Burlington Stores, Inc. Q3 FY2025 earnings call

• Third Quarter Results: Total sales increased 7% at the high end of guidance, comp store sales grew 1%. Started the quarter strong with back-to-school trend but saw traffic drop in September due to warmer weather; mid-October saw comp trend pick up to mid-single digits. Earnings delivered margin expansion and beat guidance despite tariff headwind.
• Fourth Quarter and Full-Year 2025 Guidance: Maintains Q4 comp store sales guidance of 0%-2% and total sales guidance of 7%-9%. Increases Q4 margin and EPS guidance. Full-year 2025 expects comp store sales growth 1%-2%, total sales increase ~8%, EBIT margins range from 60-70 basis points expansion, and adjusted EPS in range of $9.69-$9.89.
• 2026 Outlook: Planning for total sales growth in the high single digits, opening at least 110 net new stores, comp store sales flat to 2%, and operating margin assuming flat versus this year at 2% comp growth and 10-15 basis points higher for each point of comp above 2%.
• Longer-Range Financial Goals: On track to reach ~$1.6 billion in operating income in 2028. Pleased with margin expansion progress. More bullish on new store opening program now, originally assumed 100 net new stores 2024-2028, now 2026 planning 110, and expects to sustain or exceed this pace. Believes can achieve average annual comp sales growth 4%-5% over remaining years of long-range plan.

Total sales increased 7% in the third quarter, with comp store sales up 1%. The gross margin rate for the third quarter was 44.2%, an increase of 30 basis points versus last year. Product sourcing costs in Q3 were $2 million versus $29 million in the third quarter of last year, decreasing 40 basis points. Adjusted SG&A cost in Q3 levered 20 basis points. Q3 adjusted EBIT margin was 6.2%, 60 basis points higher than last year. Q3 adjusted earnings per share was $1.8, a 16% increase versus the prior year. Comparable store inventories were down 2% versus the end of 2024 at the end of the quarter. Reserve inventory was 35% of total inventory versus 32% last year, up 26% in dollar terms. In Q3, 73 net new stores were opened, and 2025 fiscal year is expected to open 104 net new stores.

• Fourth quarter maintains comp store sales guidance of 0%-2% and total sales guidance of 7%-9%, while raising margin and EPS guidance. Q4 adjusted EBIT margin expected to increase by 30-50 basis points, EPS range $4.5-$4.7.
• Full-year 2025 expects comp store sales growth 1%-2%, total sales increase ~8%, EBIT margins 60-70 basis points expansion, adjusted EPS $9.69-$9.89.
• 2026 plans total sales high single-digit growth, at least 110 net new stores, comp store sales flat to 2%, operating margin flat at 2% comp growth and 10-15 basis points higher for each point above 2% comp.

• Economic uncertainty which could affect consumers' discretionary spending.
• Tariff impact on pricing and margin.
• Weather sensitivity affecting同店 sales, especially in relation to outerwear which is a significant part of the business.
• Competitor strategies changes that could impact market share.

Q: View on Q4 comp guidance being conservative given less weather sensitivity?

A: Michael O'Sullivan said Q4 comp guidance is conservative as up against strong comparisons from last year's 6% comp growth, and off-price peers also showing slightly lower on two-year stack basis, so not anticipating significant upside to Q4 comp sales guidance at this point.