Thomas Kingsbury - Chairman, President and CEO Marc Katz - CFO and Principal David Glick - VP, IR.

Ike Boruchow - Wells Fargo Matthew Boss - JPMorgan Lorraine Hutchinson - Bank of America Merrill Lynch Kimberly Greenberger - Morgan Stanley John Kernan - Cowen and Company Daniel Hofkin - William Blair Adrienne Yih - Wolfe Research Laura Champine - Loop Capital.

Good day, ladies and gentlemen, and welcome to the Burlington Stores First Quarter 2018 Earnings Webcast. At this time, all participants are in a listen-only mode. Later, there will be a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference call is being recorded.

I would now like to turn the conference over to David Glick, Vice President, Investor Relations. Sir, you may begin..

Thank you, operator, and good morning, everyone. We appreciate everyone’s participation in today’s conference call to discuss Burlington’s fiscal 2018 first quarter operating results. Our presenters today are Tom Kingsbury, our Chairman and Chief Executive Officer; and Marc Katz, Chief Financial Officer and Principal.

Before I turn the call over to Tom, 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 June 14, 2018. We take no responsibility for inaccuracies that may appear in transcripts of this call by third-parties.

Our remarks and the Q&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 for fiscal 2017 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 discuss today to GAAP measures are included in today’s press release. Now, here’s Tom..

Thank you, David. Good morning, everyone. We are extremely pleased to kick-off fiscal 2018 with strong first quarter results driven by a robust 4.8% comparable store sales increase on a shifted basis. Adjusted operating margin or EBIT expanded by 85 basis points.

Our overall 12.8% sales increase combined with the increase in gross margin and expense leverage resulted in a 59% increase in adjusted earnings per share, significantly ahead of our guidance.

In addition, we continued to reduce aged inventory levels to record lows and increased our inventory freshness in comparable store inventory turnover levels to record highs.

We remain highly focused on executing the strategies that have driven consistent comparable store sales and increased operating margin results over the past several years and we expect our momentum to continue as we move through fiscal 2018. Turning to highlights for the first quarter.

This was our 21st consecutive quarter of positive comp sales growth. Our comp sales growth was driven by an increase in traffic, our 13th quarterly traffic increase of the last 15 quarters.

We delivered a 35-basis point improvement in gross margin and leveraged the SG&A rate by 45 basis points which helped drive an 85-basis point increase in our adjusted EBIT margin. And our adjusted earnings per share grew 59%. I’d like to clarify at this point how we are reporting comparable store sales.

Our comparable store sales increase of 4.8% lines up with the comparable calendar weeks, specifically the 13 weeks ended May 5, 2018 versus the 13 weeks ended May 6, 2017. We believe this is the most accurate representation of our comparable store sales performance and is the basis in which we plan and manage our business.

Another key element of our first quarter is the outstanding performance of our new stores. As I just mentioned, our total sales increased 12.8% driven by the strong performance of our new and non-comp stores which contributed $82 million in sales for the quarter, as well as a robust comp store growth.

We opened 18 net new stores during the first quarter of 2018 versus only four net new stores in the first quarter of last year. We’re on track to open 35 to 40 net new stores in 2018, including 22 in the first half of the year versus only eight in the first half of 2017.

The continuous strong performance of our new stores is a testament to the strength of our real estate and store operations teams’ ability to find and open attractive new sites. Moving to category highlights.

Our top performing businesses were all areas of home, beauty, missy sportswear including better, moderate and active, men’s sportswear driven by active and team, men’s shoes and athletic shoes and Baby Depot. Regarding geographic performance, the West and the Southwest performed above the chain average while the Midwest comp below the chain average.

The Southeast and Northeast both had strong quarters with sales performance consistent with the chain average. Moving to inventory management. We were pleased once again with how our merchandizing team managed inventory as we ended the quarter with comp store inventories down 7% on top of a 7% decline last year.

The first quarter comp store turnover improved a strong 12% on top of last year’s 7% improvement. Our merchandizing and planning teams once again drove down our aged inventory levels, as inventory aged 91 days and older declined significantly as we focus on maintaining a fresh and exciting assortment for our customers.

Pack and hold as a percent of our total inventory was 27% versus 26% a year ago, as we continue to capitalize on the favorable buying environment. We continued to see no change in the vibrancy of the marketplace for our merchant teams and we are thrilled with the great assortment at amazing values that we continue to deliver to our customers.

This is clearly evident in our inventory freshness metric, inventory received in our stores that is less than 30 days old which was meaningfully higher than last year at the end of the quarter.

