact it had on our comp, but we were impacted by it, but fortunately, as we execute our model better, we can continue to post some nice comps overall. As far as categories go, ladies sportswear did very, very well in the first quarter, really outperformed the rest of the Company overall.

As I've said many times before, we just have a big opportunity there and fortunately we're capitalizing on it right now. Our ladies dress and suit business was very strong. Our shoe business in general was very good both in ladies, mens and kids, and athletic shoes. So really another standout performance overall. Mens performed very, very well, above the Company average overall, so we are very pleased with that business. And in the home business, we were pleased with our housewares and luggage business.

We still have, obviously, a big opportunity in home. We didn't do as well in the home decor and in home textiles as we wanted to, but structurally, we made some changes in terms of how the business is being managed. We have a dedicated general merchandise manager for home now which began in February.

We added an additional divisional merchandise manager in the home to have, obviously, more oversight in terms of what we're buying, and we've added to the buying group overall. So we really feel confident that we're going to be able to capitalize on the opportunity there in the future, but really, we're pleased. We had a pretty broad based strong performance across the Company in the first quarter, so we're encouraged by that.

Great, thank you.

Thank you.

Thank you. Our next question today is coming from Kimberly Greenberger from Morgan Stanley. Please proceed with your question.

Hi, this is (inaudible) on for Kimberly. In terms of the stronger and weaker regions quarter to date, are the trends consistent with what you saw in 1Q?

Well, I really can't comment on what's currently happening in the second quarter overall. The one thing I can say is, as the weather has move normalized, we're -- as it happened in March and April, we see a more consistent performance by region.

So the differential between the stronger and the weaker regions were, I want to say, less than February than March and April?

Absolutely.

Okay, and just one more follow-up on new store productivity. As you start opening more smaller box stores, how should we think about occupancy and productivity going forward?

Todd, do you want to take this?

Sure. So one of the things we talked about in the last call, and indicated again in the guidance today, is that we do expect a little bit of deleverage from occupancy this year. And that's really a combination of the new stores this year and those annualizing from last year. But I don't think we can make any generalized trends about changes in what our rents are going to be.

We really look at the economics of each store as we underwrite them and as we underwrite lease renewals. So we, as we indicated before, we do expect for the second quarter and for the year to have a little bit of deleverage, but we are not seeing a major change in the underlying rent costs.

What about productivity?

So the smaller stores, basically from a revenue standpoint, flow-through standpoint, there's not a major difference with the rest of the store base. But clearly, when we're opening new stores now that are more in the 60,000-square-foot range we're seeing a higher productivity on a per-square-foot basis. But in terms of the flow-through to the financials to the adjusted EBITDAR to the bottom line, we're not seeing a big difference depending upon the store size, it really comes down to what the operating results are of the store, and that has little to do with the square footage.

Right, but we feel very good about the current size of stores we're opening right now. I mentioned previously that the average store that we opened in 2013 was a little over 60,000 square feet, and the stores were open in 2014 around 60,000 square feet. And we've seen a positive impact in terms of dollar per square foot overall, so we really feel comfortable that we can operate stores at 50,000 to 60,000 square feet very nicely, and I think it's going to help our productivity.

Okay, thank you very much.

Thank you. (Operator Instructions) Our next question today is coming from John Kernan from Cowen and Company. Please proceed with your question.

Good morning guys. Congrats on a tough quarter in a tough environment. Just wondering how you're viewing the competitive environment with the other off-price retailers both in terms of traffic and also in terms of inventory availability? And then, just, are you concerned at all that the pricing umbrella between your offering and some of the mid-tier department store channel is narrowing? Thanks.

First of all, I'd talk about product availability. I think because that's always really everybody's question. There is plenty of product to go around. There's a continuous flow. Usually, as I mentioned before, when there's any disruption in the marketplace we usually -- there's ample product overall. So, no, it's definitely ample product out there, so it's not a problem versus our competitor.

As far as pricing goes, relative to the mid-tier department stores, our goal is to continue to be as sharp as possible and utilize every tool in the off-price tool box so that we can continue to deliver great values, great brands at great prices. So we really feel that we can compete in any type of environment as long as we're executing the off-price model superbly.

