Dive Brief:
- Burlington Stores has agreed to purchase two of its leased distribution centers as part of its long-term supply chain investment strategy, according to a March 6 earnings call.
- In Q4, the retailer completed the previously announced acquisition of a 2 million-square-foot distribution center in Savannah, Georgia that is expected to open in 2026.
- Additionally, Burlington negotiated the purchase of its “most efficient, most automated” West Coast distribution facility in Riverside, California. The deal was expected to close in March.
Dive Insight:
Burlington is pushing to own rather than lease its most productive supply chain facilities to better support its off-price operating model.
Including the Savannah center, Burlington now owns three of its 12 distribution and warehousing facilities, per a securities filing. The Riverside site will increase that number to four later this year.
“Ownership gives us greater control over the design of these buildings,” EVP and CFO Kristin Wolfe said on the earnings call. “It also allows us to leverage this capital investment as we grow over time and to avoid significant rent increases at each lease renewal.”
Those savings come at a cost, however. Burlington’s capital expenditures grew to $844 million in fiscal year 2024, a 12.5% increase over its previously expected investments of $750 million.
However, the deal to purchase the Riverside distribution center wasn’t factored into 2024 capital expenditures, per Wolfe. Instead, it will be a part of the $950 million in capital expenditures anticipated in 2025.
David Glick, group SVP of investor relations and treasurer, said the purchase of the distribution centers are “two important steps” in Burlington’s supply chain transformation, noting that the company is considering whether to raise debt to fund the purchase of the Riverside facility.
“Capitalized operating leases attributable to lease DCs are already captured on the balance sheet. So if we do choose to add some additional debt to finance the California DC purchase, we think the resulting increase in our leverage ratios would be very modest,” he said.