I am also pleased with the value that we continue to bring to our shareholders as we repurchased approximately 488,000 shares of common stock during the first quarter for $64 million. At the end of the first quarter, we had 153 million remaining on our 300 million share repurchase authorization that was approved in August of 2017.

Now let me update you on our long-term strategic priorities, which continue to be focusing on driving comparable store sales growth, expanding, modernizing and optimizing our store fleet, and increasing our operating margins.

First, with regard to driving comparable store sales growth, our underlying strategies remain enhancing our assortments as we continue to improve our execution of the off-price model with particular focus on underpenetrated businesses, building on our marketing initiatives to ensure we are continuing to engage both new and existing customers and improving the store experience for our customers.

Our first quarter results demonstrate once again that we are making significant progress increasing our underpenetrated growth categories, particularly home and beauty. These growth opportunities, like they did in the fourth quarter, allow us to continue to deweather our business, building the long-term sustainable foundation for us.

The first quarter was not an ideal quarter from a weather perspective but growth in home and beauty helped drive a very strong comparable store sales result, another example of our progress in de-weatherizing our business. With regard to home, we built on the progress we made in 2017 with another very strong quarter in this key strategic category.

Home still represents our largest category growth opportunity. We finished 2017 with home at 14% of our total sales and we believe we can achieve a penetration level of 20% over time.

Specifically, we have more opportunity to expand the presence of highly recognizable national brands in home and still see several key underdeveloped and new categories that we have targeted for growth in 2018 and beyond.

Our beauty business continued its strong momentum in the first quarter and we expect this category to be a key growth opportunity for years to come. We will continue to expand the number of brands in both designer and prestige fragrances, grow key categories in beauty accessories and enhance our assortment in cosmetics and skincare.

In addition, beauty remains an important element of our gift strategy which was a key Valentine’s Day sales driver. Ladies’ apparel remains a significant opportunity as our penetration of 23% remains well below our potential 30% penetration goal.

Missy sportswear, the largest portion of ladies’ apparel, outperformed the chain average in the first quarter. While better and active were once again standout categories in the quarter, our moderate sportswear business accelerated as well.

That said, we continue to focus on improving the sales trend in those heritage businesses we discussed on our fourth quarter call. We’re adding a second SVP in ladies’ apparel in the second half of the year in order to bring the necessary focus for this business and to capitalize on the penetration opportunity.

We continue to add to the quality of our vendor base. As we’ve highlighted on our fourth quarter call, we’ve added approximately 1,200 new brands to the mix in 2017 while edited out a similar number of less meaningful brands.

We carry approximately 5,000 brands and expect that number to increase over time as we deepen and expand our vendor relationships, grow underdeveloped categories and expand into new businesses.

The momentum we enjoyed in 2017 in terms of better and best penetration increases continued into the first quarter of 2018 as the buying environment remains very attractive and we would characterize product availability as very strong.

On the marketing front, our successful TV testimonial campaign has generated positive customer sentiment in strong brand recall.

Also, we have been pleased with the results of our ongoing personalized marketing efforts where we are able to deliver the most relevant content to customers in ways that matter most to them, including digital, mobile and social media. As mentioned previously, our dollar marketing spend will be comparable to prior years.

So we will continue to incrementally shift into digital media. Improving our store experience continues to be a key initiative for us where we made significant progress in 2017 modernizing our store fleet. We are accelerating the pace in 2018 with 60 gross new stores versus 48 last year, while continuing the strong pace of remodeling 34 stores.

A great example of our improved store experience is the new store we opened in March only a few miles from our headquarters in Burlington, New Jersey. For those of you who live in the New York and Philadelphia metropolitan areas, I would encourage you to visit this exciting new store.

The second growth initiative continues to be expanding our store fleet. We plan to open 35 to 40 net new stores in 2018 averaging 43,000 square feet. We are a national retailer that operates in 45 states plus Puerto Rico, yet we only operated 647 stores at the end of the first quarter.

As many of you have heard before, the foundation of our new store selection process is our C point strategy which we developed over three years ago. At that time, we developed close to 500 potential locations that could get us to 1,000 stores over time.

We believe the strategic tool, which we’ve been using over the last three years, has been integral in driving the strong new store sales and EBIT performance versus our underwriting model.

At the end of 2017, we refreshed and updated our C point analysis and we were able to identify even more potential locations that gives us great confidence so we can comfortably reach our goal of 1,000 stores. While the number of net new store openings in 2018 is similar to 2017, we are increasing the number of gross new store openings by 12 stores.

This acceleration of new stores combined with remodels will translate to another 94 stores in our brand standard. In just two years, 2017 and 2018 combined, we will have increased the number of stores in our brand standard by 176 stores.

