Burlington Coat sheds profits

Gary Evans, Don Hogsett, January 19, 2004

Hampered by unseasonably warm weather, which put a crimp in same-store sales, and disruption caused by store relocations, second fiscal quarter profits tumbled by more than a third at Burlington Coat Factory Warehouse, to $27.1 million from $41.6 million last year.

Net retail sales at the parent of Luxury Linens limped ahead by 0.9 percent, to $789.6 million from $782.8 million last year, helped by new store openings. But the crucial gauge of same-store sales fell by 5.9 percent.

Acting as a drag on earnings in addition to the falling comps was a punishing trifecta of rising costs, higher interest expense and thinning margins.

Under pricing pressure, average gross margin narrowed by 120 basis points, or 1.2 percentage points, to 38.1 percent from 39.3 percent a year ago.

Measured as a percentage of virtually flat sales, costs advanced by 120 basis points, or 1.2 percentage points, to 30.6 percent from 29.4 percent. Measured in absolute dollars, expenses increased by 5.1 percent, to $241.9 million from $230.2 million.

Adding an extra layer of pressure to the bottom line, interest expense, while still modest by retailing standards, almost tripled during the second quarter, rising by 175 percent, to $1.7 million from $613,000.

For the six-month period ended Nov. 29, profits skidded down by 60.6 percent, to $10.1 million from $25.5 million the preceding year.

Net retail sales edged up by 2.4 percent, to $1.3 billion, but same-store sales fell by 4.1 percent.

During the first six months of the fiscal year, 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 to locations within the same trading market. Three store locations previously operated as Decelle stores were converted to the Burlington nameplate.

The retailer said it plans to open an additional six Burlington Coat Factory stores and three MJM Designer Shoe units during the balance of the fiscal year. Additionally, two Decelle units will be converted to Cohoes Fashions stores.

Burlington Coat Factory Warehouse

Qtr. 11/29 (x000) 2003 2002 % chg
a-Net sales, excluding other income. During the second quarter, other income totaled $7.2 million, down 10.3 percent from $8.0 million last year. Total sales, including miscellaneous income, rose by 0.8 percent, to $796.8 million from $790.8 million during the prior-year quarter. For the six months, other income totaled $13.0 million, down 8.6 percent from $14.2 million. Total sales, including miscellaneous income, rose by 2.2 percent, to $1.3 billion.
b-Second-quarter results include a $2,000 net unrealized after-tax loss on non-marketable securities.
Sales $789,608a $782,777a 0.9
Oper. income (EBIT) 66,001 85,261 -22.6
Net income 27,121b 41,581 -34.8
Per share (diluted) 0.61 0.93 -34.4
Average gross margin 38.1% 39.3%
SG&A expenses 30.6% 29.4%
Six months 2003 2002 % chg
Sales 1,319,250a 1,288,881a 2.4
Oper. income (EBIT) 57,788 75,822 -23.8
Net income 10,056 25,518 -60.6
Per share (diluted) 0.23 0.57 -59.6
Average gross margin 37.4% 37.8%
SG&A expenses 34.0% 33.1

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