BURL

With Five Below, Inc. FIVE set to announce its second-quarter fiscal 2026 earnings results on Sept. 2, after the market closes, investors face a critical question: Can FIVE continue its streak of surprising results, or will challenges temper growth?The Zacks Consensus Estimate for second-quarter revenues is pegged at $1.22 billion, implying an 18.4% increase from the year-ago reported figure. Meanwhile, the consensus estimate for earnings has risen by a couple of cents over the past seven days to $1.34 per share. The estimate indicates year-over-year earnings growth of 65.4%.Five Below has a trailing four-quarter earnings surprise of 70.1%, on average. In the last reported quarter, this Philadelphia, PA-based company surpassed the Zacks Consensus Estimate by 30.6%. Image Source: Zacks Investment Research As investors prepare for Five Below’s second-quarter results, the question looms regarding an earnings beat or miss. Our proven model predicts that an earnings beat is likely for Five Below this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.Five Below has a Zacks Rank #2 and an Earnings ESP of +5.51%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. Five Below, Inc. price-consensus-eps-surprise-chart | Five Below, Inc. Quote Five Below’s second-quarter performance is likely to have benefited from continued traction in its customer-centric merchandising strategy. The company has shifted from an item-led approach toward broader assortment storytelling, with an emphasis on frequent newness, trend-right products and compelling value. The broad-based merchandise momentum across categories, including toys and collectibles, beauty, fashion, food and candy, might have provided Five Below with multiple avenues to sustain customer engagement. The integration of Five Beyond merchandise into relevant product “worlds,” along with simplified pricing and stronger in-stock execution, also appears to have made stores easier to shop and helped reinforce the value proposition.Building on that merchandising foundation, Five Below’s increasingly social-first marketing approach is likely to have supported customer engagement and store traffic during the quarter. The company has become more active in social listening, creator content and trend amplification, allowing it to identify emerging interests and quickly connect those trends with merchandise and in-store experiences. Five Below has also been emphasizing the quality of new locations and site selection, witnessing strong productivity. Distribution-center efficiencies, better in-stock levels and continued investments in the store experience are likely to have complemented the contribution from new locations.However, a cautious consumer environment, persistent inflation and higher fuel costs may have weighed on second-quarter performance. Elevated transportation costs, along with increased marketing spending and higher store labor expenses, could also have pressured profitability. Five Below, which competes with value-oriented retailers such as Burlington Stores, Inc. BURL and The TJX Companies, Inc. TJX, has seen its share price jump 12% over the past three months against the industry’s decline of 0.6%. Shares of Burlington Stores and TJX Companies have declined 19.1% and 12.8%, respectively. Image Source: Zacks Investment Research Five Below’s valuation remains elevated relative to the industry. FIVE currently trades at a forward 12-month price-to-earnings (P/E) multiple of 25.57, a notable premium to the industry average of 15.25. However, the stock is trading below its 12-month median P/E multiple of 28.17. FIVE commands a premium to some of its close peers. Burlington Stores trades at a forward 12-month P/E multiple of 19.66, while TJX Companies carries a multiple of 24.30. Image Source: Zacks Investment Research Five Below appears well positioned heading into its second-quarter earnings release, supported by healthy merchandising momentum, stronger customer engagement, effective social-first marketing and solid new-store execution. The earnings setup also looks favorable, improving the chances of a positive surprise. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Five Below, Inc. (FIVE) : Free Stock Analysis Report The TJX Companies, Inc. (TJX) : Free Stock Analysis Report Burlington Stores, Inc. (BURL) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Image source: The Motley Fool. Thursday, Aug. 27, 2026 at 8:30 a.m. ET Group Senior Vice President - David Glick Chief Executive Officer - Michael O'Sullivan Executive Vice President and Chief Financial Officer - Kristin Wolfe Operator: Good morning, and welcome to Burlington Stores, Inc. 2Q 2026 Earnings Webcast. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to David Glick, Group Senior Vice President. Please go ahead. David Glick: Thank you, operator, and good morning, everyone. We appreciate everyone's participation in today's conference call to discuss Burlington's fiscal 2026 second quarter operating results. Our presenters today are Michael O'Sullivan, our Chief Executive Officer; and Kristin Wolfe, our EVP and Chief Financial Officer. Before I turn the call over to Michael, I would like to inform listeners that this call may not be transcribed, recorded or broadcast without our express permission. A replay of the call will be available until September 3, 2026. We take no responsibility for inaccuracies that may appear in transcripts of this call by third parties. Our remarks and the Q&A that follows are copyrighted today by Burlington Stores. Remarks made on this call concerning future expectations, events, strategies, objectives, trends or projected financial results are subject to certain risks and uncertainties. Actual results may differ materially from those that are projected in such forward-looking statements. Such risks and uncertainties include those that are described in the company's 10-K and in our other filings with the SEC, all of which are expressly incorporated herein by reference. Please note that the financial results and expectations we discuss today are on a continuing operations basis. Reconciliations of the non-GAAP measures we discuss today to GAAP measures are included in today's press release. As a reminder, as indicated in this morning's press release, all historical and forward-looking profitability metrics discussed on this call exclude costs associated with bankruptcy acquired leases. These pretax costs amounted to $4 million and $11 million during the fiscal second quarters of 2026 and 2025, respectively, and $16 million and $35 million for the full fiscal years 2026 and 2025, respectively. Now here's Michael. Michael O'Sullivan: Thank you, David. Good morning, everyone, and thank you for joining us. I would like to cover 3 topics this morning. Firstly, I will talk about tariff refunds. Secondly, I will review our second quarter results. And finally, I will discuss our updated guidance. After that, Kristin will walk through the financial details. Okay. Let's start with tariff refunds. In the second quarter, we received approximately $55 million in tariff refunds. These refunds are included in our reported earnings and provided a $0.64 benefit to our second quarter earnings per share. We intend to fully reinvest these refunds into the business in the back half to deliver even sharper values to our customers. So we expect the direct impact of these tariff refunds to be neutral to full year earnings. I want to be explicit about the decision that we have made here. Rather than taking a onetime boost to earnings, we are planning to use the refunds to deliver sharper values for our customers. Over the last few years, the rising cost of living has made life difficult for many moderate and low-income families. At Burlington, we already offer great deals. Our plan is to use these tariff refunds to further sharpen values across our assortment. Okay. Let's move on to our second quarter results. As I mentioned a moment ago, these results include $55 million of tariff refunds. But for the purposes of this morning's discussion, we are going to strip out this impact. The headline is that even after you strip out the favorable impact of tariff refunds, the underlying earnings momentum in our business is extremely robust. In Q2, we delivered yet another quarter of very strong earnings growth. EPS increased 38% in the quarter, and this was on top of 39% growth last year. These very strong results further demonstrate our ability to convert sales growth into margin expansion and strong earnings flow-through. Let's talk about sales. Total sales grew 11% on top of 10% growth last year. New stores are a major driver of this growth. In Q2, we opened 51 gross new stores. After store relocations and closures, this represents a net increase of 45 new stores. As we mentioned at the start of the year, the strength of our new store pipeline has enabled us to front-load new store openings this year with 2/3 opening in the spring and 1/3 scheduled for the fall. This means that on a trailing 12-month basis, we have opened an extraordinary 178 gross new stores, translating to 149 net new stores after relocations and closures. We are very pleased with the pace, quality, productivity and profitability of these new store openings. Let's move on to comp stores. Comp sales increased 2% in Q2 on top of 5% comp growth last year. Our merchant and operating teams executed well in the second quarter, and I am pleased with our solid 7% 2-year comp stack. I should add that the relatively higher number of new store openings in the last 12 months means the comp headwind from cannibalization by new stores is slightly elevated. As a reminder, whenever we approve a new store location, we analyze and estimate the potential cannibalization impact on nearby stores, and we build this into our economic modeling. For the last couple of years, this impact has been running at about 1 percentage point of comp. Given the large number of new store openings in the past 12 months, it was worth about 1.5 percentage points of comp in Q2. We expect this to continue through the rest of this year. Again, to be clear, the net sales lift and the overall economics of our new store program are extremely attractive and easily exceed this impact on comp growth. Okay. Moving on to earnings. As I mentioned a moment ago, we were very pleased with our earnings growth in Q2. To reiterate, the numbers that I am going to quote exclude the favorable impact of tariff refunds. Operating margin expanded 100 basis points, well above the high end of our guidance for 60 basis points of expansion. As previously mentioned, adjusted EPS increased 38% on top of 39% for the same period last year. This was a high-quality earnings beat driven by stronger merchandise margin as well as supply chain and SG&A leverage. Once again, these results demonstrate