Can Burlington Stores Keep Expanding Margins Despite Tariff Pressures?

Core Insights - Burlington Stores, Inc. (BURL) is effectively managing tariff-related pressures through disciplined cost control and operational efficiencies, leading to improved gross and EBIT margins [1][5] Financial Performance - In Q3 of fiscal 2025, the EBIT margin increased by 60 basis points year-over-year to 6.2%, while the gross margin rose by 30 basis points to 44.2% [1][9] - Merchandise margin improved by 10 basis points, and freight costs decreased by 20 basis points, contributing to the overall margin enhancement [1] - Product sourcing costs decreased by 40 basis points due to supply chain and efficiency initiatives [1] Cost Management - Adjusted selling, general, and administrative expenses (SG&A) improved by about 20 basis points due to store efficiencies, although this was offset by a 20 basis point increase in depreciation from higher spending on supply chain and new stores [2] - Management focused on vendor negotiation, assortment adjustments, faster inventory turns, and distribution center productivity to mitigate tariff-driven markup pressure [3] Future Guidance - Management raised guidance for fiscal 2025, expecting the adjusted EBIT margin to increase by 60 to 70 basis points, up from the previous range of 20 to 40 basis points [4] - For Q4, the adjusted EBIT margin is projected to rise by 30 to 50 basis points, with earnings per share expected to be between $4.50 and $4.70, indicating a year-over-year increase of 9% to 14% [4] Market Position - BURL's shares have gained 10% over the past six months, outperforming the industry, which rose by only 0.5% [6] - The company trades at a forward price-to-earnings ratio of 25.42, lower than the industry average of 30.15 [7] Earnings Estimates - The Zacks Consensus Estimate for BURL's fiscal 2026 and 2027 earnings implies year-over-year growth of 17.6% and 13%, respectively [11]