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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."

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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.

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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.

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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.”

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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.

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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 .

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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

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Hello, everyone, and welcome to Burlington Stores Inc. Fourth Quarter twenty twenty four Earnings 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, Investor Relations and Treasurer. You may now begin.

Thank you, operator, and good morning, everyone. We appreciate everyone's participation in today's conference call to discuss Burlington's fiscal twenty twenty four fourth quarter operating results. Our presenters today are Michael O'Sullivan, our Chief Executive Officer and Kristin Wolf, 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 03/13/2025.

We take no responsibility for inaccuracies that may appear in transcripts of this call by third parties. The 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 K and in 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 discussed today to GAAP measures are included in today's press release. As a reminder, as indicated in this morning's press release, the financial results we discussed today are on a thirteen week versus thirteen week basis for the fiscal fourth quarter and on a fifty two week versus fifty two week basis for the full fiscal year of 2024. Additionally, all profitability metrics discussed in this call exclude costs associated with bankruptcy acquired leases. These pretax costs amounted to $5,000,000 and $6,000,000 during the fiscal fourth quarters of twenty twenty four and 2023 respectively and $16,000,000 and $18,000,000 for the full fiscal years 2024 and 2023 respectively.

Thank you, David. Good morning, everyone, and thank you for joining us. I would like to cover three topics this morning. Firstly, I will discuss our fourth quarter results. Secondly, I will comment on our full year 2024 results, and I will use these results to provide an update on the progress that we are making towards our longer range financial goals.

Finally, I will talk about guidance for the year ahead. Then, Kristin will provide additional financial details. Okay, let's start with our Q4 results. Comparable store sales for the fourth quarter increased 6%. This was well above our guidance of 0% to 2%.

I would like to double click on Q4 comp sales and provide additional color on two key factors that contributed to this strong performance. Firstly, in early twenty twenty four, we embarked on a strategy to elevate our assortment. In some categories and at some price points, this involved a higher mix of well known national brands. For sure, this higher mix was important, but this strategy was not just about brands. In other categories or price points, we elevated the assortment in other ways, perhaps through higher quality or a higher weight of fabric or more up to date fashion or more embellishment.

Depending on the category or price point, these are all characteristics that the customer uses to assess value. Another very important aspect of this strategy was to identify items to remove from the assortment. One of our senior merchants uses the phrase, eliminate to elevate. This means pruning items from the assortment that do not deserve to be there because the quality or the fashion or the value is just not good enough. We want every hanger to count.

It is also very important to make the point that this elevation strategy was pursued within the framework of a good better best assortment. We went after opportunities to elevate the assortment at all price points, paying close attention to the Need a Deal as well as the Want a Deal shopper. We drove this elevation strategy throughout last year, but it was most evident and powerful in the fourth quarter. I interpret our 6% comp sales growth in Q4 as just the customer telling us that they approved of this strategy and really loved our assortment. The second driver of our strong Q4 performance was that we were very nimble, flexible and responsive to trend in Q4 and throughout the fall season.

Let me illustrate this by talking about the quarterly trend last year. In the summer, as we exited Q2, we were flying. We reported 5% comp growth for the quarter and the trend continued to accelerate through back to school. Then it dropped off significantly due to unseasonably warm weather from mid September onwards. These warmer temperatures hurt our sales of outerwear and at that particular time of year, outerwear is a critical business for us.

The warm weather and the weak trend persisted until mid November. And then our business took off as the customer began to shop for holiday. I cannot overstate how pleased I am with how well we reacted to this volatility in sales. We chased the trend in back to school categories in the summer, then pulled back very hard on cold weather businesses from mid September onwards, and then chased holiday businesses in late November and December. This nimble and rapid execution is the essence of off price.

It is an excellent illustration of what we are trying to achieve with Burlington two point zero. We know that we will never be able to predict the future, but what we can do using the processes, tools and capabilities that we have built is to react quickly and effectively to whatever happens with external traffic and the sales trend. I'm going to move on now and talk about our results for 2024 as a whole. I would like to discuss these results within the overall context of our longer range financial objectives. Investors will recall that in November of twenty twenty three, we shared high level financial goals for our business through 2028.