our ability to drive strong margin expansion and earnings growth even on relatively modest comp store sales increases. Before we move on to the outlook for the rest of the year, I think it is worth taking a moment to put our second quarter results into context. Sometimes it can be misleading to read too much into a single quarter. So let me talk about the last 4 quarters. Over that period, and again, excluding tariff refunds, we have driven EPS growth of 24% on total sales growth of 11% and comp store sales growth of 3%. Going back even further, over the last 8 quarters, we have driven EPS growth of 51% on 19% total sales growth and 6% comp sales growth on a 2-year stack basis. Against any relevant benchmark, these results are hugely impressive. I could keep going back further, but you get the idea. At Burlington, we have a tremendous track record of driving consistent margin expansion and earnings flow-through on our total and comp store sales growth. Okay. Now let's talk about the outlook for the rest of the year. I will start with our full year guidance and then work backwards. We are taking up our earnings guidance to pass along the entire earnings beat from Q2. As described earlier, we received $55 million in tariff refunds in Q2, and we plan to use these to sharpen values in the back half. So for the full year, the direct impact of these refunds is expected to be neutral. Let's talk specifically about the back half. Excluding the impact of tariff refund investments, our earnings guidance for the back half is unchanged. Our sales guidance for the back half is also unchanged, but let me offer some editorial commentary. We continue to feel good about our sales upside potential. We will be lapping weather-related issues in Q3 and tariff-related supply constraints in Q3 and Q4. Add to that, as discussed, we will be using the favorability from tariff refunds to further sharpen merchandise values. We feel like we are set up for success in the back half. That said, there are external risks. So for now, we have chosen to maintain sales guidance. Our playbook, which has served us well and has contributed to our strong track record of earnings growth is to maintain discipline and to manage our business in a tightly controlled way. As we have done in the past, we will chase the sales trend if it is stronger. Now I would like to turn the call over to Kristin to provide additional financial details. Kristin? Kristin Wolfe: Thank you, Michael, and good morning, everyone. I will start with some additional color on the second quarter. Then I will share details on our guidance for Q3, Q4 and for the full year. The second quarter profitability metrics I will share exclude the benefit of the $55 million in tariff refunds received in the second quarter. These were recognized as a reduction to cost of goods sold and added $0.64 to Q2 earnings per share. As Michael just discussed, our guidance for Q3 and Q4 assumes we reinvest all of the $55 million in tariff refunds across both the third and fourth quarters in order to deliver even sharper value. Now turning back to the second quarter results. Total sales grew 11%, while comp store sales increased 2%, which was at the midpoint of our guidance range of 1% to 3% comp growth. The gross margin rate for the second quarter was 44.3%, an increase of 60 basis points versus last year. This was driven by a 70 basis point increase in merchandise margin, which was partially offset by a 10 basis point increase in freight expenses. Product sourcing costs were $226 million versus $209 million in the second quarter of 2025. Product sourcing costs decreased 20 basis points as a percentage of sales versus last year. Supply chain was the driver of the leverage as we continue to execute on our productivity and cost savings initiatives. We achieved leverage in supply chain despite the start-up of our new state-of-the-art Savannah distribution center. Adjusted SG&A costs in Q2 decreased 50 basis points versus last year. This was primarily driven by lower store-related costs and leverage on total sales growth. Q2 adjusted EBIT margin was 7%, 100 basis points higher than last year, which was well above our guidance range of an increase of 30 to 60 basis points. Our Q2 adjusted earnings per share was $2.37, which also came in above our guidance range of $2.05 to $2.20. This represents a 38% increase in earnings per share on top of a 39% increase in Q2 of last year and demonstrates our continued ability to convert top line growth into even stronger earnings growth. At the end of the quarter, comparable store inventories increased 11% versus the end of the second quarter of 2025. Our reserve inventory was 43% of our total inventory versus 50% of our inventory last year. We are very happy with the quality of the merchandise and the values we have in reserve. We ended the quarter with approximately $1.6 billion in total liquidity, which consisted of $704 million in cash and $942 million in availability on our ABL. We had no outstanding borrowings at the end of the quarter on the ABL. During the quarter, we repurchased $87 million in common stock. We have repurchased $167 million of common stock fiscal year-to-date. And at the end of Q2, we had $218 million remaining on our share repurchase authorization, which expires in May of 2027. In the second quarter, we opened 51 new stores and relocated 6 stores. This resulted in the addition of 45 net new stores in Q2, bringing our store count at the end of the quarter to 1,287 stores. Now moving to our updated fiscal 2026 full year guidance. This guidance excludes approximately $16 million of costs associated with bankruptcy acquired leases versus $35 million in 2025. For the full year, our guidance includes the benefit of the $55 million in tariff refunds received in Q2 and the corresponding reinvestment of those dollars across Q3 and Q4. Therefore, the net impact of tariff refunds on our full year guidance is neutral. For the full year 2026, we are increasing our earnings outlook, passing through the entire second quarter underlying earnings beat to the full year. For the full year, total sales are now expected to increase 10% to 11%. We expect comp store sales to increase in the range of 3% to 4% and our adjusted EBIT margin to expand by 20 basis points to 40 basis points versus last year. Passing through the entire Q2 EPS upside results in adjusted earnings per share guidance in the range of $11.77 to $11.97, up 16% to 18% versus fiscal 2025 and well above our initial FY '26 guidance. Moving now to our third quarter guidance, which excludes approximately $2 million of expenses associated with bankruptcy acquired leases versus $11 million in Q3 of 2025. Consistent with our prior fall guidance, we are guiding Q3 comp sales to be up 1% to 3% and total sales to increase 9% to 11%. Our quarter-to-date trend is within this comp store sales guidance range. Of course, we are only 3 weeks into the quarter and the important transitional fall selling season is still ahead of us. As noted, we plan to reinvest approximately 40% of the tariff refunds into better value in Q3 and 60% in Q4. Excluding these reinvestments, our fall guidance assumptions for EBIT margin improvement and earnings growth are unchanged versus our prior guidance, which calls for EBIT margin improvement of 10 to 30 basis points and EPS growth of 7% to 10%. As we noted earlier, we believe it's important to drive an even stronger value offering in fall. Factoring in the reinvestment, we are guiding Q3 operating margin to decrease 80 to 60 basis points versus the third quarter of 2025. This translates to an adjusted earnings per share outlook in the range of $1.60 to $1.70 compared to last year's third quarter EPS of $1.80. Excluding planned tariff refund reinvestments, we estimate Q3 operating margin would increase modestly versus last year. For the fourth quarter, we expect comp store sales to be up 1% to 3% and total sales to increase 7% to 9%. We are guiding Q4 operating margin to decrease in the range of down 60 to down 40 basis points, driven by the planned reinvestment of tariff refunds. This translates to an adjusted EPS outlook in the range of $5.05 to $5.15 compared to last year's fourth quarter EPS of $4.99. Operating margin in Q4, excluding those tariff refund reinvestments would be up versus last year. As we noted, the net impact of tariff refunds on our full year guidance is neutral. We plan to reinvest the $0.64 benefit we saw in Q2 into Q3 and Q4. Excluding these reinvestments, our underlying fall guidance of $7.30 to $7.50 and EBIT margin up 10 to 30 basis points is unchanged from the guidance we issued on our Q1 earnings call in May. I will now turn the call back over to Michael. Michael O'Sullivan: Thank you, Kristin. Before I hand it back to the operator for your questions, let me summarize 2 key messages from this morning's call. Firstly, we are very pleased with our second quarter results. Total sales increased 11% in the quarter on top of 10% last year. Comp store sales increased 2% on top of 5% last year, resulting in a solid 2-year comp stack of 7%. And most importantly, even after stripping out the favorable impact of tariff refunds, our operating margin expanded 100 basis points and our adjusted EPS increased 38% on top of 39% last year. Our results in Q2 add to an already impressive and consistent track record of strong operating margin expansion and earnings flow-through. Secondly, we believe that we are set up for success in the back half of the year. We think that there may be potential sales upside as we lap specific issues in Q3 and Q4 of last year and as we deploy tariff refunds to deliver even sharper values to our customers. That said, we recognize that there are risks. So we are going to stay disciplined and execute the off-price playbook. We are maintaining our sales guidance for Q3 and Q4 and we will be ready to chase if the sales trend turns out to be stronger. Now I would like to turn the call over for your questions. Operator: [Operator Instructions] And our first question comes from the line of Matthew Boss with JPMorgan. Matthew Boss: So Michael, on tax -- on tariff refunds, could you elaborate on your decision to use the refunds to sharpen your prices and values, particularly relative to some retailers that are using them for favorability to earnings and others that are using them to offset expense pressures? Michael O'Sullivan: Matt, thank you for the question. It's a good question. For us, this was actually an easy decision. And there were, I would say, 2 main drivers that led us there. Number one, it feels like the right thing to do for our customers. Over the last few years, many households, especially moderate to lower income families have struggled with the higher cost of living, higher prices on essentials like groceries, rent, gas prices, et cetera. So