During Burlington Stores’ second-quarter earnings call on August 29, CEO Michael O’Sullivan reflected on the company’s robust financial performance and shared insights on recent strategic changes and their positive effects.
“Over the past 18 months, the external environment has become more favorable,” O’Sullivan noted. Our primary low-income clients were severely impacted financially two years ago as a result of growing living expenses.
Since then, two key developments have occurred. As inflation has eased, conditions for lower-income shoppers have somewhat improved. Concurrently, economic pressure and uncertainty have extended beyond just lower-income shoppers, leading to a broader emphasis on value across various demographic and income groups. This increased focus on value is benefiting our business.”
In the company’s first-quarter earnings call, O’Sullivan described the economic landscape and consumer health as “difficult to interpret.”
“Discretionary spending trends appeared to be mixed, with both positive and negative indicators,” he observed at the time.
However, in recent months, the situation appears clearer, showing a stronger emphasis on value across the board. Recent earnings reports from other retailers suggest that those offering the best value are succeeding and driving comparable sales.”
Deal-Seeking Consumers Switch Loyalties
O’Sullivan noted that value-conscious shoppers are increasingly turning to Burlington Stores.
“The financial strain on lower-income customers hasn’t disappeared, but it seems to have eased somewhat,” he explained. “While these shoppers remain vulnerable, the reduction in inflation appears to have slightly improved their situation. Our data supports this observation. Two years ago, our comparable sales for stores in lower-income areas lagged behind the rest of the chain. Given the high volume of these stores, their performance is closely monitored.”
PYMNTS data indicates that cash-strapped consumers, living paycheck to paycheck, are opting to trade down rather than forego purchases entirely. This shift benefits discount retailers.
Burlington Leans Into Value to Woo Shoppers
Exceeding expectations, Burlington Stores, known for offering premium branded clothing and home goods at reduced costs, reported a 13% increase in overall sales and a 5% increase in comparable store sales.
The company added 36 net new stores during the second quarter. O’Sullivan highlighted that Burlington is on track to open 100 net new stores and approximately 30 relocations. “Our new stores are performing above the expected benchmark of $7 million in sales in their first full year,” he noted.
O’Sullivan also emphasized the company’s success with full-price sales.
“Our focus on offering exceptional value from the start is driving quicker inventory turnover and reducing the need for markdowns,” he said. “As a result, less inventory is reaching the clearance rack. We saw a double-digit decline in clearance sales in Q2, while full-price sales were up 7%.”
He commended the company’s progress in the second quarter, stating, “We’ve implemented many changes in merchandising and operations over the past few years. We are still early in these initiatives, but we are making good progress and gaining traction. We have a long way to go in achieving our full potential in off-price execution.”
O’Sullivan also noted the success of offering a broader range of premium brands.
“We’ve been working to elevate our assortment, and the introduction of better brands has been effective,” he said. “Higher-quality brands attract trade-down shoppers looking for recognizable names and enhance the overall store experience. Even if customers don’t purchase specific items, the presence of these brands strengthens our off-price value proposition and boosts our business. Expect to see an increased mix of better brands in our inventory in the coming months.”