Q2 2025 Burlington Stores Inc Earnings Call

Webcast call. Please note that this call is being recorded after the Speakers' prepared remarks, there will be a question and answer session. If you'd like to ask a question during that time lease press star followed by one on your telephone keypad. Thank you I'd now.

I'd like to hand, the call over to David Glick Group Senior Vice President Treasurer, and Investor Relations. You May now go ahead. Please.

Thank you operator, and good morning, everyone.

We appreciate everyones participation in todays conference call to discuss Burlington's fiscal 2025 second quarter operating results. Our presenters today are Michael O'sullivan, our Chief Executive Officer, and Krista Muhr, 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.

A replay of the call will be available until September four 2025.

We take no responsibility for in Accuracies 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.

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 described in the company's 10-K, and our other filings with the SEC all of which are expressly incorporated herein by reference.

Please note that the financial results and expectations. We discuss 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.

As a reminder, as indicated in this morning's press release, all profitability metrics discussed in this call exclude costs associated with bankruptcy acquired leases.

Ellie: Hello, ladies and gentlemen, and welcome to the Burlington Stores earnings webcast. We will be starting shortly. Again, we will be starting shortly. Thank you so much. Hello, everyone. My name is Ellie. I'm going to be your operator, and welcome to the Burlington Stores, Inc. Second Quarter 2025 earnings conference and webcast call. Please note that this call is being recorded. After the speaker's prepared remarks, there will be a question and answer session. If you'd like to ask a question during that time, please press star followed by one on your telephone keypad. Thank you. I'd now like to hand the call over to David Glick, Group Senior Vice President, Treasurer, and Investor Relations. You may now go ahead, please.

These pretax costs amounted to $11 million and $3 million respectively.

During the fiscal second quarters of 2025 and 2024 and.

$17 million and $9 million, respectively for the first half of 2025 and 2024.

Now here's Michael.

Thank you David.

Good morning, everyone.

Thank you for joining us.

I would like to cover three topics this morning.

Firstly.

I will briefly review our second quarter results.

Then I will discuss our third quarter and updated full year guidance.

And lastly.

We believe that our exceptional performance in the second quarter can be directly attributed to Burlington two points higher initiatives that we have pursued over the last few years.

So I would like to spend some time this morning, providing additional color on some of these initiatives.

Speaker #2: Hello, everyone. My name is Ellie. I'm going to be your operator, and welcome to the Burlington Stores, Inc. second quarter 2025 earnings conference and webcast call.

Okay, let's talk about our second quarter results.

Speaker #2: Please note that this call is being recorded. After the speakers prepare their remarks, there will be a question-and-answer session. If you'd like to ask a question during that time, please press star followed by one on your telephone keypad.

We are pleased with our very strong sales performance in the quarter.

Total sales grew 10% on top of 13% total sales growth last year.

Speaker #2: Thank you. I'd now like to hand the call over to David Glick, Group Senior Vice President, Treasurer, and Investor Relations. You may now go ahead, please.

These double digit growth rates demonstrate the power of our business to consistently take market share even in an uncertain retail environment.

Speaker #5: Thank you, operator, and good morning, everyone. We appreciate everyone's participation in today's conference call to discuss Burlington's fiscal 2025 second quarter operating results. Our presenters today are Michael O'Sullivan, our Chief Executive Officer, and Kristin Wolfe, our EVP and Chief Financial Officer.

John Kernan: Thank you, Operator, and good morning, everyone. We appreciate everyone's participation in today's conference call to discuss Burlington Stores, Inc.'s fiscal 2025 second quarter operating results. 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. A replay of the call will be available until September 4, 2025. We take no responsibility for inaccuracies that may appear in transcripts of this call by third parties. Our remarks in the Q&A that follows are copyrighted today by Burlington Stores. Remarks made on this call concerning future expectations, events, strategies, objectives, trends, or projected financial results are subject to certain risks and uncertainties.

In Q2 these market share gains were driven by new store openings and by very strong comp store sales growth.

Comp store sales increased 5% on top of 5% comp sales growth last year.

Speaker #5: 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.

The trend in Q2 started out slowly with weather in the Midwest and northeast and May being cooler than last year and then our trend picked up in June and July as the weather normalized.

Speaker #5: A replay of the call will be available until September 4th, 2025. We take no responsibility for inaccuracies that may appear in transcripts of this call by third parties.

Speaker #5: Our remarks and the Q&A that follows are copyrighted today by Burlington Stores. Remarks made on this call concerning future expectations, events, strategies, objectives, trends, or projected financial results are subject to certain risks and uncertainties.

We are also very pleased with our strong earnings performance in Q2.

Our operating margin expanded 120 basis points versus last year.

Speaker #5: Actual results may differ materially from those that are projected in such forward-looking statements. Such risks and uncertainties include those that are described in the company's 10-K and other filings with the SEC.

John Kernan: Actual results may differ materially from those that are projected in such forward-looking statements. Such risks and uncertainties include those that are described in the company's 10-K and/or 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, the GAAP measures, are included in today's press release. As a reminder, as indicated in this morning's press release, all profitability metrics discussed in this call exclude costs associated with bankruptcy-acquired leases. These pre-tax costs amounted to $11 million and $3 million, respectively, during the fiscal second quarters of 2025 and 2024, and $17 million and $9 million, respectively, for the first half of 2025 and 2024. Now, here's Michael.

This was a very high quality earnings beat driven by stronger merchandise margins and expense efficiencies across the P&L.

Speaker #5: All of which are expressly incorporated herein by reference. Please note that the financial results and expectations we discuss today are on a continuing operations basis.

Our EPS of one dollar and 72 cents was 42.

Above the high end of our guidance range.

Speaker #5: Reconciliations of the non-GAAP measures we discuss today to GAAP measures are included in today's press release. As a reminder, as indicated in this morning's press release, all profitability metrics discussed in this call exclude costs associated with bankruptcy-acquired leases.

Let me move on to the outlook for the rest of the year.

Despite our very strong performance in the second quarter, we remain concerned about the external outlook for the back half.

We are maintaining our comp guidance of zero to 2% for Q3 and Q4.

Speaker #5: These pre-tax costs amounted to $11 million and $3 million, respectively, during the fiscal second quarters of 2025 and 2024, and $17 million and $9 million, respectively, for the first half of 2025 and 2024.

Let me comment on Q3, specifically.

As we have discussed in the past our strong heritage in outerwear means that we are more sensitive than most retailers to seasonal weather variations in the third quarter.

Speaker #5: Now, here's Michael.

Speaker #6: Thank you, David. Good morning, everyone. Thank you for joining us. I would like to cover three topics this morning. Firstly, I will briefly review our second quarter results.

Michael O'sullivan: Thank you, David. Good morning, everyone. Thank you for joining us. I would like to cover three topics this morning. Firstly, I will briefly review our second quarter results. Then, I will discuss our third quarter and updated full-year guidance. Lastly, we believe that our exceptional performance in the second quarter can be directly attributed to Burlington 2.0 initiatives that we have pursued over the last few years. I would like to spend some time this morning providing additional color on some of these initiatives. Okay, let's talk about our second quarter results. We are pleased with our very strong sales performance in the quarter. Total sales grew 10% on top of 13% total sales growth last year. These double-digit growth rates demonstrate the power of our business to consistently take market share, even in an uncertain retail environment.

If temperatures in late September through October turned out to be warmer or cooler than last year. This can have a big impact on our trend.

We have terrific outerwear buys and reserved inventory.

Speaker #6: Then, I will discuss our third quarter and updated full-year guidance. And lastly, we believe that our exceptional performance in the second quarter can be directly attributed to Burlington 2.0 initiatives that we have pursued over the last few years.

We are well positioned to chase a stronger trend if that happens.

We will manage the business cautiously and see how the trend develops.

I am not planning to comment in detail on the fourth quarter at this point.

We will have more to say in November.

Speaker #6: So, I would like to spend some time this morning providing additional color on some of these initiatives. Okay, let's talk about our second quarter results.

But it is worth calling out that in Q4, we will be up against 6% comp sales growth from the fourth quarter of last year.

So the upside in Q4 is probably limited.

Speaker #6: We are pleased with our very strong sales performance in the quarter. Total sales grew 10% on top of 13% total sales growth last year.

Moving on to earnings.

We are raising our full year guidance and passing along most of the Q2 earnings beat.

Speaker #6: These double-digit growth rates demonstrate the power of our business to consistently take market share, even in an uncertain retail environment. In Q2, these market share gains were driven by new store openings and by very strong comp store sales growth.

We are not flowing through the entire earnings beat.

This is because of incremental tariff pressure in the back half.

Paris for most countries are higher now than when we last discussed earnings guidance on our Q1 call in May.

Michael O'sullivan: In Q2, these market share gains were driven by new store openings and by very strong comp store sales growth. Comp store sales increased 5% on top of 5% comp sales growth last year. The trend in Q2 started out slowly with weather in the Midwest and Northeast in May being cooler than last year, but our trend picked up in June and July as the weather normalized. We are also very pleased with our strong earnings performance in Q2. Our operating margin expanded 120 basis points versus last year. This was a very high-quality earnings beat, driven by stronger merchandise margins and expense efficiencies across the P&L. Our EPS of $1.72 was $0.42 above the high end of our guidance range. Let me move on to the outlook for the rest of the year.

Our updated full year guidance assumes that we will be able to offset most but not all of this incremental tariff pressure.

Speaker #6: Comp store sales increased 5% on top of 5% comp sales growth last year. The trend in Q2 started out slowly with weather in the Midwest and Northeast in May being cooler than last year, but then our trend picked up in June and July as the weather normalized.

I would like to move on now and talk about the direct link that we see.

Our very strong Q2 sales and earnings results and the key Burlington two <unk> initiatives that we have pursued over the last few years.

Many of these initiatives are in the early stages of that potential impact.

Speaker #6: We are also very pleased with our strong earnings performance in Q2. Our operating margin expanded 120 basis points versus last year. This was a very high-quality earnings beat.

We are excited because we expect this impact to grow over time and to drive our longer term performance.

I will focus on three items.

Merchandising two <unk> stores to <unk> and the impact of recently opened stores once they joined the comp base.

Speaker #6: Driven by stronger merchandise margins and expense efficiencies across the P&L. Our EPS of $1 and 72 cents was 42 cents above the high end of our guidance range.

I will start with merchandising to point in time.

As you know merchandising to toe is our collective name for the new systems processes and tools that we have developed and rolled out to enable our buyers and planners to more effectively and rapidly respond to changes in the external environment.

Speaker #6: Let me move on to the outlook for the rest of the year. Despite our very strong performance in Q2, we remain concerned about the external outlook for the back half.

Michael O'sullivan: Despite our very strong performance in the second quarter, we remain concerned about the external outlook for the back half. We are maintaining our comp guidance of 0 to 2% for Q3 and Q4. Let me comment on Q3 specifically. As we have discussed in the past, our strong heritage in outerwear means that we are more sensitive than most retailers to seasonal weather variations in the third quarter. If temperatures in late September through October turn out to be warmer or cooler than last year, this can have a big impact on our trend. We have terrific outerwear buys in reserve inventory, so we are well positioned to chase a stronger trend if that happens. We will manage the business cautiously and see how the trend develops. I am not planning to comment in detail on the fourth quarter at this point. We'll have more to say in November.

