Burlington Stores(US:BURL)2025-11-25 14:30Financial Data and Key Metrics Changes - Total sales increased by 7% in Q3 2025, following an 11% growth in the same quarter last year, resulting in year-to-date total sales growth of 8% on top of 11% from the previous year [4][13] - Comparable store sales for Q3 increased by 1%, with a significant drop in traffic due to warmer-than-usual weather impacting sales [4][5] - Adjusted EBIT margin for Q3 was 6.2%, which is 60 basis points higher than last year, exceeding guidance expectations [14][19] - Adjusted earnings per share for Q3 was $1.80, representing a 16% increase compared to the prior year [14][19] Business Line Data and Key Metrics Changes - The gross margin rate for Q3 was 44.2%, an increase of 30 basis points year-over-year, driven by a 10 basis point increase in merchandise margin and a 20 basis point decrease in freight expenses [13][14] - Product sourcing costs were $214 million in Q3, slightly up from $209 million last year, but decreased by 40 basis points compared to last year due to supply chain efficiencies [13][14] - Store inventories were down 2% year-over-year, indicating effective inventory management despite the weather-driven sales slowdown [15][16] Market Data and Key Metrics Changes - The Southeast region was the strongest performer in Q3, while the Southwest trailed behind the chain average [72] - Strong performance was noted in beauty, accessories, and shoes, while home category sales were softer [72] Company Strategy and Development Direction - The company plans to open 110 net new stores in 2026, reflecting confidence in the new store pipeline and performance [8][20] - The updated full-year 2025 guidance indicates an EBIT margin expansion of 60-70 basis points, despite tariff pressures [7][19] - The company aims for average annual comp sales growth of 4-5% over the remaining years of its long-range plan [11][58] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the significant impact of weather on Q3 sales, particularly in cold weather categories, and expressed optimism about recent trends as weather normalized [5][21] - The company is cautious about the economic environment for 2026, planning conservatively for comp sales growth of flat to 2% [8][20] - Management emphasized the importance of adapting to market conditions and learning from off-price peers to maintain competitiveness [46][48] Other Important Information - The company repurchased $61 million in stock during Q3, with $444 million remaining on the repurchase authorization [17] - Reserve inventory was 35% of total inventory, up from 32% last year, indicating a strategic approach to manage inventory levels [16] Q&A Session Summary Question: Concerns about relative performance compared to peers - Management acknowledged a 1% comp in Q3 compared to peers' 6-7%, attributing part of the difference to weather but recognizing the need for improvement in performance [26][28] Question: Details on operating margin expansion - Management highlighted a 60 basis point increase in operating margin, driven by merchandise margin improvements and cost efficiencies despite tariff pressures [29][30] Question: Impact of decisions on margin versus sales - Management confirmed that some decisions made to enhance margins may have negatively impacted sales, particularly in light of tariff mitigation strategies [34][35] Question: Trends with lower-income customers - Management reported resilience among lower-income customers, with strong performance in stores located in lower-income trade areas [60][61] Question: Guidance for fourth quarter - Management maintained Q4 guidance for comp sales of flat to 2% and total sales growth of 7-9%, while increasing margin and EPS guidance [63][64]