00:00I should just point out that earnings out yesterday were really strong for Burlington. I wonder what behavior at your
00:07stores has been like over the past two weeks as the war in Iran broke out.
00:11Michael have you seen any change in consumer behavior. Well let me start by saying good morning. Thank you for
00:18having me on the show. It's great to great to be here.
00:20Now of course gas prices are a concern but you know it's too early for it to really have had
00:27much of an impact on retailers or consumers.
00:30I suspect many consumers haven't filled their gas tanks recently so it's going to take a little while before any
00:36impact really starts to be felt.
00:39Now the long-term impact of higher gas prices I think depends upon how long the situation in the Middle
00:44East lasts.
00:45For sure if if the situation lasts for a long time then consumers if they're spending more on gas they're
00:51going to spend less on other categories.
00:54And that's not good for retail. But you know let me step back and say look higher gas prices they're
01:01just one more thing.
01:03Over the last several years there have been numerous headwinds you know coming out of COVID we had increases in
01:11freight costs.
01:12We had higher wage rates. We had port issues and delays. We had cost of living inflation. We had and
01:18more recently tariffs.
01:20So so just add gas prices to that list. You know as a retailer we recognize that the key thing
01:26across all of these events and issues is to be nimble and flexible.
01:31We can't predict or control what's going to happen externally but what we can do what we have been doing
01:37is making sure that our business our operations our buyers are well positioned to react to whatever happens.
01:44Well you also have in Burlington in your brand a product that maybe consumers will flock to when gas prices
01:56do rise right.
01:57If I'm paying more at the pump and then I go shopping I'm more likely to choose the white label
02:03you know store brand or try and buy more efficiently by maybe going to Burlington instead of I don't know
02:12some other you know fancier.
02:14Fancier mall department store. Are you seeing that effect.
02:19Well certainly if I if I look at our results in Q4 we had very strong performance in the fourth
02:25quarter our our total sales growth in Q4 was 11 percent.
02:29And that was on top of 10 percent growth the prior year. Our comp store growth was 4 percent and
02:35that was on top of 6 percent the prior year.
02:37Now we didn't just grow earnings. We didn't just grow sales. We also drove earnings in the fourth quarter. We
02:43saw EPS up 21 percent and for the full year EPS was up 22 percent.
02:49Now coming back to your point you know what's driving that one of the things that's driving that is that
02:54over the last few years we focused heavily on value.
02:57And the one thing I would correct in your question is that we don't sell private label. What we're doing
03:02what we're what we're selling is for the most part we're selling well known recognizable brands.
03:07We're selling the latest fashions. Our proposition to the customer is it's the same item the same brand the same
03:14great fashion but we're selling it at a retail price that's up to 60 percent lower than traditional retailers.
03:21So that focus on value has really helped to drive our business over the last few years and certainly as
03:27you said if if gas prices remain high or if they get worse and the consumers really looking for value
03:34we think we could be a beneficiary of that.
03:36I find that really interesting then last week on the earnings you mentioned that it would that you would likely
03:42raise prices you tested increases on some items and encountered little pushback.
03:46Why do you think that is those feel a little bit contrasting that people are looking for value but can
03:51also maybe pay a little bit more.
03:54Yeah let me clear that up. It's it's a great question. We what we saw throughout last year is we
04:00were very successful at trading the customer up to higher price points.
04:04Now that does not mean that we raise prices on the same item. What we did was we have we
04:09have a good better best assortment.
04:11So we have a lower price points opening price points. Maybe the brand is less recognizable but a higher price
04:18points the brand would be more recognizable.
04:20The quality might be better. The fashion might be more up to date. What we were very successful in doing
04:24last year was actually trading the customer up.
04:27The customer could see the yet it was worth paying an extra dollar to get that particular brand or that
04:33better quality or that more up to date fashion.
04:36And that's what caused our average retail to rise last year rather than we took prices up. We were very
04:41careful on like items not to take prices up.