our goal is to use the tariff refunds to give our customers a break. We already offer great value at Burlington. But by reinvesting the tariff refunds into lower prices, we should be able to sharpen those values further and to offer the customer an even better deal. The second thing that I would say, and this one is a bit more technical, so let me try and explain. We think it makes sense that different retailers have made different choices on this. Our tariff refunds are worth $55 million. Now in dollar terms and as a percentage of sales, that is much lower than many of our retail peers and competitors. And one of the reasons for that is because in the back half of last year, we pivoted away from categories where the impact of tariffs was very high. Now as you'll remember, that hurt our sales trend in the back half of last year, but it meant that we were still able to drive very strong earnings growth because we suffered less impact from tariffs. Now there were other retailers who made a different decision as they stayed in those tariff-impacted categories. That meant they saw stronger sales than us, but weaker earnings. Anyway, scroll forward to the back half of this year, relative to our peers, we're sitting on a higher base of earnings from last year. And our current earnings momentum is also very strong. So we're confident that we can hit our earnings targets even without the assistance of tariff refunds. Now for some other retailers, that calculus may be different. For them, the refunds may be an opportunity to catch back up on earnings that they missed out on in the second half of last year. Anyway, I guess I would sum up my answer by reiterating that for us, this was an easy decision. Reinvesting the refunds into sharper values feels like the right thing to do for our customers. And at the same time, we're confident that we can hit our targets without flowing these refunds to earnings. Matthew Boss: That's great color. And Kristin, to Michael's point, 100 basis points of second quarter margin expansion and 38% earnings growth. That's impressive flow-through on only a 2% comp. Could you elaborate on the drivers of the margin upside? Kristin Wolfe: Matt, yes, we feel very good about our ability to continue to drive operating margins higher, drive strong EPS growth even on the 2% comp, as you said in your question. That 38% EPS growth we saw in Q2 was on top of 39% EPS growth in Q2 of last year. So we think this consistent earnings growth is worth calling attention to. On the Q2 margin expansion specifically, I'd call out a few key drivers. First, our merch margin was up 70 basis points. This was better than we planned. It was primarily driven by better markup with less tariff pressure compared to last year. The timing of markdowns from Q1 as well as a lower shortage rate also drove some additional leverage in merch margin in the quarter. The second area is in supply chain. We saw 20 basis points of leverage driven by productivity and cost savings initiatives in DCs, and this was despite the headwind of the Savannah start-up in the quarter. And finally, we drove 50 basis points of SG&A leverage, primarily due to lower store-related costs, including lower occupancy and leverage on that 11% total sales growth. These drivers more than offset some pressure we had in freight from higher fuel as well as some higher depreciation in the second quarter. Operator: Our next question comes from the line of Ike Boruchow with Wells Fargo. Irwin Boruchow: Michael, first question is on the sales guidance for the back half. Given that you're making this investment via the tariff refund to sharpen the values this fall, just curious, why not be a little bit more aggressive on the sales guidance? It doesn't look like you're assuming much benefit from those sharper prices. Could you elaborate there? Michael O'Sullivan: Sure. Well, Ike, thank you for the question. Let me start by saying that when we set guidance, it is not an exact science. We try to balance numerous competing factors and considerations. As we said in the prepared remarks, we feel very good about our sales guidance for the back half. In fact, we think there may be upside. We're going to be lapping weather-related issues in Q3 and tariff-related supply constraints in Q3 and Q4. And as you mentioned in your question, the fact that we are reinvesting tariff refunds into sharper values should provide an additional tailwind to the sales trend. So all of those factors are causing us to be optimistic about the back half. But there are also some reasons to be a little cautious. From a macroeconomic perspective, gas prices rose in the first quarter, and that increase has not gone away. And as we look at the full range of retailer results that have been reported over the last couple of weeks, there are some exceptions. But overall, the comp results have been weak. And all the commentary that we see and hear right now suggests that shoppers are under a lot of pressure. So that gives us some concern about the back half. One other point to make. We believe that reinvesting the tariff refunds into sharpening values will help drive our sales momentum. But we also recognize that we are not the only retailer in America. There are other retailers who will be doing the same thing and some of them much larger than us. So that further reinforces our decision to reinvest the tariff refunds in sharper values, but it may mean that any impact on our sales trend is somewhat muted. I guess let me wrap up my answer by saying that we're an off-price retailer. We believe in the discipline of the off-price model. That discipline has served us well, and it has certainly helped drive our earnings outperformance over the last few years. And the way that the model works is that we manage our sales and inventories conservatively and then we chase. So if our sales guidance turns out to be conservative, then you can be sure we'll be ready to chase the upside. Irwin Boruchow: Got it. Makes sense. And then a follow-up for Kristin. Maybe just more color on the Q3 and Q4 margin guide. Just would be helpful to understand how exactly you're going to reinvest those dollars. Kristin Wolfe: Ike, thanks for the question. We said a couple of times today, we're reinvesting the tariff refunds from Q2 into fall to offer even stronger value to our customers. So we expect these incremental investments to result in lower gross margins versus last year in both Q3 and in Q4. Again, that reinvestment, approximately 40% into Q3 and 60% into Q4. These tariff refund reinvestments are the sole reason we are adjusting our Q3 and Q4 guidance and the sole reason we're guiding lower EBIT margins in both of those quarters. Excluding these reinvestments, our underlying fall guidance assumptions for EBIT margin expansion are unchanged versus our prior guidance, where we called for EBIT margin improvement of 10 to 30 basis points. So underneath that, drivers of that underlying EBIT margin expansion in fall include continued savings in supply chain as well as some additional leverage in SG&A, partially offset by the higher -- by some higher freight costs due to fuel. And these are all embedded in our guidance for Q3 and Q4. Operator: Our next question comes from the line of Lorraine Hutchinson with Bank of America. Lorraine Maikis: Results across retail in the second quarter have been pretty mixed. Does this make you a little more cautious today about the consumer than you were on last quarter's call? And where do you think the consumer is? And what impact that may have on demand for the rest of the year? Michael O'Sullivan: Lorraine, thank you for the question. My direct answer to your question is yes. We are a little more cautious on the consumer. I would say there are a few reasons for that. Number one, as I mentioned earlier, there was a big spike in gas prices back in March because of the situation in the Middle East. But first, I think many observers thought that would be temporary, but it hasn't turned out to be temporary. And I think that sort of adds to the general concern that consumers, especially moderate to low-income households are feeling stretched right now. Number two, and again, I mentioned this earlier, as we look at the full range of retailer results that have been reported in the last 2 weeks, there are a couple of notable exceptions. But in general, I would describe the Q2 comp results across the sector as having been underwhelming even at large value-oriented retailers. And then number three, let me talk about our own comp trend. In Q2, I think that our merchant and operating teams executed well. There are always opportunities for improvement, but I thought that our values and assortments were good. But we still only ran 2% comp growth. And of course, on a 2-year basis, that's fine. It's a solid 7% 2-year stack, even more if you adjust for new store cannibalization. But candidly, I was hoping for more than a 2% comp in the second quarter. Anyway, again, the direct answer to your question is, yes, we are a little more cautious on the customer. But let me pivot and talk about what the action implications of that are for us. I would say that despite that caution, we still feel good about our sales guidance for the back half, and we still feel good about potential upside. But as an off-price retailer, it makes sense to be cautious. We know that we can do well even in a difficult retail environment if we stay disciplined. So we plan to appropriately manage our open to buy, our receipts and our inventory levels and then be ready to chase if the trend turns out to be stronger. Lorraine Maikis: And then, Kristin, comp store inventory levels were higher than we expected exiting the quarter. Can you walk through what drove that increase and why you're comfortable with that higher inventory level? Kristin Wolfe: Lorraine, it's a great question. At the end of Q2, our comp store inventory was up 11%. And this increase was a bit higher than what we typically see, and there were a few drivers. Let me walk through. First, we exited the quarter with higher home inventory versus last year's purposeful pullback in home due to the higher tariffs. And in addition, we felt we had opportunity last year in the later back-to-school market. So we pulled forward some back-to-school receipts into late July to ensure we were well positioned there. There were also some tax-free shopping shifts that modestly influenced our back-to-school inventory levels at the end of the quarter. And the last thing was we mentioned this on last quarter's call, we have very selectively stepped up our investments in strong performing fast-turning categories like those in beauty and accessories. So overall, for those 3 drivers, stepping back, we're comfortable with our inventory levels and how we exited the quarter. Operator: Your next question comes