Burlington’s newest store in Yuba City hopes to target inflation-sensitive customers

The opening of Burlington’s 99th California location in Yuba City comes as company officials hope to reverse declining sales, betting that inflation will ultimately draw customers to the new store and the company’s other locations.

The Yuba City location at the Yuba Sutter Marketplace mall, which opened on July 15, is one of 120 locations across the country that the company plans to open this year. The openings come even as store sales are slumping in 2022 compared to the prior year. The company, based in Burlington, New Jersey, is also closing 30 stores.

Burlington, which changed its name from Burlington Coat Factory, in 2014, has reduced its once strong focus on coats to offer a more diverse selection of fashion items including toys,books and housewares.

It competes with TJ Maxx, Marshalls and Ross stores.

Sales at the company’s existing locations declined by 18% for the 13-week period ending April 30, 2022, compared to a year earlier. Net income of $16 million for the quarter ending April 30, 2022 was down by more than 6%.

Company officials are predicting that for the second quarter ending July 30 comparable store sales for existing locations will see a 13% to 15% decline from the same quarter in 2021.

“We had anticipated that 2022 would be a difficult year in retail but the economic environment, especially the impact of inflation on lower income shoppers, is having a greater impact than we had expected. We have lowered our outlook for sales,” said Burlington CEO Michael O’Sullivan said during the first-quarter earnings call with equity analysts on May 26.

O’Sullivan also blamed Burlington’s strategy in the first quarter, saying it had a smaller inventory on hand at the beginning of the quarter than needed.

But O’Sullivan concluded his remarks by saying, “We also believe that if inflation persists and this economic slowdown spreads, then it may cause shoppers to trade down to off-price, looking for value.”

The company relies on an off-price retail model that is based on buying over-produced brand name products and selling them to customers at a lower price.

Inflation impact on Burlington Stores

Company officials are predicting Burlington’s comparable store sales will improve by the time the current fiscal year is over. They say the downward trend in retail sales for the first-half of the year will be off a smaller estimated 6% to 9% for the 52-week fiscal year that started on Jan. 28, 2022 compared to a year earlier.

A key reason for optimism O’Sullivan said back on May 26: inflation may start affecting a larger group than lower-income shoppers.

“We anticipate the high inflation, higher interest rates, falling stock market and a possible economic slowdown will at some point affect other income groups as well,” he said. “If this happens, then we would expect to see a trade-down customer in our stores and this could drive stronger sales trend for our business in the back half of 2022.”

Sanford C. Bernstein equity analyst Aneesha Sherman sided with O’Sullivan’s assessment.

We agree with the CEO’s view that disruptive times are generally good for off price, “ she said in a May 26 research note. “While the initial impact has been painful, if we are headed for something between a mild downturn and an extended recession, the combination of unusually good branded packaway product and deep value positioning will set up Burlington for share gains through FY22-23.”

Setting up shop in Yuba City

It’s unclear how company officials chose Yuba City for its latest location, but its estimated average household income in 2022 of $51,000 is 6% less than the national average, and in line with the lower income demographic that Burlington Industries targets.

A spokesperson did not respond to inquires on the selection of Yuba City. The company has three locations in Sacramento, one in Elk Grove and another in Citrus Heights.

The new Burlington store occupies the former space of Smart & Final, a supermarket warehouse chain. Smart & Final closed its Yuba City location in early August, 2019, just a year and a half after opening.

Burlington officials have said the store will have 65 employees. A company spokesperson said the store is currently hiring for retail sales associates, retail receiving leaders, customer service leads and cashiers. The spokesperson did not say how many open positions remained.

Yuba City, 44 miles from Sacramento, has seen modest population growth from around 67,000 residents to about 70,000 in 2020, U.S. census figures show.

This story was originally published July 21, 2022 at 5:00 AM.