With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

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The companies on this annual list make a conscious effort to be supportive, inclusive workplaces.

2025 Best Large Workplaces for Women_Burlington Stores, Inc._US1__68a71ffe383bc91cadd06a8c_1

Employees say:"Burlington truly is a caring company that offers everyone an opportunity to grow and flourish and reach their full potential within the organization. Burlington actively invests in the growth and advancement of its team members. I am proud to work for a company who considers the well-being of their associates and provides such a supporting environment for personal and professional development."

100 Best Large Workplaces for Women

See which workplaces made this year's list.

2025_GPTW_Retail_Large_Burlington Stores, Inc._US1__685d56f6023fa8a02634236e_1

Best Large Workplaces in Retail

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

GPTW Retail Large 2024-Burlington Stores, Inc._US1__20240712204823_6

Employees say:"All ideas are valued and heard. Senior leadership exudes the company's culture and encourages us to step out of our comfort zone. I have autonomy to make the decisions for my team and to take appropriate risks. My senior leadership truly listens and respects my opinions. We don't always agree, however I have never felt ashamed when redirected or my ideas were not implemented."

Industries included in the sector are automotive retail, general merchandisers, internet retail, and specialty retail.

Fortune Sector Leaders: Retailing

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

GPTW 2023 Best Workplaces Retail Large Burlington Stores, Inc_5

Employees say: 
 
"All ideas are valued and heard. Senior leadership exudes the company's culture and encourages us to step out of our comfort zone. I have autonomy to make the decisions for my team and to take appropriate risks. My senior leadership truly listens to my methodology and respects my opinions."

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

Great Places to Work in Retail Large- 2022-Burlington Stores, Inc._1400608-4

Employees say: 
 
“This is truly a diverse caring company. The organization is super flexible with work life and personal life and will help out in any they can to help you get the job done if you need support. Everyone that I've had the pleasure to work with are always smiling, they are kind, willing to help resolve questions or concerns. I feel very comfortable going to other internal departments to seek help when it's needed or just to get to know them and learn what they do it helps build strong relationships with my peers. It feels good when I walk down the hallway and I greet my peers and they greet back with a smile. I've learned so much working at Burlington and I love what I do. I look forward to many more years with them!”

This year’s Fortune 500 marks the 68th running of the list.

Our 2021 list of the 100 best companies to work for, as ranked by their employees. See which companies made the list.

100 Best Companies 2021-70-Burlington Stores, Inc.

While off-price retailers like Burlington Stores are typically among the fastest-growing chains, not having e-commerce really dinged the company during the early weeks of the pandemic when stores were largely closed. But Burlington still paid employees who got sick from COVID up to two weeks’ pay while they quarantined. As stores reopened in early summer, Burlington brought back its furloughed employees and restored pay to initial levels.

Fortune 100 Best Companies to Work For

These companies foster supportive cultures, where employees find opportunities for growth with help from their colleagues.

Best Large Workplaces New York 2021-Burlington-Stores

Employees say: 
 
“The people here were all super nice and welcoming when I first started. At Burlington, the managers are super nice and see mistakes as learning opportunities and as a part of doing business.”

Best Large Workplaces in New York

See which retailers made this year's list.

Best-Workplaces-Retail-2021-Burlington-Stores

Employees say: 
 
“This is a very welcoming company. They don't judge people and their value based on "titles" and there are many opportunities to improve and grow. Our associates are very friendly, fun, welcoming and diverse making Burlington such a fun place to work.”

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-471-Burlington Stores

2020 was a brutal year for retail and Burlington Stores was no exception. The company reported a loss of $216.5 million in net income for 2020 and a 21% decrease in total sales compared to 2019. Yet, as bargain hunters emerge from their pandemic-induced hibernation, the New Jersey-based off-price retailer could benefit; in the first quarter of 2021, the company reported a 35% year-over-year sales increase.

Best-Workplaces-Retail-2020-Burlington

Employees say: 
 
"Very impressed with our opening after COVID. Not only was management ready to deal with the unexpected possibilities of re-opening, but they were well organized for the additional responsibilities of our 50% off sale."

The companies on this year's list make a conscious effort to be supportive, inclusive workplaces.

Best Workplaces Women 2020-Burlington Stores, Inc

Employees say: 
 
“There are a lot of women in management. Makes me feel like they take the role of women in the workplace seriously.”

