Burlington Stores, Inc. reported adjusted earnings, which excluded gains from tax refunds, rose 37.3 percent in the second quarter as gross margins grew 250 basis points and same-store sales improved 2 percent. Burlington raised its full-year guidance while vowing to use any proceeds from tariff refunds to reduce prices for customers.

Second-Quarter Highlights

  • Total sales increased 11 percent, on top of 10 percent last year
  • Comparable store sales increased 2 percent, on top of 5 percent last year
  • Net income was $184 million, and diluted EPS was $2.88
  • Excluding tariff refunds and certain expenses associated with bankruptcy acquired leases:
  • Adjusted EPS increased 38 percent to $2.37, on top of a 39 percent increase last year
  • Adjusted EBIT margin increased 100 basis points versus last year
  • Increasing full year adjusted EPS guidance to $11.77 to $11.97

Michael O’Sullivan, CEO, stated, “We are pleased with our strong financial performance in the second quarter, Total sales grew 11 percent on top of a strong 10 percent increase last year. Comp store sales increased 2 percent on top of 5 percent last year, for a solid 7 percent two-year stack. Excluding the impact of tariff refunds, Adjusted EPS grew 38 percent versus the second quarter of last year, on top of a 39 percent increase in the prior year. This was driven by a 100 basis point increase in our operating margin. 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.”

O’Sullivan continued, “During the second quarter, we received $55 million in tariff refunds. Rather than taking a one-time boost to earnings, we intend to fully invest these refunds back into the business in the back-half of the year, to deliver even sharper values to our shoppers. Over the last few years, the rising cost of living has made life difficult for many customers. At Burlington, we already offer great deals. We plan to use the refunds to make these deals even better.”

O’Sullivan continued, “Given our intent to invest the refunds in sharper values, we expect the direct impact of tariff refunds to be neutral to full year earnings. That said, we are raising guidance for the full year, passing through our underlying performance beat from Q2. Our updated Fiscal 2026 guidance is for comp growth of 3 percent to 4 percent and EPS growth of 16 percent to 18 percent.”

Fiscal 2026 Second Quarter Operating Results

  • Total sales increased 11 percent compared to the second quarter of Fiscal 2025 to $2,998 million, while comparable store sales increased 2 percent compared to the second quarter of Fiscal 2025.
  • Gross margin rate as a percentage of net sales was 46.2 percent vs. 43.7 percent for the second quarter of Fiscal 2025, an increase of 250 basis points. Excluding the benefit of $55 million in tariff refunds, merchandise margin expanded 70 basis points, while freight expense increased 10 basis points as a percentage of net sales.
  • Product sourcing costs, which are included in selling, general and administrative expenses (SG&A), were $226 million vs. $209 million in the second quarter of Fiscal 2025. Product sourcing costs include the costs of processing goods through our supply chain and buying costs.
  • SG&A was 34.0 percent as a percentage of net sales vs 35.2 percent in the second quarter of Fiscal 2025. Adjusted SG&A, excluding $4 million and $11 million of expenses, respectively, associated with bankruptcy acquired leases, was 26.2 percent as a percentage of net sales vs. 26.7 percent in the second quarter of Fiscal 2025.
  • The effective tax rate was 23.9 percent vs. 26.0 percent in the second quarter of Fiscal 2025. The adjusted effective tax rate was 23.6 percent vs. 26.0 percent in the second quarter of Fiscal 2025.
  • Net income was $184 million, or $2.88 per share vs. $94 million, or $1.47 per share for the second quarter of Fiscal 2025. Adjusted net income, excluding the $41 million after-tax benefit of tariff refunds, was $151 million, or $2.37 per share, vs. $110 million, or $1.72 per share for the second quarter of Fiscal 2025; this also excluded $3 million and $8 million, respectively, of expenses in each period, net of tax, associated with bankruptcy acquired leases.
  • Diluted weighted average shares outstanding amounted to 63.9 million during the quarter compared with 63.9 million during the second quarter of Fiscal 2025.
  • Adjusted EBITDA was $324 million vs. $257 million in the second quarter of Fiscal 2025, which excludes the $55 million benefit of tariff refunds, as well as $4 million and $11 million, respectively, of expenses associated with bankruptcy acquired leases, an increase of 130 basis points as a percentage of sales. Adjusted EBIT was $210 million vs. $162 million in the second quarter of Fiscal 2025, excluding the same amounts, an increase of 100 basis points as a percentage of sales.

Second-quarter guidance had called for total sales to increase in the range of 10 percent to 12 percent; comp gains in the range of 1 percent to 3 percent; and adjusted EPS in the range of $2.05 to $2.20,

First Six Months of Fiscal 2026 Results

Total sales increased 12 percent compared to the first six months of Fiscal 2025. Net income increased 53 percent compared to the same period in Fiscal 2025 to $299 million, or $4.67 per share vs. $3.05 per share in the prior period. Adjusted EBIT, excluding $12 million and $17 million, respectively, of expenses associated with bankruptcy acquired leases, as well as the $55 million benefit of tariff refunds, was $389 million vs. $314 million in the first six months of Fiscal 2025, an increase of 60 basis points as a percentage of sales. Adjusted Net Income, excluding $9 million and $12 million, respectively, of after-tax expenses associated with bankruptcy acquired leases, as well as the $41 million after-tax benefit of tariff refunds, was $286 million, or $4.46 per share, vs. $217 million, or $3.39 per share for the first six months of Fiscal 2025.

