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Burlington sees widening 1Q deficit

Loss tied to expansion of store base

With costs climbing steeply higher as it builds out its store base, off-price retailer Burlington Coat Factory, parent of Luxury Linens, recorded a substantially widened first-quarter loss of $20.6 million, compared with a prior-year deficit of $14.4 million.

But lifted by the new stores it has opened, sales at the off-price chain expanded by 8.6 percent, to $451.6 million from $415.7 million last year.

Contributing to the deeper losses, the chain had an additional 13 stores in operation, accounting for $0.05 cents of a per-share loss for the quarter of $0.46. Pre-opening expenses for 24 new stores — compared with 15 new stores in the prior year — resulted in an additional $0.02 per share loss. Another big drag to Burlington Coat's bottom line were operating expenses at an additional distribution facility, in Bristol, PA, which accounted for another $0.15 per share of the overall deficit.

Driving the widening deficit, Burlington Coat's expenses, tied to chain-wide expansion, climbed by 180 basis points in the period, to 39.9 percent of sales from 28.1 percent the prior year. Measured in absolute dollars, costs soared higher by 13.8 percent, or $21.8 million, to $180.4 million from $158.5 million a year ago.

By far the biggest piece of the loss, about $0.35 per share, was stepped-up depreciation expense due to the increased level of write-offs associated with anticipated store relocations pegged to the acquisition of new store locations from Montgomery Ward.

On the plus side, average gross margin improved by 20 basis points, to 34.7 percent from 34.5 percent the preceding year. Lifted by rising sales and widening margins, gross margin dollars increased by 9.3 percent, to $156.7 million from $143.3 million.

Weighed down by the rising costs, the company recorded an operating loss of $32.7 million, up from a far-smaller year-before deficit of $20.9 million.

Easing some of the pain, the retailer received an income-tax credit of 12.4 million, compared with a prior-year tax benefit of $8.2 million.

With all those stores opened or on the schedule, the retailer built up its inventories to stock all those new shelves. Stockpiles climbed higher by 21.9 percent, to $652.8 million from $535.4 million a year ago.

In a prop to the bottom line, Burlington Coat whittled down its already small long-term debt by 7.3 percent, to $7.0 million from $7.6 million a year ago. As the company retired some of its debt load ahead of schedule, interest expense was pared by almost two-thirds, or 63.2 percent, to $313,000 from $850,000 the preceding year.

The chain operates 297 stores in 42 states, and plans to open about 20 more during the current fiscal year.

Burlington Coat Factory Inc.

Qtr. 9/1 (x000) 2001 2000 % CHG
(loss)
a-First-quarter results include an income-tax benefit of $12.4 million, compared with a year-ago tax benefit of $8.2 million. The prior-year quarter also included a loss of $815,000 from the early retirement of debt. The retailer recorded a pre-tax loss before one-time items of $33.0 million, up 51.8 percent from a prior-year pre-tax deficit of $21.7 million.
Sales $451,551 $415,671 8.6
Oper. income (EBIT) (32,663) (20,868)
Net income (20.577)a (13,536)a
Per share (diluted) (0.46) (0.32)
Average gross margin 34.7% 34.5%
SG&A expenses 39.9% 38.1%


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