We expect to grow total sales to approximately $16,000,000,000 and to increase our operating profit to about $1,600,000,000 during this period. We are only one year into this five year program, but we are very pleased and encouraged by our initial progress towards these goals. The headline is that in 2024, we achieved very strong total sales growth of 11% and we expanded our operating margin by 100 basis points. As you will recall, there are three major drivers of our long range model: new store openings, comp store sales growth and operating margin expansion. I will now review the progress that we made on each of these major drivers in 2024.

Let's start with new store openings. Our long range model projects an average of 100 net new stores each year plus a couple of dozen relocations of older oversized stores. In 2024, we opened 101 net new stores. But let me dissect that number a little further. Of course, there is no such thing as a net new store.

In 2024, we actually opened 147 new stores. 31 of these were relocations and we also shuttered 15 mostly older and less productive locations. Mathematically, this equals 101 net new stores. But my point is that the full impact on the chain is much more significant. Our long range goal is to grow and transform our store network.

147 gross new stores in 2024 represents strong progress on this transformation program. Okay. Let me comment on the performance of our new stores. There are a number of important relevant metrics that we track. For new stores, these include the sales volume in the opening year and the comp performance in the first few years once the store joins the comp base.

For relocations, we focus on the comp sales and the productivity lift that we see in the new location. We are pleased with how all of these metrics are tracking. I should add that when we approve a new location, we analyze the internal rate of return based on expected sales, profitability and CapEx. The rate of return that we are achieving on new store openings and on relocations is very attractive. I will finish up on our new store program by talking about the pipeline.

Of course, at this point, our plan and our schedule for new store openings in 2025 is largely set. We feel confident in our ability to open 100 net new stores this year. For 2026, the pipeline is also shaping up nicely. It is early, but at this point, I feel good about our ability to also open 100 net new stores in 2026. I'm going to move on now and talk about the second major driver of our long range model, comp store sales growth.

Our long range model projects that through 2028, we should be able to achieve comp sales growth in the mid single digits, in other words, between 46%. We are pleased that in 2024, we achieved 4% comp growth, and this was on top of 4% comp growth in 2023. But we recognize that comp growth is the most difficult variable to project. There are internal and external drivers of the comp trend. We are confident about the internal drivers and our ability to execute.

We have made huge improvements across our business in merchandising, stores and supply chain. I am also very bullish on the longer term external prospects for the off price segment and for our business in particular. Across retail, shoppers are voting for value, and we are very well positioned to deliver that value for our customers. So with that said, we recognize that the short term outlook is uncertain and it is important to plan and manage our business accordingly. We will talk more about this in a moment when I discuss our thinking and our guidance for the year ahead.

But before I get there, let me finish with the third major driver of our long range model, operating margin expansion. As a reminder, our long range model calls for approximately 400 basis points of operating margin expansion between 2023 and 2028. We expect about half of this expansion to come from leverage on our projected double digit top line sales growth. And we expect the other half to come from opportunities unrelated to sales. These opportunities fall into two buckets.

Firstly, higher margin driven by better control and allocation of inventory leading to faster turns and secondly, productivity improvements and other expense savings in our supply chain. As I said a moment ago, we achieved 100 basis points of operating margin expansion in 2024. This was well ahead of our initial guidance of 10 to 50 basis points. Christian will provide more details later in the call, but the major drivers of this expansion were stronger merchant margin from faster inventory turns, ahead of planned savings from supply chain productivity initiatives and sales leverage on fixed costs. Okay, enough about 2024.

I would like to segue now to our 2025 outlook. As previewed in our third quarter call last November, our 2025 guidance is for total sales growth of 6% to 8%, driven by 100 net new store openings plus comp store sales growth of 0% to 2%. Based on this comp sales range, we expect operating margin expansion of zero to 30 basis points. This 2025 guidance is consistent with our playbook. The outlook for 2025 is very uncertain with significant economic, political and geopolitical risks that could affect consumers.

