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.
Second-Quarter Sales and Earnings
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.
Inventory, Stores and Capital Position
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.
Updated Full-Year and Fall Outlook
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.
Consumer, Home and Weather Considerations
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.
About Burlington Stores (NYSE:BURL)
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.
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