Burlington Coat Hurt by Leveraging

By Don Hogsett -- Home Textiles Today, 1/29/2007 12:00:00 AM

Burlington, N.J. —

Hit by soaring interest expense since its takeover a year ago, and recording a sharp jump in stockpiles, Burlington Coat Factory Investments Holdings recorded a 74.1% slide in second quarter profits, to $11.7 million from $45.4 million during the same period a year ago.

Sales at the off-price retailer, the parent of Luxury Linens, grew by 4.2%, to $984.8 million from $945.4 million last year. Same-store sales declined by 2.4%.

Taking a bite out of the bottom line, interest expense rocketed higher, jumping 23-fold, 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.

Inventories climbed by 29.0%, pulling $205.1 million away from the bottom line. Stockpiles climbed to $913.3 million by Dec. 2 from a mid-year level of $708.2 million.

Average gross margin rose 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 operating costs as a percentage of sales rose by 130 basis points, or 1.3 percentage points, to 29.2% from 27.9% last year. Measured in absolute dollars, costs jumped up by 8.9%, to $287.6 million from $264.2 million, pulling $23.4 million away from the bottom line.

BURLINGTON COAT FACTORY