This year's Fortune 500 marks the 66th running of the list.

F500-2020-424-Burlington-Stores

Discount apparel retailer Burlington Stores has recently tacked against prevailing trends in its industry. It opened 76 new physical locations in 2019, and it announced in March 2020 that it would wind down its ecommerce operations.

From groceries to apparel to home decor, see which companies made the list.

Burlington Stores-Best Workplaces in Retail 2019

Employees say: 
“There is a smile on most associates' faces and the offices in general have a upbeat nature to it. We are given the opportunity to grow and it shows through Burlington's efforts to engage and develop employees.”

At the Best Workplaces for Women, company leaders foster mentorship and career growth.

Burlington Stores-Best Large Workplaces for Women 2019

An employee supervisor says: 
 
"They hire people because their potential as an employee - they don't care what preference you have in your personal life, or gender, or nationality. They recognize you as a good employee and encourage you to keep growing with the company." 
 
Read the Great Place to Work review .

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

Best Large Workplaces for Women 2018_Burlington Stores

Employees say: 
 
&nbsp; 
 
"A wonder management team of women who make it fun and engaging for all the employees." 
 
&nbsp; 
 
Read the Great Place to Work review .

This year's Fortune 500 marks the 63rd running of the list.

Fortune’s annual list of the 100 Best Workplaces for Women highlights companies with generous benefits, flexible schedules, and an emphasis on balancing work and life. 

Best Workplaces for WomenBurlington Stores, Inc.

Employees say: "We are a retailer that has a strong focus on being a caring company and serving a purpose in the community. It's great to be able to provide our customers with great values, but it's especially heartwarming to be part of something bigger and make a difference in our local communities nationwide." 
 
&nbsp; 
 
"Upper level management cares and interacts with all employees. Your voice counts. " Read the .

This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Burlington Stores, which operates the Burlington Coat Factory chain, is an off-price retailer of high-quality branded merchandise at deep discounts, typically selling items for 60% off department store prices. Its first store opened in Burlington, N.J., in 1972. It now has around 1,100 stores in 46 states, and its merchandise assortment has expanded to include women’s ready-to-wear apparel, menswear, youth apparel, beauty products, and more. Like rival businesses including Ross Stores and TJX, Burlington not only sells close-out items that went unsold at department stores; it also offers merchandise made by top brands, which sell them directly to Burlington Stores.

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Burlington Stores (BURL): Company Profile, Stock Price, News, Rankings

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Burlington Stores

burlington stores

Hello, ladies and gentlemen, and welcome to the Burlington Stores Earnings Webcast. Will be starting shortly. Thank you so much. Hello, everyone. My name is Ellie.

I'm going to be your operator, and welcome to the Burlington Stores Inc. Second Quarter twenty twenty five Earnings Conference and Webcast Call. Please note that this call is being recorded. After the speakers' prepared remarks, there will be a question and answer session. Thank you.

I'd now like to hand the call over to David Glick, Group Senior Vice President, Treasurer and Investor Relations. You may now go ahead please.

Thank you, operator and good morning everyone. We appreciate everyone's participation in today's conference call to discuss Burlington's fiscal twenty twenty five second quarter operating results. Our presenters today are Michael O'Sullivan, our Chief Executive Officer and Kristin Wolff, 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 expressed permission. A replay of the call will be available until 09/04/2025.

We take no responsibility for inaccuracies that may appear in transcripts of this call by third parties. Our remarks and the Q and 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 ks 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 profitability metrics discussed in this call exclude costs associated with bankruptcy acquired leases. These pretax costs amounted to $11,000,000 and $3,000,000 respectively, during the 2025 and 2024 and $17,000,000 and $9,000,000 respectively for the 2025 and 2024. Now here is Michael.

Thank you, David. Good morning, everyone. Thank you for joining us. I would like to cover three topics this morning. Firstly, I will briefly review our second quarter results.

Then I will discuss our third quarter and updated full year guidance. And lastly, we believe that our exceptional performance in the second quarter can be directly attributed to Burlington two point zero initiatives that we have pursued over the last few years. So I would like to spend some time this morning providing additional color on some of these initiatives. Okay, let's talk about our second quarter results. We are pleased with our very strong sales performance in the quarter.

