Q1 2025 Burlington Stores Inc Earnings Call

Ladies and gentlemen, thank you for standing by at this time I would like to welcome everyone to Burlington stores, Inc. First quarter 'twenty 'twenty four earnings and webcast. All lines have been placed on mute to prevent any background nice after the speakers' remarks, there will be a question and answer session.

Operator: Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to Burlington Stores Inc.'s first quarter 2024 earnings and webcast.

Operator: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, again press the star number one. Thank you. I would now like to turn the conference over to David Glick, Senior Vice President. Please go ahead.

Speaker Change: If you would like to ask a question during that time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, Chris. This started what thank you I would now like to turn the conference over to David Glick Senior Vice President. Please go ahead.

David J. Glick: Thank you operator, and good morning, everyone. We appreciate everyone's participation in today's conference call to discuss Burlington's fiscal 2024 first quarter operating results.

David J. Glick: Thank you, operator. And good morning, everyone.

David J. Glick: We appreciate everyone's participation in today's conference call to discuss Burlington's fiscal 2024 first quarter operating results. Unless otherwise indicated, our discussion of results for the 2024 first quarter excludes the impact of certain expenses associated with the acquisition of Bed Bath & Beyond. Our presenters today are Michael O'Sullivan, our Chief Executive Officer, and Kristin Wolfe, our EVP and Chief Financial Officer. Before I turn the call over to Michael, I would like to inform listeners that this call may not be transcribed, recorded, or broadcast without our express permission.

David J. Glick: Otherwise indicated our discussion of results for the 2024 first quarter exclude the impact of certain expenses associated with the acquisition of bed Bath <unk> beyond leases.

Speaker Change: Our presenters today are Michael O'sullivan, our Chief Executive Officer, and Christine <unk>, our EVP and Chief Financial Officer.

David J. Glick: A replay of the call will be available until June 6, 2024. However, we take no responsibility for inaccuracies that may appear in transcripts of this call by third parties. Our remarks and the Q&A that follows are copyrighted today by Burlington Stores. Marks made on this call concerning future expectations, events, strategies, objectives, trends, or projected financial results are subject to certain risks and uncertainties. Actual results may differ materially from those that are projected in such a forward-looking statement.

Speaker Change: Before I turn the call over to Michael I would like to inform listeners that this call may not be transcribed recorded or broadcast without our express permission.

Speaker Change: A replay of the call will be available until June six 2024.

Speaker Change: Take no responsibility for in Accuracies that may appear in transcripts of this call by third parties.

Speaker Change: Our remarks, and the Q&A that follows are copyrighted today by Brendan <unk> stores.

Michael O'sullivan: Remarks made on this call concerning future expectations events strategies objectives trends or projected financial results are subject to certain risks and uncertainties actual results may differ materially from those that are projected in such forward looking statements such risks and uncertainties include those that are describe.

David J. Glick: Such risks and uncertainties include those that are described in the company's 10-K for fiscal 2023 and in other filings with the SEC, all of which are expressly incorporated herein by reference. Please note that the financial results and expectations we discussed today are on a continuing operations basis. Reconciliations of the non-GAAP measures we discussed today to GAAP measures are included in today's press release. Now, Michael.

Michael O'sullivan: In the company's 10-K for fiscal 2023.

Michael O'sullivan: Our filings with the SEC all of which are expressly incorporated herein by reference.

Michael O'sullivan: Please note that the financial results and expectations. We discussed today are on a continuing operations basis.

Speaker Change: Reconciliations of the non-GAAP measures, we discuss today to GAAP measures are included in today's press release now Here's Michael.

Michael O'sullivan: Thank you David.

Michael O'sullivan: Good morning, everyone, and thank you for joining us. I would like to cover three topics this morning. First, I will discuss our Q1 results. Second, I will talk about our Q2 guidance. And finally, I will comment on our full year out.

Michael O'sullivan: Good morning, everyone and thank you for joining us.

Michael O'sullivan: I would like to cover three topics this morning.

Michael O'sullivan: Firstly I will discuss our Q1 results.

Michael O'sullivan: Secondly, I will talk about our Q2 guidance.

Michael O'sullivan: And finally, I will comment on our full year outlook.

Michael O'sullivan: After that I will hand over to Christian to walk through the financial details of our Q1 results and our updated 2020 for guidance.

Michael O'sullivan: After that, I will hand over to Kristin to walk through the financial details of our Q1 results and our updated 2024 guidance, then we will be happy to respond to your questions. Okay, let's talk about our first quarter results. I'm going to start with total sales. We believe that total sales growth, compared to other retailers, is the best proxy indicator for what is happening with market share. Our total sales in Q1 grew by 11% compared to the first quarter of 2023.

Michael O'sullivan: Then we will be happy to respond to your questions.

Christian: Okay, let's talk about our first quarter results.

Michael O'sullivan: That was on top of 11% total sales growth versus Q1 of 2022. New stores are a key driver of this top-line growth. In Q1, we added 14 net new stores and ended the quarter with 1,021 stores.

Christian: I'm going to start with total sales.

Christian: We believe that total sales growth compared to other retailers is the best proxy indicator, but what is happening with market share.

Christian: Our total sales in Q1 grew by 11% compared to the first quarter of 2023.

Christian: That was on top of a 7% total sales growth versus Q1 of 2022.

Christian: New stores are a key driver of this top line growth.

Christian: In Q1, we added 14 net new stores and ended the quarter with 1021 stores.

Christian: We are on track to open 100, net new stores this year.

Michael O'sullivan: We are on track to open 100 more new stores this year. The other driver of top line sales is comp store sales growth. CompStore sales for the first quarter increased 2% versus our guidance of flat to 2%. This 2% comp store sales growth was on top of last year's Q1 comp store sales increase of plus 4%. As we described in our last earnings call on March 7th, our February sales trend was softer than we had anticipated.

The other driver of top line sales as comp store sales growth.

Christian: Comp store sales for the first quarter increased 2%, firstly valid guidance of flat to 2%.

This 2% comp store sales growth was on talk as last year's Q1 comp store sales increase of plus 4%.

Christian: As we described in our last earnings call on March seven our February sales trend was softer than we had anticipated.

Michael O'sullivan: We believe that this was attributable to disruptive winter weather as well as the slower pace of tax refunds versus February of 2023. As we have discussed in the past, our core lower-income shopper is sensitive to the timing of tax refunds, and specifically refunds related to earned income tax credits.

Christian: We believe that this was attributable to disruptive winter weather as well as the slower pace of tax refunds Firstly as February of 2023.

Christian: As we have discussed in the past our call lower income shopper.

Christian: Due to the timing of tax refunds.

Christian: Typically refunds related to earned income tax credit.

Christian: As you might expect at tax refunds began to normalize our sales trends improved as the quarter unfolded.

Michael O'sullivan: As you might expect, as tax refunds began to normalize, our sales trend improved as the quarter unfolded. In the March-April period combined, our pump sales increased a solid 4%. Because of the timing of Easter Sunday, it is very important to look at the comp sales trend for these two months combined.

Christian: In the March April period, combined our pump sales increased a solid 4%.

Christian: Because of the timing of Easter Sunday. It is very important to look at the comp sales trend for these two months combined.

Christian: Similar to the fourth quarter, our regular price selling with particularly strong.

Michael O'sullivan: Similar to the fourth quarter, our regular price selling was particularly strong. For the quarter as a whole, our regular price comp growth was positive 4%, and for the March-April period, it was positive 6%. These growth rates more than offset a double-digit decrease in clearance sales. This level of regular price selling is very helpful. It shows that shoppers are responding well to the assortments and great values they are finding in our stores.

Christian: For the quarter as a whole our regular price comp growth with positive 4% and.

Christian: And so the March April period, it was positive 6%.

Christian: These growth rates more than offset a double digit decrease in clearance sales.

Christian: This level of regular price selling is very healthy.

Christian: Jos that shoppers are responding well to the assortment and great values.

Christian: <unk> in our stores.

Christian: Before I turn to our outlook for the second quarter and the full year I would like to comment on our strong profit growth in Q1.

Michael O'sullivan: Before I turn to our outlook for the second quarter and the full year, I would like to comment on our strong profit growth in Q1. Our EBIT margin increased a robust 170 basis points, and our adjusted EPS was up 68% over last year. As Kristin will explain in a moment, this favorable growth was partially driven by expense timing, but even after adjusting for this.

Christian: Our EBIT margin increased a robust 170 basis points and our adjusted EPS was up 68% over last year.

Christian: Christian will explain in a moment this favorability was partially driven by.

Speaker Change: By expense timing, but even after adjusting for this.

Michael O'sullivan: Our margin and earnings performance was well ahead of our guidance. There were two major drivers of this strong margin expansion. Firstly, as I mentioned a moment ago, our regular price selling was very strong, which drove faster turns and lower markdowns.

Speaker Change: Our margin and earnings performance was well ahead of our guidance.

Speaker Change: There were two major drivers of this strong margin expansion.

Speaker Change: Firstly as I mentioned, a moment ago, our regular price selling was very strong.

Speaker Change: This drove faster turns and lower markdowns.

Speaker Change: The second major driver with faster than expected progress on our supply chain efficiency initiatives.

Michael O'sullivan: The second major driver was faster-than-expected progress on our Supply Chain Efficiency Initiative. We are encouraged by the strong early results that we are seeing from this program. Okay, let me move on to the outlook for the second quarter. Our comp guidance for Q2 is flat to 2%. We recognize that, based on our most recent trends, there could be upside to this forecast. But there are a couple of reasons to remain cautious.

Speaker Change: We are encouraged by the strong early results, but we are seeing from this program.

Speaker Change: Okay, Let me move on to the outlook for the second quarter.

Speaker Change: Our comp guidance for Q2 is flat to 2%.

We recognize that based on our most recent trend that could be upside to this forecast.

Speaker Change: There are a couple of reasons to remain cautious.

Speaker Change: Firstly, we believe that our strong March and April trend was driven by the catch up in tax refunds and we expect that at some point.

Michael O'sullivan: Firstly, we believe that our strong March and April trend was driven by the catch-up in tax refunds, and we expect that at some point, this tailwind could abate. Secondly, our comp growth for each of the past two quarters has been plus 2%. So it feels reasonable to keep our guidance heathered to plus 2%. If our Q2 trend turns out to be stronger than this guidance, I am confident that we will be able to chase it.