Rather than trying to predict what is going to happen, our approach is to manage our business conservatively and then be ready to pull back or to chase the sales trends if it is stronger. This approach served us well in 2024 and we hope for the same in 2025. At this point, I would like to turn the call over to Kristin. Kristin?

Thank you, Michael, and good morning, everyone. In the fourth quarter, total sales grew 10% and comp sales grew 6%, well above the high end of our guidance. Our adjusted EBIT margin expanded 10 basis points versus last year. This was 60 basis points above the high end of our guidance. The gross margin rate for the fourth quarter was 42.9, an increase of 30 basis points versus last year.

This was driven by a 10 basis point increase in merchandise margin due to better than expected shortage results and lower markdowns, partially offset by lower markup due to higher better brand penetration. Freight expenses decreased 20 basis points. Product sourcing costs were $217,000,000 versus $197,000,000 in the fourth quarter of twenty twenty three. Product sourcing costs were flat as a percentage of sales versus last year as leverage on supply chain expenses and buying costs were offset by higher incentive costs and higher asset protection costs. Adjusted SG and A costs in Q4 were 20 basis points higher than last year.

This excludes the impact of expenses associated with bankruptcy acquired leases. These were worth approximately $5,000,000 this year and $6,000,000 last year. In Q4, we achieved sales leverage on corporate G and A expenses, but this leverage was offset by higher incentive comp and the timing of advertising costs. Q4 adjusted EBIT margin was 11.1%, ten basis points above last year, well above our guidance for a decrease of 50 basis points to 80 basis points. Our adjusted earnings per share in Q4 was $4.13 again well above the high end of our guidance.

This represents a 12% increase versus the prior year. At the end of the quarter, comparable store inventories were down 3% versus the end of the fourth quarter in 2023. Our reserve inventory was 46% of our total inventory versus 39% of our inventory last year. We are pleased with the quality of the merchandise and the value that we have in reserve. We ended the quarter in a very strong liquidity position with approximately $1,800,000,000 in total liquidity, which consisted of $995,000,000 in cash and $827,000,000 in availability on our ABL.

We had no borrowings outstanding at the end of the quarter on the ABL. During the quarter, we repurchased $61,000,000 in common stock, bringing our annual share repurchases to $242,000,000 dollars At the end of Q4, we had $263,000,000 remaining on our share repurchase authorization that expires in August of twenty twenty five. In Q4, we opened five net new stores, bringing our store count at the end of the quarter to eleven oh eight stores. This includes eight new store openings, one relocation and two closings. As Michael noted, for the full year, we opened 147 new stores, while relocating 31 stores and closing 15 stores, adding 101 net new stores to our fleet.

I will now move on to discuss our full year 2024 results. In fiscal twenty twenty four, total sales increased 11% on top of 10% in 2023. Comp store sales increased 4% on top of 4% in 2023. Our operating margin for the full year expanded by 100 basis points. Merchandise margin increased by 60 basis points.

Freight improved by 20 basis points. Supply chain cost leveraged by 50 basis points. And we achieved 20 basis points of leverage on fixed expenses. This operating margin expansion was partially offset by deleverage driven by investments in store payroll, higher incentive costs and higher depreciation in fiscal twenty twenty four. Before I turn to guidance, I would like to provide an update on our supply chain strategy and capital expenditures.

On our November call, we talked about the strategic rationale for owning rather than leasing our most productive distribution centers. Our vision for future DC capacity is one designed to better support our off price operating model and more highly automated. As a reminder, historically, we have leased our distribution centers, which made sense at the time when our balance sheet was much more leveraged. We now have the balance sheet strength to own rather than lease. Ownership gives us greater control over the design of these buildings.

It also allows us to leverage this capital investment as we grow over time and to avoid significant rent increases at each lease renewal. With that said, I'm pleased to share that in the fourth quarter, we exercised the purchase option on our 2,000,000 square foot Savannah, Georgia DC that is on target to be opened in 2026. Given the progress we have made during the construction process, we exercised this purchase option in January, a few months earlier than originally planned. As a result, CapEx for FY 2024 increased to $844,000,000 above our previous guidance of $750,000,000 Additionally, we have also recently opportunistically negotiated the purchase of our most efficient, most automated West Coast DC, our Cactus facility in Riverside, California. This deal will have CapEx implications for FY 2025, which I will review.