Total sales grew 10% on top of 13% total sales growth last year. These double digit growth rates demonstrate the power of our business to consistently take market share even in an uncertain retail environment. In Q2, these market share gains were driven by new store openings and by very strong comp store sales growth. Comp store sales increased 5% on top of 5% comp sales growth last year. The trend in Q2 started out slowly with weather in the Midwest and Northeast in May being cooler than last year, but then our trend picked up in June and July as the weather normalized.

We are also very pleased with our strong earnings performance in Q2. Our operating margin expanded 120 basis points versus last year. This was a very high quality earnings beat, driven by stronger merchandise margins and expense efficiencies across the P and L. Our EPS of $1.72 was $0.42 above the high end of our guidance range. Let me move on to the outlook for the rest of the year.

Despite our very strong performance in the second quarter, we remain concerned about the external outlook for the back half. We are maintaining our comp guidance of 0% to 2% for Q3 and Q4. Let me comment on Q3 specifically. As we have discussed in the past, our strong heritage in outerwear means that we are more sensitive than most retailers to seasonal weather variations in the third quarter. If temperatures in late September through October turn out to be warmer or cooler than last year, this can have a big impact on our trend.

We have terrific outerwear buys in reserve inventory. So we are well positioned to chase a stronger trend if that happens. We will manage the business cautiously and see how the trend develops. I am not planning to comment in detail on the fourth quarter at this point. We'll have more to say in November.

But it is worth calling out that in Q4, we will be up against 6% comp sales growth from the fourth quarter of last year. So the upside in Q4 is probably limited. Moving on to earnings. We are raising our full year guidance and passing along most of the Q2 earnings beat. We are not flowing through the entire earnings beat.

This is because of incremental tariff pressure in the back half. Tariffs for most countries are higher now than when we last discussed earnings guidance on our Q1 call in May. Our updated full year guidance assumes that we will be able to offset most, but not all of this incremental tariff pressure. I would like to move on now and talk about the direct link that we see between our very strong Q2 sales and earnings results and the key Burlington two point zero initiatives that we have pursued over the last few years. Many of these initiatives are in the early stages of their potential impact.

We are excited because we expect this impact to grow over time and to drive our longer term performance. I will focus on three items, Merchandising two point zero, Stores two point zero and the impact of recently opened stores once they join the comp base. I will start with Merchandising two point zero. As you know, Merchandising two point zero is our collective name for the new systems, processes and tools that we have developed and rolled out to enable our buyers and planners to more effectively and rapidly respond to changes in the external environment and the sales trend. The last several months and the uncertainty created by tariffs have provided a showcase for the power of these capabilities.

In the weeks leading up to the tariff announcements in early April, we began to make multiple detailed revisions to our assortment plans for Q2 and the fall season, pivoting away from categories with the greatest tariff exposure to those with less tariff impact and with stronger, more reliable supply. These forecast provisions and scenarios also involve remixing and remodeling our margin plans to find offsets to the impact of tariffs. It seems like a long time ago now, but in April and early May, the tariff on imports from China was 145%. This rate represented an effective embargo on Chinese imports, and it created an interruption or an air pocket, if you like, to the flow of receipts across the retail industry. There are some merchandise categories, for example, decorative bedding, cookware and toys, where there are very few alternative sources of supply outside of China.

In these merchandise categories, the interruption in imports in April and May impacted inventory levels across the retail industry in the second quarter. These categories were a drag on the sales trend in our Home business during the quarter. But what I am really excited about is that despite this headwind, we were able to deliver 5% comp growth across the store. Our buyers and planners deserve huge credit. They did an amazing job rapidly responding and pivoting into other businesses.

The key point though is that merchandising two point zero gave them the visibility and the tools to do this. Let me move on to Stores two point zero. Historically, the customer perception of Burlington was a big, old, difficult to shop stores, consistent with our Coke factory heritage. But that is not who we are anymore. Over the last few years, you have heard us talk a lot about the actions we are taking to drive incredible value.

We've talked less about stores, but in parallel, we've also been working very hard to improve the shopping experience. This starts with the standards that we set for ourselves, our store managers, and our field teams. It also involves new systems, processes, tools, and reports to drive consistency and efficiency. In the past year, we have seen the impact of these programs really start to take off. Our customer service scores are running at historical all time highs, and we have seen improvements across all major operational metrics.