Speaker Change: Tailwind could abate.

Speaker Change: Secondly, our comp growth for each of the past two quarters.

Speaker Change: <unk> been plus 2%.

Feels reasonable to keep our guidance.

Speaker Change: To plus 2%.

Speaker Change: Q2 trend turns out to be stronger than this guidance I am confident that we will be able to chase it.

Speaker Change: It is worth calling out that in the first quarter as the comp trends picked up rapidly in March and April our merchandising and supply chain teams did a nice job ramping up receipt.

Michael O'sullivan: It is worth calling out that in the first quarter, as the comp trend picked up rapidly in March and April, our merchandising and supply chain teams did a nice job ramping up receipt flow to chase these sales.

Speaker Change: The case these sales.

Speaker Change: So to reiterate our Q2 comp guidance is zero to 2%, but we hope to do better.

Michael O'sullivan: So, to reiterate, our Q2 comp guidance is 0 to 2%, but we hope to do better. Let me segue now to our outlook for the remainder of the year. At this point, we are maintaining our comp guidance for the full year at flat to 2%. That said, based on the strength of our first quarter margin and earnings performance, we are raising our full year margin and adjusted EPF. Kristin will provide further details on this in a few moments.

Speaker Change: Let me segue now to our outlook for the remainder of the year.

Speaker Change: At this point, we are maintaining our comp guidance for the full year at flat to 2%.

Speaker Change: That said based on the strength of our first quarter margin and earnings performance, we are raising our full year margin and adjusted EPS.

Speaker Change: Christian will provide further details on this in a few moments.

Reflecting on our start to 2024.

Michael O'sullivan: Reflecting on our start to 2024, I am very pleased with our underlying sales trends and our margin performance. We are well positioned for Q2 and the rest of the year. I'm even more excited about the longer-term opportunity in front of us. As we have discussed before, over the next five years, we believe that we can grow our sales to $16 billion and our operating income to $1.6 billion. That is almost three times our 2023 operating profit. Now I would like to turn the call over to Kristin, who will share more details on our first quarter financial results, our outlook for Q2 and our updated full year 2024 guidance.

Speaker Change: I am very pleased with our underlying sales trends and our margin performance.

Speaker Change: We are well positioned for Q2 and the rest of the year.

Speaker Change: I'm, even more excited about the longer term opportunity in front of us.

Speaker Change: As we have discussed before over the next five years, we believe that we can grow our sales to $16 billion.

Speaker Change: And our operating income to $1 $6 billion.

Speaker Change: That is almost three times, our 2023 operating profit.

Speaker Change: Now I would like to turn the call over to Christian who will share more details on our first quarter financial results and our outlook for Q2, and our updated full year 2020 for guidance.

Speaker Change: Kristin.

Kristin: Thank you Michael and good morning, everyone.

Kristin Wolfe: Thank you, Michael, and good morning, everyone. Okay, let's now move on to the details of our first quarter results. Total sales grew 11%, and Comp Sales grew 2%, both at the high end of our guidance. Our adjusted EBIT margin expanded 170 basis points versus last year. And adjusted earnings per share increased 68% compared to last year, both significantly ahead of guidance. The drivers of the better-than-expected margin expansion in Q1 were a much higher gross margin, improved expense leverage and supply chain, and a timing shift of approximately $9 million of expenses. Let me walk you through the details.

Kristin: Okay, let's now move on to the details of our first quarter result.

Kristin: Total sales grew 11%.

Kristin: And comp sales grew 2% both at the high end of our guidance.

Kristin: Our adjusted EBIT margin expanded 170 basis points versus last year.

Kristin: And adjusted earnings per share increased 68% compared to last year.

Kristin: Both significantly ahead of guidance.

Kristin: The drivers of the better than expected margin expansion in Q1 were a much higher gross margin improved.

Kristin: Improved expense leverage in supply chain.

Kristin: And the timing shift of approximately $9 million of expenses.

Kristin: Let me walk through the detail.

Kristin Wolfe: The gross margin rate for the first quarter was 43.5%, an increase of 120 basis points versus last year. This was driven by a 90 basis point increase in merchandise margins due to strong regular price selling, which generated faster inventory turns and lower markdowns. Freight expenses decreased 30 basis points, primarily due to lower freight rates and cost savings initiatives. Product sourcing costs were $183 million versus $187 million in the first quarter of 2023, decreasing 100 basis points as a percentage of sale. 80 basis points of disfavorability came from the supply chain. There were two drivers of this supply chain leverage.

Kristin: The gross margin rate for the first quarter with 43, 5% an increase of 120 basis point versus last year.

Kristin: This was driven by a 90 basis point increase in merchandise margin.

Kristin: Due to strong regular price selling.

Kristin: <unk> generated faster inventory turns and lower markdowns.

Kristin: Freight expenses leveraged 30 basis points, primarily due to lower freight rate and cost savings initiatives.

Kristin: Product sourcing costs were $183 million versus $187 million in the first quarter of 2023.

Kristin: Decreasing 100 basis points as a percentage of sales.

80 basis points of this favorability came from supply chain.

Kristin: There are two drivers of this supply chain leverage.

Kristin Wolfe: First, and most significantly, we made faster-than-expected progress on our Distribution Center Productivity Initiative. And secondly, we benefited from the timing of receipts between Q1 and Q2. Adjusted SG&A costs in Q1 were 60 basis points higher than last year, but this was partly driven by $6 million of dark rent and other expenses related to the BED, BAF, and BEYOND leases.

Kristin: First and most significantly we made faster than expected progress on our distribution center productivity initiatives.

Kristin: And secondly, we benefited from the timing of receipt between Q1 and Q2.

Kristin: Q.

Kristin: Adjusted SG&A costs in Q1 were 60 basis points higher than last year.

This was partly driven by $6 million of dark rent.

Kristin: And other expenses related to the bed Bath <unk> beyond leases.

Kristin: Excluding these expenses.

Kristin: Adjusted SG&A deleverage was 40 basis points.

Kristin: Driven primarily by increased investment in store payroll.

Kristin: Q1, EBIT margin was five 7% 170 basis points higher than last year.

Kristin Wolfe: Excluding these expenses, adjusted SD&AD leverage was 40 basis points, driven primarily by increased investments in store payroll. Q1 EBIT margin was 5.7%, 170 basis points higher than last year compared with guidance for an increase of 20 to 60 basis points. Our adjusted earnings per share in the first quarter was $1.42, which was well above the high end of our range of $0.95 to $1.10. This result and the guidance range exclude approximately $6 million of pre-tax expenses associated with the Bed Bath & Beyond leases.

Kristin: <unk> with guidance for an increase of 20 to 60 basis points.

Kristin: Our adjusted earnings per share in the first quarter was $1 42.

Kristin: Which was well above the high end of our range of 95.

Kristin: Two $1 10.

Kristin: This result, and the guidance range excludes approximately $6 million of pre tax expenses associated with the bed Bath <unk> beyond leases.

Kristin: At the end of the quarter, our comparable store inventories were 6% below 2023.

Kristin: While our reserve inventory with 40% of our total inventory.

Kristin: Versus 44% last year.

Kristin: We are very happy with the quality of the merchandise and the values that we have in reserve.

Kristin: During the quarter, we repurchased $63 million in common stock.

Kristin: As of the end of the first quarter, we had $442 million remaining on our share repurchase authorization that expires in August of 2025.

Kristin: In the first quarter, we opened 14 net new stores, bringing our store count at the end of this quarter to 1021 stores.

Kristin Wolfe: At the end of the quarter, our comparable store inventories were 6% below 2023, while our reserve inventory was 40% of our total inventory, versus 44% last year. We are very happy with the quality of the merchandise and the values that we have in reserve. During the quarter, we repurchased $63 million in common stock. As of the end of the first quarter, we had $442 million remaining on our share repurchase authorization, which expired in August of 2025. In the first quarter, we opened 14 net new stores, bringing our store count at the end of the quarter to 1,021. This included 36 new store openings. 11 relocations and 11 closings

Kristin: This included 36, new store openings.

Kristin: 11 relocations.

Kristin: 11 clothing.

Kristin: We continue to expect to open 100, net new stores in fiscal 2024.

Kristin Wolfe: We continue to expect to open 100 net new stores in fiscal 2024. Now I will turn to our outlook for the full fiscal year, the second quarter, and the back half of the year.

Speaker Change: Now I will turn to our outlook for the full fiscal year.

Speaker Change: The second quarter and the back half of the year.

We are increasing our full year earnings guidance and maintaining our comp sales outlook of flat to up 2%.

Kristin Wolfe: We are increasing our full-year earnings guidance and maintaining our comp sales outlook of flat to up 2%. In addition, due to the slightly later timing of new store openings, we are making a modest adjustment to our expected total sales growth to an increase of 8% to 10% for the full fiscal year, just below our original guidance of 9% to 11%. Based on our strong first quarter financial performance, we are increasing our margin and adjusted earnings per share guidance for the full fiscal year.

Speaker Change: In addition, due to slightly later timing of new store openings.

Speaker Change: We're making a modest adjustment to our expected total sales growth.

Speaker Change: Two an increase of 8% to 10% for the full fiscal year.

Speaker Change: Just below our original guidance of 9% to 11%.

Speaker Change: Based on our strong first quarter financial performance, we are increasing our margin and adjusted earnings per share guidance for the full fiscal year.

Kristin Wolfe: We now expect our full-year adjusted event margin to increase by 40 to 60 basis points, up from our original guidance for an increase of 10 to 50 basis points. This updated margin outlook now translates to an adjusted earnings per share range of $7.35 to $7.75, up from our original guidance of $7 to $7.60. For the second quarter, we are guiding to a comp increase of flat to plus 2% and a total sales increase of 9% to 11%.

Speaker Change: We now expect our full year adjusted EBIT margin to increase by 40 to 60 basis points.

Speaker Change: Up from our original guidance for an increase of 10 to 50 basis points.

Speaker Change: This updated margin outlook now translates to an adjusted earnings per share range of $7 35.

To $7 75.

Speaker Change: From our original guidance of $7 to $7 60.

Speaker Change: For the second quarter, we are guiding to a comp increase of flat to plus 2%.

Speaker Change: And a total sales increase of 9% to 11%.