Looking out five years, at the current rate of new store openings and remodels, we would expect a significant majority of our stores to be in our brand standard. We also remain focused on our third growth priority, continuing to increase our operating margin.

Over the last five years, we expanded our operating margins by 370 basis points, an average of approximately 75 basis points per year. While we are very pleased with this progress, we continue to believe we have a 400 to 600-basis point operating margin gap versus our peers which we believe we can continue to close.

Going forward, we will continue to execute the same strategies that we have deployed over the last five years; increasing total sales to leverage fixed costs, optimizing markdowns, remaining disciplined with inventory management and maintaining an active profit improvement culture across all SG&A areas.

Before I turn the call over to Marc, I want to reinforce some of the comments we made last quarter about some incremental investments we are making in 2018. We feel very good about the approach we are taking to balance CapEx and incremental OpEx investments in our business while continuing to deliver expansion in operating margin.

Our business model generates substantial cash flow which we are deploying in 2018 to drive sales growth, improve our infrastructure and give back to our associates.

Number one, our company’s highest annual growth CapEx spend of over $300 million, which will continue to include 60 new stores, 34 remodels, another 35 million of spend in our supply chain, and 11.5 million to complete the renovations of our corporate headquarters.

Year-to-date, we have added 25 stores to our brand standard well ahead of the seven stores at this point in fiscal 2017. Number two, we remain confident in our approach to wages investing an incremental $13 million for hourly wages in 2018 on top of three prior years of similar increases.

We continue to feel good about this strategy as our recent hourly employee turnover and open job statistics continue to validate this approach. Number three, we are well on our way to increasing our merchandizing team headcount by 10% in 2018.

Among the additions to our merchandizing team we have already made this year are one additional EVP and two SVPs further narrowing the scope and increasing the specialization of our team. Number four, we are pleased to have increased employer contributions to our medical costs to keep employee costs flat for the second straight year.

Overall, we believe we are taking a balanced approach with investments in the business while simultaneously expanding operating margins which we believe was evident in our first quarter performance. Now, I’d like to turn the call over to Marc to review our first quarter financial performance and updated outlook in more detail..

Thanks, Tom, and good morning, everyone. Thank you for joining us today. We ended the first quarter by recording our 21st consecutive quarter of positive comparable store sales.

In addition, we achieved strong contribution from new stores and non-comp stores and expansion in adjusted EBIT margin, which combined delivered a 59% increase in adjusted earnings per share. Next, I will turn to a review of the income statement.

Due to the 53rd week in fiscal 2017, our results are reported for the 13 weeks ended May 5, 2018 versus the 13 weeks ended April 29, 2017.

All of our results are reported on this fiscal basis with the exception of comparable store sales which we report on a shifted basis comparing similar calendar weeks which are the 13 weeks ended May 5, 2018 versus the 13 weeks ended May 6, 2017.

For the first quarter, total sales increased 12.8% and comparable store sales on a shifted basis increased 4.8%. New and non-comp stores contributed an incremental 82 million in sales for the first quarter. Our Q1 comparable store sales performance was driven by an increase in traffic, AUR and units per transaction while conversion was flat.

We have seen traffic increases in 13 out of the last 15 quarters. As of the end of the first quarter, six stores were still closed due to the 2017 weather-related issues.

We expect two stores to reopen by the end of the second quarter, one store by the end of the third quarter, two stores by the end of Q4 and a final store is expected to reopen in early 2019.

Gross margin rate was 41.2%, an increase of approximately 35 basis points versus last year driven by a lower markdown rate and slightly higher IMU more than offsetting higher freight costs which negatively impacted the gross margin rate by approximately 20 basis points.

We now expect freight expense to be slightly higher than we indicated on our fourth quarter call, up 20 basis points for the year versus our original expectation of 10 basis points.

However, this will not impact our loaded gross margin or our EBIT margin guidance for the full year as we expect to be able to offset the slight increase in freight costs with a combination of slightly higher merchandize margin and slightly lower product sourcing costs just as we did in Q1.

Product sourcing costs, which include the costs of processing goods through our supply chain and buying costs, were 5 basis points higher than last year as a percentage of net sales, slightly better than we expected.

We are once again very pleased with the continued productivity improvements in our supply chain and will continue to focus on additional productivity gains as we move forward in 2018. SG&A, less product sourcing costs, was 26.1%, approximately 45 basis points lower than last year as a percentage of sales.

These results were driven by leverage in store operations including occupancy, payroll and other store expenses as well as leverage in marketing and ongoing profit improvement initiatives. Adjusted EBITDA increased 21% or 28 million to 165 million.