from the line of Brooke Roach with Goldman Sachs. Brooke Roach: Kristin, you finished the quarter at the midpoint of your comp guidance. Can you talk about how sales trended within the quarter and whether there were any meaningful changes in the business as the quarter progressed? What are you seeing in terms of the comp trend on an August month-to-date basis? Kristin Wolfe: Brooke, thanks for the question. You may recall in our last earnings call in May, we shared that we were at the high end of our 1% to 3% comp guidance range. And as we progress through the quarter, the trend in June was similar to that of May, and then it moderated in July. July represented our toughest comparison, and it's important to call out on a 2-year stack basis, July was our strongest month in the quarter. And for August, our quarter-to-date trend is within our 1% to 3% Q3 comp guidance range. August does represent our toughest monthly compare in the third quarter, and those comparisons ease in September and October. The last point I'd make here is that it's difficult to reliably extrapolate Q3 sales trends based on the first few weeks of August. August is typically driven by back-to-school demand, while September and October are much more seasonal shopping periods. We see the largest sales opportunity in the latter months of the third quarter, particularly as we anniversary those tariff-related assortment gaps from last year. Brooke Roach: That's great. And then maybe a follow-up for Michael, given those opportunities that you have this quarter, can you provide an update on the Home business? What progress are you seeing? And how confident are you in the opportunity for Home as the category becomes more important into the back half of the year? Michael O'Sullivan: This is an important question. The headline is that we feel very good about the progress of our Home business. As a reminder, going back a year ago, our Home business was significantly impacted by tariffs, especially in Q3 and Q4. But when tariffs were first introduced in April of 2025, we moved very fast to remix our assortment and to take down sales and receipt plans in categories that were the most heavily impacted by tariffs. And that turned out to be the right thing to do from a margin and earnings perspective, but it had a very significant impact on sales, especially in our Home business in the back half of the year. Now in late Q2 of this year, in other words, over the last couple of months, we've started to lap that impact, and we are very happy with what we are seeing. In July, our Home business outcomped the chain, and that trend has continued into August. And as I said, that's very important because, as you mentioned in your question, Home becomes a larger proportion of our business later in the year, especially as we get into the fourth quarter. Now just to add a little more color and spice. Right now, we are seeing a lot of strength in categories like home furnishings, kitchen essentials and toys. And as we look forward, we're very happy with our on order position in -- and our reserve positions in gifting, toys and holiday categories. So overall, I feel like we are set up for success in Home in the back half of the year. Operator: Your next question comes from the line of Dana Telsey with Telsey Group. Dana Telsey: Kristin, it sounds like you opened a record number of new stores over the last 12 months. Can you provide some more color on these openings? And then I have a follow-up. Kristin Wolfe: Dana, thanks for the question. Yes, over the last 12 months, we've opened 178 gross new stores. This is the highest level of new store growth in Burlington's history for that time period. With the strength of our pipeline, we were able to front-load 2026 new stores more into the spring season. And this in contrast in 2025 when new stores were more back weighted openings in fall. So these gross new store openings after closures and relocations resulted in 149 net new stores opened in the last 12 months, a 13% growth in store count over the period. And I'll provide just a little bit more detail on these stores. We've really been pleased with the quality of these stores, the pace and the consistency of our execution. They average -- these stores average about 27,000 gross square feet. They're located in highly productive strip centers. We estimate these stores will be over $7 million in annual sales while delivering really great economic returns. We estimate a payback period of less than 2 years. And from an operational standpoint, we're opening these stores on time and staffing them with experienced Burlington leadership teams. So it's great. We're pleased with this execution. For full year 2026, we continue to expect 135 gross store openings or about 115 net new stores this year. And last point I'll make here is on the pipeline. We feel very, very good about our '27 pipeline. '28 pipeline is continuing to build really nicely, and we remain confident in our ability to open at least 110 net new stores annually, and believe we're well positioned to reach and likely exceed the 1,500 store target by the end of 2028. Dana Telsey: Great. And then the follow-up, can you talk a little bit about the cannibalization impact of new stores on comp growth? Kristin Wolfe: Sure. As Michael discussed some of this in the prepared remarks, but let me provide a little bit more color. We, of course, expect some level of cannibalization of nearby stores when we open a new store. That impact is incorporated into our site selection and our underwriting processes before we ever approve a new location. So this level of cannibalization is not a surprise to us. And typically, over the years, we've seen cannibalization generally be about a 1% headwind to comp sales. But given that extraordinary pace we talked about just in the prior question, that headwind is now higher, running about 1.5 points in the second quarter. This, of course, is an impact we're happy to accept and absorb. A new store may create a small cannibalization headwind in nearby locations, but the overall incremental sales generated by the new store are obviously significantly greater and the overall economics of Burlington are very attractive. So the last point I'll make on the cannibalization is the can we're seeing today is due to that unusual concentration I talked about in your first question. So we expect this will continue through the rest of this year. And as that timing normalizes, we'll expect the cannibalization impact to moderate accordingly. Operator: Your next question comes from the line of Alex Straton with Morgan Stanley. Alexandra Straton: I've got one for Michael and then one for Kristin. So maybe starting with Michael, can you just give us some updated color on any trends you're seeing by demographic segment? Michael O'Sullivan: Sure. Well, Alex, welcome back. So demographics, yes, I guess I would say that the only important headline to share is that our stores that are in lower income trade areas continue to outperform the rest of the chain. Now as you'd expect, given my comments earlier about the macroeconomic environment, that metric is something we're watching very closely. And what the data says is that in the second quarter, our stores in trade areas with lower median household income continue to have comp growth above the chain average. So in other words, and I'm very happy to say it, we continue to see strong resilience among lower-income shoppers. As for other demographic factors, there isn't much to call out. Maybe the only other thing to share is on Hispanic shoppers. In Q2, our stores that are in high Hispanic areas performed in line with the chain. So again, we continue to feel good about that important demographic. Alexandra Straton: Great. And maybe for Kristin, do you expect to receive additional tariff refunds in the back half of the year beyond what you already received in the second quarter? Kristin Wolfe: Alex, thanks for the question. And to answer it directly, we do not expect to receive any material additional tariff refunds beyond what we've already recognized. There may be some additional amounts received as various claims are finalized, but we expect those amounts to be relatively small and not meaningful to our financial results. And it's worth reiterating what Michael said earlier, both the dollar amount of our refund and the benefit as a percentage of sales were lower than what many retailers experienced. And that's really a reflection of the actions we took last year as tariffs increased. And in the back half of 2025, we deliberately pivoted away from some of the more heavily tariff exposed categories, particularly in home. And that decision created pressure on sales, but it reduced our exposure to higher tariff costs and ultimately contributed to the strong earnings performance we delivered last year. Operator: Your next question comes from the line of Adrienne Yih with Barclays. Adrienne Yih-Tennant: Michael, I'll start with you. So the investments that you're making for the tariffs, they sound like they're almost exclusively going back into pricing. I'm wondering if there's any opportunity or anything thought about from the marketing standpoint just to highlight the values? And what metrics are you watching to prove that these investments in price aren't onetime in nature and will result in loyalty and long-term customer value? And then a follow-up for Kristin. I'll just do it now. Can you talk about the ability to leverage your supply chain expenses, pretty nice ability to do that? And then an update on your Savannah DC and when we can see productivity and efficiencies, how much of that is in the guidance in the back half? Michael O'Sullivan: Adrienne, yes, first question on marketing. Yes, we -- at Burlington, we've known for some time that we have a particular challenge or rather an opportunity in marketing. We don't have the same awareness levels as other retailers. And when shoppers have heard of us, more often than not, they think of the Coat Factory. So we need to raise our awareness levels and change perception at the same time. And I would say that's a particular and unique challenge to us. So we have been looking over the past, I would say, 6 to 12 months, we've been looking at ways to really sort of step up our marketing and go after those opportunities. And I would say we're still experimenting. We're still trying some different things. But I would expect over the next few quarters, we'll roll out some of those programs. In terms of your -- the second part of your question around how will we know if the tariff investments are paying off, once we get -- if we see a benefit to sales, that will obviously be the main driver in terms of -- or the main indicator in terms of whether or not the customer is responding to sharper values. Kristin Wolfe: And then this is