Speaker Change: This would result in operating margin expansion of up 32 up 50 basis points versus Q2 of 2023.

Kristin Wolfe: This would result in operating margin expansion of up 30% to up 50 basis points versus Q2 of 2023. This translates to earnings per share guidance for the second quarter of $0.83 to $0.93, which includes an approximately $0.09 negative impact from the timing of expenses from Q1. Consistent with prior quarters, this guidance excludes expenses associated with the recently acquired leases from Bed Bath & Beyond of approximately $0.03. For the back half of fiscal 2024, this outlook assumes comp store sales of 0% to plus 2%.

Speaker Change: This translates to earnings per share guidance for the second quarter of 83.

Speaker Change: 293.

Speaker Change: Which includes an approximately 9% negative impact from the timing of expenses from Q1.

Speaker Change: Consistent with prior quarters. This guidance excludes the expenses associated with the recently acquired leases from bed Bath <unk> beyond the approximately three <unk>.

Speaker Change: For the back half of fiscal 2024, this outlook assumes comp store sales of zero percent to plus 2%.

Kristin Wolfe: Total sales are expected to increase 7% to 9%, and EBIT margins are expected to be flat to an increase of 30 basis points, and earnings per share are expected in the range of $5.10 to $5.40, an increase of 7% to 13% compared to last year. I will now turn the call back to Michael.

Speaker Change: Total sales to increase 7% to 9%.

EBIT margins to be flat to an increase of 30 basis points.

Speaker Change: And earnings per share in the range of $5 10.

The $5 48.

Speaker Change: An increase of 7%.

Speaker Change: 13% compared to last year.

Speaker Change: I will now turn the call back to Michael.

Michael O'sullivan: Thank you Christian.

Let me recap four key points that we've discussed this morning.

Michael O'sullivan: Let me recap four key points that we discussed this morning. Firstly, we are pleased with our sales growth in Q1. 11% total sales growth for the quarter; 2% comp sales growth for the quarter and 4% comp sales growth for March-April combined. Secondly, we are very pleased with our Q1 margin and earnings results. These were driven by higher merchandise margins from strong regular price selling, leading to faster turns and lower markdowns, and also driven by faster than expected progress on our supply chain initiatives.

Michael O'sullivan: Firstly, we are pleased with our sales growth in Q1.

Michael O'sullivan: 11% total sales growth for the quarter.

Michael O'sullivan: 2%.

Michael O'sullivan: Sales growth for the quarter.

Michael O'sullivan: And 4% comp sales growth for March April combined.

Michael O'sullivan: Secondly, we are very pleased with our Q1 margin and earnings results.

Michael O'sullivan: These were driven by higher merchandise margins from strong regular price selling leading to faster turns and lower markdowns.

Michael O'sullivan: And also driven by faster than expected progress on <unk>.

Michael O'sullivan: Our supply chain initiatives.

Michael O'sullivan: Thirdly, we are maintaining our flat to 2% comp guidance for Q2.

Michael O'sullivan: Thirdly, we are maintaining our flat to 2% comp guidance for Q2. We recognize that, given our recent trend, this may be conservative, but we are very well positioned to change. And finally, we are raising and updating our full-year earnings guidance to reflect our strong, ahead-of-plan, year-one results. With that, I would now like to turn the call over to your questions.

Michael O'sullivan: We recognize that given our recent trends this may be conservative.

Michael O'sullivan: But we are very well positioned to chase.

Michael O'sullivan: And finally, we are raising and updating our full year earnings guidance to reflect our strong.

Michael O'sullivan: Head of plan Q1 results.

Speaker Change: With that I would now like to turn the call over for your questions.

Speaker Change: Thank you.

Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: Now open for your questions. If you have dialed in and we'd like to ask a question. Please press star one on your telephone keypad duration hand, and joined the queue. If you would like to withdraw your question simply press Star one again.

Speaker Change: We are called upon to ask your questions and listening via loud speakers on your device. Please pickup your handset and ensure that your phone is not on mute when asking a question.

Speaker Change: You do request for today's session that you. Please limit to one question and one follow up again crest I wanted to join the queue.

Operator: We do request for today's session that you please limit to one question and one follow-up. Again, press star 1 to join the queue. Your first question comes from the line of Matthew Boss with JP Morgan. Your line is open.

Speaker Change: Your first churn comes from the line of.

Matthew Robert Boss: Matthew boss with Jpmorgan Your line is open.

Matthew Robert Boss: Great thanks, and congratulations on a nice quarter. Thanks, Matt. Michael, could you elaborate on the progression of your comp sales trend through the first quarter, walk through some of the factors such as tax refunds that may have impacted the trend, and then could you comment on what you're seeing so far in May?

Matthew Robert Boss: Great Thanks, and congrats on a nice quarter.

Speaker Change: Thanks, Matt.

Speaker Change: So Michael could you elaborate on the progression of your comp sales trend through the first quarter walk through some of the factors such as tax refunds that may have impacted the trend and then could you comment on what youre seeing so far in may.

Michael O'sullivan: Well good morning, Matt. Thank you for the question.

Michael O'sullivan: Well, good morning, Matt. Thank you for the question. I think it may be easier if I just share the month-by-month comp numbers. February was a minus 2 comp, March was a plus 1%, and April was up 8%. Now, to make sense of those numbers, it's important to adjust for March and April for the timing of Easter. Our stores are, like many retailers, closed on Easter Sunday.

Michael O'sullivan: I think it may be easier if I just.

Michael O'sullivan: The month by month.

Michael O'sullivan: Compass.

Michael O'sullivan: February was minus two comp March was a plus 1% and April was up 8%.

Michael O'sullivan: Now to make sense of those numbers.

Michael O'sullivan: To adjust.

Michael O'sullivan: March and April for the timing of Easter.

Michael O'sullivan: Our stores.

Michael O'sullivan: Many retailers our stores are closed on Easter Sunday this.

Michael O'sullivan: This year, Easter Sunday fell in March versus April last year, and that means that March had one fewer selling day this year, and April had one more selling day this year compared with 2023. That shift of a selling day is worth three to four points of comp within each month. So if you adjust for the timing of Easter Sunday, then what you see is a strong pickup in the trend in March versus February, and then that momentum continued through April.

Michael O'sullivan: This year Easter Sunday fell in March versus April last year and that means that.

Michael O'sullivan: Mark had one less selling day this year and April had one more selling day this year compared with 2023.

Michael O'sullivan: That shift of a selling day is worth.

Michael O'sullivan: Three to four points of comp within each month.

If you adjust for the timing of Easter Sunday.

Michael O'sullivan: And what you see is a strong pickup in the trend in March versus February and then that momentum continued continued through April.

Michael O'sullivan: And we believe that the major driver of this month-by-month trajectory was the timing of tax refunds. As we've explained in the past, our core lower-income customer is very sensitive to the timing of tax refunds, especially the timing of the earned income tax credit. In February, those refunds fell behind last year's level. They did eventually catch up, but not until the end of March.

Michael O'sullivan: We believe that the major.

Michael O'sullivan: The major driver of this month by month trajectory with the timing of tax refunds and as we've explained in the past our core lower income customer is very sensitive to the timing of tax refunds, especially the timing of the earned income tax credit in February those refunds fell.

Michael O'sullivan: <unk> last year's levels.

Michael O'sullivan: Eventually catch up but not until the end of March.

Michael O'sullivan: And that that timing correlates with the momentum in our sales trend. There is I'd say there is one other factor that we think may have contributed to the monthly trend. This year, we made a deliberate decision to slow our seasonal merchandise by a month or two later than we did last year. The benefit of that is that it gave us a chance to read and react more effectively to early season trends, at a business and at a school level.

Michael O'sullivan: Timing correlate with the with the momentum in our sales trends.

Michael O'sullivan: There is I would say there is one other factor that we think may have contributed to the.

Michael O'sullivan: The monthly trend this year, we made a deliberate decision.

Michael O'sullivan: The slow our seasonal merchandise later in the quarter than we did last year.

Michael O'sullivan: The benefit of that is that gave us a chance to read it.

Michael O'sullivan: And react more effectively to early season trends.

Michael O'sullivan: I had a business at the store level.

Michael O'sullivan: By slowing receipts later, we were able to adjust the mix of those receipts, and we were able to adjust the allocation of those receipts by store, based upon real selling data. And I would say that contributed to faster inventory turns, lower markdowns, and stronger sales. I guess the last part of your question was about May month to date. I would say that we are happy with how sales have been trending this month. Q2 is off to a good start, but that said, there's still a long way to go in the quarter.

Michael O'sullivan: By slowing receipts later, we were able to adjust the mix of those receipts and we were able to adjust the allocation of those receipts by store based upon real selling data.

Michael O'sullivan: I'd say that contributed to foster inventory turns lower markdowns and stronger stronger sales.

Speaker Change: I guess the last part of your question was that was about may month to date.

I would say that we are happy with how sales have been trending. This month Q2 is off to a good a good stock.

But that said, there's still a long way to go in the quarter.

Speaker Change: Great and then maybe a follow up for Chris then just on your first quarter margin and the expense shift could.

Kristin Wolfe: Great. And then maybe a follow-up for Kristin, just on your first quarter margin and the expense shift. Could you just provide any additional color on the expenses that shifted out of the first quarter and why? And then, excluding the shift, could you just walk through the drivers of operating margin upside that you saw in the first quarter?

Speaker Change: Could you just provide any additional color on the expenses that shifted out of the first quarter.

Speaker Change: And why and then excluding the shift.

Speaker Change: Could you just walk through the drivers of operating margin upside that you saw in the first quarter.

Matt: Matt Good morning, Yeah. Thanks for the question.

Kristin Wolfe: Matt, good morning. Yes, thanks for the question. Overall, we did have a strong first quarter in terms of margin expansion, about 170 basis points versus last year. And this expansion does include a benefit from the timing of expenses that's worth about $9 million for around 40 basis points out of Q1 and primarily into Q2. And after accounting for the expense timing, our Q1 adjusted EBIT margin increased 130 basis points versus the first quarter of last year, which was well above our guidance of 20 to 60 basis points. Let me give a little more detail on the expense shift. There were actually three drivers.

Overall, we did have a strong first quarter in terms of margin expansion about 170 basis points versus last year.