<unk> and the sales trend.

Speaker #6: We are maintaining our comp guidance of zero to two percent for Q3 and Q4. Let me comment on Q3 specifically. As we have discussed in the past, our strong heritage in outerwear means that we are more sensitive than most retailers to seasonal weather variations in the third quarter.

The last several months and the uncertainty created by tariffs are provided a showcase for the power of these capabilities.

In the weeks, leading up to the tariff announcements in early April we began to make multiple detailed revisions to our assortment plans for Q2 and the full season.

Pivoting away from categories with the greatest tariff exposure to those with less tariff impact and with stronger more reliable supply.

Speaker #6: If temperatures in late September through October turn out to be warmer or cooler than last year, this can have a big impact on our trend.

These forecast revisions and scenarios also involved remixing and remodeling our margin plans to find offsets to the impact of tariffs.

Speaker #6: We have terrific outerwear buys in reserve inventory, so we are well positioned to chase a stronger trend if that happens. We will manage the business cautiously and see how the trend develops.

It seems like a long time ago now, but in April and early may the tariff on imports from China was 145%.

Speaker #6: I am not planning to comment in detail on the fourth quarter at this point. We'll have more to say in November. But it is worth calling out that in Q4, we will be up against 6% comp sales growth from the fourth quarter of last year.

This rate represented an effective embargo on Chinese imports and it created an interruption or an air pocket. If you like to the flow of receipts across the retail industry.

Michael O'sullivan: It is worth calling out that in Q4, we will be up against 6% comp sales growth from the fourth quarter of last year. The upside in Q4 is probably limited. Moving on to earnings, we are raising our full-year guidance and passing along most of the Q2 earnings beat. We are not flowing through the entire earnings beat. This is because of incremental tariff pressure in the back half. Tariffs for most countries are higher now than when we last discussed earnings guidance on our Q1 call in May. Our updated full-year guidance assumes that we will be able to offset most, but not all, of this incremental tariff pressure.

There are some merchandise categories for example, decorative bedding cookware and toys, where there are very few alternative sources of supply outside of China.

Speaker #6: So the upside in Q4 is probably limited. Moving on to earnings, we are raising our full-year guidance and passing along most of the Q2 earnings beat.

And these merchandise categories the interruption in imports in April and May impacted inventory levels.

The retail industry in the second quarter.

Speaker #6: We are not flowing through the entire earnings beat. This is because of incremental tariff pressure in the back half. Tariffs for most countries are higher now than when we last discussed earnings guidance on our Q1 call in May.

These categories were a drag on the sales trend in our home business during the quarter.

But what I am really excited about is that despite this headwind we were able to deliver 5% comp growth across the store.

Speaker #6: Our updated full-year guidance assumes that we will be able to offset most, but not all, of this incremental tariff pressure. I would like to move on now and talk about the direct link that we see between our very strong Q2 sales and earnings results and the key Burlington 2.0 initiatives that we have pursued over the last few years.

Our buyers and planners.

Huge credit they did an amazing.

<unk> job rapidly responding and pivoting into other businesses.

The key point, though is that merchandising two points Ho gave them the visibility and the tools to do this.

Michael O'sullivan: I would like to move on now and talk about the direct link that we see between our very strong Q2 sales and earnings results and the key Burlington 2.0 initiatives that we have pursued over the last few years. Many of these initiatives are in the early stages of their potential impact. We are excited because we expect this impact to grow over time and to drive our longer-term performance. I will focus on three items: Merchandising 2.0, Stores 2.0, and the impact of recently opened stores once they join the comp base. I will start with Merchandising 2.0. As you know, Merchandising 2.0 is our collective name for the new systems, processes, and tools that we have developed and rolled out to enable our buyers and planners to more effectively and rapidly respond to changes in the external environment and the sales trend.

Let me move on to stores to point out.

Historically, the customer perception of Burlington was a big old difficult to shop stores consistent with our coat factory heritage.

Speaker #6: Many of these initiatives are in the early stages of their potential impact. We are excited because we expect this impact to grow over time and to drive our longer-term performance.

But that is not who we are any more.

Over the last two years you have heard us talk a lot about the actions we are taking to drive incredible value.

Speaker #6: I will focus on three items. Merchandising 2.0, stores 2.0, and the impact of recently opened stores once they join the comp base. I will start with merchandising 2.0.

We've talked less about stores, but in parallel we have also been working very hard to improve the shopping experience.

This starts with the standards that we set for ourselves our store managers and our field teams.

It also involves new systems processes tools and reports to drive consistency and efficiency.

Speaker #6: As you know, Merchandising 2.0 is our collective name for the new systems, processes, and tools that we have developed and rolled out to enable our buyers and planners to more effectively and rapidly respond to changes in the external environment and the sales trend.

In the past year, we have seen the impact of these programs really start to take off.

Our customer service scores are running at historical all time highs and.

And we have seen improvements across all major operational metrics.

Speaker #6: The last several months and the uncertainty-created by tariffs have provided a showcase for the power of these capabilities. In the weeks leading up to the tariff announcements in early April, we began to make multiple detailed revisions to our assortment plans for Q2 and the fall season.

Michael O'sullivan: The last several months and the uncertainty created by tariffs have provided a showcase for the power of these capabilities. In the weeks leading up to the tariff announcements in early April, we began to make multiple detailed revisions to our assortment plans for Q2 and the fall season, pivoting away from categories with the greatest tariff exposure to those with less tariff impact and with stronger, more reliable supply. These forecast revisions and scenarios also involve remixing and remodeling our margin plans to find offsets to the impact of tariffs. It seems like a long time ago now, but in April and early May, the tariff on imports from China was 145%. This rate represented an effective embargo on Chinese imports, and it created an interruption, or an air pocket, if you like, to the flow of receipts across the retail industry.

Our store teams have really embraced these changes and our associate engagement levels have risen sharply.

In addition, as.

As I mentioned during our call in May we have re imagined and redesigned our store layout signage and fixed stream.

The objective of this redesign is to make our stores still new and more exciting.

Speaker #6: Pivoting away from categories with the greatest tariff exposure to those with less tariff impact and with stronger, more reliable supply. These forecast revisions and scenarios also involved remixing and remodeling our margin plans to find offsets to the impact of tariffs.

ZEA to shop, more fund more off price and more Burlington to point out.

At this point, we have retrofitted about half of the chain to this new design.

Customer feedback has been very positive and.

Speaker #6: It seems like a long time ago now, but in April and early May, the tariff on imports from China was $145%. This rate represented an effective embargo on Chinese imports.

And we are seeing a nice sales lift in these stores.

This lift helped drive our 5% comp growth in the second quarter.

There is more to come as.

As we retrofit the rest of the chain in 2026.

Speaker #6: And it created an interruption or an air pocket, if you like, to the flow of receipts across the retail industry. There are some merchandise categories--for example, decorative bedding, cookware, and toys--where there are very few alternative sources of supply outside of China.

Let me move on to new stores.

In fact, I want to talk specifically about the impact of recently opened stores once they turn comp.

Michael O'sullivan: There are some merchandise categories, for example, decorative bedding, cookware, and toys, but there are very few alternative sources of supply outside of China. In these merchandise categories, the interruption in imports in April and May impacted inventory levels across the retail industry in the second quarter. These categories were a drag on the sales trend in our home business during the quarter. What I am really excited about is that despite this headwind, we were able to deliver 5% comp growth across the store. Our buyers and planners deserve huge credit. They did an amazing job rapidly responding and pivoting into other businesses. The key point, though, is that Merchandising 2.0 gave them the visibility and the tools to do this. Let me move on to Stores 2.0. Historically, the customer perception of Burlington was of big, old, difficult-to-shop stores, consistent with our tote factory heritage.

Our new stores join our comp base 15 months after opening.

Speaker #6: In these merchandise categories, the interruption in imports in April and May impacted inventory levels across the retail industry in the second quarter. These categories were a drag on the sales trend in our home business during the quarter.

As we've discussed in the past, we expect new stores to ramp up over time and to comp ahead of the chain for that first few years.

That is indeed, what is happening.

When we analyzed comp stores that were opened over the last several years, we see very strong comp sales growth rates well ahead of our original expectations.

Speaker #6: But what I am really excited about is that, despite this headwind, we were able to deliver 5% comp growth across the store. Our buyers and planners deserve huge credit.

Again. These recent new store cohorts helped to drive our very strong 5% comp sales growth in the second quarter.

Speaker #6: They did an amazing job rapidly responding and pivoting into other businesses. The key point, though, is that Merchandising 2.0 gave them the visibility and the tools to do this.

This is very exciting because as we look ahead over the next few years the mix of younger stores in our comp base is going to grow.

Speaker #6: Let me move on to stores 2.0. Historically, the customer perception of Burlington was of big, old, difficult-to-shop stores consistent with our coat factory heritage.

So we anticipate that the impact of this comp tailwind will increase over time.

Okay. At this point I would like to turn the call over to Kristin.

Speaker #6: But that is not who we are anymore. Over the last few years, you have heard us talk a lot about the actions we are taking to drive incredible value.

Michael O'sullivan: That is not who we are anymore. Over the last few years, you have heard us talk a lot about the actions we are taking to drive incredible value. We've talked less about stores, but in parallel, we've also been working very hard to improve the shopping experience. This starts with the standards that we set for ourselves, our store managers, and our field teams. It also involves new systems, processes, tools, and reports to drive consistency and efficiency. In the past year, we have seen the impact of these programs really start to take off. Our customer service scores are running at historical all-time highs, and we have seen improvements across all major operational metrics. Our store teams have really embraced these changes, and our associate engagement levels have risen sharply.

Kristin.

Thank you Michael and good morning, everyone.

I plan to cover a couple of topics this morning.

I will start with some additional color on our second quarter performance.

Speaker #6: We've talked less about stores, but in parallel, we've also been working very hard to improve the shopping experience. This starts with the standards that we set for ourselves, our store managers, and our field teams.

Then I will share details on our updated guidance.

Starting with the second quarter total sales grew 10% while comp store sales increased 5%.

Well above the high end of our guidance range.

Speaker #6: It also involves new systems, processes, tools, and reports to drive consistency and efficiency. In the past year, we have seen the impact of these programs really start to take off.

Traffic was flat in the quarter.

Our comp was driven by a higher transaction size.

Our average unit retail was up mid single digits versus last year.

Speaker #6: Our customer service scores are running at historical all-time highs, and we have seen improvements across all major operational metrics. Our store teams have really embraced these changes, and our associate engagement levels have risen sharply.

The gross margin rate for the second quarter was 43, 7%.

An increase of 90 basis points versus last year.

This was driven by a 60 basis point increase in merchandise margin and a 30 basis point decrease in freight expense.

Speaker #6: In addition, as I mentioned during our call in May, we have reimagined and redesigned our store layout, signage, and fixturing. The objective of this redesign is to make our stores feel new and more exciting.

