BURL Shares Slide 8% Despite Q2 Earnings Beat, Higher FY26 View

Burlington Stores, Inc. BURL reported second-quarter fiscal 2026 results, with the bottom line surpassing the Zacks Consensus Estimate but revenues falling short. Still, both earnings and sales increased sharply year over year. The off-price retailer benefited from merchandise-margin expansion, supply-chain productivity, and adjusted selling, general and administrative (SG&A) leverage, enabling the company to post its 15th consecutive quarter of double-digit underlying earnings growth.

Management highlighted solid execution across merchandising, inventory management, store operations and the supply chain. Beauty and accessories were the strongest categories, while the Home business began outperforming the chain late in the quarter. The Northeast and Midwest led regional performance, while the Southwest trailed. New stores remained a major growth driver, with the company adding 45 net new stores during the quarter.

Despite the earnings beat and an increase in the fiscal 2026 guidance, investors reacted negatively to the results, sending shares down more than 7.6% yesterday. The sell-off appears to have reflected the revenue shortfall, comparable sales at the midpoint of guidance and a third-quarter forecast that incorporates year-over-year margin contraction and lower earnings per share (EPS) as tariff refunds are reinvested. Management's more cautious assessment of spending pressure on moderate- and low-income households may have weighed on sentiment.

More on Burlington Stores’ Q2 Financial Results

Burlington Stores reported adjusted earnings of $2.96 per share, comfortably beating the Zacks Consensus Estimate of $2.18. Adjusted EPS increased 86.2% from $1.59 in the year-ago quarter. The results included a 64-cent-per-share benefit from $55 million in tariff refunds. Excluding the refunds and expenses associated with bankruptcy-acquired leases, adjusted EPS was $2.37, up 38% from $1.72 a year earlier and above management's guidance of $2.05-$2.20.

Total revenues increased 11% year over year to $3,002 million but missed the Zacks Consensus Estimate of $3,029 million. Net sales rose 11% to $2,998 million from $2,701 million in the prior-year quarter.

Comparable store sales increased 2%, at the mid-point of management's guidance of 1-3% and on top of 5% growth in the year-ago quarter, producing a solid 7% two-year stack. New-store cannibalization created an estimated 1.5-percentage-point headwind to comps. According to management, the comparable-sales increase was driven mainly by a higher basket size, while transactions were relatively flat. Our model anticipated a 2.7% year-over-year rise in comparable store sales for the fiscal second quarter.

Insight Into BURL’s Margins

The gross margin was 46.2%, rising 250 basis points from the prior-year rate, including the $55-million tariff-refund benefit. Without that benefit, the gross margin was 44.3%, an underlying improvement of 60 basis points. The merchandise margin gained 70 basis points on better markup, the timing of markdowns and a lower shortage rate, while freight costs created a 10-basis-point offset.

Adjusted SG&A expenses were $791.2 million, up 8.1% from $732.3 million in the second quarter of fiscal 2025. After excluding $4 million and $11 million during the fiscal second quarters of 2026 and 2025, respectively, of expenses associated with bankruptcy-acquired leases, adjusted SG&A represented 26.2% of net sales versus 26.7% a year earlier. Lower store-related costs, including occupancy expenses and leverage on the 11% sales increase, drove the 50-basis-point improvement.

Product sourcing costs rose to $225.9 million from $209 million. As a share of sales, expenses improved by 20 basis points as distribution-center productivity and cost savings outweighed start-up pressure from the new Savannah facility. The measure covers buying activities and the cost of moving merchandise through Burlington Stores' supply chain.

On a basis that excludes the tariff refund and bankruptcy-acquired lease expenses, adjusted EBIT climbed to $210 million from $162 million. The related margin increased 100 basis points to 7%, comfortably ahead of management's 30-60-basis-point expansion target. Merchandise margin strength, supply-chain productivity and SG&A leverage accounted for the outperformance.

Adjusted EBITDA on the same underlying basis advanced to $324 million from $257 million. Its margin widened by 130 basis points, demonstrating strong operating flow-through despite the modest 2% comparable-sales increase.

BURL’s Financial Snapshot: Cash, Debt & Equity

Burlington Stores ended the second quarter of fiscal 2026 with total liquidity of $1.65 billion, consisting of $704 million in unrestricted cash and $942 million of availability under its asset-based lending facility.

Total outstanding debt at the quarter-end was $1.91 billion, including $1.71 billion under the term-loan facility and $186 million in convertible notes. The company had no borrowings under its asset-based lending facility.

The company repurchased 270,279 shares of its common stock for $87 million in the fiscal second quarter. Fiscal year-to-date share repurchases totaled $167 million. At the end of the fiscal second quarter, $218 million remained available under the current share-repurchase authorization, which expires in May 2027.

