Burlington Stores Q2 Earnings Call Highlights

Burlington Stores (NYSE:BURL) reported fiscal 2026 second-quarter sales growth and margin expansion, while saying it plans to reinvest approximately $55 million in tariff refunds into lower prices and sharper customer values during the second half of the year. Chief Executive Officer Michael O’Sullivan said the tariff refunds added $0.64 to second-quarter earnings per share and were recognized in reported results. However, the company intends to use the full amount to enhance value across its merchandise assortment in the third and fourth quarters, making the direct full-year earnings impact neutral. “Rather than taking a one-time boost to earnings, we are planning to use the refunds to deliver sharper values for our customers,” O’Sullivan said, citing pressure on moderate- and lower-income households from higher living costs.

Total second-quarter sales increased 11% from the prior year, following 10% growth in the comparable period last year. Comparable-store sales rose 2%, compared with 5% growth a year earlier, producing a two-year comparable-sales stack of 7%. The company said its rapid store expansion created an elevated comparable-sales headwind from cannibalization. Burlington estimated that new-store cannibalization reduced second-quarter comparable sales by about 1.5 percentage points, compared with its typical impact of about 1 percentage point. Management expects the higher impact to continue through the remainder of fiscal 2026.

Excluding the benefit of tariff refunds, adjusted earnings per share rose 38% to $2.37, following 39% growth in the prior-year second quarter. Adjusted EBIT margin was 7%, up 100 basis points from last year and above the company’s prior outlook for 30 to 60 basis points of expansion. Chief Financial Officer Kristin Wolfe said the margin improvement reflected a 70-basis-point increase in merchandise margin, 20 basis points of supply-chain leverage and 50 basis points of adjusted SG&A leverage. Merchandise-margin gains were aided by better markup, less tariff pressure than the prior year, markdown timing from the first quarter and a lower shortage rate, she said. Supply-chain productivity and cost-savings initiatives generated leverage despite startup expenses associated with Burlington’s new Savannah distribution center. Higher fuel-related freight costs and depreciation partially offset those gains.

Comparable-store inventories were up 11% at the end of the quarter. Wolfe said the increase reflected higher home inventory compared with last year’s tariff-driven pullback, earlier back-to-school receipts, tax-free shopping timing shifts, and selective investments in fast-turning categories including beauty and accessories. Reserve inventory represented 43% of total inventory, compared with 50% a year earlier. Wolfe said the company was pleased with both the quality of its merchandise and the values held in reserve.

Burlington opened 51 stores and relocated six during the quarter, resulting in 45 net new stores and a quarter-end store count of 1,287. Over the past 12 months, the company opened 178 gross stores and added 149 net stores after closures and relocations. New stores average about 27,000 gross square feet, according to Wolfe. The company estimates the locations will generate more than $7 million in annual sales and have payback periods of less than two years. Burlington continues to expect 135 gross openings and roughly 115 net new stores for fiscal 2026. The company ended the quarter with approximately $1.6 billion in total liquidity, including $704 million of cash and $942 million of availability under its asset-based lending facility. It had no outstanding ABL borrowings. Burlington repurchased $87 million of common stock ...