I'll first move to our 2025 guidance. This guidance excludes approximately $13,000,000 in 2025 versus $16,000,000 in 2024 in expenses associated with bankruptcy acquired leases. For 2025, we expect total sales growth in the range of six percent to 8%. This assumes 100 net new store openings. We anticipate that most of these stores will open in the latter half of the year.

We are forecasting comp store sales to increase in the range of flat to 2% and our adjusted EBIT margin to be in the range of flat to an increase of 30 basis points versus last year. We expect the major drivers of this expansion to be higher merchandise margin and productivity savings from supply chain initiatives. All this results in adjusted earnings per share guidance in the range of 8.7 to $9.3 an expected increase of 4% to 11%. Capital expenditures, net of landlord allowances, are expected to be approximately $950,000,000 in fiscal twenty twenty five. The increase in CapEx for FY 2025 is driven by the purchase of our currently leased Cactus DC in Southern California.

This purchase is scheduled to close later this month. When combining our FY 2024 actual and FY 2025 guidance, total capital expenditures are higher than we previously indicated by about $200,000,000 This variance is entirely driven by the opportunistic purchase of the Cactus DC. This purchase had not previously been contemplated in our long range model. I would like to move on to guidance for the first quarter of twenty twenty five. This Q1 guidance excludes approximately $6,000,000 each in 2025 and in 2024 in expenses associated with bankruptcy acquired leases.

We expect total sales to increase 5% to 7%. Comp store sales are assumed to be flattish for Q1. We are expecting adjusted EBIT margin to be in the range of down 50 basis points to down 90 basis points over the first quarter of twenty twenty four. This results in an adjusted EPS outlook in the range of $1.3 to $1.45 versus last year's first quarter adjusted EPS of $1.42 I will now turn the call back to Michael.

Thank you, Kristin. Before I turn the call over to questions, I would like to reinforce a few of the key points that we have discussed this morning. Firstly, we are pleased with our Q4 results. These results were well above the high end of guidance. They were driven by number one, our strategy to elevate value across categories and price points and number two, our effectiveness in responding to sudden unexpected shifts in the external sales trend throughout the fall season.

Secondly, we are pleased and encouraged with the progress that we made in 2024 towards our long range financial goals. 11% total sales growth 4% comp store sales growth 100 basis points of margin expansion. We are just one year into our long range model, but we are tracking well on each of the key drivers of this model. Thirdly, the 2025 outlook is uncertain. And in this environment, we are planning and managing our business conservatively.

This is consistent with our playbook, and it should put us in the best possible position to react to whatever happens externally. I would now like to turn the call over for your questions.

now opening the floor for question and answer Your first question comes from the line of Matthew Boss from JPMorgan. Your line is now open.

Thanks and congrats on a really great fourth quarter.

So Michael, could you elaborate on sales trends that you've seen so far in the first quarter, in particular the comp guidance for the first quarter appears more conservative than the remainder of the year, if you could share what is driving this?

Sure. Well, good morning, Matt. Thank you for the question. In February, our first quarter trend started out weaker than we had planned or expected. Now I think that's consistent with what you've heard from other retailers who've reported.

But let me offer some detailed commentary on what the potential drivers of that weakness might be. I think I've said before that the first quarter is typically the most volatile and unpredictable quarter of the year. There are two factors that typically drive that volatility. Firstly, weather, the weather especially in February and March can vary a lot from one year to the next. And secondly, the timing of tax refunds.

Our customer, as you know, is very sensitive to the timing of tax refunds, specifically earned income tax credit and child tax credit. Now of course, whenever we see a weaker than expected trend, we slice and dice the sales data to identify what might be going on. For the first few weeks of February, we didn't have to look very hard. It was clear from the underlying sales data that the weakness in the trend was concentrated in two specific regions, the Midwest and the Northeast. Those regions are obviously very important to us.

