By Håkon Helgesen
Burlington has ended its year with a strong set of figures, posting its sixteenth consecutive quarter of same-store sales uplifts. Sales growth was sequentially better than the prior quarter, although this uptick was no doubt aided by a set of fairly soft comparatives from the prior year.
A number of external factors played into Burlington’s hands over the final quarter. These included a snap of cold weather which, when compared to last year’s unseasonably warm end to the year, was extremely helpful given Burlington’s traditional focus on coats and outerwear. Continued price sensitivity was another helpful trend which meant bargain hunters were out in force across the holiday period.
Gift selections and festive store presentation were much stronger. Another future growth initiative comes from the opening of new stores, which Burlington will continue to roll out. Burlington is also gaining ground outside of its traditional apparel offer, with range developments in both home and beauty helping to drive up average basket sizes.
Beneficial external factors were joined by a number of self-help initiatives in propelling growth. Foremost among these was a much stronger holiday and Christmas product line-up in stores. Although Burlington has been steadily improving this part of its offer over the past few years, it has often come across as a bit lackluster. However, we feel that a corner was turned this year and that gift selections and festive store presentation were much stronger.
Burlington is also gaining ground outside of its traditional apparel offer, with range developments in both home and beauty helping to drive up average basket sizes. While neither category is yet at maximum customer penetration, shopper interest and purchasing rates continue to grow which indicates that Burlington has pitched these categories correctly and is executing them well in store. In our view, this range extension is one of the most exciting growth vectors for Burlington over the next few years and we believe it will continue to support good levels of same-store sales growth.
Another future growth initiative comes from the opening of new stores, which Burlington will continue to roll out. The company made good progress in enlarging its fleet in 2016 but, in our view, it was a bit more cautious that it needed to be. Given that there were many other activities on Burlington’s corporate plate this is perhaps understandable; but we hope that the above-plan results from new stores will help to increase the pace of new store growth — especially so in the Midwest and across the West Coast — in the new fiscal.
Looking to the year ahead, Burlington has penciled in a fairly cautious first quarter uplift of 1-2% in same-store sales. Although it is coming up against some tougher comparatives we believe that this is achievable and, if anything, is probably slightly conservative. That said, there may be something in the company’s hypothesis that delayed income tax refunds will act as a brake on spending growth in the early months of this year.
Overall, we remain optimistic about Burlington, even against the backdrop of an increasingly crowded and competitive off-price sector.
Håkon Helgesen is an analyst at GlobalData Retail.