04:44So have you not been increasing prices on even if something that I buy at Burlington is less expensive than
04:52something I would buy from you know a retailer like I don't know Bergdorf Goodman or Barney's.
05:01Have you not taken price at all because as you mentioned you've got tariffs coming into effect. We've got inflation
05:08coming through from now the oil spike.
05:12Aren't you going to have to to protect margins move prices at at some point.
05:17Well we really try. Going back to your earlier question about the consumer looking for value. That's our focus. We're
05:24really trying to make sure we're offering terrific value.
05:26We know if we offer great value to the customer whatever happens in the external environment. We're going to things
05:32are going to work out for us if we're offering terrific value.
05:34Now let me take tariffs because that was part of your question. I think tariffs were a terrific example of
05:40what we do when we're faced with you know a sudden you know unexpected event last April.
05:45We were effect. We were basically faced with tariffs at levels that no one had expected and and those tariffs
05:51throughout the summer remained uncertain and very volatile.
05:54So what we did in response to that rather than taking prices up which we knew our customer wouldn't react
05:59well to was we went back and we looked at our assortment and we said well let's understand which which
06:05categories we sell are the most impacted by tariffs whether the margin pressure is the greatest from tariffs.
06:11And let's actually plan those businesses down and then there are other businesses that maybe are sourced in lower tariff
06:18countries or sourced domestically that we can plan up.
06:21Now that kind of sort of remixing mid-year is very complex for a retailer and only certain retailers who
06:28are very nimble very flexible and actually I think the off price retailers in particular have that kind of ability.
06:34And it's a capacity and it's a it's a it's a it's a it's a it's a strength that we've
06:37been investing in over for several years now.
06:39So in 2025 we really put that that muscle to work we remixed our assortment.
06:46Now it did mean that when we got into the back half of the year there were some categories that
06:50we planned down where we could have done more sales but those sales would have been unprofitable because of the
06:54tariff impact.
06:55But we still ended up based upon the remixing of our business driving total sales by nine percent for the
07:02full year last year and more importantly driving earnings per share by 22 percent.
07:07So what we did if what we did was basically pivot away from the from the impact of tariffs rather
07:13than saying oh tariffs are here let's take up prices because we know our customer would not react well to
07:17that.
07:18So Michael you had strong sales growth and you're boosting earnings as well in the fourth quarter but if I
07:26look at the stock over five years it's relatively little changed actually down 4 percent whereas TJ Maxx is up
07:32133 percent and I would put you in a similar category.
07:38What are they doing that you are not or why do you think there's that massive difference.
07:46No I think it's a great question I think there are two there are two aspects of that question I'd
07:51like to get at the first is that we said we share similar characteristics to the other major off price
07:59retailers but there are also some differences and I would say our core customer base is somewhat different to the
08:06other off price retailers our core customer base which actually over over the long term has been a source of
08:12strength.
08:12Our core customer base tends to be younger tends to have a larger family size tends to be more ethnically
08:19diverse tends to be low to moderate income that particular customer really struggled in 2022 as the cost of living
08:28spiked.
08:28It was a really difficult time for them and we saw that in our business we we offered better value
08:34to try and support ourselves but it but it was hard our core customer was really under pressure.
08:38Now in the last few years I think if you looked at our stock price over the last two or
08:43three years you'd see a different story in the last two or three years that core customer has really been
08:49fairly resilient.
08:50We've seen pretty good strength and that's continued through the fourth quarter of last year.
08:54Now I think you've heard you've heard other retailers recently talk about how they're seeing some pullback at the low
09:01end.
09:01We're we're we're we're not seeing that now let me pivot to the second part of my answer which is
09:06compared with the other off price retailers there's something that's that's particularly unique about Burlington from an investment point of
09:13view and that's that we're much smaller.
09:16We have right 1,200 stores about half or less than half of what our off price peers have so
09:22we have huge growth potential ahead of us.
09:25We're opening many more stores than they are and we also I would say have some catch up in terms
09:30of operational and execution capability that's also driving our operating margin.
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