And in February, they experienced unfavorable weather. I should add, as the weather began to normalize later in the month, we saw the sales trend pick up. Now as for the timing of tax refunds, in February, the distribution of tax refund payments fell well behind last year and we think that that delay also contributed to some of the weakness in the sales trend that we saw during the month. Again, as refunds caught up later in February, the sales trend strengthened. So we believe that the weak trend in February can largely be attributed to the usual suspects weather and the timing of tax refunds.

But in our business, at least in the short term, it pays to be neurotic. Could there be something else going on? We have not seen anything in the data to suggest this, at least not yet. But that said, we recognize that there are a lot of things happening externally. And at this point, we don't know if or when those things might have an effect on our customer.

We haven't seen it yet, but of course, there is risk. We're only four weeks into the quarter. We need to get further along and see how the sales trend develops. So turning to guidance, given that weaker than expected start to the quarter, we're being a little more cautious about our Q1 guidance. That's the reason why we're guiding to a flattish comp versus 0% to 2% for the full year.

Great color. And then maybe just a follow-up on your first quarter margin guide. It looks a bit lower relative to the year. Kristen, could you just walk through the drivers of margin contraction in the first quarter and the cadence of margin expansion by quarter through the year?

Sarah, good morning, Matt. It's a good question. Let me provide a little bit more context. Last year in fiscal twenty twenty four, our biggest EBIT margin increase was in the first quarter. It was up 170 basis points.

Our EBIT margin increases then moderated as the year unfolded largely due to clearance level comparisons and the timing of certain freight and supply chain savings. But for fiscal twenty twenty five, we anticipate the reverse of this trend will be true with the most challenging margin comparison here in the first quarter. We then expect margin comparison to improve as the year unfolds and we actually expect the biggest year over year improvement in the fourth quarter. So put another way, if you were to look at our margin expansion on a two year basis, generally it'd be fairly consistent across quarters. But to your question more specifically on Q1, there are a couple of factors I want to explain more on.

First, merchandise margin is expected to be a driver of EBIT margin improvement in fiscal twenty twenty five, but in the first quarter we're not expecting as much help from merch margin. This is due to some modest mark on pressure from increased better brands and timing of some markdowns. The second factor in Q1 is on supply chain. We will anniversary some DC lease renewal increases in the back half of twenty twenty five and the fixed cost deleverage in supply chain is most pronounced in the first quarter. And I should add that while we expect to continue to drive cost savings in supply chain, we expect most of these savings will come through later in this year.

And then the last point on Q1 is that we have deleverage on fixed costs based on our comp sales assumption of flattish or minus one to plus one. And that deleverage is exacerbated by the fact that Q1 is our lowest sales volume quarter of the fiscal year. So all these factors make Q1 by our toughest EBIT margin comparison and outlook for the fiscal year. As I look to the balance of the year, we do expect comp store sales to be flat to plus two and about 75% of our new stores are scheduled to open in the second half of the year. So total sales growth is lower in the first half of the year relative to the back half.

So taking all this together, we expect pretty modest EBIT margin expansion in the second quarter. And then for the third quarter, EBIT margin improvement should look more like our annual guidance. And finally for the fourth quarter, we expect that will be our most significant EBIT margin improvement in 2025.

Your next question comes from Ike Mauricio from Wells Fargo. Your line is now open.

Hi. Good morning. Congrats, Michael, Chris and David. I guess, Michael, for you, good strong finish to 2024, of course. I guess, I'm wondering if you can break down your comp trend for 2024, especially in the fourth quarter in terms of maybe how much you think might be coming from trade down shoppers versus existing customers?

Good morning, Ike. It's a good question. As you know, we think of our customers in two major buckets, two major segments. Let me start with the first of those, the Need a Deal customer. That customer is typically lower income and they are very focused on value.