Kristin. I'll take the supply chain Savannah question. So as we've noted, supply chain levered 20 basis points in the quarter. This was really driven by DC productivity and cost savings initiatives. So I've said that a couple of times. So let me give more -- a little more color on that. In DCs, we're highly focused on improving processes, increasing throughput and maximizing our most efficient facilities. We're using better predictive tools and routing capabilities and better integrating more seamlessly with allocation to make smarter, more efficient decisions across the network. This reduces handling costs, reduces touches and ultimately drives efficiency and improves the merchandise flow. And what's particularly encouraging, I mentioned earlier, is that in supply chain, we were able to leverage in Q2 despite the cost of starting up Savannah, which I think leads to the kind of second part of your question, Savannah is just coming online. This is our largest, most automated distribution center. We're very pleased with the progress. The facility began receiving inbound product in April and has started supporting outbound flow as well. And the start-up has gone really largely as planned, even though our largest and most automated. Relatedly, and it sort of gets to the productivity point, we're encouraged by what we're seeing at our Logan distribution center. This distribution center is starting its third year or its junior year as we've been calling it, and it's really becoming a meaningful contributor to the strong productivity gains we're seeing. And this gives us confidence in the long-term opportunity ahead for Savannah. While, of course, new DCs carry start-up costs as they ramp, we believe Savannah's scale and automation position it to be a critical driver of capacity, productivity and supply chain leverage over time. Operator: And your next question comes from the line of Mark Altschwager with Baird. Mark Altschwager: Michael, the forecast calling for a super El Niño imply warmer-than-normal fall weather and winter weather across much of the country. How is that changing the way you're planning cold weather receipts for the back half? And is any of that risk built into the guidance? Michael O'Sullivan: Well, I can't believe we've made it this far in the call without talking about the weather. So Mark, thank you. Thank you for the question. Seriously, though, it's an important question, and let me take a bit of time in answering this. I think it's widely understood that at Burlington, formerly known as the Coat Factory, we are more sensitive than most retailers to seasonal weather variations, especially in the third quarter. Now as you mentioned in your question, there are predictions that this could be a super El Niño year, which would mean warmer than average conditions in the back half. Now that would not be helpful for sales in our outerwear businesses, especially from late September through November. Now of course, those kinds of longer-term forecasts are not necessarily reliable, but it does represent a risk. And it's another reason to be cautious and not raise sales guidance for the back half of the year. Now with that said, I would like to talk about several actions that we've taken this year that I think should help to reduce the sales risk even if the weather turns out to be unfavorable. Let me start with, in the back half of last year, in addition to softness in our outerwear business, driven by warmer temperatures, we also face significant tariff-related assortment gaps in our Home business, and we've referred to that a few times on this call. Now scroll forward to this year, we've really strengthened our home assortment. So even if the weather is not favorable, those improvements should still help drive our overall sales trend as we anniversary those tariff-related assortment gaps. Secondly, over the last couple of years, we've been investing in our localization capabilities. Now those capabilities should enable us to do a better job of customizing the mix of inventory across merchandise categories based on regional weather patterns. Now for example, that might mean increasing the mix of fleece and lightweight jackets and reducing the flow of medium and heavyweight coats in regions where it's warmer. Again, those capabilities should help support our trend, no matter the weather. The other -- the last thing I'll call out is that this year, when we developed our overall sales plan for the back half, we deliberately planned down our outerwear businesses and plan up our weather-neutral businesses. Now historically, we would not have been comfortable planning down such an important category. But with our merchandising 2.0 systems and tools, we're confident that we can start with a more conservative plan for these businesses and then react more rapidly if the weather does turn out to be cooler. So that means that our overall sales plan for the fall is less exposed to our outerwear businesses. Now that does not completely eliminate the risk in our overall sales plan, but it does reduce it. So anyway, let me sum up. This is a long answer. Let me sum up. The weather pattern from late September onwards is a very important driver of our comp, especially in Q3, for good or for bad. But this year, we've taken numerous actions that should help reduce the risk and support our sales trend even if the weather is not favorable. And we also believe that we have the ability to chase the trend if it's stronger and if the weather actually does turn out to be cooler than last year. Mark Altschwager: A quick follow-up for Kristin. Can you speak to what stood out by region and by category in the quarter? And then on the composition of the comp, I'm not sure if we heard it, but can you speak to how much came from transactions versus basket? Kristin Wolfe: Great. Thanks, Mark. In terms of regional performance, it was pretty broad-based. The Northeast and the Midwest were the top-performing regions. They outperformed the chain. The Southwest region trailed the chain. Our category trends were strongest in beauty and accessories, and our Home business has started to outperform the chain as we build that business back. And finally, to your last question, in terms of comp metrics or components of comp, our second quarter comp was driven primarily by a higher basket size. Transactions were relatively flat compared to last year. Operator: That concludes our question-and-answer session. I will now turn the call back over to Michael O'Sullivan for closing remarks. Michael? Michael O'Sullivan: Let me close by thanking everyone for your interest in Burlington Stores. We look forward to talking to you again in November to discuss our third quarter 2026 results. We appreciate your questions and your time today. Thank you. Operator: This concludes today's call. You may now disconnect. Before you buy stock in Burlington Stores, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Burlington Stores wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $440,710!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,335,252!* That performance is why people listen. 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Burlington (BURL) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Burlington Stores, Inc. BURL reported second-quarter fiscal 2026 results, with the bottom line surpassing the Zacks Consensus Estimate but revenues falling short. Still, both earnings and sales increased sharply year over year. The off-price retailer benefited from merchandise-margin expansion, supply-chain productivity, and adjusted selling, general and administrative (SG&A) leverage, enabling the company to post its 15th consecutive quarter of double-digit underlying earnings growth.Management highlighted solid execution across merchandising, inventory management, store operations and the supply chain. Beauty and accessories were the strongest categories, while the Home business began outperforming the chain late in the quarter. The Northeast and Midwest led regional performance, while the Southwest trailed. New stores remained a major growth driver, with the company adding 45 net new stores during the quarter.Despite the earnings beat and an increase in the fiscal 2026 guidance, investors reacted negatively to the results, sending shares down more than 7.6% yesterday. The sell-off appears to have reflected the revenue shortfall, comparable sales at the midpoint of guidance and a third-quarter forecast that incorporates year-over-year margin contraction and lower earnings per share (EPS) as tariff refunds are reinvested. Management's more cautious assessment of spending pressure on moderate- and low-income households may have weighed on sentiment. Burlington Stores, Inc. price-consensus-eps-surprise-chart | Burlington Stores, Inc. Quote Burlington Stores reported adjusted earnings of $2.96 per share, comfortably beating the Zacks Consensus Estimate of $2.18. Adjusted EPS increased 86.2% from $1.59 in the year-ago quarter. The results included a 64-cent-per-share benefit from $55 million in tariff refunds. Excluding the refunds and expenses associated with bankruptcy-acquired leases, adjusted EPS was $2.37, up 38% from $1.72 a year earlier and above management's guidance of $2.05-$2.20.Total revenues increased 11% year over year to $3,002 million but missed the Zacks Consensus Estimate of $3,029 million. Net sales rose 11% to $2,998 million from $2,701 million in the prior-year quarter.Comparable store sales increased 2%, at the mid-point of management's guidance of 1-3% and on top of 5% growth in the year-ago quarter, producing a solid 7% two-year stack. New-store cannibalization created an estimated 1.5-percentage-point headwind to comps. According to management, the comparable-sales increase was driven mainly by a higher basket size, while transactions were relatively flat. Our model anticipated a 2.7% year-over-year rise in comparable store sales for the fiscal second quarter. The gross margin was 46.2%, rising 250 basis points from the prior-year rate, including the $55-million tariff-refund benefit. Without that benefit, the gross margin was 44.3%, an underlying improvement of 60 basis points. The merchandise margin gained 70 basis points on better markup, the timing of markdowns and a lower shortage rate, while freight costs created a 10-basis-point offset.Adjusted SG&A expenses were $791.2 million, up 8.1% from $732.3 million in the second quarter of fiscal 2025. After excluding $4 million and $11 million during the fiscal second quarters of 2026 and 2025, respectively, of expenses associated with bankruptcy-acquired leases, adjusted SG&A represented 26.2% of net sales versus 26.7% a year earlier. Lower store-related costs, including occupancy expenses and leverage on the 11% sales increase, drove the 50-basis-point improvement.Product sourcing costs