Our store teams have really embraced these changes and our associate engagement levels have risen sharply. In addition, as I mentioned during our call in May, we have reimagined and redesigned our store layout, signage and fixturing. The objective of this redesign is to make our stores feel new and more exciting, easier to shop, more fun, more off price and more Burlington two point zero. At this point, we have retrofitted about half of the chain to this new design. Customer feedback has been very positive, and we are seeing a nice sales lift in these stores.

This lift helped drive our 5% comp growth in the second quarter. There is more to come as we retrofit the rest of the chain in 2026. Okay. Let me move on to new stores. In fact, I want to talk specifically about the impact of recently opened stores once they turn comp.

Our new stores join our comp base 15 after opening. As we've discussed in the past, we expect new stores to ramp up over time and to comp ahead of the chain for their first few years. That is indeed what is happening. When we analyze comp stores that were opened over the last several years, we see very strong comp sales growth rates, well ahead of our original expectations. Again, these recent new store cohorts helped drive our very strong 5% comp sales growth in the second quarter.

This is very exciting because as we look ahead over the next few years, the mix of younger stores in our comp base is going to grow. So we anticipate that the impact of this comp tailwind will increase over time. Okay. At this point, I would like to turn the call over to Kristen. Kristin?

Thank you, Michael, and good morning, everyone. I plan to cover a couple of topics this morning. I will start with some additional color on our second quarter performance. Then I will share details on our updated guidance. Starting with the second quarter, total sales grew 10%, while comp store sales increased 5%, well above the high end of our guidance range.

Traffic was flattish in the quarter. Our comp was driven by a higher transaction size. Our average unit retail was up mid single digits versus last year. The gross margin rate for the second quarter was 43.7%, an increase of 90 basis points versus last year. This was driven by a 60 basis point increase in merchandise margin and a 30 basis point decrease in freight expense.

On merchandise margin, the 60 basis point expansion was driven by improvement in shortage and lower markdowns, which more than offset the lower markup due to tariffs. While there was significant pressure on markup from tariffs in the quarter, we took several effective offsetting actions to reduce the impact. The net result of these actions was that our Q2 markup was only modestly lower than last year. The second quarter product sourcing costs were $2.00 $9,000,000 versus $191,000,000 in the 2024. Product sourcing costs were flat as a percentage of sales compared to last year.

Adjusted SG and A cost in Q2 decreased 30 basis points versus last year, driven by savings initiatives, primarily in stores and leverage on higher comp sales. Q2 adjusted EBIT margin was 6%, 120 basis points higher than last year, which was well above our guidance range of down 30 basis points to flat. Our adjusted earnings per share in Q2 was 1.72 which came in significantly above our guidance range. This represents a 39% increase versus the prior year. At the end of the quarter, comparable store inventories were down 8% versus the end of the second quarter twenty twenty four.

Our reserve inventory was 50% of our total inventory versus 41% of our inventory last year. In dollar terms, our reserve inventory was up 43% compared to last year, reflecting the great deals we were able to make to get ahead of tariffs. We are very pleased with the quality of the merchandise and the values and brands that we have in reserve. As Michael said earlier, we are well positioned to chase if the sales trend in Q3 turns out to be stronger than guidance. During the quarter, we raised $500,000,000 in additional term loan debt, primarily to fund the purchase of our highly automated West Coast distribution center.

Additionally, we upsized and extended our ABL facility in Q2, which is now a $1,000,000,000 line that matures in July 2030. We ended the quarter with approximately 1,700,000,000 in total liquidity, which consisted of $748,000,000 in cash and $946,000,000 in availability on our ABL with no outstanding borrowings at the end of the quarter on the ABL. During the quarter, we repurchased $26,000,000 in common stock. And at the end of Q2, we had $632,000,000 remaining on our share repurchase authorization. In the second quarter, we opened 23 net new stores, bringing our store count at the end of the quarter to eleven thirty eight stores.

This includes 30 new store openings, four relocations and three closings. We continue to expect to open 100 net new stores in fiscal twenty twenty five. I will now move on to discuss our outlook for the full fiscal year as well as for the third quarter and 2025. Based on our strong performance in the second quarter, we are increasing our full year fiscal twenty twenty five guidance for comp sales, total sales, adjusted EBIT margin and adjusted earnings per share as follows: comparable store sales are now expected to increase 1% to 2%, with total sales to increase 7% to 8% for the full year 2025. This revised full year guidance factors in our year to date comp store sales as well as our guidance for comparable store sales to increase zero to 2% for the balance of fiscal twenty twenty five.