So it's really -- we're, obviously, we're always worried about what's going on in the marketplace, but we try to keep it as simple as possible, and that is, to execute the off-price model and deliver great value. So we feel that we can be very competitive, which I think we have been, obviously, with our performance last year, our consistent performance last year quarter by quarter, and, obviously, our performance in the first quarter.

Okay, then can you just talk about the drivers of comp in the first quarter?

Yes, I'm sorry.

Specifically, in terms of basket or traffic and ticket? And then are you feeling any of the sector-wide pressure there has been on traffic? Thanks.

Our traffic was comparable to last year. Overall, we experienced gains in both units per transaction and AUR. So we had a higher average basket, so that's what really drove a lot of our comp increase.

All right, great, thank you.

Thanks.

Thank you. Our next question today is coming from Pamela Quintiliano from SunTrust Robinson Humphrey. Please proceed with your question.

Great. Thanks so much and congratulations, guys, in executing in such a challenging environment.

Thank you.

Just had a few questions. Can you remind us how many vendors you'd had at the end of last year, and just how many you've added? And then, can you also talk a bit more about home in terms of the timing of increasing the penetration there? And you mentioned that you added some new talent recently, when we should expect the impacts to be felt from that?

Okay, talking about vendors. We ended last year with 4,500 vendors. It was 1,000 more than 2012, and we are very encouraged by the availability of vendors and adding to our stable of vendors. We're not going to give really an update on a quarter-by-quarter basis, but just, clearly, we have an opportunity to grow. We know that our competitors have more than we have.

We feel comfortable about adding net 1,000 vendors and brands every year for the foreseeable future, so we feel good in what's coming our way. We're very encouraged by what we see from our West Coast office in terms of things that are coming available to us overall. So the vendor thing, we really feel it's going to be good overall. As far as the home goes, again, we just put a lot of this increased management into the home beginning with February. We really feel the benefit in home is really going to happen more in the second half of the year as we get ramped up in terms of executing.

Okay, and then, can I just follow-up with two more. Just the advertising campaign that you ran, can you talk about the effectiveness of that new campaign, and just any type of insights you can give us on your go forward plans there? And then, lastly, just an update on the percent of your base that's been retrofitted and how we should think about that going forward?

Okay, I'll take the first part and I'll let Todd answer the second part. The advertising campaign is doing very well. We feel that it's a contributor to our good comps in the first quarter overall. It's really resonating with our customers.

We do a lot of customer chats and there's been a lot of positive reaction to the campaign overall. As far as our strategy goes from marketing, we're going to continue to utilize our testimonial campaign which we're currently in right now for the foreseeable future. And in terms of spend and in terms of marketing, it's going to be comparable to last year.

Okay, and on CapEx, we, as we've indicated in earlier calls, we are continuing to look at refreshing the stores that have a need for that and remodeling key stores as we go forward. At the end of this year, we expect that roughly 75% of the store base will either be new, remodeled, or refreshed stores. So we continue to make progress on that and we continue to be prudent about which stores we invest in.

And is that something that will be more loaded to a specific quarter, or should we expect that evenly distributed throughout the year?

I would say it's probably heaviest in Q2 and the early part of Q3.

Great, thanks so much, and best of luck.

Thank you.

Thank you. Our next question today is coming from Karru Martinson from Deutsche Bank. Please proceed with your question.

Good morning. You guys mentioned simplifying your cap structure, so I was just curious kind of why aren't we addressing the remaining stub of the Holdco Notes right now?

I'll take this one. This is Bob LaPenta. So the Holdco Notes are junior to all of the other debt, and in order to redeem those in advance of the senior debt you have to have capacity in your restricted payment basket. We used the available capacity we had in April to redeem the $58 million, and won't have additional capacity to redeem more of those until next year. The only other opportunity would be if we have an opportunity to refinance the entire capital structure, we'll address it in that transaction.

Okay, and then you guys talked about making progress on getting better and best inventory into the store. What percentage of sales would you say that stands at today?