rose to $225.9 million from $209 million. As a share of sales, expenses improved by 20 basis points as distribution-center productivity and cost savings outweighed start-up pressure from the new Savannah facility. The measure covers buying activities and the cost of moving merchandise through Burlington Stores' supply chain.On a basis that excludes the tariff refund and bankruptcy-acquired lease expenses, adjusted EBIT climbed to $210 million from $162 million. The related margin increased 100 basis points to 7%, comfortably ahead of management's 30-60-basis-point expansion target. Merchandise margin strength, supply-chain productivity and SG&A leverage accounted for the outperformance.Adjusted EBITDA on the same underlying basis advanced to $324 million from $257 million. Its margin widened by 130 basis points, demonstrating strong operating flow-through despite the modest 2% comparable-sales increase. Burlington Stores ended the second quarter of fiscal 2026 with total liquidity of $1.65 billion, consisting of $704 million in unrestricted cash and $942 million of availability under its asset-based lending facility.Total outstanding debt at the quarter-end was $1.91 billion, including $1.71 billion under the term-loan facility and $186 million in convertible notes. The company had no borrowings under its asset-based lending facility.The company repurchased 270,279 shares of its common stock for $87 million in the fiscal second quarter. Fiscal year-to-date share repurchases totaled $167 million. At the end of the fiscal second quarter, $218 million remained available under the current share-repurchase authorization, which expires in May 2027. In the second quarter of fiscal 2026, Burlington Stores opened 51 stores, including six relocations, resulting in a net increase of 45 stores during the period. The company ended the quarter with 1,287 stores across 47 states, Washington, DC, and Puerto Rico. Over the trailing 12 months, Burlington Stores added 149 net new stores, increasing its store count 13%. For third-quarter fiscal 2026, management projects total sales growth of 9-11% and comparable sales growth of 1-3%. The adjusted EBIT margin is expected to contract 60-80 basis points. That outlook excludes $2 million of anticipated bankruptcy-acquired lease expenses compared with $11 million in the year-ago quarter.The projected margin decline reflects the planned reinvestment of about 40% of the tariff refunds during the quarter to provide sharper customer value. Excluding this reinvestment, management estimates that the third-quarter operating margin would increase modestly year over year.Burlington Stores expects continued leverage in product sourcing costs as it realizes benefits from supply-chain productivity and cost-saving initiatives. Management expects additional SG&A leverage, although these benefits are expected to be partially offset by higher fuel-related freight expenses.The company anticipates an adjusted effective tax rate of 26% and adjusted earnings per share of $1.60-$1.70, whereas it reported $1.80 in the third quarter of fiscal 2025. Management noted that quarter-to-date comparable sales were within 1-3% guidance, with comparisons expected to ease in September and October. Burlington Stores lifted its fiscal 2026 total-sales forecast to growth of 10-11% from 9-11%. The company raised its comparable-sales assumption to 3-4% from 2-4%, following a 2% increase in fiscal 2025. The company expects to open approximately 115 net new stores during the year, with 135 gross store openings planned. Management remains confident in its ability to open at least 110 net new stores annually and reach or exceed 1,500 stores by the end of fiscal 2028.The updated plan calls for adjusted EBIT margin expansion of 20-40 basis points, improving on the earlier 10-30-basis-point range. It excludes $16 million of anticipated bankruptcy-acquired lease expenses in fiscal 2026 compared with $35 million in fiscal 2025. Full-year adjusted EPS is forecast at $11.77-$11.97, up from the prior stated $11.45-$11.80, whereas it reported $10.17 in fiscal 2025. The revised range implies 16-18% year-over-year growth. Capital expenditure, net of landlord allowances, is projected at $875 million.Management noted that the $55-million tariff-refund benefit recognized in the second quarter is expected to be fully reinvested in sharper customer value during the second half, making the direct full-year earnings impact neutral. About 40% of the reinvestment is planned for the third quarter and 60% for the fourth quarter. Excluding the reinvestment, the underlying fall outlook remains unchanged, with the adjusted EBIT margin expansion of 10-30 basis points and adjusted EPS of $7.30-$7.50. For the fourth quarter, total sales are projected to increase 7-9%, with comparable-store sales up 1-3%. Adjusted earnings are expected at $5.05-$5.15 per share, whereas it registered $4.99 last year. The operating margin is forecast to decline 40-60 basis points. Excluding refund reinvestment, management expects the fourth-quarter operating margin to increase year over year. BURL Stock Past 3-Month Performances Image Source: Zacks Investment Research Over the past three months, this Zacks Rank #3 (Hold) company has lost 10.4% against the industry’s 0.5% growth. We have highlighted three better-ranked stocks, namely Target Corporation TGT, Macy's, Inc. M and Ross Stores Inc. ROST.Target offers guests fashionable, differentiated merchandise and everyday essentials at discounted prices. It currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Target’s current fiscal-year earnings and sales suggests growth of 37.7% and 4.6%, respectively, from the year-ago actuals. TGT delivered a trailing four-quarter average earnings surprise of 10.5%.Macy's sells a wide range of merchandise, including men’s, women’s and children’s apparel and accessories, cosmetics, home furnishings and other consumer goods. The company carries a Zacks Rank #2 (Buy) at present. The Zacks Consensus Estimate for Macy's current fiscal-year earnings and sales suggests a decline of 4.3% and growth of 0.1%, respectively, from the year-ago actuals. Macy's delivered a trailing four-quarter average earnings surprise of 211%.Ross Stores operates as an off-price retailer of apparel and home accessories. The company also currently has a Zacks Rank #2. The Zacks Consensus Estimate for Ross Stores’ current fiscal-year earnings and sales indicates growth of 32.8% and 11.7%, respectively, from the year-ago actuals. ROST delivered a trailing four-quarter average earnings surprise of 11.2%. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Burlington Stores, Inc. (BURL) : Free Stock Analysis Report Macy's, Inc. (M) : Free Stock Analysis Report Target Corporation (TGT) : Free Stock Analysis Report Ross Stores, Inc. (ROST) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management reported extremely robust underlying earnings momentum, with adjusted EPS growing 38% on top of 39% growth last year, excluding the impact of tariff refunds. The company received approximately $55 million in tariff refunds in Q2, which management has strategically decided to reinvest into the business to deliver sharper values for customers in the back half of the year. Total sales growth of 11% was significantly driven by an aggressive new store opening program, with 178 gross new stores opened on a trailing 12-month basis. Comp store sales increased 2%, which included a 1.5 percentage point headwind from new store cannibalization, an impact management views as acceptable given the attractive overall economics of the new store program. Operating margin expanded 100 basis points, exceeding guidance due to stronger merchandise margins, supply chain productivity, and SG&A leverage on total sales growth. Management attributed the ability to drive strong earnings flow-through on modest comp growth to the execution of the off-price playbook and disciplined expense management. Full-year earnings guidance was raised to pass through the Q2 beat, while the direct impact of tariff refunds is expected to be neutral as they are fully reinvested in Q3 and Q4. Sales guidance for the back half remains unchanged despite potential upside from lapping weather-related issues and tariff-related supply constraints from the prior year. The company is maintaining a cautious stance on the consumer due to persistent high gas prices and underwhelming results across the broader retail sector. Management plans to manage open-to-buy and inventory levels conservatively, remaining ready to 'chase' sales if trends prove stronger than the current 1% to 3% comp guidance. The reinvestment of tariff refunds is expected to result in lower year-over-year operating margins in Q3 and Q4, though underlying margins (excluding reinvestment) are projected to expand. The new Savannah distribution center, the company's largest and most automated, began operations in April and is expected to be a long-term driver of supply chain leverage. Management identified a 'super El Niño' forecast as a potential risk to cold-weather seasonal sales, prompting a strategy to plan down outerwear and plan up weather-neutral categories. Inventory levels at the end of Q2 were up 11%, driven by a recovery in the Home category, pull-forward of back-to-school receipts, and strategic investments in fast-turning categories like beauty. The company continues to face a unique marketing challenge regarding brand perception, aiming to shift consumer awareness from 'Coat Factory' to a broader value retailer. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management stated the decision was 'easy' because they are already meeting earnings targets and want to support moderate-to-low income families facing high costs of living. They noted that unlike peers who may need refunds to recover lost earnings from last year, Burlington's prior pivot away from tariff-heavy categories left them with a higher earnings base. Cannibalization was a 1.5 percentage point headwind in Q2, up from the historical 1 percentage point average due to the record pace of 178 gross openings in 12 months. Management expects this elevated headwind to persist through the end of the year before normalizing as the opening schedule stabilizes. The Home business outcomped the chain in July and August as the company anniversaries significant tariff-related supply gaps from the previous year. Management expressed high confidence in the category for the back half, citing strong reserve positions in toys, gifting, and holiday categories. Management confirmed increased caution regarding the consumer, noting that Q2 comp results across the retail sector were generally 'underwhelming'. Despite macro pressures, stores in lower-income trade areas continued to outperform the chain average, showing resilience in the core customer base.