Sales growth, gross margin improvement and SG&A leverage led to a 70-basis point expansion in rate for the quarter. Depreciation and amortization expense, exclusive of net favorable lease amortization, increased 3 million to 45 million and interest expense increased 1 million to 15 million.

The effective tax rate was 17.4% for the first quarter, driven by the statutory reduction in federal tax rates and by the accounting for share-based compensation. Combined, this resulted in adjusted net income of 87 million, a 54% increase versus last year. We continue to return value to our shareholders through our share repurchase program.

During the quarter, we repurchased approximately 488,000 shares of stock for 64 million. At the end of the first quarter, we had 153 million remaining on our 300 million share repurchase authorization that was approved in August 2017. All of this resulted in earnings per share of $1.20 versus $0.73 last year.

Adjusted earnings per share were $1.26 versus $0.79 last year. $1.26 per share result represents a $0.17 beat versus our top-end guidance. This beat was split between $0.11 of true operating outperformance and $0.06 due to a lower tax rate than planned. Turning to our balance sheet.

At quarter end, we had 83 million in cash, 12 million in borrowings on our ABL and had unused credit availability of approximately 533 million. We ended the period with total debt of 1.1 billion and a debt-to-adjusted EBITDA leverage ratio of 1.6x.

In regards to the $1.1 billion outstanding on our term loan B, 800 million of that amount is fixed at an effective LIBOR interest rate of 1.65% including the swap premium through May of 2019. Given the current interest rate environment, we will continue to evaluate hedging options beyond May of 2019.

In addition, we will continue to actively monitor the credit markets for an opportunity to reprice our term loan which is currently priced at LIBOR plus 250 basis points. As a reminder, our soft call provision from our last repricing expired on May 17, 2018.

Finally, our $600 million ABL matures on August 13, 2019 which we anticipate extending for five years. Given our continued strong performance, relatively low usage on our ABL and decreasing leverage ratio, we believe we have opportunities to continue to optimize our capital structure while simultaneously reducing interest expense.

Merchandize inventories were 787 million versus 726 million last year.

This increase was driven primarily by inventory related to 51 net new stores opened since the first quarter of 2017 and a slight increase in pack and hold inventory, which was 27% of total inventory at the end of the first quarter of fiscal 2018 compared to 26% at the end of the first quarter of fiscal 2017.

Comparable store inventory decreased 7% and comparable store inventory turnover improved 12% during the first quarter. In addition, we were very pleased that inventory aged 91 days and older at the end of the first quarter was down significantly versus the prior year.

Cash flow provided by operations increased 32 million to 60 million driven by higher net income. Net capital expenditures were 52 million for the first quarter. During the quarter, we opened 24 gross new stores including five relocations and closed one store ending the period with 647 stores.

We continue to expect to open 60 gross new stores and close or relocate 20 to 25 stores resulting in 35 to 40 net new stores for fiscal 2018. Now, I will turn to our updated outlook. For the 2018 fiscal year, we now expect total sales growth in the range of 9.7% to 10.5% compared to fiscal 2017, excluding the 53rd week.

Comparable store sales on a shifted basis to increase in the range of 2% to 3% for the balance of fiscal 2018 resulting in a full year fiscal 2018 shifted comparable store sales increase of 2.6% to 3.4% on top of last year’s 3.4% increase.

Adjusted EBITDA margin expansion of 30 to 40 basis points; depreciation and amortization, exclusive of favorable lease amortization, to be approximately 200 million; adjusted EBIT margin expansion of 20 to 30 basis points; interest expense to approximate 60 million and effective tax rate of approximately 22% to 23%; capital expenditures, net of landlord allowances, are expected to be approximately 250 million.

Based on our strong first quarter performance, this results in an updated adjusted earnings per share guidance in the range of $5.90 to $6.00 and the company now expects adjusted EPS, excluding the estimated impact of 2017 tax reform and the accounting for share-based compensation, to be in the range of $4.82 to $4.92, representing an increase of 16% to 19% over the comparable 52-week 2017 adjusted EPS of $4.14.

For the second quarter of 2018, we expect total sales growth in the range of 8% to 9%; comparable store sales on a shifted basis to increase between 2% and 3%; adjusted earnings per share expected to be in the range of $0.91 to $0.95 compared to $0.72 per share last year.

Excluding the estimated impact of the 2017 tax reform and the accounting change for share-based compensation, we expect adjusted EPS growth to be in the range of 12% to 17%. With that, I will turn it over to Tom for closing remarks..

Thanks, Marc. In summary, we believe our results this quarter once again demonstrate the agility and increasingly strong foundation of our business model.