Michael O'sullivan: In addition, as I mentioned during our call in May, we have reimagined and redesigned our store layout, signage, and fixturing. The objective of this redesign is to make our stores feel new and more exciting, easier to shop, more fun, more off-price, and more Burlington 2.0. At this point, we have retrofitted about half of the chain to this new design. Customer feedback has been very positive, and we are seeing a nice sales lift in these stores. This lift helped drive our 5% comp growth in the second quarter. There is more to come as we retrofit the rest of the chain in 2026. Let me move on to new stores. In fact, I want to talk specifically about the impact of recently opened stores once they turn comp. Our new stores join our comp base 15 months after opening.

On merchandise margin the <unk>.

60 basis point expansion was driven by improvement in shortage and lower markdowns.

Which more than offset lower markup due to tariffs.

Speaker #6: Easier to shop. More fun. More off-price. And more Burlington 2.0. At this point, we have retrofitted about half of the chain to this new design.

While there was significant pressure on markup from tariffs in the quarter, we took several effective offsetting actions to reduce the impact.

The net result of these actions is that our Q2 markup was only modestly lower than last year.

Speaker #6: Customer feedback has been very positive, and we are seeing a nice sales lift in these stores. This lift helped drive our 5% comp growth in the second quarter.

This second quarter product sourcing costs were $209 million.

$191 million in the second quarter of 2024.

Speaker #6: There is more to come as we retrofit the rest of the chain in 2026. Okay, let me move on to new stores. In fact, I want to talk specifically about the impact of recently opened stores once they turn comp.

Product sourcing costs were flat as a percentage of sales compared to last year.

Adjusted SG&A costs in Q2 decreased 30 basis points versus last year.

Driven by savings initiatives primarily in stores.

And leverage on higher comp sales.

Speaker #6: Our new stores join our comp base 15 months after opening. As we've discussed in the past, we expect new stores to ramp up over time and to comp ahead of the chain for their first few years.

Q2, adjusted EBIT margin was 6%.

Michael O'sullivan: As we've discussed in the past, we expect new stores to ramp up over time and to comp ahead of the chain for their first few years. That is indeed what is happening. When we analyze comp stores that were opened over the last several years, we see very strong comp sales growth rates, well ahead of our original expectations. These recent new store cohorts helped drive our very strong 5% comp sales growth in the second quarter. This is very exciting because as we look ahead over the next few years, the mix of younger stores in our comp base is going to grow. We anticipate that the impact of this comp tailwind will increase over time. At this point, I would like to turn the call over to Kristin. Kristin.

120 basis points higher than last year.

Which was well above our guidance range and down 30 basis points to flat.

Speaker #6: That is indeed what is happening. When we analyze comp stores that were opened over the last several years, we see very strong comp sales growth rates.

Our adjusted earnings per share in Q2 was $1 72.

Which came in significantly above our guidance range.

This represents a 39% increase versus the prior year.

Speaker #6: Well ahead of our original expectations. Again, these recent new store cohorts helped drive our very strong 5% comp sales growth in Q2.

At the end of the quarter comparable store inventories were down 8% versus the end of the second quarter 2024.

Our reserve inventory with 50% of our total inventory versus 41% of our inventory last year.

Speaker #6: This is very exciting because, as we look ahead over the next few years, the mix of younger stores in our comp base is going to grow.

In dollar terms, our reserve inventory was up 43% compared to last year, reflecting the great deals we were able to make to get ahead of tariffs.

Speaker #6: So, we anticipate that the impact of this comp tailwind will increase over time. At this point, I would like to turn the call over to Kristin.

We're very pleased with the quality of the merchandise and the values and brands that we have in reserve.

Speaker #6: Kristin.

As Michael said earlier, we are well positioned to chase if the sales trend in Q3 turns out to be stronger than guidance.

Speaker #7: Thank you, Michael, and good morning, everyone. I plan to cover a couple of topics this morning. I will start with some additional color on our second quarter performance, then I will share details on our updated guidance.

Kristin Wolfe: Thank you, Michael, and good morning, everyone. I plan to cover a couple of topics this morning. I will start with some additional color on our second quarter performance. I will share details on our updated guidance. Starting with the second quarter, total sales grew 10% while comp store sales increased 5%, well above the high end of our guidance range. Traffic was flattest in the quarter. Our comp was driven by a higher transaction size. Our average unit retail was up mid-single digits versus last year. The gross margin rate for the second quarter was 43.7%, an increase of 90 basis points versus last year. This was driven by a 60 basis point increase in merchandise margin and a 30 basis point decrease in freight expense.

During the quarter, we raised $500 million in additional term loan debt primarily to fund the purchase of our highly automated west coast distribution Center.

Speaker #7: Starting with the second quarter, total sales grew 10%, while comp store sales increased 5%. Well above the high end of our guidance range. Traffic was flattish in the quarter.

Additionally, we upsized and extended our ABL facility in Q2.

Which is now a $1 billion line that matures in July of 2030.

Speaker #7: Our comp was driven by a higher transaction size. Our average unit retail was up mid-single digits versus last year. The gross margin rate for the second quarter was 43.7%.

We ended the quarter with approximately $1 $7 billion in total liquidity.

Which consisted of $748 million in cash.

$946 million in availability on our ABL.

Speaker #7: An increase of 90 basis points versus last year. This was driven by a 60 basis point increase in merchandise margin and a 30 basis point decrease in freight expense.

With no outstanding borrowings at the end at the quarter on the ABL.

During the quarter, we repurchased $26 million in common stock and.

And at the end of Q2, we had $632 million remaining on our share repurchase authorization.

Speaker #7: On merchandise margin, the 60 basis point expansion was driven by improvement in shortage and lower markdowns, which more than offset the lower markup due to tariffs.

Kristin Wolfe: On merchandise margin, the 60 basis point expansion was driven by improvement in shortage and lower markdowns, which more than offset the lower markup due to tariffs. While there was significant pressure on markup from tariffs in the quarter, we took several effective offsetting actions to reduce the impact. The net result of these actions was that our Q2 markup was only modestly lower than last year. The second quarter product sourcing costs were $209 million versus $191 million in the second quarter of 2024. Product sourcing costs were flat as a percentage of sales compared to last year. Adjusted SG&A costs in Q2 decreased 30 basis points versus last year, driven by savings initiatives primarily in stores and leverage on higher comp sales.

In the second quarter, we opened 23 net new stores, bringing our store count at the end of the quarter to 1138 stores.

Speaker #7: While there was significant pressure on markup from tariffs in the quarter, we took several effective offsetting actions to reduce the impact. The net result of these actions was that our Q2 markup was only modestly lower than last year.

This includes 30 new store openings.

For relocation and three closings.

We continue to expect to open 100, net new stores in fiscal 2025.

I will now move on to discuss our outlook for the full fiscal year as well as for the third quarter and fourth quarter of fiscal 2025.

Speaker #7: The second quarter product sourcing costs were $209 million, compared to $191 million in the second quarter of 2024. Product sourcing costs were flat as a percentage of sales compared to last year.

Based on our strong performance in the second quarter, we are increasing our full year fiscal 2025 guidance for comp sales total sales adjusted EBIT margin and adjusted earnings per share as follows.

Speaker #7: Adjusted SG&A costs in Q2 decreased 30 basis points versus last year. Driven by savings initiatives, primarily in stores, and leverage on higher comp sales.

Comparable store sales are now expected to increase 1% to 2% with total sales to increase 7% to 8% for the full year 2025.

Speaker #7: Q2 adjusted EBIT margin was 6%, 120 basis points higher than last year. This was well above our guidance range of down 30 basis points to flat.

Kristin Wolfe: Q2 adjusted EBIT margin was 6%, 120 basis points higher than last year, which was well above our guidance range of down 30 basis points to flat. Our adjusted EPS in Q2 was $1.72, which came in significantly above our guidance range. This represents a 39% increase versus the prior year. At the end of the quarter, comparable store inventories were down 8% versus the end of the second quarter of 2024. Our reserve inventory was 50% of our total inventory versus 41% of our inventory last year. In dollar terms, our reserve inventory was up 43% compared to last year, reflecting the great deals we were able to make to get ahead of tariffs. We are very pleased with the quality of the merchandise and the values and brands that we have in reserve.

This revised full year guidance factors and our year to date comp store sales as well as our guidance for comparable store sales to increase zero to 2% for the balance of fiscal 'twenty five.

Speaker #7: Our adjusted earnings per share in Q2 was $1.72, which came in significantly above our guidance range. This represents a 39% increase versus the prior year.

We now expect our full year adjusted EBIT margins to increase by 20 to 40 basis points.

This is up from our most recent guidance for an increase of flat to 30 basis points.

Speaker #7: At the end of the quarter, comparable store inventories were down 8%, versus the end of the second quarter, 2024. Our reserve inventory was 50% of our total inventory, versus 41% of our inventory last year.

This updated margin outlook now translates to our full year 2025 adjusted earnings per share range of $9 19.

To $9 59.

Up from our original guidance of $8 70.

Speaker #7: In dollar terms, our reserve inventory was up 43% compared to last year, reflecting the great deals we were able to make to get ahead of tariffs.

To $9 30.

For the third quarter, we expect comparable store sales growth of flat to 2%.

Speaker #7: We are very pleased with the quality of the merchandise and the values and brands that we have in reserve. As Michael O'Sullivan said earlier, we are well positioned to chase if the sales trend in Q3 turns out to be stronger than guidance.

And a total sales increase of 5% to 7%.

This would result in operating margin is down 20 basis points to flat versus the third quarter of 2024.

Kristin Wolfe: As Michael said earlier, we are well positioned to chase if the sales trend in Q3 turns out to be stronger than guidance. During the quarter, we raised $500 million in additional term loan debt, primarily to fund the purchase of our highly automated West Coast distribution center. Additionally, we upsized and extended our ABL facility in Q2, which is now a $1 billion line that matures in July of 2030. We ended the quarter with approximately $1.7 billion in total liquidity, which consisted of $748 million in cash and $946 million in availability on our ABL, with no outstanding borrowings at the end of the quarter on the ABL. During the quarter, we repurchased $26 million in common stock, and at the end of Q2, we had $632 million remaining on our share repurchase authorization.

This translates to earnings per share guidance for the third quarter of $1 50.

Speaker #7: During the quarter, we raised $500 million in additional term loan debt, primarily to fund the purchase of our highly automated West Coast distribution center.

To $1 60.

Our third quarter guidance excludes approximately $10 million of expenses associated with bankruptcy acquired leases.

Speaker #7: Additionally, we upsized and extended our ABL facility in Q2, which is now a $1 billion line that matures in July 2030. We ended the quarter with approximately $1.7 billion in total liquidity.

For the fourth quarter of fiscal 2025, we expect comps.

Comparable store sales growth of flat to 2% and total sales to increase 7% to 9%.

EBIT margins to range from a decrease of 10 basis points to an increase of 30 basis points.

Speaker #7: Which consisted of $748 million in cash and $946 million in availability on our Asset-Based Line (ABL), with no outstanding borrowings at the end of the quarter on the ABL.

And adjusted earnings per share in the range of $4 30.

To $4 60.

Our fourth quarter guidance excludes approximately $7 million of expenses associated with bankruptcy acquired leases.

Speaker #7: During the quarter, we repurchased $26 million in common stock. And at the end of Q2, we had $632 million remaining on our share repurchase authorization.

I will now turn the call back to Michael.

Thank you Kristen.

Before I turn the call over to the operator for your questions.