BURL’s Store Update

In the second quarter of fiscal 2026, Burlington Stores opened 51 stores, including six relocations, resulting in a net increase of 45 stores during the period. The company ended the quarter with 1,287 stores across 47 states, Washington, DC, and Puerto Rico. Over the trailing 12 months, Burlington Stores added 149 net new stores, increasing its store count 13%.

BURL’s Q3 Guidance

For third-quarter fiscal 2026, management projects total sales growth of 9-11% and comparable sales growth of 1-3%. The adjusted EBIT margin is expected to contract 60-80 basis points. That outlook excludes $2 million of anticipated bankruptcy-acquired lease expenses compared with $11 million in the year-ago quarter.

The projected margin decline reflects the planned reinvestment of about 40% of the tariff refunds during the quarter to provide sharper customer value. Excluding this reinvestment, management estimates that the third-quarter operating margin would increase modestly year over year.

Burlington Stores expects continued leverage in product sourcing costs as it realizes benefits from supply-chain productivity and cost-saving initiatives. Management expects additional SG&A leverage, although these benefits are expected to be partially offset by higher fuel-related freight expenses.

The company anticipates an adjusted effective tax rate of 26% and adjusted earnings per share of $1.60-$1.70, whereas it reported $1.80 in the third quarter of fiscal 2025. Management noted that quarter-to-date comparable sales were within 1-3% guidance, with comparisons expected to ease in September and October.

BURL Raised Its FY26 View

Burlington Stores lifted its fiscal 2026 total-sales forecast to growth of 10-11% from 9-11%. The company raised its comparable-sales assumption to 3-4% from 2-4%, following a 2% increase in fiscal 2025. The company expects to open approximately 115 net new stores during the year, with 135 gross store openings planned. Management remains confident in its ability to open at least 110 net new stores annually and reach or exceed 1,500 stores by the end of fiscal 2028.

The updated plan calls for adjusted EBIT margin expansion of 20-40 basis points, improving on the earlier 10-30-basis-point range. It excludes $16 million of anticipated bankruptcy-acquired lease expenses in fiscal 2026 compared with $35 million in fiscal 2025. Full-year adjusted EPS is forecast at $11.77-$11.97, up from the prior stated $11.45-$11.80, whereas it reported $10.17 in fiscal 2025. The revised range implies 16-18% year-over-year growth. Capital expenditure, net of landlord allowances, is projected at $875 million.

Management noted that the $55-million tariff-refund benefit recognized in the second quarter is expected to be fully reinvested in sharper customer value during the second half, making the direct full-year earnings impact neutral. About 40% of the reinvestment is planned for the third quarter and 60% for the fourth quarter. Excluding the reinvestment, the underlying fall outlook remains unchanged, with the adjusted EBIT margin expansion of 10-30 basis points and adjusted EPS of $7.30-$7.50. 

For the fourth quarter, total sales are projected to increase 7-9%, with comparable-store sales up 1-3%. Adjusted earnings are expected at $5.05-$5.15 per share, whereas it registered $4.99 last year. The operating margin is forecast to decline 40-60 basis points. Excluding refund reinvestment, management expects the fourth-quarter operating margin to increase year over year.

BURL Stock Past 3-Month Performances

Image Source: Zacks Investment Research

Over the past three months, this Zacks Rank #3 (Hold) company has lost 10.4% against the industry’s 0.5% growth.

Key Picks

We have highlighted three better-ranked stocks, namely Target Corporation TGT, Macy's, Inc. M and Ross Stores Inc. ROST.

Target offers guests fashionable, differentiated merchandise and everyday essentials at discounted prices. It currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Target’s current fiscal-year earnings and sales suggests growth of 37.7% and 4.6%, respectively, from the year-ago actuals. TGT delivered a trailing four-quarter average earnings surprise of 10.5%.

Macy's sells a wide range of merchandise, including men’s, women’s and children’s apparel and accessories, cosmetics, home furnishings and other consumer goods. The company carries a Zacks Rank #2 (Buy) at present. 

The Zacks Consensus Estimate for Macy's current fiscal-year earnings and sales suggests a decline of 4.3% and growth of 0.1%, respectively, from the year-ago actuals. Macy's delivered a trailing four-quarter average earnings surprise of 211%.

Ross Stores operates as an off-price retailer of apparel and home accessories. The company also currently has a Zacks Rank #2. 

The Zacks Consensus Estimate for Ross Stores’ current fiscal-year earnings and sales indicates growth of 32.8% and 11.7%, respectively, from the year-ago actuals. ROST delivered a trailing four-quarter average earnings surprise of 11.2%.

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