We drove operating results above our expectations and expect the continued implementation of our growth initiatives and store expansion plans to enable us to continue our positive performance through the remainder of 2018 and beyond.

We remain confident in our outlook and believe in our focus on evolving our off-price model and our ability to capitalize on the rapidly changing retail landscape. This positions us well to bring more great brands, styles and value to our customers and increased value for our shareholders.

Again, I’d like to thank the store, supply chain, and corporate teams for their contributions to our strong first quarter results. With that, I’d like to turn the call over to the operator to begin the question-and-answer portion of the call..

Thank you. [Operator Instructions]. Our first question comes from Ike Boruchow with Wells Fargo. Your may begin..

Hi. Good morning, Tom, Marc, David. Congrats on another great quarter..

Thanks..

Tom, for you, a two-part question if you don’t mind. First, a number of retailers had talked about the impact of weather on Q1, maybe could you comment on the impact weather had on your business in the first quarter? And then second, I think on the last call you talked about some issues and opportunities in ladies apparel.

Could you maybe update us on any progress in that category?.

Okay. Well, first of all, there’s no question that weather was not as favorable as it could have been in the first quarter. So it had to have some impact on our apparel businesses overall. Temperatures nationally were colder than last for each month of the quarter.

But with that said, like in the fourth quarter we were pleased with the progress we made in Q1 deweathering our business.

Apparel in total did come slightly below the chain average while coats clearly underperformed the chain; however, growth in those underdeveloped, less weather-sensitive businesses such as home and beauty among others helped us not only overcome the weather but outperformed in total once again in the first quarter.

We also saw weather impact in our regional performances as the West and the Southwest led the chain, while the more weather-sensitive regions, the Northeast and Midwest, were either with or below the chain. So the second part of your question in terms of what’s going on in ladies apparel.

First of all, it trended much closer to the chain average in the first quarter than it did in 2017. That said, the business is not outperforming the chain. As I said in my prepared remarks, missy sportswear led the first quarter trend again in ladies apparel.

Not only were better and active strong but in the first quarter we also saw much stronger performance in moderate sportswear which also comped above the chain which was very encouraging.

In addition, as I mentioned earlier, we are adding a second SVP in ladies apparel in the second half of the year to expand our leadership and increase our specialization in that business..

Got it. Thanks, Tom. And then if I can, one more. Marc, on the freight dynamic, I think freight costs are 20 bips you said in Q1 and now you’re expecting higher for the year.

Can you just kind of walk us through what changed in the drivers of gross margin that are helping you offset those costs?.

Yes, sure. You’re absolutely right. We had originally guided 10-basis point headwind in freight for the year and that was really being driven by three things; higher fuel, higher contract rates and a mix of more West Coast deliveries versus the East Coast.

It just so happens in Q1 the fuel really ended up being higher than we had originally planned and that really – that drove that additional 10 basis points.

The good news is that we were able to offset it and we were able to offset it with 5 basis points of incremental good news in merchandize margin and with product sourcing costs only being 5 basis points of course when we had originally guided 10.

So to your point on the year now, we are forecasting 20 basis points of bad news for freight due to fuel and contract rate increases more so for the back half of the year. Again, both of those are beyond our original assumptions.

But we’re still guiding that 30 basis points of loaded margin and of course by loaded margin what I mean, the reported margin less the product sourcing costs. Those are still at 30 basis points. So we believe we can offset those incremental freight costs with increased merchandize margin and little bit less in product sourcing just as we did in Q1.

And I guess your other question was, what were the specifics that helped us at that? So we had 55 basis points of good news in merch margin and that was really driven primarily by a lower markdown rate, slightly higher markup but the lower markdowns was the big contributor there.

And you got to tip your head to our merchant team because they did a great job with inventory management. Comp store inventories were down 7%. Comp store turnover was 12% faster and as Tom mentioned, aged inventory once again at record low levels. I guess I should also throw out that we did start the year with very clean inventories.

And from a product sourcing point of view, supply chain continues to embrace our profit improvement culture and they were able to implement some efficiencies during the quarter and I’m certainly hopeful that that will continue as well..

Got it. Congrats, everyone..

Thanks..

Thank you..

Thank you. Our next question comes from Matthew Boss with JPMorgan. You may begin..

Thanks. Congrats on another great quarter guys..

Thanks..

Tom, as we think about lateral brick and mortar closures, have you seen any impact on Baby Depot from the Toys R Us bankruptcy so far? And I guess as we think about your store growth trajectory, does Toys R Us present an acceleration opportunity where maybe there’s the opportunity to potentially increase store openings as the year progresses?.