Speaker #7: In the second quarter, we opened 23 net new stores, bringing our store count at the end of the quarter to 1,138 stores. This includes 30 new store openings, four relocations, and three closings.

Kristin Wolfe: In the second quarter, we opened 23 net new stores, bringing our store count at the end of the quarter to 1,138 stores. This includes 30 new store openings, four relocations, and three closings. We continue to expect to open 100 net new stores in fiscal 2025. I will now move on to discuss our outlook for the full fiscal year, as well as for the third quarter and fourth quarter of fiscal 2025. Based on our strong performance in the second quarter, we are increasing our full-year fiscal 2025 guidance for comp sales, total sales, adjusted EBIT margin, and adjusted earnings per share as follows. Comparable store sales are now expected to increase 1% to 2%, with total sales to increase 7% to 8% for the full year 2025.

I would like to emphasize three key points from this morning's discussion.

Firstly, we are very pleased with our exceptional performance in Q2.

These very strong results demonstrate the power of our business to profitably gain market share even in an uncertain retail environment.

Speaker #7: We continue to expect to open 100 net new stores in fiscal 2025. I will now move on to discuss our outlook for the full fiscal year, as well as for the third quarter and fourth quarter of fiscal 2025.

Secondly, based on a very strong Q2 performance, we are raising our full year guidance.

But the external outlook remains uncertain and we see risks in the back half.

Speaker #7: Based on our strong performance in the second quarter, we are increasing our full-year fiscal 2025 guidance for comp sales, total sales, adjusted EBIT margin, and adjusted earnings per share as follows.

We are managing our business cautiously, but we are ready to chase sales trend if it turns out to be stronger.

Thirdly, we believe that our exceptional performance in Q2 can be attributed to Burlington two <unk> initiatives that we have pursued over the last few years.

Speaker #7: Comparable store sales are now expected to increase 1% to 2%, with total sales expected to increase 7% to 8% for the full year 2025. This revised full-year guidance factors in our year-to-date comparable store sales as well as our guidance for comparable store sales to increase 0% to 2% for the balance of fiscal 2025.

We are excited because the impact of these initiatives is still in the early stages.

Kristin Wolfe: This revised full-year guidance factors in our year-to-date comp store sales, as well as our guidance for comparable store sales to increase 0% to 2% for the balance of fiscal 2025. We now expect our full-year adjusted EBIT margins to increase by 20 to 40 basis points. This is up from our most recent guidance for an increase of flat to 30 basis points. This updated margin outlook now translates to a full-year 2025 adjusted earnings per share range of $9.19 to $9.59, up from our original guidance of $8.70 to $9.30. For the third quarter, we expect comparable store sales growth of flat to 2% and a total sales increase of 5% to 7%. This would result in an operating margin of down 20 basis points to flat versus the third quarter of 2024. This translates to earnings per share guidance for the third quarter of $1.50 to $1.60.

And we anticipate that it will grow over time.

Now I would like to turn the call over for your questions.

Speaker #7: We now expect our full-year adjusted EBIT margins to increase by 20% to 40 basis points. This is up from our most recent guidance for an increase of flat to 30 basis points.

Turning to Florida for a question and answer session, if you'd like to ask a question. Please press star followed by one on your telephone keypad. Please limit. Your one question your questions to one question and one follow up.

Your first question comes from the line of Matthew Boss of Jpmorgan. Your line is now open.

Speaker #7: This updated margin outlook now translates to a full-year 2025 adjusted earnings per share range of $9.19 to $9.59, up from our original guidance of $8.70 to $9.30.

Thanks, and congrats on a great quarter.

Thank you Matt.

So Michael on your five comp in the second quarter, which is a 10 on a two year stack.

How best to think about your back half guide, which implies a material drop off from there should we think of this as your usual playbook to plan conservatively and chase or are you seeing something that's causing you concern about sales in the back half of the year.

Speaker #7: For the third quarter, we expect comparable store sales growth of flat to 2%, and a total sales increase of 5% to 7%. This would result in an operating margin of down 20 basis points to flat versus the third quarter of 2024.

Well good morning, Matt.

For the question.

The direct answer to your question is this is just our standard playbook.

Speaker #7: This translates to earnings per share guidance for the third quarter of $1.50 to $1.60. Our third quarter guidance excludes approximately $10 million of expenses associated with bankruptcy-acquired leases.

We are planning and managing our business cautiously and we are ready to chase a stronger trend.

Kristin Wolfe: Our third quarter guidance excludes approximately $10 million of expenses associated with bankruptcy-acquired leases. For the fourth quarter of fiscal 2025, we expect comparable store sales growth of flat to 2% and total sales to increase 7% to 9%. EBIT margins to range from a decrease of 10 basis points to an increase of 30 basis points, and adjusted EPS in the range of $4.30 to $4.60. Our fourth quarter guidance excludes approximately $7 million of expenses associated with bankruptcy-acquired leases. I will now turn the call back to Michael.

I should add that we are especially confident in our ability to do this right now.

Because merchandise supply is very strong.

Speaker #7: For the fourth quarter of fiscal 2025, we expect comparable store sales growth of flat to 2%, and total sales to increase 7% to 9%.

And we also have some great deals packed away and reserve inventory.

Add to that we've just demonstrated in the second quarter.

Speaker #7: EBIT margins are expected to range from a decrease of 10 basis points to an increase of 30 basis points, with adjusted earnings per share projected in the range of $4.30 to $4.60.

We are very good at flexing up and chasing a stronger sales trend so.

With all that it makes sense to stick with our standard playbook and.

We're very confident in our ability to execute it.

Speaker #7: Our fourth-quarter guidance excludes approximately $7 million of expenses associated with bankruptcy-acquired leases. I will now turn the call back to Michael.

With that said, though.

I want to be careful in answering your question I don't want to understate.

The external risks.

We have just reported an extraordinarily strong Q2, but as you know in our business you can't just extrapolate from that.

Speaker #6: Thank you, Kristin. Before I turn the call over to the operator for your questions, I would like to emphasize three key points from this morning's discussion.

Michael O'sullivan: Thank you, Kristin. Before I turn the call over to the operator for your questions, I would like to emphasize three key points from this morning's discussion. Firstly, we are very pleased with our exceptional performance in Q2. These very strong results demonstrate the power of our business to profitably gain market share even in an uncertain retail environment. Secondly, based on our very strong Q2 performance, we are raising our full-year guidance. The external outlook remains uncertain, and we see risks in the back half. We are managing our business cautiously, but we are ready to chase the sales trend if it turns out to be stronger. Thirdly, we believe that our exceptional performance in Q2 can be attributed to Burlington 2.0 initiatives that we have pursued over the last few years.

External headwinds can emerge in individual quarters to throw off the trend.

As I mentioned in the <unk>.

Speaker #6: Firstly, we are very pleased with our exceptional performance in Q2. These very strong results demonstrate the power of our business to profitably gain market share even in an uncertain, retail environment.

As I mentioned in the remarks.

The most obvious risk is weather.

Until recently coats will literally our middle name.

I Love This heritage when September and October are colder than last year, but not so much with when they are unseasonably warm.

Speaker #6: Secondly, based on our very strong Q2 performance, we are raising our full-year guidance. However, the external outlook remains uncertain, and we see risks in the back half.

On a multiyear basis, the weather averages out, but in an individual quarter and an individual year it matches.

Now of course, the risks in the back half are not just limited to whether there are plenty of macroeconomic and other.

Speaker #6: We are managing our business cautiously but we are ready to chase sales trend if it turns out to be stronger. Thirdly, we believe that our exceptional performance in Q2 can be attributed to Burlington 2.0 initiatives that we have pursued over the last few years.

External variables that can have an impact on retail sales.

Higher unemployment rising inflation changes in consumer outlook.

For the back half of this year.

All of those risks are real.

Speaker #6: We are excited because the impact of these initiatives is still in the early stages. And we anticipate that it will grow over time. Now, I would like to turn the call over for your questions.

Michael O'sullivan: We are excited because the impact of these initiatives is still in the early stages, and we anticipate that it will grow over time. Now, I would like to turn the call over for your questions.

At a high level I would say there are many experts and analysts who are predicting.

The tariffs are going to have a significant and potentially.

Negative effect on the economy.

Those effects not really happened yet.

And that that highly highly unpredictable.

Speaker #2: Opening the floor for a question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad.

Operator: Opening the floor for question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. Please limit your questions to one question and one follow-up. Your first question comes from the line of Matthew Boss of JPMorgan. Your line is now open.

The good news for us is that as an off price retailer.

Don't have to take a position on these risks we don't have to predict the future, but we have to do is manage our business to be nimble and flexible. So we can react no.

Speaker #2: Please limit your one questions to one question and one follow-up. Your first question comes from the line of Matthew Boss of JP Morgan, your line is now open.

No matter what happens.

That is a standard playbook, it's what a standard playbook is designed to do.

Speaker #8: Thanks and congrats on a great quarter.

John Kernan: Thanks, and congrats on a great quarter.

So the risk of sounding like a broken record, we will manage our business cautiously and aggressively chase the trend.

Speaker #6: Thank you.

Matthew Boss: Thank you.

Speaker #8: So, Michael, on your five comp in the second quarter, which is a 10 on a two-year stack, how best to think about your back half guide which implies a material drop-off from there?

John Kernan: Michael, on your five comp in the second quarter, which is a 10% on a two-year stack, how best to think about your back half guide, which implies a material drop-off from there? Should we think of this as your usual playbook to plan conservatively and chase, or are you seeing something that's causing you concern about sales in the back half of the year?

Great and then a follow up for Chris for Kristen to to stay on guidance. So it looks like your past most of your second quarter upside through to the updated annual guide could.

Speaker #8: Should we think of this as your usual playbook to plan conservatively and chase, or are you seeing something that's causing you concern about sales in the back half of the year?

Could you walk us through the puts and takes on your new fall guidance impact of tariffs offsets you have in place and just any color on the difference between the third and fourth quarter operating margin year over year.

Speaker #6: Well, good morning, Matt. Thank you for the question. The direct answer to your question is this is just our standard playbook. We are planning and managing our business cautiously and we are ready to chase a stronger trend.

Michael O'sullivan: Good morning, Matt. Thank you for the question. The direct answer to your question is this is just our standard playbook. We are planning and managing our business cautiously, and we are ready to chase a stronger trend. I should add that we are especially confident in our ability to do this right now because merchandise supply is very strong, and we also have some great deals packed away in reserve inventory. Add to that, you know, we've just demonstrated in the second quarter that we are very good at flexing up and chasing a stronger sales trend. With all that, it makes sense to stick with our standard playbook, and we're very confident in our ability to execute it. With that said, I want to be careful in answering your question. I don't want to understate the external risks.

Good morning, Matt. It's a very good question, let me split the answer into two parts first on tariffs as Michael mentioned in the prepared remarks, we do have incremental tariff risk in the fall tariffs for many countries are at a higher rate now than they were when we last issued guidance back.

Speaker #6: I should add that we are especially confident in our ability to do this right now. Because merchandise supply is very strong. And we also have some great deals packed away in reserve inventory.

In may and our updated guidance assumes that we will offset most but not all of this additional tariff crusher essentially our final guidance reflects our best estimation of the net impacts of tariffs tariffs put significant pressure on mark up, but we've worked very hard to.