Matt: And this expansion does include a benefit from the timing of expenses Thats worth about $9 million or around 40 basis points out of Q1, and primarily into Q2 and after accounting for the expense timing. Our Q1, adjusted EBIT margin increased 130 basis points versus the <unk>.

Matt: First quarter of last year, which was well above our guidance of 20 to 60 basis points.

Let me give a little more detail on the expense, Jeff there were really three drivers the <unk>.

Kristin Wolfe: The first was in the supply chain, which represented approximately $3 million. This was driven by two factors. The biggest piece was the timing of receipts. Some receipts expected that we expected to be processed in Q1 shifted to Q2. And then secondly, there were some startup expenses associated with the opening of our new New Jersey Distribution Center, which opens in the second quarter, as we planned. The second factor in the expense timing was freight.

Speaker Change: <unk> was in supply chain, which represented approximately $3 million. This was driven by two factors. The biggest piece was the timing of receipts of some receipts expected that we expected to be processed in Q1 shift into Q2, and then secondly, there were some startup expenses associated with the opening of our new New Jersey.

Speaker Change: The distribution center, which opens in the second quarter as we planned.

Speaker Change: The second factor in expense timing was was on freight there was about $2 million in freight expenses that shifted from Q1 to Q2 and that was associated with the receipt timing and then finally, there was approximately $3 million of SG&A items. This includes the timing of marketing spend and select.

Kristin Wolfe: There was about $2 million in freight expenses that shifted from Q1 to Q2, and that was associated with the receipt timing. And then, finally, there was approximately $3 million in SG&A items. This includes the timing of marketing spend and select benefit expenses which shifted out of the first quarter and into the second quarter, and then another $1 million of miscellaneous SG&A items that shifted out of Q1 and into the fall. So, in total, the expense timing shift included $8 million out of Q1 and into Q2, and $1 million shifting out of Q1 and into fall.

Speaker Change: Benefit expenses shifted out of the first quarter and into the second quarter and then another $1 million of miscellaneous SG&A items that shifted out of Q1 and into fall. So in total the expense timing shifts included $8 million out of Q1 and into Q2 and $1 million shifting out of Q1.

Speaker Change: And into fall so looking at the quarter net of these expenses as part of your question EBIT margin as I mentioned expanded by 130 basis points and this this is really driven by three primary factors first a 90 basis point increase in merchandise margin due to a faster inventory turn.

Kristin Wolfe: So, looking at the quarter net of these expenses, as was part of your question, EBIT margin, as I mentioned, expanded by 130 basis points. And this was really driven by three primary factors. First, a 90 basis points increase in merchandise margin due to faster inventory turn and lower markdown. Secondly, 70 basis points of leverage, I'm excluding the timing of expenses there, 70 basis points of leverage in the supply chain, and then 20 basis points of leverage on freight. Partly offsetting the leverage of those items was de-leverage in SG&A, namely in store payroll, and then also in depreciation given the higher CapEx spend.

Speaker Change: And lower markdowns.

Secondly is 70 basis points of leverage them, excluding the timing of expenses. There are 70 basis points of leverage in supply chain, and then 20 basis points of leverage on freight.

Speaker Change: Partly offsetting the leverage those items was deleverage in SG&A, namely in store payroll and then also in depreciation given the higher capex spend.

Speaker Change: That's great color best of luck.

Matthew Robert Boss: It's a great color. Best of luck.

Matthew Robert Boss: Great Color Festival

Matt: Matt Thank you.

Speaker Change: Next question comes from the line of Ike <unk> with Wells Fargo. Your line is open.

Irwin Bernard Boruchow: The next question comes from the line of Ike Boruchow with Wells Fargo. Your line is open.

Speaker Change: Hey, good morning, everyone great print.

Irwin Bernard Boruchow: Hey, good morning, everyone. Great print.

Speaker Change: Two questions first for Michael just if we could kind of unpack the low end consumer a little bit more.

Michael O'sullivan: Two questions. First, for Michael, just so we could kind of unpack the low-end consumer a little bit more. I know you guys have a lot of ties there, and Michael, you spoke about that a little bit. So we've heard a lot of noise and volatility in that consumer. It looks like you guys bucked that trend pretty nicely in the quarter. So I guess my question is, what exactly are you seeing with that cohort of the consumer base today? And then, what exactly did you guys do to outperform them?

Speaker Change: I know you guys have a lot of times there Michael you spoke about that a little bit. So we've heard a lot of noise and volatility in that consumer it looks like you guys. What does that trend pretty nicely in the quarter. So I guess my question is what exactly are you seeing with that.

Speaker Change: With that cohort of the consumer base today and then what.

Speaker Change: Did you guys do to outperform there.

Speaker Change: Yes.

Michael O'sullivan: Well, good morning, Ike. Thank you for the thank you for the question.

Speaker Change: Well good morning Ike.

Speaker Change: Thank you for the question.

Michael O'sullivan: Let me start by saying that the external environment is very hard to read right now, but our assessment is that all income groups, not just lower-income consumers, are feeling economic pressure. I know this is not a very sophisticated framework, but we divide the world into two main segments, and Wanted Deal shoppers who tend to have slightly higher incomes and more financial choices, and both of those segments shop off price. Now the Neededale shopper needs value, especially at opening price points and on moderate brands.

Speaker Change: Let me start by saying that the.

Speaker Change: We think the external environment is very hard.

Speaker Change: To read right now.

Speaker Change: But our assessment is that all income groups not just <unk>.

Speaker Change: Lower income consumers all income groups are feeling economic pressure.

Speaker Change: I know this is not a very sophisticated framework, but we divide the world into two main segments.

Speaker Change: Need a deal shoppers, who tend to be lower income and have larger family size.

Speaker Change: And once the deal shoppers, who tend to have slightly higher incomes and more financial choices and.

Speaker Change: And both of those segments shop off price.

Now the need of deal shopper.

Speaker Change: <unk> value, especially at opening price points and on moderate brands.

And as we've said before that shopper is very important to us.

Speaker Change: So in your question, you kind of referenced sort of noise and I would say investor concerns.

Michael O'sullivan: And as we've said before, that shopper is very important to us. So in your question, you kind of reference some noise, and I would say investor concerns about those lower-income consumers. You know, we actually think that at this point, those fat noises, those concerns may be overblown. You know, those concerns are mostly in the rear view mirror. They concern a phenomenon that's really in the rear view mirror.

Speaker Change: Those lower income consumers.

Speaker Change: We actually think that at this point those that noise those concerns maybe overblown.

Speaker Change: We think that at this point.

Speaker Change: Those concerns.

Speaker Change: Mostly in the.

Speaker Change: They can set a phenomenon thats really in the in the rearview mirror.

Michael O'sullivan: In 2022, and we certainly felt this, lower-income shoppers were crushed by the combination of the higher cost of living and the end of pandemic era benefits. But our view is that since then, in other words, over the last five quarters, discretionary income for that demographic appears to have stabilized. The consumer is still fragile, and we saw evidence of that with the delayed tax refunds in February, but inflation has come down.

Speaker Change: In 2022, and we certainly felt this.

Speaker Change: Those lower income shoppers were crushed by the combination of.

Speaker Change: The higher cost of living and the end of pandemic era benefits.

Speaker Change: But I don't deal with it since then and otherwise over the last five quarters.

Speaker Change: Discretionary income for that demographic appears to have stabilized.

Speaker Change: The consumer but that consumer is still fragile and we saw evidence of that with the delayed tax refunds in February about inflation has come down.

Michael O'sullivan: And it looks like real incomes at the lower end are not shrinking in the way that they were in 2022. You know, we're not saying that the situation for this customer is getting better yet. They're not bouncing back. But our assessment is that the situation doesn't seem to be getting any worse. So, coming back to your question.

Speaker Change: And it looks like real incomes at the lower end and not shrinking and the way that they were in 2022, we're not saying that the situation for for this customer is getting better.

Speaker Change: Yes.

Speaker Change: Bouncing back, but our assessment is that the.

Speaker Change: The situation doesn't seem to be getting any worse.

Speaker Change: So coming back to your question.

Speaker Change: How do I explain our strong trend in March and April.

Michael O'sullivan: How to explain our strong trend in March and April? I think that there are two factors that explain that trend. Number one, the catch-up in tax refunds in that period meant that lower income shoppers had some extra money in their pockets. In the last couple of years, that shopper has really come to appreciate Burlington as a great place to find value. So it's natural that they would come to us when they have some extra money to spend.

Speaker Change: I think that there are two factors that explain that trend number one.

Speaker Change: The catch up in tax refunds and that period meant that lower income shoppers.

Speaker Change: At some extra money in their pockets in the last couple of years.

Speaker Change: That shopper has really come to appreciate Burlington.

Speaker Change: As a great place to find value so it's natural that they.

Speaker Change: Would come to us when they have some extra money to spend.

Speaker Change: The second factor is unrelated.

Michael O'sullivan: The second factor is unrelated to Lowering Home Shopping. You know, when we look at spelling, especially on better brands at higher price points, we believe that we're benefiting from more trade-down traffic in our stores, and that's helping to support our comp trend. In 2022, it felt as if moderate to high-income shoppers were somewhat insulated from the impact of inflation. Perhaps they had excess savings that they could tap into. But we believe that now that demographic is also feeling the pinch, and we think that's good for us. It means that those customers are shopping off price in search of value.

Speaker Change: The lower income shoppers when.

Speaker Change: When we look at selling especially on better brands at higher price points.

Speaker Change: We believe that we're seeing and we're benefiting from more trade down traffic in our stores.

Speaker Change: And that's helping to support our comp trend.

Speaker Change: In 2022.

Speaker Change: As this moderate to high income shoppers with somewhat insulated from the impact of inflation.

Speaker Change: Perhaps they had excess savings that they could tap into.

Speaker Change: But we believe that now that demographic is also feeling the pinch.

Speaker Change: We think thats good for us it means that those customers are shopping off price.

Speaker Change: And such a value.

Speaker Change: Got it very helpful and then Christian if I can sneak one more in just you referenced the supply chain efficiencies in the quarter benefiting your can you just unpack that a little bit more just what exactly are those drivers.

Irwin Bernard Boruchow: Got it. Very helpful. And then, Kristin, if I can sneak one more in, just, you referenced the supply chain efficiencies in the quarter benefiting you. Can you just unpack that a little bit more? Just what exactly are those drivers that led to some of that upside in the first quarter? And then, I guess, a follow-up to that is, is there more to come? Is this just a one-time thing in the first quarter?