Well, we haven’t talked about Baby Depot for a long time as an outperforming business. We really feel that we’re making a lot of progress in that business overall. Candid, we feel we’re on the right track at the right time. So the Toys R Us liquidation does create disruption in product availability.

But with that said, Baby Depot it’s a very important business but it’s a small heritage business for us and we see it as a differentiator overall. And we’ll see over time what will happen with the business based on obviously Toys R Us no longer in business.

In addition to the potential sales opportunity, Toys R Us situation could present us with a real estate opportunity. This type of situation, like the Sports Authority liquidation is a fluid dynamic process and will evolve over time.

The good news as I mentioned, we have our C point strategy, so we have real clarity as to what stores we may be interested in. We did end up with over 30 Sports Authority locations, so we shall see if the Toys R Us situation will end up yielding additional locations for us or not.

As always, we will be disciplined, not chase store count and make sound financial decisions as we approach this potential opportunity. But stay tuned..

Great. And then maybe one for Marc. Understanding the comps you guys reported on a shifted basis, total sales in the first quarter were up 13% and then the second quarter’s plan up 8% to 9%.

I guess can you just walk through some of the drivers of the delta and any color you can provide on the shift by quarter for the balance of the year that would be helpful?.

Sure, Matt. As Tom mentioned in his prepared remarks, we believe that shift is the most accurate representation of our comp sales performance. That’s how we plan and manage our business.

I think some other folks have talked about the impact of shifted versus non-shifted spring versus fall, but just to state the obvious in terms for us reporting comps on a shifted basis versus non-shifted results in us reporting a lower number for the first three quarters and a higher number in Q4.

In terms of your specific question, we’re moving from a 13% in Q1 to a 9% at the high end of Q2, really two drivers there. The first is, the higher shift impact we had in Q1 versus Q2. So in Q1, Matt, you’re talking about a differential over 200 basis points and in Q2 expectation is it’s more around [50] [ph]. So that’s one piece.

And the second piece was of course our Q1 was a [4-A] [ph] comp and at the high end of Q2 were [to 3] [ph]. So those were the big differences there. Matt, in terms of modeling the rest of the year, we obviously guided 2% to 3% shifted comps for the remaining quarters of the year.

But given that we’re up against this 53rd week, we thought maybe it’s be helpful to provide a little bit more color than we typically do and this is not something that we’re going to do every year but just to try and help as it relates to total sales.

We’ll give some direction that for Q3 the total sales increase should be approximately 11% to 12% and Q4 total sales increase to approximate 7% to 8%. Those are the numbers that we have baked into that full year guidance that we already provided just to try to help a little bit here..

That’s great, really helpful and congrats again..

Thanks, Matt..

Thank you. Our next question comes from Lorraine Hutchinson with Bank of America. Your line is open..

Thanks. Good morning. I wanted to ask about the initial markup was a nice driver to merchandized margin.

Can you talk about what drove that and then your expectations for markup going forward?.

Yes, slightly higher markup did help us, Lorraine, but just to be clear, the 55 basis points of good news we had in merch margin, the major piece of that was a lower markdown rate. The lower markdown rate was much more impactful than the markup.

And the markup I can tell you continues to be – as our buying team continues to mature, I think we continue to negotiate a little better. The slightly better markup came across all buy types which we like to see. So that obviously is a balance. This model is rooted in value as you well know, so we’re always balancing markup with driving sales.

But I would expect some slight pickup there, but again I think the majority of our merch margin pickup through the rest of the year will be more so related to the lower markdown rate..

Yes, and just to piggyback on what Marc said. We’re going to continue to pass value onto the customer because one of our primary focus is driving comp store growth. So we will really – most of the improvement will come out of the markdown like Marc said.

Markdown optimization has been really a good tool for us and it’s really helped us stay current in terms of the inventory freshness. So again, we’re going to continue just to deliver value to the customer. That’s our number one goal..

Thank you..

Thank you. Our next question comes from Kimberly Greenberger with Morgan Stanley. You may begin..

Great. Thank you so much, Marc, and I appreciate the extra color on the modeling. If I could just follow up on a couple of the things you talked about. In the fourth quarter you indicated 7% to 8% revenue growth.

Is that a 13-week versus 14-week sales growth rate?.

No, that’s flat, 13 to 13..

Okay, got it. Thank you. Perfect. And then tax rate obviously you’re coming in lower than expected. I know it’s very difficult to project at the stock comp piece I think came in $0.06 better than the guide.

Should we leave $0.22 to $0.23 – I’m sorry, 22% to 23% in our tax rate for the rest of the year?.

