Burlington Stores’ (BURL) gross margin as a percentage of net sales expanded 20 basis points on a year-over-year basis to 42% in fiscal 4Q17, which ended on February 3, 2018. A higher merchandise margin drove the improvement.
Operating margin in fiscal 4Q17
On an adjusted basis, the company’s operating margin expanded 20 basis points to 12.9% in fiscal 2017. The operating margin improvement in the quarter was driven by a higher merchandise margin as well as the leverage of SG&A (selling, general, and administrative) expenses on higher sales growth. The improvement in SG&A expenses was driven by a leverage in occupancy costs, business insurance, and marketing expenses. However, the company experienced deleverage in incentive compensation and stock compensation expense.
For fiscal 2017, the company’s adjusted operating margin expanded 90 basis points to 8.5%. Its gross margin improved 75 basis points to 41.5%.
Aiming for further improvement
In its fiscal 4Q17 conference call, Burlington’s CEO Thomas Kingsbury stated that the company’s operating margin has expanded 370 basis points over the last five years. However, the company believes there’s room for more improvement.
Burlington Stores is aiming to drive improvement in its operating margin by leveraging fixed costs on higher sales, optimizing markdowns, enhancing inventory management, and driving further improvement in SG&A expenses. It also aims to drive continued improvement in its supply chain to deliver further productivity gains in fiscal 2018.
For fiscal 2018, the company expects an adjusted EBIT (earnings before interest and tax) margin expansion of 20 to 30 basis points.