Speaker Change: It led to some of that upside in the first quarter and then I guess a follow up to that is there more to come there or is this just a onetime thing in the first quarter is there a possible more efficiencies to come.

Kristin Wolfe: Great. Good morning, Ike. That's a good question.

Speaker Change: Great. Good morning, I know, it's a good question.

Kristin Wolfe: Is there possibly more efficiencies to come? Thanks. Great. Good morning, Ike. That's a good question. We were

Speaker Change: We're encouraged by the progress, we're making in terms of driving down supply chain costs as a percentage of sales excluding that expense shifts.

Speaker Change: Talked about into Q2 supply chain leveraged 70 basis points, which is more than we had planned.

Kristin Wolfe: We were encouraged by the progress we're making in terms of driving down supply chain costs as a percentage of sales. Excluding that expense shift I just talked about in Q2, supply chain leveraged 70 basis points, which was more than we had planned. And as I've shared before, we talked about a number of productivity initiatives we have in place in supply chain where we're targeting meaningful cost savings. These are process improvements, industrial engineering-oriented improvements that streamline operations, reduce touches, reduce time to process merchandise, and ultimately save labor dollars in our DCs.

Speaker Change: I've shared before we've talked about a number of productivity initiatives, we have in place.

Speaker Change: Supply chain, where we're targeting meaningful cost savings. These are process improvements industrial engineering oriented improvements at streamline operations reduce touches reduced tender process merchandize and ultimately save labor dollars Nrdc's. We are in the first quarter. We found we're harvesting harvesting.

Kristin Wolfe: We are, in the first quarter, we found that we're harvesting these savings a bit faster than we'd originally expected. And to kind of your follow-up question on whether there is more to come, yeah, as you know, we believe that we have about 400 basis points of EBIT margin opportunity over the next five years, that's using 2023 EBIT of around 6% as the baseline. And we believe about half of this 200 basis points of the margin opportunity is independent of sales, and a meaningful part of this 200 basis points will come from, or we expect it to come from, continued supply chain leverage, with the balance coming from lower freight and higher merchandise margin. So, we feel like we've demonstrated good progress in the first quarter on all three of those line items, particularly supply chain.

Speaker Change: These savings a bit faster than we'd originally expected.

Speaker Change: <unk>.

Speaker Change: Kind of your follow up question on is there more to come.

Speaker Change: Yeah. As you know we've said we believe that we have about 400 basis points of EBIT margin opportunity over the next five years, that's using 2023 EBIT of around 6% as the baseline and we believe about half of that 200 basis points of the margin opportunities independent of sales and in <unk>.

Speaker Change: Meaning for part of this 200 basis points will come from we expect to come from continued supply chain leverage with the balance coming from lower freight and higher merchandise margin. So we feel like we've demonstrated good progress in the first quarter on all three of those line items, particularly supply chain.

Speaker Change: Awesome. Thank you again.

Speaker Change: Right.

Speaker Change: Next question comes from the line of Australian Hutchinson with Bank of America. Your line is open.

Lorraine Corrine Maikis Hutchinson: The next question comes from the line of Lorraine Hutchinson with Bank of America. Your line is open. Thank you. Good morning.

Lorraine Corrine Maikis Hutchinson: Thank you. Good morning, Michael.

Michael O'sullivan: Thank you good morning, Michael Youre off price peers have talked about increasing their mix of brand as a way to drive comps in March you said this might be an opportunity for you as well do you have any update on this and also I'm curious if you see any risks to this strategy.

Michael O'sullivan: Your AltPrice peers have talked about increasing their mix of brands as a way to drive comp. In March, you said this might be an opportunity for you as well. Do you have any update on this? And also, I'm curious if you see any risks to this strategy.

Speaker Change: Well good morning Lorraine.

Michael O'sullivan: Good morning, Lorraine. It's good to hear from you. Yes, we do see an opportunity to increase our mix of brands, and, actually, more generally, we see an opportunity to elevate our assortments. In fact, we're already seeing some success with that approach in businesses like sportswear. But we plan to lean into that opportunity more, I would say, in the back half.

Michael: Good to hear from you.

Michael: Yes.

Michael: We do see an opportunity to increase.

Michael: Our mix of brands and actually more generally we see an opportunity to elevate our assortments.

Michael: In fact, we're already seeing some success with that approach and businesses like businesses like sportswear.

Michael: But we plan to lean into that opportunity more I would say in the back half of the year.

Michael O'sullivan: But let me spend a minute just sort of talking about the role that brands play in our business and also address the last part of your question about the risks or the limits of that strategy. Now, in off-price, brands are important. But the most critical thing, by far, is value. Brands are just one component of value; fashion, quality, and, of course, price also drive the customer's perception of value. You can have a great brand, but if the fashion, the quality, or the price are wrong, the customer isn't going to buy it; it's going to end up in the clearance run. The second point to make is that the role that the brand plays And that's why our merch... Spent a lot of time planning and styling out the whole rack, and then executing our good, better, and best strategy.

Michael: But let me let me spend a minute just sort of talking about the role that brands play in our business and also addressing the last part of your question about about the risks so the limits of that strategy.

Michael: No.

Michael: <unk>.

Michael: And off price.

Michael: Brands, Inc.

Michael: Portland.

Michael: But the most critical thing Tal.

Michael: As value.

Michael: Brands are just one component of value.

Michael: Fashion quality and of course price also drive the customer's perception of value.

Michael: You can have a great brand, but the fashion and the quality of the price of Rome.

Michael: The customer isn't going to buy it it's going to end up in the clearance from.

Michael: The second point to make is that the role that the brand plays in defining value depends on the category and also depends on the customer and their price sensitivity.

Michael: And Thats why our merchants spent a lot of time planning and styling out the whole rack and then executing our good better best strategy again brands are important but that's just one piece of that.

Michael O'sullivan: Again, brands are important, but they're just one piece of that. And I should add, that calculus may be different for other retailers, depending upon their own customer profile. Okay, so with all of that as context, let me talk about where we see opportunity. As I said earlier, in this economy, we believe that all shoppers are now focused on value. We know that we do, I think we do, an excellent job when it comes to the low-income, need-a-deal shopper.

Michael: I should add that calculus, maybe different retailers, depending upon their own their own customer profile.

Okay. So with all of that as context, let me talk about where we see opportunity as I said earlier in this economy. We believe the all shoppers are now focused on value.

Michael: We know that we do I think we do an excellent job when it comes to the low income needed they are sharper.

Michael O'sullivan: And let me emphasize, we intend to continue to do an excellent job with those very important customers. But we think we can also do more to drive sales with lower or slightly higher income shoppers. When those shoppers walk in our store, they're more likely to be drawn to great deals on better bread. So as we get further into the year, you'll see more of those brands in our range.

Michael: And let me emphasize we continue to.

Michael: We intend to continue to do an excellent job with those very important customers.

Michael: We think we can also do more to drive sales with trade down or slightly higher income shoppers.

Michael: When those shoppers walk in our store.

Michael: More likely to be drawn to great deals on better brands.

Michael: So as we get further into the year Youll see more of those brands.

Michael: <unk>.

Michael O'sullivan: Now, as you'd expect, we'll do that selectively in businesses where it works and where brands really matter. But let me maybe finish up by reinforcing the point that we see this as an ending strategy. You know, we'll go after this trade-down opportunity, and we're going to continue to deliver for our core needle gel shoppers as well.

Michael: And as you would expect we will do that selectively in businesses, where it works and where our brands really matter.

Michael: But let me let me maybe finish up by reinforcing the point that we see this as and strategy.

Michael: So after the straight down opportunity and we're going to continue to deliver core on core need until shoppers as well.

Thank you and then Christian the margin performance in the first quarter was much better than we expected obviously the balance of fiscal 'twenty four including <unk> is not calling for that kind of increase in EBIT margins. What was unique about the first quarter that enabled such strong flow through and why aren't we seeing the same <unk>.

Lorraine Corrine Maikis Hutchinson: And then, Kristin, the margin performance in the first quarter was much better than we expected. Obviously, the balance of fiscal 24, including 2Q, is not calling for that kind of increase in EBIT margins. What was unique about the first quarter that enabled such strong flow-through, and why aren't we seeing the same outlook for the balance of the year? Also, what should we expect in 3Q and 4Q? Great Good morning, Lorraine.

Speaker Change: Look for the balance of the year also what should we expect in <unk> and <unk>.

Lorraine: Great. Good morning, Lorraine. Thanks for the question certainly we had strong margin performance in Q1, lower clearance levels and faster turns really helped drive strong merchandise margins and.

Kristin Wolfe: Great. Good morning, Lorraine.

Kristin Wolfe: Thanks for the question. Certainly, we had strong margin performance in Q1. Lower clearance levels and faster turns really helped drive strong merchandise margins. And our supply chain leverage was better than we had expected, as I spoke about just a few moments ago. But to your question, and turning to the second quarter, there are a couple call-outs I want to make.

Lorraine: In our supply chain leverages better than we had expected as I spoke about just a few months ago.

Kristin Wolfe: First, we have about $9 million in expenses that shifted out of Q1, of which $8 million shifted into Q2. So that's having around a 30-basis point negative EBIT margin impact on the second quarter. And in addition, our newest distribution center in New Jersey will be coming online in the second quarter this quarter, which will add some modest leverage in the supply chain given the startup and training costs. Now, we expect that this will be more than offset by the productivity initiatives I just talked about in the supply chain, but that will likely temper the leverage in the supply chain in Q2.

Lorraine: But to your question and turning to the second quarter. There are a couple of callouts I wanted to first we have about $9 million in expenses that shifted out of Q1 of which $8 million shifted into Q2, So thats, having around a 30 basis point negative EBIT margin impact on the second quarter.

And in addition, our newest distribution center in New Jersey will be coming online in the second quarter and this quarter, which will add some modest deleverage in supply chain given the start up and training costs now we expect.

Lorraine: This will be more than offset by the productivity initiatives I just talked about in supply chain, but that will likely temper the leverage in supply chain in Q2.

