Dive Brief:
- Burlington Stores continued to reduce its product sourcing costs in Q3 thanks to its distribution center investments and other supply chain initiatives, executives said on a Nov. 26 earnings call.
- The discount retailer achieved a 50-basis-point reduction in product sourcing costs — which include processing and buying expenses — as a percentage of sales for the quarter, per its Q3 earnings report. The company also decreased freight expenses by 20 basis points during the quarter.
- “We'll probably end ‘24 showing product sourcing leverage of around 50 basis points better than last year,” EVP and CFO Kristin Wolfe said on the call. “So we're about halfway there to the 100 basis points goal embedded in our five-year plan.”
Dive Insight:
Burlington is leaning on supply chain upgrades to drive cost reductions as it grows its store footprint.
The company expects its capital expenditures to be around 7% of sales this year and in 2025, Wolfe told analysts. This “slightly higher” than historical spending level will be led by new store openings and distribution center investments.
On the distribution center front, the discount retailer is focusing on owning rather than leasing, Wolfe added.
“This will enable us to design these facilities to support the flexibility and efficiency that our off-price model requires,” Wolfe said.
Burlington announced in March that it will open a 2 million-square-foot distribution center in Savannah, Georgia, in 2026. Wolfe told analysts last week the company plans to own the facility and that it may “explore opportunities” to take ownership of other facilities it is currently leasing.
Burlington owned just two of its 12 primary distribution centers and warehousing facilities as of February, per an SEC filing.
Beyond having more direct ownership of its distribution centers, Burlington aims to continue investing in automation within its facilities to improve productivity.
“We're redesigning how merchandise flows within the DC, automating select processes, ultimately reducing touches and time to process merchandise and saving labor dollars in DCs,” Wolfe said.
Following the opening of the Savannah facility, the company plans to further modernize its supply chain with larger and more automated distribution centers after 2028, according to Wolfe.
With new distribution centers, Burlington has an opportunity to design the facilities with more automation to service its off-price retail model, Wolfe said.