Yes. Kimberly, that’s the best we can give. You’re absolutely right. The big difference in the $0.06 in that tax rate was related to share-based compensation and just all of our associates. It is not just restricted stock vesting for us. A lot of that has to do with options and we have options at varying strike prices.

So that was the big driver that took us to 17. But for the rest of the year you asked for right now 22% to 23% and of course we’ll update that each quarter..

Okay, great. And then my last modeling clarification is just on SG&A. I’m wondering if the one-week shift in the fiscal calendar is shifting perhaps here in the first quarter a higher expense week into Q1 and therefore caused perhaps a slightly higher SG&A growth rate in the first quarter.

And is that expected to maybe can vary throughout the year?.

Yes, I guess the way I would say it is, is we did end up with 45 basis points of leverage in other SG&A and typically on a 5 comp that number would be 40. So maybe it was about 5 higher and some better flow through. But nothing significant, nothing that changes our full year guide..

Great. Thanks, Marc, and congratulations on a really great first quarter..

You bet, Kimberly..

Thank you. Our next question comes from John Kernan with Cowen. You may begin..

Good morning, everybody. Congrats on another solid quarter..

Thanks, John..

Tom, I think you talked about reduced aged inventory to record lows, comparable store inventory turns are at record highs.

How much lower can you push aged inventory? How much faster can you turn comparable store inventory at this point before you start to affect the comps in your mind?.

Well, we feel we have a lot of opportunity to increase our inventory turns. We’re going to focus on reducing our comp store inventories by mid to high-single digits or a long period of time. Even though we’ve done a really great job in reducing our inventories, I just personally feel that we can do even more.

So I think it’s a long time before it would impact our overall sales performance, but I feel very good about what we’ve done. The aged inventories I mentioned was at record lows and freshness goods were received in our stores were lesser days as record high.

So we’re going in the right direction but we still I think have work to do in terms of increasing our turns..

That’s great. Thanks. And then Marc, did you give us an updated on the drivers of comp between traffic and ticket in Q1 and how are you thinking about that as we go through the year on the guidance for 2 to 3? Thank you..

Sure, John. Traffic was by far the biggest driver of our comp. We did see nice increases in AUR and UPT as well, conversion was flat. And again, traffic up 13 of the last 15 quarters. So we feel real good about that.

AUR was up again as we said and it probably a combination; higher, better, best penetration, higher percent of full price sales versus markdown sales. But John, we’ve talked about this before. We don’t have a strategy to move AUR from X to Y.

We have lots of merchandizing strategies to grow the business and some of those put downward pressure on AUR and some of them put upward pressure on AUR. So I think we’ll continue to move similarly but again it’s really going to be based on those underlying merchandizing strategies..

That’s great. Thanks everybody. Best of luck..

Thanks, John..

Thank you. Our next question comes from Daniel Hofkin with William Blair. You may begin..

Good morning, everyone. Nice job once again on the quarter..

Thank you..

Just a couple of questions, I don’t know if you touched on this specifically. But any comp progression comment within the quarter? I think February of last year you had the negative impact of the late tax refund.

So just curious, is February the best month or how did that flow this quarter?.

I guess the best way to answer that is we felt good about February and we felt good about Marpril [ph]..

Okay..

Because with the Easter shift – it can’t do any better than that..

You have to look at it March and April combined..

Fair enough.

I guess if you were to adjust for that, was – did February have an outsized gain relative to March and April combined?.

No. We were very happy with the result in both those time periods, if you will..

Okay.

And then can you discuss the stores I guess that are – that have been under your brand standard for some period of time? Can you discuss kind of the performance of those stores whether it’s comps or margins progression versus stores that are not yet under the brand standard? Any commentary you can give there?.

Well, I’ll tell you, we see nice comps across the entire fleet of stores and across really all of our cohorts. So even the older stores we’re seeing nice comps and a lot of those older stores, the bigger stores, but they also pay low occupancy rates and have very high EBIT percent. So overall, we’re very comfortable with those.

If the question was more related to new stores and our new store cohorts and how they comp versus the chain average, Dan, I’d probably go back to the stat that we gave at the end of the last year which was our 14 and 15 cohorts together, how did they react 16 to 17 versus the chain. And they out-comped the chain by 240 basis points.

It’s probably I’d go back to [indiscernible] for the most recent cohort..

Okay. Thanks very much. Best of luck..

Thank you..

Thank you. Our next question comes from Adrienne Yih with Wolfe Research. You may begin. Adrienne, you’re line is open. Please check your mute button..

Hello?.

Hello.

We can hear you now?.

You can hear me now? Okay. I was not mute though. Anyway, congratulations..