Burlington Stores Inc. (NYSE:BURL) shares declined 2.88% on Thursday after the off-price retailer reported second-quarter revenue slightly below Wall Street expectations, despite delivering adjusted earnings comfortably ahead of forecasts. Adjusted earnings per share reached $2.37, exceeding the analyst consensus of $2.17. Revenue came in at approximately $3 billion, narrowly below expectations of $3.02 billion. Total sales increased 11% year over year to $2.998 billion, while comparable store sales advanced 2%. The comparable sales growth followed a 5% increase in the corresponding period last year. Burlington’s adjusted EPS increased 38% compared with the second quarter of fiscal 2025, supported by a 100-basis-point improvement in operating margin. The company also received $55 million in tariff refunds during the quarter. Rather than retaining the entire benefit, Burlington plans to reinvest part of the proceeds into offering stronger value to customers during the second half of the year. “We are pleased with our strong financial performance in the second quarter,” said CEO Michael O’Sullivan. “This represented our 15th consecutive quarter of double digit EPS growth, reflecting our ability to consistently convert sales growth into margin expansion and exceptional earnings growth.” Following the quarterly performance, Burlington increased its adjusted EPS guidance for fiscal 2026 to between $11.77 and $11.97. The midpoint of the new range, at $11.87, compares with adjusted EPS of $10.17 in the previous year and represents growth of approximately 17%. The retailer continues to expect comparable store sales to increase between 3% and 4% for the full year, while total sales are projected to grow between 10% and 11%. For the third quarter, Burlington expects adjusted EPS of between $1.60 and $1.70, giving a midpoint of $1.65. That compares with adjusted EPS of $1.80 in the corresponding period last year. The outlook incorporates Burlington’s plan to reinvest approximately 40% of the tariff refunds received during the second quarter. The strategy is intended to pass part of those savings to customers through more competitive value rather than allowing the refunds to provide only a temporary boost to earnings. Burlington ended the quarter with 1,287 stores and continues to expand its physical footprint. The company plans to open approximately 115 net new locations during fiscal 2026. While the modest revenue miss and third-quarter earnings outlook weighed on the shares following the announcement, Burlington’s 38% increase in adjusted EPS, improved operating margin, higher full-year earnings guidance and continued store expansion highlighted the retailer’s ongoing growth and profitability. Burlington Stores stock price

Interested in Burlington Stores, Inc.? Here are five stocks we like better. Burlington delivered strong second-quarter results: Sales rose 11%, adjusted EPS excluding tariff refunds increased 38% to $2.37, and adjusted EBIT margin expanded 100 basis points to 7%. New-store cannibalization pressured comparable sales, which rose 2%. The company plans to reinvest approximately $55 million in tariff refunds into lower prices and improved customer value during the second half, making the full-year earnings benefit neutral despite adding $0.64 to second-quarter reported EPS. Burlington raised its fiscal 2026 adjusted EPS outlook to $11.77–$11.97 and continues to target 135 gross store openings. Management cited a cautious consumer, potential warm-weather pressure on outerwear, and ongoing cannibalization as key risks. MarketBeat Week in Review – 06/22 - 06/26 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. → Quantum Computing Is Raising the Stakes for Cybersecurity: 5 Stocks to Watch Burlington Is Winning Over Shoppers But Investors Need Patience “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%. → NVIDIA Reveals $21 Billion SpaceX Stake: Signal of Confidence or Circular Financing? Ollie's Stock Has Lagged Despite Earnings Beats—What's Holding It Back? 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. → Berkshire Boosts Its Bet: This AI Hyperscaler Is Now a Top-3 Holding 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 during the quarter and $167 million year to date, leaving $218 million under its authorization through May 2027. Burlington raised its full-year adjusted earnings-per-share outlook to $11.77 to $11.97, representing expected growth of 16% to 18% from fiscal 2025. The increase passes through the company’s underlying second-quarter earnings outperformance, management said. For fiscal 2026, Burlington expects: Total sales growth of 10% to 11%. Comparable-store sales growth of 3% to 4%. Adjusted EBIT margin expansion of 20 to 40 basis points. For the third quarter, the company maintained its prior sales outlook, calling for comparable-store sales growth of 1% to 3% and total sales growth of 9% to 11%. It forecast adjusted EPS of $1.60 to $1.70, compared with $1.80 in the prior-year quarter, as it directs about 40% of tariff-refund investments toward third-quarter pricing and value. Fourth-quarter comparable sales are also projected to rise 1% to 3%, with total sales expected to increase 7% to 9%. Burlington forecast fourth-quarter adjusted EPS of $5.05 to $5.15, compared with $4.99 a year earlier. The company expects to allocate the remaining approximately 60% of the tariff-refund reinvestment to the fourth quarter. Wolfe said that excluding the planned tariff-refund reinvestment, Burlington’s prior fall assumptions were unchanged, including EBIT margin improvement of 10 to 30 basis points. O'Sullivan said management had become “a little more cautious” about the consumer, pointing to higher gas prices, broadly underwhelming retail comparable-sales results and Burlington’s own 2% second-quarter comp increase. Still, he said the company sees potential sales upside as it laps weather-related issues and tariff-related supply constraints from last year. Management said stores in lower-income trade areas continued to outperform the chain during the quarter, while locations in high-Hispanic trade areas performed in line with the company average. Second-quarter comparable-sales growth was driven primarily by higher basket size, while transactions were relatively flat year over year. The Northeast and Midwest outperformed the chain, while the Southwest trailed it. The company also said its home business outperformed the chain in July and continued to do so in August as Burlington lapped tariff-related assortment gaps from last year. O'Sullivan cited strength in home furnishings, kitchen essentials and toys, along with favorable on-order and reserve positions in gifting, toys and holiday categories. Management identified potentially warmer fall and winter weather as a sales risk for outerwear, particularly during the third quarter. Burlington said it has reduced some of that exposure by planning outerwear more conservatively, increasing weather-neutral merchandise plans and using localization capabilities to adjust assortment mixes by region. O'Sullivan said the company would remain disciplined with inventory and be prepared to chase demand if sales trends prove stronger than expected. Burlington Stores, Inc is an American off-price retailer that sells apparel and home goods at discounted prices. The company's merchandise assortment includes clothing for women, men and children, plus baby products, footwear, accessories, beauty items, toys and home décor. Burlington's merchandising strategy focuses on offering branded and private-label goods at lower prices than traditional department stores by sourcing excess inventory, closeouts and opportunistic buys from manufacturers and other retailers. The business traces its roots to the Burlington Coat Factory name established in the early 1970s and has since evolved into a broader off-price retailer that carries a wide range of seasonal and everyday merchandise. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Burlington Stores Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