Kristin Wolfe: And then to your last question, in the back half of the year, there is a 53rd week impact. Fall total sales growth is planned for 7% to 9%, slightly lower than our full year guidance of 8% to 10%. The 53rd week has the most acute impact on Q4 sales growth, where we are essentially trading a week in November for a week in January as compared to Q4 last year from a total sales growth standpoint.

Lorraine: And then to your last question on the back half of the year. There is a 50 <unk> week impact.

Lorraine: While total sales growth is planned for 7% to 9% slightly lower than our full year guidance of 8% to 10%. The 50 <unk> week has the most acute impact on Q4 sales growth, where we are essentially trading a week in November for a week in January as.

Lorraine: Compared to Q4 of last year on it from a total sales growth standpoint, now will share more detail on Q3, and Q4 margin guidance on our call in August.

Kristin Wolfe: Now, we'll share more detail on Q3 and Q4 margin guidance on our call in August. But for now, as you think about modeling Q3 and Q4, keep in mind that the total sales growth for Q3 will be higher than Q4 due to the 53rd week calendar impact, which will impact, which will thereby impact the relative margin improvement for Q3 versus Q4.

Lorraine: Now as you think about modeling Q3, and Q4 keep in mind that the total sales growth for Q3 will be higher than Q4 due to the 50, <unk> week calendar impact, which will impact, which would thereby impact the relative margin improvement for Q3 versus Q4.

Speaker Change: Thank you.

Speaker Change: Next question comes from the line of John Kernan with D. D. Cohen Your line is open.

John David Kernan: The next question comes from the line of John Kernan with T.D. Cowan. Your line is open.

John David Kernan: Thanks, Good morning, Michael Chris and David Nice job on the top line and the margin flow through.

John David Kernan: Thanks. Good morning, Michael, Kristin, and David.

John David Kernan: Nice job on the top line in March and float through. Kristin, let's just keep it on the margin theme here. It looks like freight was a margin driver in Q1. Will freight continue to be a margin tailwind for the rest of the year? Is there any chance it becomes a headwind as you get further into the year?

John David Kernan: Kristen, let's just keep it on the margin theme here it looks like freight was a margin driver in Q1.

Speaker Change: Freight continues to be a margin tailwind for the rest of the year is there any chance that becomes a headwind as you get further in the year.

David J. Glick: And just a quick follow-up for David after that. Good morning.

Speaker Change: Just a quick follow up for David after that.

Kristin Wolfe: I appreciate the question. We were pleased with the 30 basis points of leverage we saw in freight in the first quarter. About 10 basis points, as I described, were due to the timing of receipts. But the majority of the leverage was due to favorable freight rates and specific transportation-related cost savings initiatives we have. We do expect to continue to see freight leverage this year, but we're unlikely to get all of the way back to FY19 freight expense as we've previously discussed.

Speaker Change: Great. Good morning, John I. Appreciate the question, we were pleased with the 30 basis points of leverage we saw on freight in the first quarter about 10 basis points as I described was due to the timing of receipts.

John David Kernan: Great. Good morning, John.

Speaker Change: But the majority of the leverage was due to favorable freight rates and specific transportation related cost savings initiatives we have.

Speaker Change: We do expect to continue to see great leverage this year.

Speaker Change: We're unlikely to get all the way back to FY 19 freight expense as we've previously discussed.

Kristin Wolfe: But we recently finalized our latest round of domestic freight contracts, and we're pleased with where we landed. Freight should continue to drive expense leverage through all of 2024. And, in addition, diesel fuel rates have begun to become a modest tailwind here.

We recently finalized our latest round of domestic freight contracts.

Speaker Change: Pleased with where we landed freight to continue to drive expense leverage through all of 2024 and in addition fuel diesel fuel rates have begun to become a modest tailwind here.

Speaker Change: Got it thanks, David just on the balance sheet in today's release the convertible notes it looks like they've become.

John David Kernan: Got it. Thanks, David. Just on the balance sheet in today's release, the convertible notes look like they've become our current liability in Q1, what's the plan on retiring these? Wondering also if there's any impact to the stock repurchase program or share account sometimes. The accounting for converts can be pretty tricky to model.

Speaker Change: Current liability in Q1, what's the plan on retiring knees.

Speaker Change: Just wondering also if there's any impacts of the stock repurchase program or share counts sometimes.

Counting for converts can be pretty tricky to model.

David J. Glick: Thanks, John. I appreciate it.

John: Thanks, John I appreciate I'm glad you asked about the.

John David Kernan: Thanks, John. I appreciate it. Glad you asked about the

Speaker Change: Converts good question.

David J. Glick: Glad you asked about the conversions. Good question. Before I answer your question directly, I just want to talk about our liquidity. We feel very good about our current liquidity. We ended the quarter with $742 million in cash. We had no borrowings on our ABL and about $1.5 billion in total liquidity.

And before I answer your question directly I just wanted to.

Speaker Change: Talking about our liquidity, we feel very good about our current liquidity, we ended the quarter with $742 million in cash we had no borrowings on our ABL and about $1 $5 billion in total liquidity.

David J. Glick: Secondly, we're really comfortable with our total debt levels, and we would expect, as, hopefully, our EBITDA continues to grow, that our leverage ratios would stay on the healthy trend of improvement we've seen over the last few years. Now, I'm getting to your question on the 2025 convertible notes. Yes, they became a current liability.

Speaker Change: Secondly, we're really comfortable with our total debt levels and we would expect this hopefully our EBITDA continues to grow that our leverage ratios.

Speaker Change: Would stay on the healthy trend of improvement we've seen over the last few years.

Speaker Change: Getting to your question on the 2025 convertible notes, yes. They became a current liability is at the end of this quarter there was $156 million outstanding that mature in April 2025.

David J. Glick: This is the end of this quarter. There are 156 million outstanding that mature in April of 2025. If you recall, John, we did an amend and extend convert transaction in 2023. And at that time, it was our intention to ultimately reduce the total amount of converts outstanding on our balance sheet, and we extended $297 million in new convertible notes out to December 2027, you know, while purposely allowing the converts you referenced, the $156 million, the 2025s, to go to maturity.

Speaker Change: You recall John.

Speaker Change: Did an amend and extend convert transaction in 2023 at that time is our intention to ultimately reduce the total amount of converts outstanding on our balance sheet and we extended $297 million in new convertible notes now to December 2027.

Speaker Change: While purposely, allowing the converts you referenced the $156 million of the 2020 fives to go to maturity. So given the strong liquidity that I just referenced we are very comfortable retiring that.

David J. Glick: So given the, you know, the strong liquidity that I just referenced, we're very comfortable retiring that $156 million in principal with cash on hand next April. And, you know, as you might expect, this is a strategy that we socialized up front with the rating agencies before we completed the transaction.

156 million of principal with cash on hand next April and as you might expect this is a strategy that we socialized upfront with the rating agencies before we completed the transaction.

David J. Glick: You know, getting to sort of the heart of your question about buybacks. Since we completed the Convert transaction last year, we bought back about $164 million in stock between Q4 of last year and Q1 of this year. And we indicated on our last earnings call that we viewed last year's level of buyback, which was $232 million, as a reasonable proxy or target for buybacks this year. And, as you probably note in the press release, we have 442 million remaining on our current share price authorization.

Speaker Change: Getting to the heart of your question about buybacks.

Speaker Change: Since we completed the convert transaction last year, we bought back about $164 million in stock between Q4 of last year in Q1 of this year and we indicated on our last earnings call that we you'd used reviewed last year's level of buybacks.

Speaker Change: Which was $232 million is it reasonable proxy or target for buybacks this year.

Speaker Change: As you probably noted in the press release, we have $442 million remaining on our current share price authorization. So look we know that our shareholders value.

David J. Glick: So look, we know that our shareholders value a consistent approach to share repurchases. And our intention would be, given our strong liquidity as well as what we expect to generate in cashflow, that we would continue to buy back shares consistently, not only in 2024 but in 2025 as well, assuming our financial performance continues as we have it.

Speaker Change: Consistent approach to share repurchases and our intention would be given our strong liquidity as well as what we expect to generate in cash flow that we would continue to buy back shares consistently not only in 2024 for 2025 as well assuming our financial performance continue.

Speaker Change: As we haven't planned.

Speaker Change: Got it thanks.

Sean: Thanks, Sean.

Speaker Change: Next question comes from the line of Brooke Roach with Goldman Sachs. Your line is open.

Brooke Siler Roach: This next question comes from the line of Brooke Roach with Goldmine Sachs. Your line is open.

Speaker Change: Good morning, and thank you for taking our question Mike.

Brooke Siler Roach: Good morning, and thank you for taking our question. Michael, several retailers have recently announced that they're reducing or sharpening their price and value equation. What impact could these lower prices have on Burlington, and what is your strategy or reaction?

Brooke Siler Roach: Michael several retailers have recently announced that they are reducing reducing or sharpening their price and value equation, what impacts could these lower prices have on Burlington and what is your strategy or reactions.

Brook: Well good morning Brook. Thank you for the question.

Michael O'sullivan: Well, Brooke. Thank you for the question. You're right, it feels like a number of retailers have recently talked about reducing, sharpening, or rolling back their prices. As an off-price retailer, relative value is critically important to us. So we pay close attention to what competitors are saying. But you know, that said, there are a few reasons why I think we are in pretty good shape. Firstly.

Mike: Youre right. It does feel like a number of retailers have recently talked about.

Mike: Reducing sharpening of rolling back type prices.

Mike: As an off price retailer relative value is critically important to us.

Mike: So we pay close attention to what competitors are saying.

Mike: That said there are a few reasons why I think we are in pretty good shape.

Mike: Firstly.

Michael O'sullivan: You know, many retailers have raised their prices over the last few years. Now that the consumer is pushing back, it's not that surprising that some retailers are having to roll their prices back. In contrast, we have not raised prices.

Yes, many retailers raised their prices over the last few years.

Mike: Now that the consumer is pushing back.

Speaker Change: That's surprising.

Speaker Change: Some retailers are having to roll that prices back in contrast, we have not raised prices in fact, our average retails are lower now than they were two years ago.

Michael O'sullivan: In fact, our average retail prices are lower now than they were two years ago. The reason for that is that our core customer has been under significant economic pressure since the end of 2021. So we've had to stay very, very sharp on value. So in other words, I feel like we're already starting from a very strong value position. Secondly, Owl Merchants is in our competitors' stores every week, in off-price department stores, specialty stores, e-commerce websites, and other retailers.

