Burlington, N.J. – Although traffic was flat in the second quarter, Burlington Stores Inc. shoppers were spending a little more freely.
Sales of $2.7 billion were up 10% – on top of a 13% increase in last year’s Q2. Same-store sales rose 5% on top of a 5% increase in the year-ago quarter, with AUR up in the mid-single digits.
The top line also got a lift from new stores and better-than-expected performance from locations that are now beginning to comp.
Burlington is keeping in-store inventories tight to drive faster turns and reduce markdowns. Still, merchants earlier this year loaded up on reserve inventory to get ahead of tariffs. At the end of the quarter, reserve accounted for 50% of total inventory compared to 41% at the close of last year’s second quarter.
Before the quarter, buyers began to pivot away from categories with strongest tariff impacts – especially during the period when goods from China were carrying a 145% tariff, according to CEO Michael O’Sullivan.
“We’ve been able to remix and remodel our margin plan to find an offset to tariffs,” he said.
That included cutting back on decorative bedding, cookware and toys. “ These categories were a drag on the home business during the quarter,” said O’Sullivan. “Despite this headwind, we were able to generate a 5% comp across the store.”
Net income for the quarter ended Aug. 2 jumped 27% to $94 million, or $1.47 per share. Merchandise margin expanded 60 basis points, driven by lower shortage and reduced markdowns, while freight expense improved 30 basis points as a percentage of net sales.
“The third quarter is off to a solid start, and as is our practice, we will manage our business conservatively and be ready to chase,” he said.
While Burlington is maintaining its guidance for for 0% to 2% comp growth in the third and fourth quarters, it did raise its full-year outlook on earnings. Adjusted EPS are expected in the range of $9.19 to $9.59, as compared to $8.35 of adjusted EPS last year.