We now expect our full year adjusted EBIT margins to increase by 20 to 40 basis points. This is up from our most recent guidance for an increase of flat to 30 basis points. This updated margin outlook now translates to a full year 2025 adjusted earnings per share range of $9.19 to $9.59 up from our original guidance of $8.7 to $9.3 For the third quarter, we expect comparable store sales growth of flat to 2% and a total sales increase of 5% to 7%. This would result in operating margin of down 20 basis points to flat versus the 2024. This translates to earnings per share guidance for the third quarter of $1.5 to $1.6 Our third quarter guidance excludes approximately $10,000,000 of expenses associated with bankruptcy acquired leases.

For the 2025, we expect comparable store sales growth of flat to 2% and total sales to increase 7% to nine percent EBIT margins to range from a decrease of 10 basis points to an increase of 30 basis points and adjusted earnings per share in the range of $4.3 to $4.6 Our fourth quarter guidance excludes approximately $7,000,000 of expenses associated with bankruptcy acquired leases. I will now turn the call back to Michael.

Thank you, Kristen. Before I turn the call over to the operator for your questions, I would like to emphasize three key points from this morning's discussion. Firstly, we are very pleased with our exceptional performance in Q2. These very strong results demonstrate the power of our business to profitably gain market share even in an uncertain retail environment. Secondly, based on our very strong Q2 performance, we are raising our full year guidance.

But the external outlook remains uncertain and we see risks in the back half. We are managing our business cautiously, but we are ready to chase sales trend if it turns out to be stronger. Thirdly, we believe that our exceptional performance in Q2 can be attributed to Burlington two point zero initiatives that we have pursued over the last few years. We are excited because the impact of these initiatives is still in the early stages, and we anticipate that it will grow over time. Now I would like to turn the call over for your questions.

Your first question comes from the line of Matthew Boss of JPMorgan. Your line is now open.

So Michael on your five comp in the second quarter, which is a 10 on a two year stack, how best to think about your back half guide, which implies a material drop off from there? Should we think of this as your usual playbook to plan conservatively in Chase? Or are you seeing something that's causing you concern about sales in the back half of the year?

Well, good morning, Matt. Thank you for the question. The direct answer to your question is this is just our standard playbook. We are planning and managing our business cautiously and we are ready to chase a stronger trend. I should add that we are especially confident in our ability to do this right now because merchandise supply is very strong.

And we also have some great deals packed away in reserve inventory. And add to that, we've just demonstrated in the second quarter that we are very good flexing up and chasing a stronger sales trend. So with all that, it makes sense to stick with our standard playbook and we're very confident in our ability to execute it. With that said though, I want to be careful in answering your question. I don't want to understate the external risks.

We've just reported an extraordinarily strong Q2. But as you know in our business, you can't just extrapolate from that. External headwinds can emerge in individual quarters to throw off the trend. As I mentioned in the remarks, the most obvious risk is weather. Until recently, coats were literally our middle name.

I love this heritage when September and October are colder than last year, but not so much when they are unseasonably warm. Now on a multiyear basis, the weather averages out. But, in an individual quarter, in an individual year, it matters. Now of course, the risks in the back half are not just limited to weather. There are plenty of macroeconomic and other external variables that can have an impact on retail sales, higher unemployment, rising inflation, changes in consumer outlook.

For the back half of this year, all of those risks are real. At a high level, I would say there are many experts and analysts who are predicting that tariffs are going to have a significant and potentially, negative effect on the economy. Those effects have not really happened yet, and that they're highly unpredictable. The good news for us is that as an off price retailer, we don't have to take a position on these risks. We don't have to predict the future.

What we have to do is manage our business to be nimble and flexible so we can react no matter what happens. That is our standard playbook. It's what our standard playbook is designed to do. So at the risk of sounding like a broken record, we will manage our business cautiously and aggressively chase the trend.

Great. And then a follow-up for Kristen to stay on guidance. So it looks like you passed most of your second quarter upside through to the updated annual guide. Could you walk us through the puts and takes on your new fall guidance, impact of tariffs, offsets you have in place? And just any color on the difference between the third and fourth quarter operating margin year over year?

Good morning, Matt. It's a very good question. Let me split the answer into two parts. First on tariffs, as Michael mentioned in the prepared remarks, we do have incremental tariff risk in the fall. Tariffs for many countries are at a higher rate now than they were when we last issued guidance back in May.

