Burlington Coat Factory 3Q Profits Off

Don Hogsett, April 17, 2006

Nicked by higher costs and thinning margins, third fiscal quarter profits at Burlington Coat Factory Warehouse Corp. fell by more than 12%, despite sales that climbed by almost 6%, even as some stores remained shuttered after last year's hurricanes in New Orleans and Florida.

Earnings at the diversified apparel and home retailer, the parent of Luxury Linens, slipped by 12.6% during the all-important Christmas quarter, to $58.3 million from $66.7 million last year. Sales improved by 5.7%, to $1.0 billion from $968.1 million last year. The crucial gauge of same-store sales rose by 3.5% during the quarter, and did even better for the nine months year to date, rising by 5.5%.

Costs climbed higher during the holiday period, rising by 170 basis points, or 1.7 percentage points, to 26.1% of sales from 24.5% a year ago. Also, margins contracted by 30 basis points, or three-tenths of a percentage point, to 36.6% from 36.9% a year ago.

Providing some lift to earnings, the retailer slashed its interest costs by almost two-thirds, or 61.6%, to $683,000 from $1.8 million last year, generating a cash savings of $1.1 million.

Skewing the year-over-year comparison slightly, last year's third quarter included $603,000 in after-tax income from discontinued operations. Without that, earnings this year declined by slightly less, or 11.8%, to $58.3 million from $66.1 million.

Through the first nine months of the fiscal year, the retailer opened eight Burlington Coat Factory stores, while relocating five and closing two. Three free-standing MJM Designer Shoe stores were opened, and two Luxury Linens stores were closed. Three Burlington stores remained temporarily closed due to hurricane damage, and the company has not yet decided when they will reopen.

Burlington Coat Factory Warehouse Corp.

Qtr. 2/25 (x000) 2005 2004 % change
a. Third quarter results include $8.4 million in other revenue, compared with $7.5 million during the same period a year ago; and miscellaneous income of $3.6 million, compared with $3.4 million last year. Prior-year results include $603,000 in income from discontinued operations.
b. Nine-month results include $24.2 million in other revenue, compared with $21.8 million last year; and miscellaneous income of $1.1 million, compared with $9.0 million a year ago. Prior-year results include $439,000 in income form discontinued operations; and a $1,000 loss on non-marketable securities.
Sales $1,023,662 $968,109 5.7
Oper. income (EBIT) 83,844 99,648 -15.9
Net income 58,310a 66,718a -12.6
Per share (diluted) 1.30 1.49 -12.8
Average gross margin 36.6% 36.9%
SG&A expenses 26.1% 24.5%
Nine months
Sales $2,619,919 $2,414,314 8.5
Oper. income (EBIT) 121,731 122,059 -0.3
Net income 87,776b 89,731b -2.2
Per share (diluted) 1.96 2.01 -2.5
Average gross margin 36.5% 36.9%
SG&A expenses 29.3% 29.2%

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