Speaker #6: And add to that, you know, we've just demonstrated in the second quarter that we are very good at flexing up and chasing a stronger sales trend.

Speaker #6: So with all that, it makes sense to stick with our standard playbook and we're very confident in our ability to execute it. With that said, though, I want to be careful in answering your question.

Identify offsetting actions.

Offsets include continuously working and negotiating with our vendor partners on costs.

Adjusting and Remixing, our assortment selectively raising retails.

Speaker #6: I don't want to understate the external risks we've just reported an extraordinarily strong Q2, but as you know, in our business, you can't just extrapolate from that.

Driving a faster inventory turns to drive lower markdowns accelerating planned savings initiatives, and then aggressively going after incremental expense savings across the P&L.

Michael O'sullivan: We've just reported an extraordinarily strong Q2, but as you know, in our business, you can't just extrapolate from that. External headwinds can emerge in individual quarters to throw off the trend. As I mentioned in the remarks, the most obvious risk is weather. Until recently, coats were literally our middle name. I love this heritage when September and October are colder than last year, but not so much when they are unseasonably warm. On a multi-year basis, the weather averages out, but in an individual quarter, in an individual year, it matters. Of course, the risks in the back half are not just limited to weather. There are plenty of macroeconomic and other external variables that can have an impact on retail sales. Higher unemployment, rising inflation, changes in consumer outlook. For the back half of this year, all of those risks are real.

Speaker #6: External headwinds can emerge in individual quarters to throw off the trend. As I mentioned in the remarks, the most obvious risk is weather. You know, until recently, coats were literally our middle name.

On the second part of your question I can provide some additional color on the specific quarters.

For the third quarter, we are assuming gross margin rate to be lower year over year due to the impact of tariffs on merch margin.

This should more than offset modest year on year favorability in freight.

And product sourcing costs, we are expecting supply chain savings initiatives to drive leverage and.

Speaker #6: I love this heritage when September and October are colder than last year. But not so much when they are unseasonably warm. Now, on a multi-year basis, the weather averages out, but in an individual quarter, in an individual year, it matters.

And in SG&A, we expect that our savings initiatives will enable us to show some modest leverage on the high end of our flat to 2% comp outlook.

And finally for Q4. The story line is similar but there are a couple of line items that are more pronounced we're expecting more pressure on merch margin from tariffs in the fourth quarter and offsetting that pressure, we do expect supply chain savings initiatives to drive leverage in product sourcing cost and grade.

Speaker #6: Now, of course, the risks in the back half are not just limited to weather. There are plenty of macroeconomic and other external variables that can have an impact on retail sales.

Speaker #6: You know, higher unemployment, rising inflation, changes in consumer outlook. You know, for the back half of this year, all of those risks are real.

<unk> SG&A leverage due to savings initiatives, but also the lapping of last year's higher incentive comp accrual in the fourth quarter of 24.

Speaker #6: At a high level, I would say there are many experts and analysts who are predicting that tariffs are going to have a significant and potentially negative effect on the economy.

Michael O'sullivan: At a high level, I would say there are many experts and analysts who are predicting that tariffs are going to have a significant and potentially negative effect on the economy. Those effects have not really happened yet, and they're highly, highly unpredictable. The good news for us is that as an off-price retailer, we don't have to take a position on these risks. We don't have to predict the future. What we have to do is manage our business to be nimble and flexible so we can react no matter what happens. That is our standard playbook. It's what our standard playbook is designed to do. At the risk of sounding like a broken record, we will manage our business cautiously and aggressively chase the trend.

So because of that we expected EBIT expansion to be somewhat higher in Q4 relative to Q3.

Okay.

Speaker #6: You know, those effects have not really happened yet. And they're highly, highly unpredictable. The good news for us is that as an off-price retailer, we don't have to take a position on these risks.

Churn comes from the line of <unk> of Wells Fargo. Your line is now open.

Hey, good morning, Michael Chris and David.

Speaker #6: We don't have to predict the future. What we have to do is manage our business to be nimble and flexible so we can react no matter what happens.

I think just first question bigger picture for me it's.

It's about pricing.

An industry level, maybe microcrystalline I'm curious what have you guys seen in terms of competitors taking up AUR is what are you. What are you expecting in the back half and I guess, what's the potential to raise prices in the fall as a way to offset some of this tariff pressure youre talking about.

Speaker #6: You know, that is our standard playbook. It's what our standard playbook is designed to do. So, to avoid sounding like a broken record, we will manage our business cautiously and aggressively chase the trend.

Okay.

Speaker #8: Great. And then a follow-up for Kristin to stay on guidance. So it looks like you passed most of your second quarter upside through to the updated annual guide.

Good morning. Thank you for the thank you for the question.

Matthew Boss: Great. A follow-up for Kristin to stay on guidance. It looks like you passed most of your second quarter upside through to the updated annual guide. Could you walk us through the puts and takes on your new fall guidance, impact of tariffs, offsets you have in place, and any color on the difference between the third and fourth quarter operating margin year over year?

On the on the first part of your question industry level pricing.

The answer is yes, we are hearing and in some cases.

Speaker #8: Could you walk us through the puts and takes on your new fall guidance impact of tariffs, offsets you have in place, and just any color on the difference between the third and fourth quarter operating margin year over year?

We are seeing that competitors are taking up retail prices.

So far though I would say that those price increases have been quite selective and and quite restrained.

Speaker #7: Good morning, Matt. It's a very good question. Let me split the answer into two parts. First, on tariffs, as Michael mentioned in the prepared remarks, we do have incremental tariff risk in the fall.

Kristin Wolfe: Good morning, Matt. It's a very good question. Let me split the answer into two parts. First, on tariffs, as Michael mentioned in the prepared remarks, we do have incremental tariff risk in the fall. Tariffs for many countries are at a higher rate now than they were when we last issued guidance back in May. Our updated guidance assumes that we will offset most of, but not all of, this additional tariff pressure. Essentially, our fall guidance reflects our best estimation of the net impacts of tariffs. Tariffs put significant pressure on markup, but we've worked very hard to identify offsetting actions. These offsets include continuously working and negotiating with our vendor partners on costs, adjusting and remixing our assortment, selectively raising retails, driving a faster inventory turn to drive lower markdowns, accelerating planned savings initiatives, and aggressively going after incremental expense savings across the P&L.

I suspect there are a few reasons for that.

Part of it may just be the the time lag between imports arriving in the country.

Speaker #7: Tariffs for many countries are at a higher rate now than they were when we last issued guidance back in May. Our updated guidance assumes that we will offset most of, but not all, of this additional tariff pressure.

And those goods showing up in stores.

But also my sense is that wholesalers and retailers have been reluctant to make decisions on raising prices.

Speaker #7: Essentially, our fall guidance reflects our best estimation of the net impacts of tariffs. So tariffs put significant pressure on markup, but we've worked very hard to identify offsetting actions and these offsets include continuously working and negotiating with our vendor partners on costs, adjusting and remixing our assortment, selectively raising retails, driving a faster inventory turn to drive lower markdowns, accelerating plan savings initiatives, and then just aggressively going after incremental expense savings across the P&L.

Until they know what the final tariff rates are going to be.

It does feel like there is there is more clarity on this now than there was a couple of months ago.

So it wouldn't be surprising if <unk>.

Retail prices were to go up across the industry in the back half of the year.

Of course, we know that our customer is very very price sensitive we saw what happened.

With their discretionary spending levels when the cost of living increased in 2022, it was not not good for us.

Speaker #7: On the second part of your question, I can provide some additional color on the specific quarters. For the third quarter, we are assuming gross margin rate to be lower year over year due to the impact of tariffs on merch margin.

Kristin Wolfe: On the second part of your question, I can provide some additional color on the specific quarters. For the third quarter, we are assuming gross margin rate to be lower year over year due to the impact of tariffs on merch margin. This should more than offset modest year-on-year favorability in freight. In product sourcing costs, we are expecting supply chain savings initiatives to drive leverage. In SG&A, we expect that our savings initiatives will enable us to show some modest leverage on the high end of our flat to 2% comp outlook. Finally, for Q4, the storyline is similar, but there are a couple of line items that are more pronounced. We're expecting more pressure on merch margin from tariffs in the fourth quarter.

So the prospect of higher inflation, especially if it spreads to non discretionary categories like groceries.

Makes us very nervous and it's another reason to be cautious on the rest of the year.

Speaker #7: This should more than offset modest year-on-year favorability in freight. And product sourcing costs, we are expecting supply chain savings initiatives to drive leverage. And an SG&A, we expect that our savings initiatives will enable us to show some modest leverage on the high end of our flat to 2% comp outlook.

I think that's a good segue.

To the second part of your question.

How are we thinking about the potential to raise our own retails.

Now of course as a business.

We need to deal with economic reality.

But as a retailer that is focused on delivering value. We also need to tread very very carefully.

Speaker #7: And finally, for Q4, the storyline is similar, but there are a couple of line items that are more pronounced. We're expecting more pressure on merch margin from tariffs in the fourth quarter.

The important thing I think to understand is that in our business has an off price retailer there is a broad.

Competitive reference.

Speaker #7: And offsetting that pressure, we do expect supply chain savings initiatives to drive leverage in product sourcing costs and greater SG&A leverage due to savings initiatives, but also the lapping of last year's higher incentive comp accrual in the fourth quarter of '24.

Kristin Wolfe: Offsetting that pressure, we do expect supply chain savings initiatives to drive leverage in product sourcing costs and greater SG&A leverage due to savings initiatives, but also the lapping of last year's higher incentive comp accrual in the fourth quarter of 2024. Because of that, we expected EBIT expansion to be somewhat higher in Q4 relative to Q3.

Our strategy is to offer significantly lower prices than traditional retailers.

If those retailers raised prices.

And this could provide some relief for us it could potentially drive additional traffic to our stores.

Sure.

Speaker #7: So because of that, we expected EBIT expansion to be somewhat higher in Q4 relative to Q3.

Could take some pressure off our own retails.

So the answer to your question is.

I think we're going to have to wait and see what impact tariffs have on price levels across the across the retail industry.

And then make a decision about our own our own prices.

Speaker #2: Question comes from the line of Virchow of Wells Fargo, your line is now open.

Operator: Question comes from the line of Ike Boruchow of Wells Fargo. Your line is now open.

Got it thanks, Michael and then maybe Chris can follow up on the on the <unk> call in May I think you described some expense timing shifts into <unk>, but.

Speaker #9: Hey, good morning, Michael, Kristin, David. I think just first question, a bigger picture for me. It's about pricing. At an industry level, maybe Michael or Kristin, I'm curious, what have you guys seen in terms of competitors taking up AURs?

Ike Boruchow: Hey, good morning, Michael, Kristin, David. I think this first question, a bigger picture for me, is about pricing. At an industry level, maybe Michael or Kristin, I'm curious, what have you guys seen in terms of competitors taking up AURs? What are you expecting in the back half? I guess, what's the potential to raise prices in the fall as a way to offset some of this tariff pressure you're talking about?

I think you guided margin flat, but you did really well I think it was up to 120 bps just could you walk us through the drivers of the Q2 margin what you saw in the quarter and basically the drivers of upside.

