Burlington Coat hurt by leveraging costs
January 18, 2007,
Burlington, N.J. -- Hobbled by soaring interest expense since its takeover a year ago, and picking up the tab for a sharp jump in stockpiles, Burlington Coat Factory Investments Holdings Inc. recorded a 74.1% slide in second fiscal quarter profits, to $11.7 million from $45.4 million during the same period a year ago.
Interest expense in the quarter jumped to $35.2 million from just $1.5 million last year. For the six months, interest costs climbed to $70.6 million from $3.3 million during the same period a year ago.
Putting the profits under even greater pressure, inventories climbed steeply, rising by 29.0%, and pulling $205.1 million away from the bottom line.
Average gross margin widened substantially during the second quarter, rising by 230 basis points, or 2.3 percentage points, to 39.0% from 37.7 % a year ago, helped by higher initial markups and lower freight costs. But offsetting some of that margin improvement, operating costs climbed higher when measured as a percentage of rising sales, creeping up by 130 basis points, or 1.3 percentage points, to 29.2% from 27.9% last year.