This is a very important segment of customers for us. In fact, it's difficult for us to drive comp sales growth without this customer. The Q4, as I look at our stores that were in that are in lower income trade areas, these were actually the strongest performing stores in the chain. And that tells me we are doing very well with the Need a Deal customer. Now in the prepared remarks, I talked about our strategy to elevate our assortment within a good better best framework, and that meant elevating the value at all price points.

Now of course, it's difficult to offer well known national brands at lower or opening price points. So our merchants had to work very hard to deliver value through other means such as great quality or strong fashion or other attributes that the customer cares about. My assessment is that they, we did a very good job delivering great value to the Neededale shopper in Q4 and throughout 2024. And that was a clear driver of our comp growth. But let me turn now to the one to deal customer, the second sort of segment, if you like.

As I just said, to Q4, our stores that are in lower income trade areas were the strongest performing stores in the chain. But we also saw a very healthy mid single digit comp store sales growth in moderate and higher income trade areas. We believe that that comp growth in those stores was driven by the trade down customer. Now in addition to comp performance of stores based upon the income level of the trade area, there are other indicators that sort of further demonstrate that trade down trend. For example, you can look at the performance of our business by price point.

As we've disclosed in the past, our average unit retail, our average ticket is about $10 In Q4, we saw a mid single digit percentage increase in that average retail versus last year. And the strongest comp sales growth rates in Q4 were in price buckets well above $10 Again, that's the trade down customer. So tying all that together, I would say that we are very pleased with the strength of our business with our core Need a Deal shoppers. And we're also very pleased with our success in attracting the want to deal or the trade down shopper. To achieve a 6% comp store sales growth in Q4, we had to deliver great value to both of those important segments of customers and that's what we did.

Got it. Super helpful. And then Michael, if I can do one more. Just we've tried this with some of our companies in the space, but I guess on the topic of broader policy changes that are likely to happen in 2025, things like tariffs, tighter immigration controls. I mean, can you comment on how do you see these policy changes affecting your customer and maybe what are the biggest risks as you kind of look out in that regard?

Sure, sure. Yes, it's a good question, Mike. It's a question we've thought a lot about. Let me share some of our thinking. And let me preface my answer by saying, we are very optimistic about our business over the next two to three years.

But we recognize that in the short term, there are risks and frankly the sales trend is likely to be choppy. There are a lot of things going on in terms of potential policy changes, including the things you mentioned. But at this point, I don't think anyone can confidently or accurately forecast what it all means. With that said, let me make a couple of points. Firstly, my experience has been that generally uncertainty and disruption tend to be good for off price.

But the key thing for us as an off price retailer is to remain nimble and flexible, so we can react more effectively to whatever happens. That is what we are doing. We're being cautious and we're tightly controlling our open Dubai. Secondly, if I think about specific policy changes, for example, tighter immigration control, higher import tariffs, both of which you mentioned, but also changes in the tax code, changes in federal benefits. It's true, some of these things could have a negative impact on our customers, but some of them could be very positive.

I think it all depends on the scale and the specifics. And we just don't know those yet. And apart from individual policy changes themselves, I think a lot depends on what happens in the overall economy. So what happens to inflation, what happens to hourly wages, what happens to trade down shoppers and what happens to our regular price competitors and apparently the rest of retail. Look, I describe myself as a rational optimist.

I could easily paint a scenario for our business that's very positive over the next couple of years. Lower taxes on hourly workers, lower energy prices, lower corporate taxes and strong availability of off price merchandise due to disruption from tariffs. We've just reported 6% comp store sales growth for Q4 and we see a lot of reasons to be excited and optimistic about our business in the years ahead. But that said, we realize it may not be a straight upward sloping line. We anticipate that in the short term things could be volatile.

There are external risks. For example, higher tariffs, which you mentioned, could drive up inflation and that could hurt discretionary spending. But this is a it's a complex issue. There are a lot of variables that mean that that might or might not happen, which brings me back to my earlier point. As a business, we need to focus on what we can control And that means planning our business cautiously, being nimble, flexible and ready to react.

And that's the approach that we are that we're taking.

Burlington Stores (BURL) Q4 2025 Earnings Call Transcript

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