And our updated guidance assumes that we will offset most of, but not all of this additional tariff pressure. Essentially, our fall guidance reflects our best estimation of the net impacts of tariffs. So tariffs put significant pressure on markup, but we've worked very hard to identify offsetting actions. These offsets include continuously working and negotiating with our vendor partners on cost, adjusting and remixing our assortment, selectively raising retails, driving a faster inventory turn to drive lower markdowns, accelerating planned savings initiatives and then just aggressively going after incremental expense savings across the P and L. On the second part of your question, I can provide some additional color on the specific quarters.

For the third quarter, we are assuming gross margin rate to be lower year over year due to the impact of tariffs on merch margin. This should more than offset modest year on year favorability in freight. In product sourcing costs, we are expecting supply chain savings initiatives to drive leverage. And in SG and A, we expect that our savings initiatives will enable us to show some modest leverage on the high end of our flat to 2% comp outlook. And finally, for Q4, the storyline is similar, but there are a couple of line items that are more pronounced.

We're expecting more pressure on merch margin from tariffs in the fourth quarter. And offsetting that pressure, we do expect supply chain savings initiatives to drive leverage and product sourcing costs and greater SG and A leverage due to savings initiatives, but also the lapping of last year's higher incentive comp accrual in the 2024. So because of that, we expected EBIT expansion to be somewhat higher in Q4 relative to Q3.

Question comes from the line of Ike Boruchow of Wells Fargo. Your line is now open.

Hey, good morning, Michael, Chris and David. I think just first question, bigger picture for me, is about pricing. At an industry level, maybe Michael or Chris said, I'm curious, what have you guys seen in terms of competitors taking up AURs? What are you expecting in the back half? And I guess, what's the potential to raise prices in the fall as a way to offset some of this tariff pressure you're talking about?

Good morning, Ike. Thank you for the question. On the first part of your question, industry level pricing, The answer is yes. We are hearing and in some cases, we are seeing that competitors are taking up retail prices. So far though, I would say that those price increases have been quite selective and quite restrained.

Now I suspect there are a few reasons for that. Part of it may just be the time lag between imports arriving in the country and those goods showing up in stores. But also my sense is that wholesalers and retailers have been reluctant to make decisions on raising prices until they know what the final tariff rates are going to be. Now it does feel like, there is more clarity on this now than there was a couple of months ago. So it wouldn't be surprising if retail prices were to go up across the industry in the back half of the year.

Of course, we know that our customer is very, very price sensitive. We saw what happened with their discretionary spending levels when the cost of living increased in 2022. It was not good for us. So the prospect of higher inflation, especially if it spreads to non discretionary categories like groceries makes us very nervous. And it's another reason to be cautious on the rest of the year.

I think that's a good segue to the second part of your question. How are we thinking about the potential to raise our own retails? Of course, as a business, we need to deal with economic reality. But as a retailer that is focused on delivering value, we also need to tread very, very carefully. The important thing I think to understand is that in our business as an off price retailer, there is a broader competitive reference set.

Our strategy is to offer significantly lower prices than traditional retailers. If those retailers raise prices, then this could provide some relief for us. It could potentially drive additional traffic to our stores or it could take some pressure off our own retails. So the answer to your question is, I think we're going to have to wait and see what impact tariffs have on price levels across the retail industry and then make a decision about our own prices.

Got it. Thanks, Michael. And then maybe Kristen to follow-up. On the 1Q call in May, I think you described some expense timing shifts into 2Q, but I think you guided margin flat, you did really well. I think it was up 120 bps. Just could you walk us through the drivers of the Q2 margin, what you saw in the quarter and basically the drivers of upside?

Great. Yes. Morning, Ike. Thanks for the question. We're really pleased with the margin performance in the quarter.

The drivers of that expansion were really broad based. And I think the team did a really nice job executing and tightly managing costs in the quarter. So let me walk through the key drivers. On the top line, the 5% comp, which was 300 basis points above the high end of the guide, this helped drive a faster inventory turn, which drove lower markdowns in the quarter. And secondly, we took physical inventory in Q2, and the results were better than we had planned. This meaningfully contributed to the merch margin increase in the quarter. So lower shortage, combined with lower markdowns from faster turns, more than offset markup pressure from tariffs in the quarter to drive the 60 basis points of merch margin expansion. And as I mentioned in the prepared remarks, markup was only modestly lower than last year because we took several effective actions to reduce the impact of tariffs. So additionally, in gross margin, freight levered 30 basis points.