It's growing. I guess that's the best way to answer that question overall. We feel very good about our progress we've made overall. We really haven't talked about that, but all I can tell you right now is we're focused on it and we really feel that there's going to be some growth for the foreseeable future there.

Okay. And I'm sorry if I missed it, could you remind us again what eCommerce is as a percentage of sales and where you see that going?

We feel that there's going to be growth in eCommerce overall. As a percent of sales, it's really very small, it's not meaningful at this point in time, but we had a nice growth there and we're going to continue to grow our eCommerce business.

All right, thank you very much.

You're welcome.

Thank you. (Operator Instructions) Our next question today is coming from Karen Eltrich from Mitsubishi. Please proceed with your question.

Thank you. As mentioned previously, obviously, your results probably would have been better had the weather been more hospitable, but on the flip side, given your strong coat business, do you think you got a benefit for that, and that is potentially a tough comparison for us next year? Or would you say that your comps were up across the board?

Well, let me talk about coats for a minute. Coats significantly under performed the Company in the first quarter. Strategically, we came out of the Fall season with a lot less inventory in coats than we did the prior year.

This is something that we've been working on for the last three to four years, to right size our coat inventory when we get into the Spring season, to be able to utilize the real estate that coats takes up in the Spring season for other categories overall. So we really, we didn't benefit from the cold weather in the cold weather categories because strategically we had a lot less inventory than we did the prior year.

So as we look at the inventory reduction that you've accomplished a lot of that was, in fact, coats?

It was really across the board to be honest with you. Obviously, coats was a piece of it, but it's really across the board. We really feel we can improve our inventory turns in all of the categories that we do business in.

Great, and can you maybe comment on how your Baby Depot sales trends have been? That, obviously, has been a very competitive challenging category of late. What are you seeing there, and what do you view as the growth opportunities there?

The Baby Depot business has been a weaker category for us versus our total overall. We're very proud of our Baby Depot business. It's an important driver for the customer in terms of a differentiator for us, but we really feel that that business is not going to grow in the near future. We just really feel that it is what it is, and our focus really is to grow all of the other categories within the box, continue to grow missy sportswear, continue to grow our home business overall. But, again, it's a good business for us, but we don't anticipate growth in that business.

Great, thank you. And as you said, you're very opportunistic with your real estate. As you look at your expansion plans, how are you balancing that between new and existing markets?

This is Todd. I'll take that one. If we look at our base of stores right now, we are in virtually all of the major markets. We have some stores that we've opened in the last few years which are in smaller markets where there may be only one or two stores, but the vast majority of our expansion will be in our currently existing markets.

There are really virtually none of our larger markets that are anywhere close to penetrated. So we think we have substantial white space opportunity across the country.

Great, thank you very much, and congrats on the quarter.

Okay, thanks much.

Thank you. Our next question is coming from Carla Casella from JPMorgan Chase. Please proceed with your question.

Hi, so your new stores you're opening, can you just remind us the square footage and whether it will bring down your average square foot per store over the next few years?

This is Tom. I'll respond to that. As I mentioned before, the average size of the stores we opened in 2013 was a little over 60,000 square feet, and the average for 2014 is around 63,000 square feet. Yes, it will bring down the average as we move forward because we're comfortable with a 50,000 to 60,000-square-foot box.

Okay, great. And then, you mentioned you've got some good opportunities for opportunistic buys. Should we see that level of pack and hold, then, go up through the remainder of the year on seasonal opportunistic buys right now?

Well, we don't really set targets for pack and hold. We feel that the deals should just present themselves, and then we'll look at it and evaluate it, and, if in fact, we grow pack and hold we grow pack and hold. But it's all deal related, and, again, we just feel that the right thing to do is to make sure that we're not targeting how much pack and hold we have and that we challenge the merchandise organization to scour the market and find great deals, and then present them to us in terms of being able to be put into pack and hold. But right now our inventory levels are higher in pack and hold.

Great, thank you.

Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back to management at this time.

Thank you, again, for your participation on today's call. We look forward to updating you on our performance on future quarterly calls, and thank you, again, for your continued interest in Burlington Stores. Have a great day. Thanks, again.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.