Burlington Stores, Inc. Q4 FY2025 earnings call

Michael O'Sullivan covered Q4 results, full year 2025 results, and 2026 outlook. Q4 total sales up 11%, comp sales up 4%, 100 basis points operating margin expansion, 21% EPS growth. Full year 2025: 9% total sales growth, 2% comp sales growth, 80 basis points operating margin expansion, 22% EPS growth. In 2025, response to tariffs included pivoting away from tariff-impacted categories, reducing inventory, raising retails in select categories, and expense savings. 2026 outlook: bullish on sales, external factors like customer resilience and tax refunds, internal factors like easy comps and Burlington 2.0 initiatives. Kristin Wolfe provided financial details on Q4 and full year 2025, and 2026 guidance including store openings and margins.

Total sales increased 11% in Q4, with comp store sales up 4%. For full year 2025, total sales grew 9% on top of 11% in 2024, comp sales grew 2% on top of 4% in 2024. Q4 adjusted EBIT margin expanded 100 basis points vs last year, full year operating margin expanded 80 basis points. Q4 gross margin 43.7%, up 80 basis points vs last year. Product sourcing costs $232 million in Q4 vs $217 million in 2024, levered 30 basis points as % of sales. Adjusted SG&A costs in Q4 40 basis points lower than last year. End of Q4 comparable store inventories up 12% vs 2024, reserve inventory 40% of total inventory vs 46% last year. 2026 guidance: total sales growth 8%-10%, 110 net new store openings, comp store sales 1%-3%, adjusted EBIT margin flat to up 20 basis points, adjusted EPS $10.95-$11.45, cap ex net of landlord allowances ~$875 million. Q1 2026 guidance: total sales increase 9%-11%, comp store sales 2%-4%, adjusted EBIT margins down 60-100 basis points vs 2025, adjusted EPS $1.60-$1.75 vs $1.67 last year.

2026 total sales growth expected in range of 8% to 10% assuming 110 net new store openings. Comp store sales forecasted to increase 1% to 3%. Adjusted EBIT margin expected to be in range of flat to an increase of 20 basis points. Adjusted earnings per share guidance in range of $10.95 to $11.45, expected increase of 8% to 13%. Capital expenditures net of landlord allowances expected to be approximately $875 million in fiscal 2026. Q1 2026 total sales expected to increase 9% to 11%, comp store sales assumed to increase 2% to 4%, adjusted EBIT margins expected to be in range of down 60 to down 100 basis points over 2025, adjusted EPS outlook in range of $1.60 to $1.75 vs last year's first quarter adjusted earnings per share of $1.67.

Remarks on this call concerning future expectations, events, strategies, objectives, trends, or projected financial results are subject to certain risks and uncertainties. Such risks and uncertainties include those described in the Company's 10-Ks and other filings with the SEC, which are incorporated herein by reference. Actual results may differ materially from projected forward-looking statements. For example, tariffs could re-emerge as a margin challenge, weather could impact sales, and new store openings or relocations could face unforeseen issues.

Q: Could you elaborate on what drove ahead-of-plan sales in Q4 and why you could have done more sales?

A: Michael O'Sullivan said Q4 comp growth was strong in certain categories like apparel, footwear, beauty, accessories due to remixing plans to focus on less tariff-impacted areas, but home and holiday categories had lower growth as they deliberately lowered mix in response to tariffs.

Q: How to interpret 2026 comp guidance of 1%-3% being higher than typical?

A: Michael O'Sullivan said external factors like customer resilience, tax refunds, and internal factors like easy comps and Burlington 2.0 initiatives drive optimism, giving merchants more open-to-buy.

Q: What are moving pieces for Q1 margins being down?

A: Kristin Wolfe said Q1 has pressure on gross margin from no anniversary tariffs and markdown timing shift, supply chain deleverage from new DC start-up costs, and lapping one-time favorable items from last year.

Q: Should we think of higher tax refunds in same way as 2021 stimulus checks?

A: Michael O'Sullivan said yes, but differences include 2021 checks were more significant and one-time, while current tax refund change is permanent but impact may be less.

Q: Are you happy with inventory levels?

A: Kristin Wolfe said comp store inventories up 12% was deliberate, feeling good about inventory freshness and quality, reserve penetration at 40% is in line with historical levels. Michael O'Sullivan said buying environment for off-price is excellent with plenty of supply.

Q: How did Q4 comp sales perform monthly and exit the quarter?

A: Kristin Wolfe said November and December combined comp sales increased mid-single digits, January ran mid-single digit but winter storm impacted, momentum continued into February.

Q: Sales trends by customer demographic?

A: Michael O'Sullivan said comp sales trends in Q4 were broad-based across income segments and ethnicities, no major pockets of weakness.

Q: Color on elevation strategy and supply chain?

A: Michael O'Sullivan said elevation strategy drove higher customer perception, comp growth in higher price buckets, expanded margins. Kristin Wolfe said supply chain costs levered, new Savannah DC opening with start-up expenses, expecting flat supply chain costs as productivity initiatives offset, new DC will drive cost efficiencies over time.

Q: Pipeline for new stores and relocations?

A: Michael O'Sullivan said ahead of long-range plan, new stores achieve $7M first full year sales, relocations and downsizing programs drive sales lift and lower occupancy costs.

Q: Detail on localization initiatives?

A: Michael O'Sullivan said localization is a major opportunity, working on better planning, analytics, assortment planning, with Merchandising 2.0 enabling progress.

Q: Margin drivers?

A: Kristin Wolfe said Q4 margin drivers included increased gross margin, product sourcing cost leverage, SG&A leverage offsetting depreciation. Full year margin drivers same with gross margin increase, supply chain savings, SG&A leverage offsetting depreciation, with sustainable margin gains and future opportunities.