Inventory

Merchandise inventories were $1,541 million vs. $1,415 million at the end of the second quarter of Fiscal 2025, a 9 percent increase, driven by our 149 net new stores and a comparable store inventory increase of 11 percent compared to the second quarter of Fiscal 2025. Reserve inventory was 43 percent of total inventory at the end of the second quarter of Fiscal 2026 compared to 50 percent at the end of the second quarter of Fiscal 2025. Reserve inventory is largely composed of merchandise that is purchased opportunistically and will be sent to stores in future months or next season.

Liquidity and Debt

The company ended the second quarter of Fiscal 2026 with $1,646 million in liquidity, comprised of $704 million in unrestricted cash and $942 million in availability on its ABL facility.
The company ended the second quarter with $1,914 million in outstanding total debt, including $1,712 million on its Term Loan facility, $186 million in Convertible Notes, and no borrowings on its ABL facility.

Common Stock Repurchases

During the second quarter of Fiscal 2026, the company repurchased 270,279 shares of its common stock under its share repurchase program for $87 million. As of the end of the second quarter of Fiscal 2026, the company had $218 million remaining on its current share repurchase program authorization.

Outlook

Guidance now includes the benefit of $55 million in tariff refunds, which were recognized in the second quarter of fiscal 2026. In addition, guidance also includes the reinvestment of approximately 40 percent of such refunds in the third quarter and approximately 60 percent in the fourth quarter of fiscal 2026. Tariff refunds therefore have a neutral impact on full fiscal year 2026 earnings guidance.

Excluding the $55 million planned tariff refund reinvestment, Burlington said its underlying Fall guidance assumptions for EBIT margin improvement and earnings growth are unchanged versus prior guidance, estimated EBIT margin improvement of 10 to 30 basis points and EPS growth of 7 percent to 10 percent. As we noted earlier, we believe it is important to pass on those savings to our customers and drive even stronger value offerings.

For Fiscal Year 2026 (the 52-weeks ending January 30, 2027), the company now expects:

  • Total sales to increase in the range of 10 percent to 11 percent on top of the 9 percent increase during Fiscal 2025; this assumes comparable store sales will increase in the range of 3 percent to 4 percent, on top of the 2 percent increase during Fiscal 2025;
  • Capital expenditures, net of landlord allowances, to be approximately $875 million. This excludes any potential costs related to the relocation of our corporate headquarters, which is currently being evaluated. The timing and amount of such relocation expenditures are still uncertain;
  • To open approximately 115 net new stores;
  • Depreciation and amortization to be approximately $460 million;
  • Adjusted EBIT margin to increase in the range of 20 to 40 basis points versus Fiscal 2025; excluding $16 million of anticipated expenses associated with bankruptcy acquired leases in Fiscal 2026 and $35 million in Fiscal 2025;
  • Net interest expense to be approximately $55 million;
  • An adjusted effective tax rate of approximately 25 percent; and
  • Adjusted EPS in the range of $11.77 to $11.97, as compared to $10.17 of adjusted EPS last year; excluding $12 million, net of tax, of anticipated expenses associated with bankruptcy-acquired leases in Fiscal 2026 and $26 million in Fiscal 2025. This assumes a fully diluted share count of approximately 64 million shares.

Previously, guidance called for adjusted EPS in the range of $11.45 to $11.80, total sales to increase in the range of 9 percent to 11 percent, and comparable store sales to increase in the range of 2 percent to 4 percent.

For the third quarter of Fiscal 2026 (the 13-weeks ending October 31, 2026), the company expects:

  • Total sales to increase in the range of 9 percent to 11 percent; this assumes comparable store sales will increase in the range of 1 percent to 3 percent versus the third quarter of Fiscal 2025;
  • Adjusted EBIT margin to decrease 80 to 60 basis points versus the third quarter of Fiscal 2025; excluding approximately $2 million of anticipated expenses associated with bankruptcy acquired leases in the third quarter of Fiscal 2026 and $11 million in the third quarter of Fiscal 2025;
  • An adjusted Effective Tax Rate of approximately 26 percent; and
  • Adjusted EPS in the range of $1.60 to $1.70, as compared to $1.80 in adjusted EPS last year; excluding $2 million, net of tax, of anticipated expenses associated with bankruptcy acquired leases in the third quarter of Fiscal 2026 and $8 million in the third quarter of Fiscal 2025.

Burlington Stores operated 1,287 stores as of the end of the second quarter of Fiscal 2026 in 47 states, Washington D.C. and Puerto Rico, principally under the name Burlington Stores.

Image courtesy Burlington Stores