Speaker #9: What are you expecting in the back half? And I guess what's the potential to raise prices in the fall as a way to offset some of this tariff pressure you're talking about?

Great. Yes. Good morning. Thanks for the question, we're really pleased with the margin performance in the quarter.

The drivers of that expansion, we're really broad based.

Speaker #6: Good morning, Mike. Thank you for the question. On the first part of your question, industry level pricing, the answer is yes, we are hearing and in some cases we are seeing that competitors are taking up retail prices.

Michael O'sullivan: Good morning, Ike. Thank you for the question. On the first part of your question, industry-level pricing, the answer is yes, we are hearing, and in some cases, we are seeing that competitors are taking up retail prices. So far, though, I would say that those price increases have been quite selective and quite restrained. I suspect there are a few reasons for that. Part of it may just be the time lag between imports arriving in the country and those goods showing up in stores. Also, my sense is that wholesalers and retailers have been reluctant to make decisions on raising prices until they know what the final tariff rates are going to be. It does feel like there is more clarity on this now than there was a couple of months ago.

And I think the team did a really nice job executing and tightly managing costs in the quarter. So let me walk through the key drivers on the topline the 5% comp, which was 300 basis points above the high end of the guide this helped drive a faster inventory turn which drove lower markdowns in the quarter.

Speaker #6: So far, though, I would say that those price increases have been quite selective and quite restrained. You know, I suspect there are a few reasons for that.

And secondly, we took a physical inventory in Q2.

And the results were better than we had planned this meaningfully contributed to the merch margin increase in the quarter.

So lower shortage combined with lower markdowns from faster turn more than offset markup pressure from tariffs in the quarter to drive the 60 basis points of merch margin expansion.

Speaker #6: Part of it may just be the time lag between imports arriving in the country and those goods showing up in stores. But also, my sense is that wholesalers and retailers have been reluctant to make decisions on raising prices.

And as I mentioned in the prepared remarks markup was only modestly lower than last year, because we took several effective actions to reduce the impact of tariffs.

Speaker #6: Until they know what the final tariff rates are going to be. Now, it does feel like there is more clarity on this now than there was a couple of months ago.

Additionally, and in gross margin freight Levered 30 basis points. This is really due to savings initiatives in transportation as well as operational efficiencies.

By a higher AUR.

Speaker #6: So, it wouldn't be surprising if retail prices were to go up across the industry in the back half of the year. Now, of course, we know that our customer is very, very price sensitive.

Michael O'sullivan: It would not be surprising if retail prices were to go up across the industry in the back half of the year. Of course, we know that our customer is very, very price-sensitive. We saw what happened with their discretionary spending levels when the cost of living increased in 2022. It was not good for us. The prospect of higher inflation, especially if it spreads to non-discretionary categories like groceries, makes us very nervous, and it's another reason to be cautious on the rest of the year. I think that's a good segue to the second part of your question. How are we thinking about the potential to raise our own retails? Of course, as a business, we need to deal with economic reality, but as a retailer that is focused on delivering value, we also need to tread very, very carefully.

<unk> sourcing costs were slightly better than what we had embedded in our guidance due to savings initiatives in supply chain and finally, SG&A SG&A leveraged 30 basis points. Despite those Q1 expense timing shifts you referenced.

Speaker #6: We saw what happened with their discretionary spending levels when the cost of living increased in 2022. It was not good for us. So the prospect of higher inflation especially if it spreads to non-discretionary categories like groceries, makes us very nervous.

The drivers of the SG&A, where Q4 first leverage on the higher comp sales and then two operational savings initiatives, we've put in place to offset some of the tariff pressures.

Taken all these line items together drove 120 basis points of EBIT expansion in the quarter.

Speaker #6: And it's another reason to be cautious on the rest of the year. I think that's a good segue to the second part of your question.

Got it thanks, so much.

Alright.

Okay.

Our next question comes from the line of Lorraine Hutchinson of Bank of America. Your line is now open.

Speaker #6: How are we thinking about the potential to raise our own retails? Now, of course, as a business, we need to deal with economic reality.

Thank you good morning, Michael I am wondering what trends youre seeing with different demographic groups. The second quarter was very strong but is there any additional color you can share about lower income consumers Hispanic customers or any other segments with standout in the data.

Speaker #6: But as a retailer that is focused on delivering value, we also need to tread very, very carefully. The important thing I think to understand is that in our business as an off-price retailer, there is a broader competitive reference set.

Michael O'sullivan: The important thing, I think, to understand is that in our business, as an off-price retailer, there is a broader competitive reference set. Our strategy is to offer significantly lower prices than traditional retailers. If those retailers raise prices, then this could provide some relief for us. It could potentially drive additional traffic to our stores, or it could take some pressure off our own retails. The answer to your question is I think we're going to have to wait and see what impact tariffs have on price levels across the retail industry and then make a decision about our own prices.

Sure well good morning Lorraine. Thank you for the thank you for the question.

Overall, I would describe our comp performance in Q2 as broad based.

Speaker #6: Our strategy is to offer significantly lower prices than traditional retailers. If those retailers raise prices, then this could provide some relief for us. It could potentially drive additional traffic to our stores.

Now as usual in Q2, we monitored and we analyze the sales trend of our stores.

Based on the demographics of their local trade area and.

Speaker #6: Or it could take some pressure off our own retails. So the answer to your question is, I think we're going to have to wait and see what impact tariffs have on price levels across the retail industry.

And between the first quarter and the second quarter, we saw an improvement in trend in all demographics trade areas.

Now, let me talk specifically about the lower income customer.

Speaker #6: And then make a decision about our own prices.

The lower income customers was especially important to us.

Speaker #9: Got it. Thanks, Michael. And then maybe Kristin, a follow-up on the Q1 call in May. I think you described some expense timing shifts into Q2, but you guided margin flat, yet you did really well.

Ike Boruchow: Got it. Thanks, Michael. Maybe Kristin, a follow-up. On the Q1 call in May, I think you described some expense timing shifts into Q2, but I think you guided margin flat, but you did really well. I think it was up to 120 basis points. Could you walk us through the drivers of the Q2 margin, what you saw in the quarter, and basically the drivers of upside?

When we look at stores in lower income trade areas.

They continue to perform very well with comp sales growth just above the chain average.

Speaker #9: I think it was up to 120 bips. Just could you walk us through the drivers of the Q2 margin, what you saw in the quarter, and basically the drivers of upside?

Now lower income stores have performed well for us for the last few years and that strength.

<unk> is continuing.

Speaker #7: Great. Yes, good morning, Mike. Thanks for the question. We're really pleased with the margin performance in the quarter. The drivers of that expansion were really broad-based.

Kristin Wolfe: Great. Yes. Good morning, Ike. Thanks for the question. We're really pleased with the margin performance in the quarter. The drivers of that expansion were really broad-based, and I think the team did a really nice job executing and tightly managing costs in the quarter. Let me walk through the key drivers. On the top line, the 5% comp, which was 300 basis points above the high end of the guide, helped drive a faster inventory turn, which drove lower markdowns in the quarter. Secondly, we took physical inventory in Q2, and the results were better than we had planned. This meaningfully contributed to the merch margin increase in the quarter. Lower shortage combined with lower markdowns from faster turns more than offset markup pressure from tariffs in the quarter to drive the 60 basis points of merch margin expansion.

Let me move on to the Hispanic customer.

Hispanic customer also as you know very important to US my answer here is a little more nuanced.

Speaker #7: And I think the team did a really nice job executing and tightly managing costs in the quarter. So let me walk through the key drivers.

When you look at stores in high Hispanic trade areas.

To make the data meaningful it's important to pull out quite a rico, Puerto Rico stores have been performing very very strongly.

Speaker #7: On the top line, the 5% comp, which was 300 basis points above the high end of the guide, this helped drive a faster inventory turn, which drove lower markdowns in the quarter.

So they kind of distort the number a little bit it also makes sense to pull out.

Speaker #7: And secondly, we took physical inventory in Q2. And the results were better than we had planned. This meaningfully contributed to the merch margin increase in the quarter.

Our stores on the southern border.

In contrast, there was a high volume stores, but given the issues at the border.

<unk> been comping below the chain this year.

Speaker #7: So lower shortage, combined with lower markdowns from faster turns, more than offset markup pressure from tariffs in the quarter to drive the 60 basis points of merch margin expansion.

So what Youre left with is still a large group of stores that are in high Hispanic trade areas, but exclude Puerto Rico and the southern border.

And the bottom line is in Q2 the trend in those stores was also slightly above the chain.

Speaker #7: And, as I mentioned in the prepared remarks, markup was only modestly lower than last year because we took several effective actions to reduce the impact of tariffs.

Kristin Wolfe: As I mentioned in the prepared remarks, markup was only modestly lower than last year because we took several effective actions to reduce the impact of tariffs. Additionally, in gross margin, freight levered 30 basis points. This was really due to savings initiatives in transportation as well as operational efficiencies, helped by a higher AUR. Product sourcing costs were slightly better than what we had embedded in our guidance due to savings initiatives in supply chain. Finally, SG&A. SG&A levered 30 basis points despite those Q1 expense timing shifts you referenced. The drivers of the SG&A were twofold. First, leverage on the higher comp sales, and then two, operational savings initiatives we put in place to offset some of the tariff pressures. Taking all these line items together drove 120 basis points of EBIT expansion in the quarter.

Now the data.

I've just described.

I think it is very encouraging I know that investors have been concerned understandably.

Speaker #7: So, additionally, in gross margin, freight levered 30 basis points. This was really due to savings initiatives in transportation as well as operational efficiencies, helped by a higher AUR.

About lower income shoppers and about Hispanic shoppers.

Yes, those shoppers are very important to us and theyre very sensitive to economic headwinds such as inflation.

Speaker #7: Product sourcing costs were slightly better than what we had embedded in our guidance due to savings initiatives and supply chain. And finally, SG&A levered 30 basis points despite those Q1 expense timing shifts you referenced.

But based on our second quarter data, we are not seeing any issues at this point.

Thank you and then how would you characterize off price availability overall do you have any concerns about merchandise out there.

Speaker #7: The drivers of the SG&A were twofold. First, leverage on the higher comp sales, and then two, operational savings initiatives we put in place to offset some of the tariff pressures.

Can have and what are you seeing from the vendors in terms of tariff related cost pressure.

Does that pressure create risk to merchandise supply or the merchandize margin in the second half.

Speaker #7: So, taken all these line items together, this drove 120 basis points of EBIT expansion in the quarter.

Yes, it's a good it's a good question Lorraine.

Speaker #9: Got Got it. Thanks so much.

Ike Boruchow: Got it. Thanks so much.

Speaker #7: Thanks, Mike.

Kristin Wolfe: Thanks, Eike.

I'll start with with availability with merchandise availability.

Speaker #9: Thanks.

Speaker #2: Our next question comes from the line of Lorraine Hutchinson of Bank of America. Your line is now open.

Operator: Our next question comes from the line of Lorraine Hutchinson of Bank of America. Your line is now open.

Overall.

Merchandise availability in the off price channel is very strong right now across the store.

Speaker #10: Thank you. Good morning. Michael, I'm wondering what trends you're seeing with different demographic groups. The second quarter was very strong, but is there any additional color you can share about lower income consumers, Hispanic customers, or any other segments that stand out in the data?