This was really due to savings initiatives in transportation as well as operational efficiencies helped by a higher AUR. Product sourcing costs were slightly better than what we had embedded in our guidance due to savings initiatives in supply chain. And finally, SG and A. SG and A levered 30 basis points despite those Q1 expense timing shifts you referenced. The drivers of the SG and A were twofold: first, leverage on the higher comp sales and then two, operational savings initiatives we put in place to offset some of the tariff pressures.

So taking all these line items together, it drove 120 basis points of EBIT expansion in the quarter.

Our next question comes from the line of Lorraine Hutchinson of Bank of America. Your line is now open.

Thank you. Good morning. Michael, I'm wondering what trends you're seeing with different demographic groups. The second quarter was very strong, but is there any additional color you can share about lower income consumers, Hispanic customers or any other segments that stand out in the data?

Sure. Well, good morning Lorraine. Thank you for the question. Overall, I would describe our comp performance in Q2 as broad based. Now as usual, in Q2, we monitored and we analyzed the sales trend of our stores based on the demographics of their local trade area.

And between the first quarter and the second quarter, we saw an improvement in trend in all demographic trade areas. Now let me talk specifically about the lower income customer. The lower income customer as you know is especially important to us. When we look at stores in lower income trade areas, they continue to perform very well, with comp sales growth just above the chain average. Now lower income stores have performed well for us for the last few years and that strength, is continuing.

Let me move on to the Hispanic customer. Hispanic customer also, as you know, very important to us. My answer here is a little more nuanced. When you look at stores in high Hispanic trade areas, to make the data meaningful, it's important to pull out Puerto Rico. Our Puerto Rico stores have been performing very, very strongly.

So they kind of distort the number a little bit. It also makes sense to pull out our stores on the Southern border. In contrast, those are high volume stores, but given the issues at the border, they've been comping below the chain this year. So what you're left with is still a large group of stores that are in high Hispanic trade areas but exclude Puerto Rico and the Southern border. And the bottom line is in Q2, the trend in those stores was also slightly above the chain.

Now the data I've just described, I think is very encouraging. I know that investors have been concerned understandably about lower income shoppers and about Hispanic shoppers. Those shoppers are very important to us and they're very sensitive to economic headwinds such as inflation. But based on our second quarter data, we are not seeing any issues at this point.

Thank you. And then how would you characterize off price availability overall? Do you have any concerns about merchandise availability in second half? And what are you seeing from the vendors in terms of tariff related cost pressure? Does that pressure create risk to merchandise supply or to merchandise margin in the second half?

Yes. It's good question, Lorraine. I'll start with availability, with merchandise availability. Overall, merchandise availability in the off price channel is very strong right now across the store. As I mentioned in the prepared remarks, there were a few specific categories in home where inventory levels across the industry dipped in Q2.

And that was driven by tariff disruption back in April and May. But the situation even in those categories has caught up and is largely back to normal now. More broadly, across the store, I would say that we are seeing plenty of merchandise. And we've been able to take advantage of some great deals that we've packed away in reserve. And, most of that reserve inventory by the way was bought at pre tariff pricing.

So we're looking forward to flowing those great values to our stores in the back half. Leaving aside reserve, there's strong availability across the board. As evidence of that actually, I would point to the fact that we were able to chase from our guidance range of 0% to 2% comp in Q2 to an actual comp of 5%. We had no problem, finding great deals to fuel that trend. Let me move on to the second part of your question, the cost pressure from tariffs.

I know we just crushed margin guidance and earnings expectations in Q2. But I want to emphasize that the cost pressure from tariffs is real. We were only able to drive earnings in Q2 because we rapidly and aggressively took actions to offset that cost pressure. Now as Kristian described earlier, those offsetting actions included a number of things working closely and negotiating with our vendor partners on cost, adjusting and remixing our assortment, selectively raising retails, driving faster turns to reduce markdowns, accelerating planned savings initiatives and aggressively going after other expense savings across the P and L. As you can see in the numbers, that approach worked very well for us in Q2.

Burlington Stores (BURL) Q2 2026 Earnings Call Transcript

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