This article first appeared on GuruFocus. Total Sales Growth: Increased 11% in Q2 2026, on top of 10% growth in the prior year. Comparable Store Sales: Increased 2% in Q2, on top of 5% growth last year, resulting in a 7% two-year comp stack. Adjusted EPS: Increased 38% to $2.37, on top of 39% growth in Q2 of last year (excluding tariff refunds). Operating Margin: Expanded 100 basis points to 7% in Q2, excluding tariff refunds, exceeding guidance of 30 to 60 basis points. Gross Margin: Increased 60 basis points to 44.3%, driven by a 70 basis point increase in merchandise margin, partially offset by a 10 basis point increase in freight expenses. Product Sourcing Costs: $226 million versus $209 million in Q2 2025, decreasing 20 basis points as a percentage of sales. Adjusted SG&A: Decreased 50 basis points versus last year, driven by lower store-related costs and leverage on total sales growth. Tariff Refunds: Received approximately $55 million in Q2, providing a $0.64 benefit to earnings per share, to be fully reinvested in the back half. Store Count: Opened 51 gross new stores and relocated 6, resulting in 45 net new stores, bringing total store count to 1,287. Inventory: Comparable store inventories increased 11% versus last year; reserve inventory was 43% of total inventory versus 50% last year. Liquidity: Ended the quarter with approximately $1.6 billion in total liquidity, including $704 million in cash and $942 million in ABL availability. Share Repurchases: Repurchased $87 million in common stock during Q2 and $167 million fiscal year to date. Full Year 2026 Guidance: Total sales expected to increase 10% to 11%; comp store sales expected to increase 3% to 4%; adjusted EPS guidance raised to $11.77 to $11.97, up 16% to 18% versus fiscal 2025. Q3 2026 Guidance: Comp sales expected to be up 1% to 3%; total sales to increase 9% to 11%; adjusted EPS outlook of $1.60 to $1.70, with operating margin expected to decrease 80 to 60 basis points due to tariff refund reinvestments. Q4 2026 Guidance: Comp sales expected to be up 1% to 3%; total sales to increase 7% to 9%; adjusted EPS outlook of $5.05 to $5.15, with operating margin expected to decrease 60 to 40 basis points due to planned reinvestments. Warning! GuruFocus has detected 8 Warning Signs with MBUU. Is BURL fairly valued? Test your thesis with our free DCF calculator. Release Date: August 27, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Burlington Stores Inc (NYSE:BURL) delivered strong Q2 earnings growth, with adjusted EPS up 38% on top of 39% growth last year, excluding tariff refunds. The company achieved 100 basis points of operating margin expansion in Q2, driven by merchandise margin, supply chain leverage, and SG&A savings. Burlington Stores Inc (NYSE:BURL) is reinvesting $55 million in tariff refunds to sharpen customer values, which is expected to drive sales momentum and customer loyalty. The company opened 51 new stores in Q2, contributing to a 13% net store count growth over the last 12 months, with strong productivity and profitability. Burlington Stores Inc (NYSE:BURL) raised its full-year EPS guidance to $11.77-$11.97, reflecting confidence in continued earnings growth despite a cautious consumer environment. Burlington Stores Inc (NYSE:BURL) reported a modest 2% comp sales increase in Q2, which was at the midpoint of guidance and below management's internal expectations. The company faces an elevated cannibalization headwind of 1.5 percentage points on comp sales due to the high number of new store openings, expected to persist through the year. Management expressed increased caution about the consumer, citing high gas prices, weak sector-wide retail results, and pressure on lower-income shoppers. Q3 and Q4 operating margins are guided to decrease by 80-60 and 60-40 basis points, respectively, due to the planned reinvestment of tariff refunds, which will pressure near-term profitability. The company faces potential sales risk from a forecasted super El Nino, which could lead to warmer weather and negatively impact outerwear sales in the back half of the year. Q: Michael, on tariff refunds, could you elaborate on your decision to use the refunds to sharpen your prices and values, particularly relative to some retailers that are using them for favorability to earnings and others that are using them to offset expense pressures?A: Michael O'Sullivan (CEO): For us, this was an easy decision. First, it feels like the right thing to do for our customers, especially moderate to lower-income families who have struggled with the higher cost of living. We plan to use the refunds to sharpen values further. Second, our refunds of $55 million are much lower as a percentage of sales than many peers because we pivoted away from heavily tariff-impacted categories last year. This hurt our sales trend but allowed us to drive strong earnings. Since we are confident we can hit our earnings targets without the refunds, reinvesting them into sharper values is the right call for our customers. Q: Kristin, to Michael's point, 100 basis points of second quarter margin expansion and 38% earnings growth is impressive flow-through on only a 2% comp. Could you elaborate on the drivers of the margin upside?A: Kristin Wolfe (CFO): We feel very good about our ability to drive operating margins higher even on a 2% comp. The Q2 margin expansion was driven by several factors. First, merchandise margin was up 70 basis points, driven by better markup with less tariff pressure, timing of markdowns, and a lower shortage rate. Second, we saw 20 basis points of supply chain leverage from productivity and cost savings initiatives, despite the Savannah DC start-up. Finally, we drove 50 basis points of SG&A leverage, primarily due to lower store-related costs and leverage on the 11% total sales growth. Q: Michael, given that you're making this investment via the tariff refund to sharpen the values this fall, why not be a little more aggressive on the sales guidance? It doesn't look like you're assuming much benefit from those sharper prices.A: Michael O'Sullivan (CEO): We feel good about our sales guidance and think there may be upside. We will be lapping weather-related issues and tariff-related supply constraints, and the reinvestment should provide a tailwind. However, we are cautious due to macroeconomic factors like higher gas prices and weak overall retail comps. Also, other retailers are doing the same thing, which may mute our impact. As an off-price retailer, we believe in discipline. We manage conservatively and then chase. If our guidance turns out to be conservative, we will be ready to chase the upside. Q: Results across retail in the second quarter have been pretty mixed. Does this make you a little more cautious today about the consumer than you were on last quarter's call? And where do you think the consumer is?A: Michael O'Sullivan (CEO): Yes, we are a little more cautious on the consumer. There are a few reasons: the spike in gas prices in March hasn't gone away, adding to concerns that households are feeling stretched; Q2 comp results across the sector have been underwhelming; and we only ran a 2% comp in Q2, which was below my hopes. However, despite this caution, we still feel good about our back-half sales guidance and potential upside. As an off-price retailer, we will manage our open-to-buy and inventory levels appropriately and be ready to chase if the trend is stronger. Q: Kristin, comp store inventory levels were higher than we expected exiting the quarter. Can you walk through what drove that increase and why you're comfortable with that higher inventory level?A: Kristin Wolfe (CFO): Our comp store inventory was up 11% at the end of Q2, which was a bit higher than typical. There were a few drivers. First, we exited with higher home inventory versus last year's purposeful pullback due to tariffs. Second, we pulled forward some back-to-school receipts into late July to ensure we were well positioned. Third, there were some tax-free shopping shifts that influenced inventory levels. Finally, we have selectively stepped up investments in strong-performing, fast-turning categories like beauty and accessories. Overall, we are comfortable with our inventory levels and how we exited the quarter. Q: Kristin, you finished the quarter at the midpoint of your comp guidance. Can you talk about how sales trended within the quarter and what you are seeing in August month-to-date?A: Kristin Wolfe (CFO): The trend in June was similar to May, and then it moderated in July, which was our toughest comparison. On a two-year stack basis, July was our strongest month in the quarter. For August, our quarter-to-date trend is within our 1% to 3% Q3 comp guidance range. August represents our toughest monthly compare in Q3, and comparisons ease in September and October. We see the largest sales opportunity in the latter months of Q3, particularly as we anniversary tariff-related assortment gaps from last year. Q: Michael, can you provide an update on the home business? What progress are you seeing? And how confident are you in the opportunity for home as the category becomes more important into the back half of the year?A: Michael O'Sullivan (CEO): We feel very good about the progress of our home business. A year ago, it was significantly impacted by tariffs, but we moved fast to remix our assortment. In late Q2, we started to lap that impact, and we are very happy with what we are seeing. In July, our home business outcomped the chain, and that trend has continued into August. This is important because home becomes a larger proportion of our business later in the year. We are seeing strength in home furnishings, kitchen essentials, and toys, and we are happy with our on-order and reserve positions in gifting, toys, and holiday categories. Q: Kristin, it sounds like you opened a record number of new stores over the last 12 months. Can you provide some more color on these openings?A: Kristin Wolfe (CFO): Over the last 12 months, we opened 178 gross new stores, the highest level in Burlington's history. This resulted in 149 net new stores, a 13% growth in store count. We are pleased with the quality and execution of these stores. They average about 27,000 gross square feet, are located in highly productive strip centers, and we estimate they will deliver over $7 million in annual sales with a payback period of less than two years. For full year 2026, we expect 135 gross store openings or about 115 net new stores. For the complete transcript of the earnings call, please refer to the full earnings call transcript.