Thank you..

Great. Tom, my first question is for you on the pack away strategy. So I was wondering if you were able to take advantage of some other retailers on maybe issues at the latter end of the quarter.

And how quickly can you redeploy the current pack away that you have? And then Marc, as you layer in higher density store locations, are you finding that your new store productivity is improving? Thank you..

As far as pack away goes, right now we’re comfortable with the level of pack and hold that we have. We really don’t want to talk about how we source our product to be honest with you. As I mentioned, there’s tons of products available. And we can move on pack and hold and bring it into our stores if we need it.

We’ve done that successfully with coats when it got colder in prior years, so we can deploy them. We have a lot of liquidity, meaning we have a lot of open buy. So we can continue to buy product every single day if we need to. Our merchants are still on the market every single week looking for great deals.

And some of it will be put on the selling floor, some of it will be put in pack and hold, but overall we have the agility to really move in any direction we need to, to support the business..

Okay. Thanks..

And Adrienne, our new store productivity, the answer is absolutely. These new stores have a higher sales per square foot. I think the stat that we did give at the end of the year was our stores less than 60,000 square feet were 22% more productive from a sales versus square foot point of view..

Okay. That would make sense. And my last housekeeping question.

Your average hourly rate increase, is that already in the Q1 numbers or did that go into effect in 2Q?.

Everything is baked into our guidance..

Yes..

Yes, in the guidance. I’m just curious that some people – some retailers have the implementation of AHR on a July annual basis.

Is that the case?.

We have various things that happen throughout the year depending on the market..

Okay, fair enough. Thanks so much and best of luck..

Thank you..

Thank you. Our next question comes from Michael Binetti with Credit Suisse. You may begin..

Hi. Good morning. This is actually Casey Callan [ph] on for Michael. Thanks so much for taking our questions. And let me also add our congrats on a solid quarter..

Thank you..

So looking at EBIT margins, so EBIT margins on the second quarter looked like they’re implied to be up in the range of about 60 to 70 basis points but the full year margins are guided to be a little bit lower, up 20 to 30.

If we’re right on some of those forensics, it looks like the second half marks an expansion, they should slow pretty significantly but it looks like you’re actually up against a little bit easier margin comparison in the second half.

Can you maybe talk through some of the puts and takes we should be thinking about on margins as we go into the second half?.

We guide conservatively. So as of right now, EBIT margins 20 to 30 basis points for the year and those are all coming with a 2% to 3% shift to comp. Obviously as we move through it, I think we’ve proven that our sales outperformed that number that we can have a pretty nice flow through on the incremental sales.

But we’d like to be conservative within our guidance..

Okay, great. Makes sense. And then maybe on the top line obviously shifting to the second quarter and the rest of the year you’re going to be up against some tougher same-store sales compares.

I know that you typically target comps in the 2% to 3% range but this does require a slight acceleration in the two-year stack rate relative to what you did in the first quarter.

You clearly have some big opportunities in home and beauty and women’s apparel, but can you maybe talk through what you see as the biggest near-term driver to help drive comps higher as you start to get into these tougher compares?.

Well, I think we’re going to deploy the current strategy that we have right now that drove the first quarter results. As I mentioned, we have big opportunities in home which we continue to – we’ll continue to see that in the future.

In beauty, our gifting strategy, we’re really excited about our gifting strategy in the first quarter and that will continue and obviously peak during the fourth quarter overall. But it’s the same as we’ve talked about a lot. We need to continue to execute our off-price model superbly and that will obviously help us in the future..

Great. Thanks so much for all the color and best of luck for the rest of the year..

Thank you..

Operator, we have time for one more question..

Our last question is from Laura Champine with Loop Capital. You may begin..

[Technical Difficulty] …also on the women’s apparel side, I think you mentioned that you believe home can eventually become 20% of sales. You entered [ph] an index on women’s apparel and your hiring new management to drive growth there.

Can you give your thoughts on a similar basis for what the penetration rate should be on women’s apparel at Burlington?.

We think it should be around 30%. So we have a big opportunity there. Again, we had some really strong businesses in the first quarter. Ladies sportswear was strong overall really led by a better sportswear business, our active business and then we saw some improvement in our moderate sportswear business.

But yes, we really feel that we have a big opportunity relative to some of our peers out there that run in the 30% range..

Got it. Thank you..

Thank you. This concludes the question-and-answer session. I’d like to turn the call back over to Tom Kingsbury for closing remarks..

Thanks, operator. Thanks for joining us today. We look forward to speaking with you when we report second quarter results in late August. Thank you..

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. Have a wonderful day..