Burlington Stores, Inc. (BURL)·Q1 2026 Earnings Summary

Executive Summary

• Q1 2026: Net sales $2.50B (+6% YoY), comps flat; GAAP EPS $1.58 and Adjusted EPS $1.67, both ahead of guidance due to expense timing and proactive cost actions; gross margin expanded 30bps to 43.8% .
• Management reaffirmed FY 2025 guidance (Adjusted EPS $8.70–$9.30), contingent on tariff levels holding, modest inflation impact, and ocean freight staying at contracted rates .
• Operating leverage driven by 30bps lower adjusted SG&A rate and 20bps merchandise margin gain; expense favorability in Q1 will reverse in Q2 (~$0.14 EPS headwind) .
• Catalysts: beat vs internal guidance, tariff mitigation “war chest,” elevated reserve inventory for opportunistic buys, and newly authorized $500M repurchase program .

What Went Well and What Went Wrong

• What Went Well

  • Adjusted EPS rose 18% YoY to $1.67, well ahead of guidance; half the beat driven by expense timing and half by margin/expense savings actions .
  • Gross margin +30bps to 43.8% (merchandise margin +20bps; freight -10bps), reflecting faster turns and reduced freight costs .
  • Strategic inventory posture: reserve inventory increased to 48% of total, enabling flexible deployment of branded goods later in the year without tariffs on those units .

• What Went Wrong

  • Comps were flat amid a broad-based slowdown vs Q4; February down ~2% on weather and tax refund timing, with March–April combined +1% .
  • Heightened tariff uncertainty likely to pressure merchandise margin; management’s guidance depends on tariffs remaining at current levels and limited inflation impact .
  • Expense timing favorability in Q1 will shift to Q2, trimming EPS by ~$0.14; product sourcing costs increased to $197M (+$14M YoY) and +10bps of sales .

Financial Results

Vs. Estimates (S&P Global)

Values with asterisk retrieved from S&P Global.

KPIs and Balance Sheet

Guidance Changes

Note: Management later raised FY 2025 Adjusted EPS to $9.19–$9.59 in Q2 results; outside Q1 timing, included for trend context .

Earnings Call Themes & Trends

Management Commentary

• “Adjusted EBIT Margin and EPS were ahead of guidance with approximately half of this beat to guidance coming from favorable timing of expenses that will negatively impact Q2.” — Michael O’Sullivan, CEO .
• “We anticipate that tariffs will put significant pressure on our merchandise margin, but...we can offset this pressure elsewhere in the P&L...These offsets, together with our Q1 earnings favorability, provide a path to achieving our original guidance.” — Michael O’Sullivan .
• “Q1 adjusted EBIT margin was 6.1%, thirty basis points higher than last year...Our adjusted EPS in Q1 was $1.67.” — Kristin Wolfe, CFO .
• “We worked with vendors to find buying opportunities in the inventory they already had here in the U.S....we’ve packed those goods away in reserve...did not incur a tariff.” — Michael O’Sullivan .

Q&A Highlights

• Tariff impact and court ruling: Management remains flexible; plans assume current tariff rates (30% China, 10% other) until clarity emerges; disruption could become a buying opportunity for off-price .
• Comps cadence: February -2% on weather/tax refunds; March–April combined +1%; May trend mid-point of Q2 guidance .
• Q1 beat drivers: ~$0.14 EPS timing favorability shifting to Q2; balance from cross-P&L savings actions .
• Demographics: Lower-income and high-Hispanic trade areas continue relative outperformance; border stores underperformed in Q1 .
• Freight: Ocean rates contracted through Q1 2026; domestic truck/intermodal capacity secured; spot exposure risk if imports surge .
• Marketing/Store Experience: Value-centric messaging, social amplification of deals, and Store Experience 2.0 rollout to all stores by end of 2026 .
• Real estate: ~100 net new stores in FY 2025; 46 Joann leases targeted to open spring 2026 .

Estimates Context

• Q1 2026 Wall Street consensus: Revenue $2.53B* and EPS $1.43*; Company delivered $2.50B revenue and GAAP EPS $1.58, a revenue slight miss but EPS beat vs consensus .
• Near-term consensus: Q2 2026 Revenue $2.63B* and EPS $1.29*; actual delivered later came in above on both (revenue $2.705B; EPS $1.47 GAAP) .
• Implication: EPS estimates likely need to reflect tariff mitigation, SG&A leverage, and reserve inventory benefits; revenue trajectory is consistent with 0–2% comp framework.

Values with asterisk retrieved from S&P Global.

Key Takeaways for Investors

• Earnings quality: Q1 beat was partly timing (~$0.14 EPS shift to Q2) but also structural (margin/expense actions); monitor Q2 normalization .
• Tariffs: Near-term margin pressure is likely, but Burlington’s flexibility, vendor partnerships, and reserve inventory should mitigate; guidance explicitly hinges on tariff/inflation/freight assumptions .
• Operating agility: Burlington 2.0 (merchandising systems, store experience, marketing) is increasingly visible in gross margin and SG&A trends; supports medium-term margin expansion .
• Inventory strategy: Elevated reserve inventory (48%) positions the company to sustain branded value without tariff exposure on those goods; expect opportunistic releases into peak seasons .
• Capital deployment: New $500M buyback authorization alongside ongoing repurchases provides downside support; watch share count drift vs guidance .
• Store growth: On track for ~100 net new stores in 2025 and Joann’s lease conversions in 2026, reinforcing multiyear unit growth .
• Trading lens: EPS beat vs consensus and reaffirmed FY guide are positives; headline volatility around tariffs/freight could create entry points; focus on comp cadence and margin resilience in Q2.

Note: All company results, margins, KPIs, guidance, quotes, and call commentary are cited from Burlington’s Q1 2026 8‑K/press release and earnings call transcript. Consensus estimates marked with * are values retrieved from S&P Global.