Speaker Change: The reason for that is that our core customer has been under significant economic pressure since the end of 2021. So we've had to stay very very sharp fall in value. So in other words I feel like we.

Speaker Change: We're already starting from a very strong value position.

Speaker Change: Secondly.

Speaker Change: Our merchants are in our competitor stores every week off price department stores specialty stores.

Michael O'sullivan: They're looking through the assortments, the styles, the prices. They're looking at what's working and what's not and what's left in the clearance range. As I mentioned a moment ago, with Merchandising 2.0, we have better visibility than we've ever had before into what's on our floor and how well it's turning. That means that we can respond very quickly if we need to make an adjustment. The third and final thing I'd say is that the guidance that we discussed today already builds in some room in case we need to reduce markup later this year in order to make our values even stronger.

Speaker Change: Commerce websites and other retailers, they're looking through.

Speaker Change: The assortments the styles of the prices.

Speaker Change: Now looking at what's working and what's not and what's left in the clearance rack.

Speaker Change: As I mentioned, a moment ago with merchandising to point out we have we have better visibility than we've ever had before into what's on our floor and how well it's turning.

Speaker Change: It means that we can respond very quickly if we need to make an adjustment.

Speaker Change: The third and final thing I'd say is that the guidance that we've discussed today.

Speaker Change: Already built in some room in case, we need to reduce markup.

Speaker Change: Later this year in order to maintain value is even stronger.

Michael O'sullivan: It's worth calling out that the Q1 gross margin that we've reported today at 43.5 percent is a historic record for the first quarter for Burlington. It's even higher than Q1 of 2021. And we're driving those margins by turning faster and taking fewer markdowns. We think we may have more favorability there, but within our guidance, we've left room in case we need to further sharpen our and pass along that

Speaker Change: It's worth calling out that the Q1 gross margin that we've reported today at 43, 5%.

Historic record for the first quarter total and it's even higher than Q1 of 2021.

Speaker Change: And we're driving those margins by turning Costa and taking fewer markdowns. We think we may have more favorable <unk>.

Speaker Change: Within our guidance, we've left room in case, we need to further sharpen our balance sheet and pass along that capability.

Speaker Change: <unk>.

Speaker Change: That's really helpful for Kristen can you elaborate on that point on the expectations for merchandise margin as you move throughout the year given some of the puts and takes on mark on versus the year on year trend on regular price selling relative to clearance from last year.

Brooke Siler Roach: That's really helpful. Kristin, can you elaborate on that point on the expectations for merchandise margin as you move throughout the year given some of the puts and takes on markdown versus the year-on-year trend on regular price selling relative to clearance from last year? Thank you.

Speaker Change: No.

Speaker Change: Okay.

Kristin Wolfe: Sure. No, it's a good question.

Speaker Change: Sure.

Speaker Change: It's a good question, we certainly saw them.

Speaker Change: Higher merchandize margin in the first quarter with the the lower clearance faster turns lower markdowns.

Kristin Wolfe: We certainly saw higher merchandise margin in the first quarter with the lower clearance, faster turns, and lower markdowns. Going forward, I'd say we think looking at, we do feel like there's an opportunity to continue seeing a faster turn, faster inventory turn, and thereby lower markdowns. Probably, maybe not as much opportunity on markup, but do you feel like we have an opportunity going forward on that? We still turn a little bit slower than some of our peers and feel like there's an opportunity there to drive improved merchandise margin. That's part of that. 200 basis points of margin opportunity that's independent of sales, as I talked about earlier. A higher merge margin is part of that, really based on a faster return.

Speaker Change: Go forward I'd say, we think looking at we do feel like there is an opportunity to continue seeing a faster turn faster inventory turns and thereby lower markdown.

Speaker Change: Maybe not as much opportunity on Mark up but do you feel like we have opportunities going forward on.

Speaker Change: Fast return, we still turn a little bit slower than some of our peers until like Theres an opportunity there to drive.

Speaker Change: Five improved merch margin thats part of that.

Speaker Change: 200 basis points of margin opportunity, that's independent of sales that I talked about earlier.

Speaker Change: Higher merch margins part of that really based on a faster turn.

Speaker Change: Great. Thanks, so much I'll pass it on.

Brooke Siler Roach: Great. Thanks so much. I'll pass it on.

Speaker Change: Next question comes from the line of Alex <unk> with Morgan Stanley. Your line is open.

Alexandra Ann Straton: The next question comes from the line of Alex Trayton with Morgan Stanley. Your line is open.

Alexandra Ann Straton: Great. Thanks for taking my questions. Just first, I wanted to dive into new store openings. As you open up new stores, do you think you're attracting new customers to Burlington? And then, if you are, who do you think you are taking these customers from?

Speaker Change: Great. Thanks for taking my question, just firstly I wanted to dive into new store openings as you open up new stores do you think youre, attracting new customers to Burlington and then if you are who do you think you are taking these customers from.

Michael O'sullivan: Good morning, Alex. That's a great question. As we mentioned in the prepared remarks, total sales growth in Q1 was up 11% versus 2023 versus Q1 of 2023, and that itself was on top of positive 11% growth versus Q1 of 2022. So obviously, those numbers heavily indicate that we're drawing incremental customers to our stores. That said, Burlington has been around for a long time, and most of our new stores are opening in markets and geographies where we already have a presence.

Speaker Change: Good morning, Alex.

Speaker Change: That's a great question.

Speaker Change: As we as we mentioned in the prepared remarks total sales growth in Q1.

Speaker Change: It was up 11% versus 2023.

Speaker Change: Versus Q1 of 2023 and that itself was on top of positive 11% growth versus Q1 of 2022.

Speaker Change: So obviously those numbers heavily indicate that we are accruing incremental customers to our stores.

Speaker Change: That said.

Speaker Change: Burlington has been around for a long time and most of our new stores.

Speaker Change: Our opening end markets and geographies, where we already have a presence.

Michael O'sullivan: So what we're seeing in our data is that, yes, some of the shoppers walking into our stores are complete, but many others actually shopped at Burlington many years ago. Maybe, maybe their mother brought them in to buy a coat back in the day. What's exciting is that when they walk into one of our stores today, it's as if they're walking into a completely different retailer. It feels like a new Burlington, and to all intents and purposes, it is.

Speaker Change: So what we're seeing in our data is that yes, some of the shockers walking into our stores.

Speaker Change: Completely new.

Speaker Change: Many others actually shopped Burlington many years ago, maybe maybe the MRO the mother brought them in to buy a coat back in the day.

Speaker Change: What's exciting is that when they walk into one of our stores today.

Speaker Change: They're walking into a completely different retailer.

Speaker Change: It feels like a new Burlington and to all intents and purposes.

Michael O'sullivan: These are essentially new customers for us, so yes, one way or another, we believe that our new store opening program is attracting new customers to Burlington. On the last part of your question, you know, where are these customers coming from? I would say that there is not one single source.

Speaker Change: Essentially new customers for us so so yes, one way or another.

Speaker Change: We believe that our new store opening program is attracting new customers to Burlington.

Speaker Change: On the other.

Speaker Change: The last part of your question where are these customers coming from.

Michael O'sullivan: Of course, at a macro level, we can see that there are certain retail formats, such as department stores and specialty stores, that are struggling and are losing share year on year. We don't have specific data, but it seems like a reasonable inference that we must be picking up some of the market share that they are losing. That said, you know, we operate in the U.S. and our customers cross shop heavily looking for the best value. So the implication for us is that if we offer the best value, then we can draw market share, I think, from a wide range of retail competitors.

Speaker Change: Yes, I would say that there is not one single source.

Speaker Change: Of course at a macro level.

Speaker Change: We can see that there are certain retail formats.

Speaker Change: Such as.

Speaker Change: Hartman stores and specialty stores.

Speaker Change: That are struggling and losing share year on year.

Speaker Change: We don't have specific data, but it seems like a reasonable inference.

Speaker Change: We must be picking up some market share that they are losing.

Speaker Change: That said we operate.

Speaker Change: In our large fragmented and very competitive space with <unk>.

Speaker Change: If price department stores specialty stores e-commerce, and other retail formats, and we know from from our own customer survey.

Speaker Change: Our customers cross shop heavily looking for the best value.

Speaker Change: So yes.

Speaker Change: <unk> for US is if we offer the best value then we can draw on market share I think from a wide range of retail competitors.

Alexandra Ann Straton: Great. Maybe just a second one from me, but on the flip side, store closures. It looks like you relocated or closed a lot of stores in the quarter. Can you just provide more color on what was going on there? And then how many additional stores do you think you ultimately need to close or relocate?

Speaker Change: Great maybe just a second one for me, but on the flip side store closures. It looks like you relocated or closed a lot of stores in the quarter can you just provide more color on what was going on there and then how many additional stores do you think you ultimately need to close or relocate.

Speaker Change: A lot.

Alexandra Ann Straton: Thanks a lot.

Speaker Change: Great. Good morning, Alex I'll take that 1%, it's a good question.

Speaker Change: We did close or relocate a number of stores in the first quarter on a net basis, we opened 14 new stores.

Speaker Change: But we opened 36 gross new stores in the first quarter, which means we closed or relocated 22 stores on our base of a little over a 1000 stores.

Speaker Change: So for the year, we plan to close or relocate approximately 40 stores and we plan to open about 140 gross new stores.

Speaker Change: This means we're moving out of approximately 40 older oversized stores that tend to be in secondary or tertiary centers.

Speaker Change: We're moving into higher traffic centers that tend to trade more broadly across income demographics and this year is really representative of what we plan to do over the next several years as leases expire and new locations in these higher traffic centers become available and we expect to close.

Speaker Change: As a relocate about 150 to 200 stores over the next five years.

Thanks, so much good luck.

Speaker Change: Okay. Thank you.

Next question comes from the line of Adrienne <unk> with Barclays. Your line is open.

Kristin Wolfe: Great, good morning. Alex, I'll take that one.

Kristin Wolfe: It's Kristin. It's a good question. We did close or relocate a number of stores in the first quarter. However, on a net basis, we opened 14 new stores. But we opened 36 growth new stores in the first quarter, which means we closed or relocated 22 stores on our base of a little over a thousand stores. So, for the year, we plan to close or relocate approximately 40 stores, and we plan to open about 140 gross new stores.