Lorraine Hutchinson: Thank you. Good morning. Michael, I'm wondering what trends you're seeing with different demographic groups. The second quarter was very strong, but is there any additional color you can share about lower-income consumers, Hispanic customers, or any other segments that stand out in the data?

As I mentioned in the prepared remarks, there were a.

A few specific categories in home.

Inventory levels across the industry dipped in Q2.

And that was driven by tariff disruption back in April and May.

Speaker #6: Sure. Well, good morning, Lorraine. Thank you for the question. Overall, I would describe our comp performance in Q2 as broad-based. Now, as usual, in Q2, we monitored and analyzed the sales trend of our stores.

Michael O'sullivan: Sure. Good morning, Lorraine. Thank you for the question. Overall, I would describe our comp performance in Q2 as broad-based. As usual, in Q2, we monitored and analyzed the sales trend of our stores based on the demographics of their local trade area. Between the first quarter and the second quarter, we saw an improvement in trend in all demographic trade areas. Let me talk specifically about the lower-income customer. The lower-income customer, as you know, is especially important to us. When we look at stores in lower-income trade areas, they continue to perform very well, with comp sales growth just above the chain average. Lower-income stores have performed well for us for the last few years, and that strength is continuing. Let me move on to the Hispanic customer. Hispanic customer also, as you know, is very important to us. My answer here is a little more nuanced.

But the situation even in those categories is caught up and is largely back to normal now.

More broadly across the store I would say that we are seeing plenty of merchandise.

And we've been able to take advantage of some great deals that we've packed away in reserve.

Speaker #6: Based on the demographics of their local trade area, and between the first quarter and the second quarter, we saw an improvement in trend in all demographic trade areas.

Most of that reserve inventory by the way was bought at pre tariff pricing. So.

So we're looking forward to flowing those great values to our stores in the back half of.

Leaving aside reserve.

Speaker #6: Now, let me talk specifically about the lower-income customer. The lower-income customers, you know, are especially important to us. When we look at stores in lower-income trade areas, they continue to perform very well, with comp sales growth just above the chain average.

There is strong availability across the board as evidence of that actually I would point to the fact that we were able to chase from our guidance range of zero to 2% comp in Q2 to an actual comp of 5%.

We had we had no problem.

Finding great deals to fuel that trend.

Speaker #6: Now, lower income stores have performed well for us for the last few years. And that strength is continuing. Let me move on to the Hispanic customer.

Let me move on to the second part of your question.

The cost pressure from tariffs.

I know, we just crust margin guidance and earnings expectations in Q2.

Speaker #6: Hispanic customer also as you know, very important to us. My answer here is a little more nuanced. When you look at stores in high Hispanic trade areas, to make the data meaningful, it's important to pull out Puerto Rico.

But I want to emphasize that the cost pressure from tariffs is real.

We're only able to drive earnings in Q2, because we rapidly and aggressively took actions to offset that cost pressure.

Michael O'sullivan: When you look at stores in high Hispanic trade areas, to make the data meaningful, it's important to pull out Puerto Rico. Our Puerto Rico stores have been performing very, very strongly, so they kind of distort the number a little bit. It also makes sense to pull out our stores on the southern border. In contrast, those are high-volume stores, but given the issues at the border, they've been comping below the chain this year. What you're left with is still a large group of stores that are in high Hispanic trade areas but exclude Puerto Rico and the southern border. The bottom line is, in Q2, the trend in those stores was also slightly above the chain. The data I've just described, I think, is very encouraging. I know that investors have been concerned, understandably, about lower-income shoppers and about Hispanic shoppers.

Now as Christian described earlier.

Speaker #6: Our Puerto Rico stores have been performing very, very strongly, so they kind of distort the number a little bit. It also makes sense to pull out our stores on the southern border.

Offsetting actions included a number of things working closely and negotiating with our vendor partners on cost.

Adjusting and Remixing, our assortment selectively raising retails driving pasta turns to reduce markdowns accelerating planned savings initiatives and aggressively going after other expense savings across the P&L.

Speaker #6: You know, in contrast, those are high volume stores, but given the issues at the border, they've been comping below the chain this year. So what you're left with is still a large group of stores that are in high Hispanic trade areas, but exclude Puerto Rico and the southern border.

As you can see in the numbers that approach works very well for us in Q2.

So for the back half assuming tariffs don't increase from that current recently announced levels.

Speaker #6: And the bottom line is that in Q2, the trend in those stores was also slightly above the chain. Now, the data I've just described, I think, is very encouraging.

We are confident that we can meet or beat our updated guidance as.

As Christian said that updated guidance builds in the additional pressure from tariffs and the impact of numerous offsetting actions and savings.

Speaker #6: I know that investors have been concerned. Understandably, about lower income shoppers and about Hispanic shoppers. Now, those shoppers are very important to us, and they're very sensitive to economic headwinds such as inflation.

That we've identified for the for the back half.

Michael O'sullivan: Those shoppers are very important to us, and they're very sensitive to economic headwinds such as inflation. Based on our second quarter data, we are not seeing any issues at this point.

Okay.

Thank you.

Thank you Brian question comes from the line of John Kernan of Gd Cowen. Your line is now open.

Speaker #6: But based on our second quarter data, we are not seeing any issues at this point.

Speaker #10: Thank you. And then how would you characterize off-price availability overall? Do you have any concerns about merchandise availability that can have? And what are you seeing from the vendors in terms of tariff-related cost pressure?

Lorraine Hutchinson: Thank you. How would you characterize off-price availability overall? Do you have any concerns about merchandise availability in the second half? What are you seeing from the vendors in terms of tariff-related cost pressure? Does that pressure create risk to merchandise supply or to merchandise margin in the second half?

Good morning, nice job on the quarter.

Thank you John Thank you Paul.

Couple of questions about inventory following your comments to <unk> question.

I think the remarks, you said that comp store inventory was down eight at the end of the quarter, but that reserve inventory was up significantly year over year I think it was.

Speaker #10: Does that pressure create risk to merchandise supply or to merchandise margin in the second half?

Up to 50% of total inventory can you provide any additional commentary on these inventory levels in the competition.

Speaker #6: Yeah, so it's a good question, Lorraine. I'll start with availability with merchandise availability. Overall, merchandise availability in the off-price channel is very strong. Right now, across the store, as I mentioned in the prepared remarks, there were a few specific categories in home where inventory levels across the industry dipped in Q2.

Michael O'sullivan: Yeah, it's a good question, Lorraine. I'll start with availability, with merchandise availability. Overall, merchandise availability in the off-price channel is very strong right now across the store. As I mentioned in the prepared remarks, there were a few specific categories in home where inventory levels across the industry dipped in Q2. That was driven by tariff disruption back in April and May. The situation even in those categories has caught up and is largely back to normal now. More broadly, across the store, I would say that we are seeing plenty of merchandise. We've been able to take advantage of some great deals that we've packed away in reserve. Most of that reserve inventory, by the way, was bought at pre-tariff pricing. We're looking forward to flowing those great values to our stores in the back half. Leaving aside reserve, there's strong availability across the board.

Sure Good morning, Jonathon Kristen I'll take that question.

Comp store inventory was down at the end down 8% at the end of the second quarter as we noted.

I'll just provide a little more commentary on on confirmatory comp store inventory is what is available to sell in stores. So we manage this inventory levels very tightly. It's obviously important for sales and markdowns. We made the deliberate decision in the March April timeframe to plan.

Speaker #6: And that was driven by tariff disruption back in April and May. But the situation in even in those categories has caught up and is largely back to normal now.

Faster inventory turns in Q2 and for the rest of the year. This is driving lower markdowns and is helping to offset margin pressure from tariffs and this strategy worked very well in the second quarter. The most important thing about in store inventory is not necessarily the level. It's the content.

Speaker #6: More broadly, across the store, I would say that we are seeing plenty of merchandise. And we've been able to take advantage of some great deals that we've packed away in reserve.

Speaker #6: And most of that reserve inventory, by the way, was bought at pre-tariff pricing. So we're looking forward to flowing those great values to our stores in the back half.

So in Q2, we had the right content and we were able to drive higher sales faster turns and lower markdowns in our in store inventory levels on a comp store basis are planned down for the rest of the year as we continue this strategy now to your question about reserve and Michael spoke to it a few minutes.

Speaker #6: And, leaving aside reserves, there is strong availability across the board. As evidence of that, I would actually point to the fact that we were able to chase from our guidance range of 0% to 2% comp in Q2 to an actual comp of 5%.

Michael O'sullivan: As evidence of that, actually, I would point to the fact that we were able to chase from our guidance range of 0% to 2% comp in Q2 to an actual comp of 5%. We had no problem finding great deals to fuel that trend. Let me move on to the second part of your question, the cost pressure from tariffs. I know we just crushed margin guidance and earnings expectations in Q2, but I want to emphasize that the cost pressure from tariffs is real. We were only able to drive earnings in Q2 because we rapidly and aggressively took actions to offset that cost pressure.

We approach reserve differently, we buy reserve merchandize, knowing we're going to pack it away and release it at a later date.

Speaker #6: And we had no problem finding great deals to fuel that trend. Let me move on to the second part of your question: the cost pressure from tariffs.

And the level of reserve inventory really depends on the deals we find in the market. This year to get ahead of tariffs, we encouraged our merchants to buy up great pre tariff merchandise and this is what's really driven up the level of reserve inventory, we're really happy with these goods in terms of quality.

Speaker #6: I know we just crushed margin guidance and earnings expectations in Q2. But I want to emphasize that the cost pressure from tariffs is real.

Speaker #6: We were only able to drive earnings in Q2 because we rapidly and aggressively took actions to offset that cost pressure. Now, as Kristin described earlier, those offsetting actions included a number of things.

Values and brands that we have in reserve.

And apart from enabling great deals reserve inventory also gives us more flexibility in that case, we know that if we plan our business cautiously, but then the sales trend takes off we have goods and reserve that we can flow.

Michael O'sullivan: Now, as Kristin described earlier, those offsetting actions included a number of things, working closely and negotiating with our vendor partners on cost, adjusting and remixing our assortment, selectively raising retails, driving faster turns to reduce markdowns, accelerating planned savings initiatives, and aggressively going after other expense savings across the P&L. As you can see in the numbers, that approach worked very well for us in Q2. For the back half, assuming tariffs don't increase from their current recently announced levels, we are confident that we can meet or beat our updated guidance. As Kristin said, that updated guidance builds in. Additional

Speaker #6: Working closely and negotiating with our vendor partners on cost. Adjusting and remixing our assortment. Selectively raising retails driving faster turns to reduce markdowns. Accelerating plan savings initiatives and aggressively going after other expense savings across the P&L.

That's helpful. Thanks, just a second question on the balance sheet again.

David Kristen It looks like you were busy in Q2 from a capital structure perspective.

Can you walk us through the changes to the debt structure, where do you expect any additional changes in the near and intermediate chairman.

Speaker #6: As you can see in the numbers, that approach worked very well for us in Q2. So for the back half, assuming tariffs don't increase from their current, recently announced levels, we are confident that we can meet or beat our updated guidance.

Should we think about the direction of interest expense. Thank you.

