BURL - NYSE

Hello, everyone, and, welcome to Burlington Stores Inc. First Quarter 2025 Earnings Call. Please note that this call is being recorded. After the speaker’s prepared remarks, there will be a question-and-answer session. [Operator Instructions] I’d now like to hand the call over to David Glick, Group Senior Vice President, Investor Relations and Treasurer. You may now begin, sir.

[Operator Instructions] Your first question comes from the line of Matthew Boss of JPMorgan.

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

Michael, a couple non-tariff questions, if that’s okay. Curious if you could maybe dig into a little bit the cadence of the monthly comp sales trends to the first quarter, February, March, April, and also any color you can provide maybe on the trend that you’ve seen May month to date would be super helpful.

Good morning, Ike. It’s Kristin, I’ll actually take the non-tariff question. Back in February, our comp sales were down about 2% and as we discussed on our Q4 call in early March, we were fairly confident that the weakness in February was really attributable to two factors: the disruptive weather versus last year in our key regions in the Northeast and the Midwest. And then secondly, the timing of tax refunds versus last year, our core customers very sensitive to the timing of tax refunds, specifically as it relates to the earned income tax credit in mid-late February. But sure enough, as we got into March, our sales trend began to pick up. Our stores are closed on Easter Sunday. So, with the timing of Easter this year, we had one more day in March and one less day in April. So, from a comp sales perspective, we look at both months combined, and our comp growth for the March-April combined period was up 1%. So this is certainly better than February, but we would like to be doing better than that. And as for the last part of your question, May months to date, the trend in May has been fairly similar to that of the March and April combined trend at about the middle of our Q2 guidance range.

Thanks, Kristin. And then maybe just one more. Can you walk us through just first quarter sources of upside, as well as the expense shift details into Q2?

Yes, so for Q1, adjusted EBIT margin increased 30 basis points despite a flat comp earnings per share was $1.67 that represents about a $0.30 beat to the midpoint of our guidance. And there were two drivers of that beat or that higher earnings performance. First, as you said in your question, there was a timing shift between the first and second quarter. This was primarily in supply chain receipt timing, as well as some store-related and SG&A expenses. This favorability will negatively impact Q2 and is worth about half of that $0.30 beat or about $0.14. And the second as Michael referenced just a moment ago, early in the quarter, we began to aggressively go after savings opportunities across the P&L. We did this in anticipation of the potential impact from tariff, and we were able to capture some of these savings during the first quarter, and that makes up the balance of the Q1 B. Those savings are across the P&L and will be used to help offset the anticipated cost impact of tariffs later in the year.

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

Thank you. Kristin, in dollar terms reserve inventory is 31% higher than last year. Seems a little high. What has driven this increase?

Good morning, Lorraine. Thanks for that question. At the end of the quarter, so, a reserve inventory was 48% of total inventory, and that compares to 40% last year. So, you’re right in, in your question. In dollar terms, reserve was up 31% compared to last year. As you said, the increases due to the great deals we were able to make, to get ahead of tariffs. The goods we have in reserve are highly branded and include spring back to school and fall merchandise. And importantly, Michael referenced this earlier, these goods did not incur a tariff as they were already in the country when we acquired them. So, reserve is a very important lever we have as an off-price retailer, especially in this environment. It allows us to be more flexible, acquire branded, high-quality merchandise that we can pack away and release later when it’s seasonably appropriate. So, overall, we feel very good about the merchandise we have in reserve, both from a quantity as well as a quality standpoint.

Your next question comes from the line of John Kernan of TD Cowen.

Understood. Maybe just a quick follow-up question about freight. Kristin, in the prepared remarks, I think you mentioned your full year guidance is contingent on being able to hold ocean freight costs to contracted rates. Can you just expand on that, and how much of a swing factor is this in your guidance? And then any commentary in the domestic freight cost picture are also helpful, given there’s been some volatility there as well.

Good morning, John. Thanks for that question. It’s a good question. Maybe I’ll take the last part, first. On domestic freight, we recently secured truck and intermodal capacity at rates we feel very good about. In addition, diesel fuel rate could potentially be an expense tailwind, but that’s obviously hard to predict or count on. On international freight to the crux of your question, this is primarily captured in our merchandise margin. We’ve locked in our contracted ocean rates through the first quarter of 2026, and we feel good about those rates and our ability to meet our capacity needs. However, given the potential volatility of shipments and potential spikes as China comes back online, there is potentially a risk of spot market exposure, and so as I mentioned in the prepared remarks, our guidance assumes we do not see an increase in ocean freight expense above our contracted rates.

Your next question comes from the line of Alex Straton of Morgan Stanley. Your line is now open.

I just have a couple for Kristin. Maybe first, can you just walk through first quarter comp performance by region, as well as address if weather impacted performance at all? Then I have a just quick follow-up after that.

Great. Good morning, Alex. In terms of regional performance, the Southeast region was -- outperformed the chain, was above the chain, while the Midwest region trailed the chain. This was likely due to the unfavorable weather in that region. In the first quarter, weather certainly had an impact on comp and traffic, particularly in February. And it had a significant impact in February on two important regions of ours, Northeast and the Midwest, but once we got into the March-April time period, weather pretty much normalized and wasn’t neutral to our March and April trend.

Great. Maybe just secondly, can you also discuss comp performance in the quarter by category, if any, were weaker or stronger?

Great. Yes. It’s a good question. Although performance across categories was fairly broad-based in the first quarter, the only real callout I’d make is that the best-performing category in the quarter was our beauty business.

Your next question comes from the line of Brooke Roach of Goldman Sachs. Your line is now open.

Your next question comes from the line of Dana Telsey of Telsey Advisory Group. Your line is now open.

Hi, good morning, everyone. As you think about real estate and Michael, that’s exciting about the new layout. Kristin, when will the 100 stores in 2025 open, spring versus fall, and given the landscape where you acquired, I believe around 46 stores from JOANN’s, how are you thinking of those openings, and will they be in the new layout also? Thank you.

Good morning, Dana, thanks for the question. For 2025, we still have a lot of confidence in our 100 net new stores. That assumes 100 net new and about 130 or so growth new store openings. We expect about 25% of stores to open in the first half of the year, and 75% or the majority will be opening in the second half, but those will almost all be in the third quarter in 2025. And then you mentioned in your question, yes, we’re excited, we recently acquired the leases of 46 former JOANN stores, because we recently acquired those leases, we’re paying rent on those stores now. So we’re focused on getting them open as quickly as possible. Right now, we’re expecting those stores to open in spring of 2026, and most will likely open in the first quarter of next year.