Adrienne Eugenia Yih: Great. Thank you very much and let me add my congratulations great start to the year.

Adrienne: Can you comment on the drivers of comp growth in Q1 traffic AUR <unk> and then how those.

Christian: The transition through the quarter and into the May quarter to date, and then Christian My follow up is on the deleverage that you mentioned on Q1 on store payroll. We're hearing from some other retailers that there is some stability.

Speaker Change: And turnover and maybe like average hourly rate gains are slowing what drove this and I am expecting that same deleverage through the rest of the year. Thank you very much.

Kristin Wolfe: So this means we're moving out of approximately 40 older oversized stores that tend to be in secondary or tertiary centers. We're moving into higher traffic centers that tend to trade more broadly across income demographics. And this year is really representative of what we plan to do over the next several years as leases expire and new locations in these higher traffic centers become available. And we expect to close or relocate about 150 to 200 stores over the next five years.

Speaker Change: Good morning, Adrian I'll actually I'll take both of your questions.

Speaker Change: The first was on the components of comp so.

Primary drivers of first quarter comp are both traffic and conversion to gather the increase in total transaction and that's what really drove the comp in the quarter.

Speaker Change: Higher conversion.

Speaker Change: It's great because it tells us when she comes in our stores you see as the content and value that he likes.

Speaker Change: We see that in conversion.

Speaker Change: <unk> was down slightly in the quarter due to mix of business and our continued focus on opening price point and units per transaction were up slightly traffic and conversion improved as we moved through the quarter. As you would expect I think both metrics were stronger in the March April period.

Speaker Change: Then in February.

Speaker Change: And then your second question was on Onstar payroll. So it's a good question we mentioned it in the prepared remarks, excluding bed Bath <unk> beyond dark rent expenses SG&A deleverage was 40 basis points and that was driven primarily by increased investments in store payroll.

Speaker Change: Rob.

Speaker Change: As a reminder, in early 2023, we thought we had opportunity to improve our customer shopping experience and improve store conditions.

Speaker Change: To ensure our stores are a neat clean easy to shop.

Speaker Change: To address this opportunity we made a purposeful investment in store payroll beginning in the back half of last year, and we will lap this payroll investment in the fall of this year.

Speaker Change: Typically you can expect that we see SG&A leverage at around a 3% comp.

The last part of your question was around store wages.

Speaker Change: <unk>.

Speaker Change: We tend to take a market by market approach we plan for obviously.

Speaker Change: Legislative increases, but we also plan for competitive.

Speaker Change: And market related wage increases and we're seeing stability, there and our approach as a market by market it seems to be working.

Speaker Change: Fantastic. Thank you so much and best of luck.

Speaker Change: Adrian Thank you.

Speaker Change: Our last question comes from the line of Dan that Delphi with Telsey Advisory Group. Your line is open.

Alexandra Ann Straton: Thanks so much. Good luck!

Adrienne Eugenia Yih: The next question comes from the line of Adrienne Yih with Barclays. Your line is open.

Adrienne Eugenia Yih: Great, thank you very much, and let me add my congratulations. A great start to the year.

Dan: Hi, good morning, everyone and congratulations on the results regards to real estate two questions any update on the bed Bath and beyond stores that you took are they all open now how are they doing and all the onetime bed Bath <unk> beyond expensive behind you and just secondly, I saw that you picked up some of the 19.

Speaker Change: <unk> only leases in the bankruptcy auction any update or detail on those stores or are they likely to open this year. Thank you.

Dana: Good morning, Dana, Yes, I think thanks for these questions. It's still early but we feel very good about the bed bath and beyond stores.

Michael O'sullivan: Michael, can you comment on the drivers of comp growth in Q1 traffic, AUR, UPT, and then how those sort of transition through the quarter and into the May quarter to date? And then, Kristin, my follow-up question is on the deleverage that you mentioned in Q1 on store payroll. We're hearing from some other retailers that there's some stability in turnover and maybe average hourly rate gains are slowing. What drives this, and are you expecting that same deleverage through the rest of the year?

Adrienne Eugenia Yih: Thank you very much.

Speaker Change #101: As a reminder, we expect that an average new store sales volumes will be about $7 million in the first full year and we expect that these bed bath and beyond stores as a group will achieve or beat that expectation.

Speaker Change #101: The 64 bed Bath locations, we opened 32 last year in fiscal 2023, the majority of those were in the fourth quarter and.

Speaker Change #101: In the first quarter of this year, we opened 20 bed Bath and beyond stores and we expect to open the remaining 12 in the second quarter, although it's possible we could have a few stragglers that fall into Q3.

Speaker Change #101: And as far as the dark rent cost and.

Speaker Change #101: Q4 of 2023 associated with bed Bath were about $6 million and all of 2023 fiscal 2023 that cost was about $18 million.

Kristin Wolfe: Good morning, Adrienne. I'll actually take both of your questions. The first was on the components of comp. So, the primary drivers of first quarter comp were both traffic and conversion. Together, the increase in total transactions, that's what really drove comp in the quarter. Hiring conversion is great because it tells us when a customer comes into our store, she sees the content and value that she likes, and we see that in conversion.

Speaker Change #101: In the first quarter of this year in 'twenty for those bed Bath <unk> beyond dark rent costs were $6 million and FERC Q for Q2, we have modeled in the guidance, we expect about $3 million a bed Bath <unk> beyond dark rent expense and then after that it should be largely behind us.

Kristin Wolfe: AUR was down slightly in the quarter due to the mix of business and our continued focus on opening price points and units per transaction were up slightly. Traffic and conversion improved as we moved through the quarter, as you would expect. I think both metrics were stronger in the March-April period than in February. And then your second question was on store payroll. So it's a good question.

Kristin Wolfe: As mentioned in the prepared remarks, excluding Bed Bath & Beyond dark rent expenses, SG&AD leverage was 40 basis points, and that was driven primarily by increased investments in store payroll. As a reminder, in early 2023, we thought we had an opportunity to improve our customer shopping experience and improve store conditions to ensure stores were neat, clean, and easy to shop. So, to address this opportunity, we made a purposeful investment in store payroll beginning in the back half of last year, and we'll lap this payroll investment in the fall of this year.

Kristin Wolfe: And typically, you can expect that we see SG&A leverage at around 3% comp. I think the last part of your question was around store wages, and we tend to take a market-by-market approach. We plan for, obviously, the legislative increases, but we also plan for competitive and market-related wage increases. And we're seeing stability there, and our approach as a market-by-market seems to be working. Fantastic.

Speaker Change #102: And I think your second question was on 99 cent only yes.

Speaker Change #103: It's a good question we evaluated.

Speaker Change #103: Over 370 store locations that became available in the 99 cent only bankruptcy, we really scrutinize. These but really very few of these sites had the characteristics. We're looking for we're looking for a busy strip malls national co tenant strong traffic sales potential or nor did many clear.

Speaker Change #103: Our new store financial hurdles. So based on our analysis will likely secured just a handful of these locations.

Speaker Change #103: And if we security stores they'll join our pipeline and in 25, or even <unk> and Argos will plan to offer a more detailed update on some of the negotiations still.

Speaker Change #103: Ongoing there.

Speaker Change #104: Thanks for the question.

Speaker Change #105: Thank you.

Speaker Change #105: Yes.

Speaker Change #106: There are no further question at this time, Mr. Michael Michael O'sullivan I turn the call back over to you.

Adrienne Eugenia Yih: Fantastic. Thank you so much and best of luck. Thank you, Adrienne. Thank you. Our last question comes from the line of Dana Telsey with the Telsey Advisory Group. Your line is open. Hi, good morning, everyone, and congratulations on the results. Regards to-

Speaker Change #107: Let me close by thanking everyone on this call for your interest in Burlington stores.

Dana Lauren Telsey: Our last question comes from the line of Dana Telsey with the Telsey Advisory Group. Your line is open. Good morning, everyone, and congratulations on the results.

Dana Lauren Telsey: Good morning, Dana. Yeah, thanks for asking these questions.

Michael O'sullivan: It's still early, but we feel very good about the Bed Bath & Beyond stores. As a reminder, we expect that, on average, new store sales volumes will be about $7 million in the first full year, and we expect that these Bed Bath & Beyond stores, as a group, will achieve or beat that expectation. Of the 64 Bed Bath locations, we opened 32 last year in fiscal 2023, and the majority of those were in the fourth quarter.

Michael O'sullivan: In the first quarter of this year, we opened 20 Bed Bath & Beyond stores, and we expect to open the remaining 12 in the second quarter, although it's possible we could have a few stragglers that fall into Q3. And as far as the dark rent cost, in Q4 of 2023, Associated with Bed Bath was about $6 million, and in all of 2023, fiscal 2023, that cost was about $18 million. In the first quarter of this year, in the first 24 months, those Bed, Bath, and Beyond DART rent costs were $6 million. And for Q2, we have modeled in the guidance, and we expect about $3 million of DART rent expense. And then after that, it should be largely behind us.

Michael O'sullivan: And I think your second question was about 99-cents only. Yes, it's a good question. We evaluated over 370 store locations that became available in the 99-cent only bankruptcy. We really scrutinized these, but really, very few of these sites had the characteristics we're looking for. We're looking for busy strip malls, national co-tenants, strong traffic, sales potential, and not many have cleared our new store financial hurdles. So based on our analysis, we'll likely secure just a handful of these locations. And if we secure these stores, they'll join our pipeline in 25 or even 26. So in August, we'll plan to offer more detailed updates as some of the negotiations are still ongoing there. Thanks.

Michael O'sullivan: There are no further questions at this time. Mr. Michael O'Sullivan, I turn the call back over to you.

Michael O'sullivan: Let me close by thanking everyone on this call for your interest in Burlington Stores. We look forward to talking to you again in August to discuss our second quarter 2024 fiscal results. Thank you for your time today.

Speaker Change #108: We look forward to talking to you again in August to discuss second quarter 2020 for fiscal results.

Speaker Change #108: Thank you for your time today.

Speaker Change #109: This concludes today's conference call you may now disconnect.

Operator: This concludes today's conference call. You may now disconnect.

Speaker Change #109: [music].

Speaker Change #109: Okay.

Speaker Change #109: Okay.

Speaker Change #109: [music].

Speaker Change #109: Okay.

Speaker Change #109: Sure.

Yeah.

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