Michael O’Sullivan: I’m going to answer your question, but I want to preface my answer by saying, we’re students of our business, so we always analyze weather. We always analyze everything, but we always analyze weather to help us explain the context for our trends. But internally, and I want to underscore this internally, we’re very careful to focus on what we control. We don’t want our merchants or operators to use weather as an excuse. But with that said, there were two main weather call-outs in Q4. I think the one that’s most widely reported elsewhere is January. The weather in January was certainly disruptive with winter storms in many of our major markets. As we came into the month, we were running a stronger trend, but the disruptive weather dragged down our comp for the quarter.
But, look, it’s, our view is it’s January. Winter storms happen, and I assume that those storms also hurt other retailers in our markets. There was another sort of weather impact in Q4 that probably hurt us disproportionately versus other retailers. That was driven by milder temperatures for most of November and for December versus last year. Those are obviously the prime selling months for outerwear, which for a company that many people still think of as Burlington Coat Factory is relatively very important. Our outerwear business is not just to drive our sales in its own right. It also brings traffic to the store and therefore lifts sales across other departments. Now in Q4, our comp sales in outerwear was down in the negative mid-single digits.
Leaving aside the broader impact on store traffic, that comp sales impact alone cost us a full point in overall comp sales for the quarter.
Brooke Roach: As you look ahead, how are trends progressing quarter-to-date? Are there any specific items we should keep in mind as we think about the cadence of comp growth opportunity throughout the year?
Michael O’Sullivan: Quarter-to-date, we’ve just wrapped up February. So, we’re four weeks into the quarter. And truthfully, I would describe the trend in February as softer than we had anticipated. Now I suspect you’ve probably heard that from some other retailers as well. We attribute that softness to maybe some unfavorable weather early in the month and then a slower pace of tax refunds versus last year. As we’ve discussed previously, our core customer is just extremely sensitive to the timing of tax refunds, especially the timing of earned income tax credit. Now we’re expecting that tax refunds will catch up over the next few weeks. But candidly, this is a good example of why it makes sense to plan our comp conservatively and flexibly, which is what we’ve done.
Operator: Your next question comes from the line of Alex Straton from Morgan Stanley.
Alex Straton: I have two for Kristin. The first being, can you just break down the drivers of comp growth in the fourth quarter? How did that look across traffic, conversion, basket size, and AUR? And then I have a quick follow-up.
Kristin Wolfe: The single biggest driver of our comp growth in the fourth quarter was higher traffic. We see this as further evidence of the improving health of the off-price shopper. And in addition, conversion was slightly higher compared to last year. Higher units per transaction were actually more than offset by lower AURs. The lower AURs were driven by a mix of business and expanded opening price points versus a year ago.
Alex Straton: Any color on how the different regions performed in the quarter as well?
Kristin Wolfe: All regions were positive and comp performance was relatively broad based geographically. In the fourth quarter, the Southwest and the Midwest regions, those were the strongest performing regions in fourth-quarter 2023.
Operator: Your next question comes from the line of Adrienne Yih from Barclays.
Adrienne Yih: Congratulations on a nice end to the year. Michael, I was wondering, can you provide some additional color on the point that you had made about red price selling versus clearance, kind of two things to dig into there. What do you think is the biggest driver of that? Is it the seasoning of the merch team? Is it the consumer at the margin slightly less price sensitive or is it the sharper price points that Kristin just mentioned?
Michael O’Sullivan: One of the metrics that we always look at internally is our comp sales growth on regular price versus markdown merchandise. That’s particularly important for us. As you know, one of the major elements of Burlington 2.0 is to turn our in-store inventory out faster. That means fewer markdowns, and that means less clearance inventory. That’s very healthy from a margin perspective, but lower clearance balances are also a slight headwind to comp. I call that out in the comments because it was quite significant in Q4. Our clearance sales were down by about a fifth versus last year. Our regular price comp was up about 4%. We regard that as a very healthy sign. In other words, the customer likes what we’re putting in front of them.
I would attribute it to all three of the things that you called out. I think our execution on the merchant side in the fall season was very good. And actually, one of things I really liked about how we managed the business in the fall season, there were some merchandise areas that did not perform well. But early in this season, we saw that they were not performing well, and our merchants and planners moved very quickly to take money out of those businesses and push that money into faster trending areas. That’s exactly what you want in an off -price business, and that worked well for us. It obviously saved margin dollars because had we not done that, we would have taken markdowns in those businesses. But it also helps drive the sales trend in businesses that we could chase.
So I feel good about what it says about the seasoning of the buyers, and also I also feel about good what is says our values. Ultimately, what’s driving the customer to make a purchase is the value they are seeing in front of them. And if they’re seeing great value at a regular price, then we don’t need to mark it down. So, I take that as a very positive sign. The last thing, I should say, I should add that we are planning faster inventory turns in 2024. So we anticipate that that comp headwind from lower clearance will continue to have an impact, especially in the first half of the year. We’ve factored that into our guidance, but I think it’s worth calling out.
