Last Tuesday, Burlington Stores (NYSE:BURL) revealed that CEO Thomas Kingsbury, who has led the company since late 2008, will step down from that role later this year.
Fortunately, the off-price retailer has already secured a worthy replacement to lead the company into the future. Michael O'Sullivan, who resigned as president and chief operating officer of Ross Stores (NASDAQ:ROST) earlier this month, is set to take over as CEO of Burlington on or around September 16. Investors cheered the news, sending Burlington Stores stock soaring 9% on the day after the announcement.
A proven leader
O'Sullivan is a great choice to be CEO of Burlington. He has spent more than 15 years at Ross Stores, the No. 2 U.S. off-price retailer, and was its president and chief operating officer since 2009.
During that period, Ross Stores has delivered an incredible run of performance for investors. By refining its merchandising strategy and reducing inventory per store, Ross Stores has improved its profitability to industry-leading levels and driven strong comp sales growth while also rapidly expanding its store base.
Indeed, over the past decade, Ross Stores' revenue has more than doubled and net income has risen fivefold, leading to huge gains for investors.
Had he stayed at Ross Stores, O'Sullivan likely would have become its next CEO -- eventually. That would arguably be a more prestigious post, as Ross Stores is more than twice Burlington's size (as measured by revenue). However, current Ross Stores CEO Barbara Rentler is 61 years of age and may not be planning to retire anytime soon.
Burlington announces another promotion
In addition to hiring O'Sullivan last week, Burlington Stores also promoted chief merchandising officer Jennifer Vecchio to the title of president, effective immediately. She will keep her existing duties overseeing merchandising and planning but will also expand her sphere of responsibility to include marketing and strategy.
Incidentally, Vecchio also spent more than a decade at Ross Stores before joining Burlington. Her success in helping to lead a turnaround at Burlington since joining the company in 2015 hints at O'Sullivan's potential to deliver similar positive results in the coming years. Vecchio should also be able to help her new boss understand the differences between how Burlington and Ross Stores operate.
Meanwhile, Kingsbury will continue as CEO until O'Sullivan comes on board later this year. At that time he will become executive chairman for an undetermined period. This will help ensure an orderly leadership transition, as Kingsbury will be around to help his successor get up to speed at Burlington.
Another bump in the road for Burlington
In conjunction with announcing its leadership transition plan, Burlington Stores cut its outlook for the first quarter. (In light of that fact, the stock's 9% surge on Wednesday highlights just how excited investors are about the CEO hire.)
Last month, the company reported disappointing results for the fourth quarter, as comp sales rose just 1.3%, missing management's guidance for 2% to 3% growth. Management also offered up a cautious outlook for Q1, calling for a 0% to 2% comp sales increase and adjusted earnings per share between $1.21 and $1.31, compared to $1.26 in the year-ago period.
In last Tuesday's guidance update, Burlington indicated that it expects to deliver results near the bottom of those guidance ranges this quarter, with comp sales growth between 0% and 0.5% and adjusted EPS between $1.21 and $1.25.
This clearly represents a setback for the company. Nevertheless, Burlington Stores has made tremendous progress over the past few years. With a talented executive in Michael O'Sullivan set to take the reins later this year, Burlington is likely to get back on track soon enough.