Sure.

I'll take that one.

Good morning, John Thanks for the question.

We took several steps during the quarter to strengthen our balance sheet and enhance our liquidity first we raised $500 million in additional term loan debt primarily to fund the purchase of <unk>.

Speaker #6: As Kristin said, that updated guidance builds in the additional pressure from tariffs and the impact of numerous offsetting actions and savings that we've identified for the back half.

Michael O'sullivan: Pressure from tariffs and the impact of numerous offsetting actions and savings that we've identified for the back half.

One of our most automated are our most automated west coast D. C. We've got the cactus DC as well as to retire the 2025 converts which matured back in April and in addition.

Speaker #10: Thank you.

Kristin Wolfe: Thank you.

Speaker #6: Thank you, Lorraine.

David Glick: Thank you, Lorraine.

Speaker #2: Question comes from the line of John Kernan of TD Cohen. Your line is now open.

Ellie: Question comes from the line of John Kernan of TD Cowen. Your line is now open.

We also extended and Upsized our ABL in July it is now a $1 billion line up from $900 million and we extended the maturity by five years out to July 2030.

Speaker #8: Good morning. Nice job on the quarter.

John Kernan: Good morning. Nice job on the quarter.

Speaker #10: Thank you, John.

David Glick: Thank you.

Speaker #6: I have a couple of questions about inventory following your comments to Lorraine's question. I think the remarks you said that comp store inventory was down 8% at the end of the quarter, but that reserve inventory was up significantly year over year.

Ellie: Thank you.

John Kernan: I have a couple of questions about inventory following your comments to Lorraine's question. I think the remarks you said that comp store inventory was down 8% at the end of the quarter, but that reserve inventory was up significantly year over year. I think it was up to 50% of total inventory. Can you provide any additional commentary on these inventory levels and the composition?

Given our growth we now have the borrowing base to support a bigger line and enhance our liquidity.

As a reminder, we pay down the ABL to zero during Q2, and there were no borrowings on the ABL at the end of the quarter and we don't anticipate borrowing on the ABL for the balance of the year.

Speaker #6: I think it was up to 50% of total inventory. Can you provide any additional commentary on these inventory levels and the composition?

Kristin Wolfe: Sure. Good morning, John. It's Kristin. I'll take that question. Comp store inventory was down 8% at the end of the second quarter, as we noted. I'll just provide a little more commentary on comp store inventory. Comp store inventory is what is available to sell in stores. We manage this inventory level very tightly. It's obviously important for sales and markdown. We made the deliberate decision in the March-April timeframe to plan faster inventory turns in Q2 and for the rest of the year. This is driving lower markdowns and is helping to offset margin pressure from tariffs. This strategy worked very well in the second quarter. The most important thing about in-store inventory is not necessarily the level, it's the content. In Q2, we had the right content, and we were able to drive higher sales, faster turns, and lower markdowns.

Related to the term loan we hedged $300 million of the $500 million issued and that's keeping our hedge total hedge ratio around 65%.

Able to lock in rates below current sofa.

And given the level of activity in the quarter.

Arent expecting any changes in the near term and continue to expect to return excess cash to shareholders in the form of share repurchases and we did update our interest expense forecast to $50 million.

In the quarter, it's a little bit lower based on.

The decision to purchase our cactus PC and there was some capitalized interest and a lot of puts and takes we can certainly take that offline and a follow up to <unk>.

To walk you through that but our updated forecast is at $50 million.

Understood. Thank you.

Thanks, Tom.

Churn comes from the line of Alex Chang.

Organ Stanley your lines now open.

Kristin Wolfe: Our in-store inventory levels on a comp store basis are planned down for the rest of the year as we continue this strategy. Now, to your question about reserve, and Michael spoke to it just a few minutes ago, we approach reserve differently. We buy reserve merchandise knowing we're going to pack it away and release it at a later date. The level of reserve inventory really depends on the deals we find in the market. This year, to get ahead of tariffs, we encouraged our merchants to buy up great pre-tariff merchandise. This is what's really driven up the level of reserve inventory. We're really happy with these goods in terms of quality, values, and brands that we have in reserve. Apart from enabling great deals, reserve inventory also gives us more flexibility in the chase.

Perfect. Thanks, so much congrats on a great quarter I've got a couple first one for Michael can you maybe provide some color on the improvements that you made in store standards and conditions and then I have a quick follow up for Christian.

Good morning, Alex.

Yes. Thank you.

Glad you asked this question.

I would describe the.

The improvement in standards in our stores over the past couple of years as has extraordinary.

As I mentioned in the script.

Customer service scores are running at historical all time highs.

And we've seen significant improvements in all major operating metrics in stores.

Kristin Wolfe: We know that if we plan our business cautiously, but then the sales trend takes off, we have goods in reserve that we can flow.

We've also seen a recent improvement in shortage.

And at the same time.

Productivity levels in stores have improved in other words, we're leveraging store payroll.

John Kernan: That's helpful. Thanks. Just a second question on the balance sheet again. David, Kristin, looks like you were busy in Q2 from a capital structure perspective. Can you walk us through the changes to the debt structure? Whether you expect any additional changes in the near and intermediate term, and how should we think about the direction of interest expense? Thank you.

That combination of outcomes higher store standards and lower store payroll is has a remarkable remarkable accomplishment.

Let me explain how we've done it.

It starts with leadership and I don't mean me.

Michael O'sullivan: Sure. I'll take that one. Morning, John. Thanks for the question. We took several steps during the quarter to strengthen our balance sheet and enhance our liquidity. First, we raised $500 million in additional term loan debt, primarily to fund the purchase of one of our most automated West Coast DC. We call it the Cactus DC, as well as to retire the 2025 converts, which matured back in April. In addition, we also extended and upsized our ABL in July. It's now a $1 billion line, up from $900 million, and we extended the maturity by five years out to July 2030. Given our growth, we now have the borrowing base to support a bigger line and enhance our liquidity. As a reminder, we paid down the ABL to zero during Q2, and there were no borrowings on the ABL at the end of the quarter.

Our head of stores she's assembled.

Terrific team a.

A combination of internal promotions and external talent.

Over the last couple of years, he and his team have set higher expectations for our sales leaders.

<unk> managers and associates those expectations together with improved tools better reporting greater process discipline.

At a much stronger sense of accountability.

Driven these these great results.

I would also add.

But our store managers and associates have embraced these higher expectations and standards as we have.

Communicated and rolled out this approach we've seen significant increases in our associate engagement scores across the chain.

The final point I would like to make is that for all the progress that we've made we know there is still a lot of opportunity.

Michael O'sullivan: We don't anticipate borrowing on the ABL for the balance of the year. Related to the term loan, we hedged $300 million of the $500 million issued, and that's keeping our total hedge ratio around 65%. We were able to lock in rates below current SOFR. Given the level of activity in the quarter, we aren't expecting any changes in the near term and continue to expect to return excess cash to shareholders in the form of share repurchases. We did update our interest expense forecast to $50 million in the quarter. It's a little bit lower based on the decision to purchase our Cactus DC, and there was some capitalized interest and a lot of puts and takes. We can certainly take that offline in our follow-up to walk you through that. Our updated forecast is at $50 million.

We want every store to be consistently need to clean and organized we want them all to enable and bring to life the treasure Hunt.

That's the core vision that our head of stores and her leadership team are going after we have a long way to go but it's already clear from the data that our customers like this vision and they appreciate the improvements that we've that we've made.

Perfect that's great color and maybe for Chris then can you just provide a little bit more detail on that shortage favorability to gross margin in the quarter and also how that dynamic may evolve into the back half. Thanks a lot.

Good morning, Alex Yes, it's a good question that the external environment.

Still is challenging and continues to be challenging. We're obviously very focused here with great leadership as Michael just described and we have made and will continue to make significant investments to mitigate shortage.

John Kernan: Understood. Thank you.

Kristin Wolfe: Thanks, John.

David Glick: Thanks, Paul.

Ellie: Question comes from the line of Alex Straton of Morgan Stanley. Your line is now open.

As I mentioned earlier, we took physical inventory in the second quarter. This showed lower or better shortage performance than we had planned and better than last year driving to merch margin favorability and.

comes from the line of Alex, tracking of Morgan Stanley, your lines now open

David Glick: Perfect. Thanks so much. Congrats on a great quarter. I've got a couple, and first one for Michael. Can you maybe provide some color on the improvements that you made in store standards and conditions? I have a quick follow-up for Kristin.

In the second quarter. We're obviously pleased with this result, although it is only one measurement at one point in time.

Perfect. Thanks so much, congrats on a great quarter. I've got a couple and and and first 1 for for Michael, can you maybe provide some caller on the improvements that that you made and store standards and conditions? And then I have a quick follow up for Kristen.

Michael O'sullivan: Good morning, Alex. Thank you. I'm glad you asked this question. I would describe the improvement in standards in our stores over the past couple of years as extraordinary. As I mentioned in the script, customer service scores are running at historical all-time highs, and we've seen significant improvements in all major operating metrics in stores. We've also seen a recent improvement in shortage, and at the same time, our productivity levels in stores have improved. In other words, we're leveraging store payroll. That combination of outcomes, higher store standards, and lower store payroll is a remarkable accomplishment. Let me explain how we've done it. It starts with leadership, and I don't mean me. I mean our Head of Stores. She's assembled a terrific team, a combination of internal promotions and external talent.

For the back half we plan to take another physical inventory in the fourth quarter to get the full year measurement for 2025, and we're hopeful that we continue to see the progress on shortage that we saw in Q2, given the high level of focus on these finish Dave across the organization.

Well, good morning, Alex. Um,

Yeah, thank you. I'm glad you asked this question. I would describe...

the Improvement in standards in our stores over the past couple of years, as, as extraordinary,

We will plan to continue our intensified focus on reducing shortage and continue our shortage mitigation investments as well.

um, as I mentioned in the script,

Customer service scores are running at historical all-time highs.

Thanks, so much good luck.

Uh huh.

Okay.

She comes from the line of Greg Roche of Goldman Sachs. Your line is now open.

And we've seen significant improvements in all major operating metrics in stores.

We've also seen a recent improvement in shortage.

Good morning, and thank you for taking our question Michael could you could you provide additional color on back to school trends. What are you seeing in July and August so far.

Good morning Brook. Thank you for the question.

We've been very pleased with that back to school business. This year.

Early back to school selling in July was especially strong.

Now that that momentum has moderated somewhat since then but still for August month to date I would describe our sales trend for back to school business is as solid.

Michael O'sullivan: Over the last couple of years, she and this team have set higher expectations for our field leaders, store managers, and associates. Those expectations, together with improved tools, better reporting, greater process discipline, and a much stronger sense of accountability, have driven these great results. I would also add that our store managers and associates have embraced these higher expectations and standards. As we've communicated and rolled out this approach, we've seen significant increases in our associate engagement scores across the chain. The final point I would like to make is that for all the progress that we've made, we know there is still a lot of opportunity. We want every store to be consistently neat, clean, and organized. We want them all to enable and bring to life the treasure hunt. That's the core vision that our Head of Stores and her leadership team are going after.

And at the same time um our productivity levels in stores have improved. In other words, we're leveraging store payroll. Um you know that that combination of outcomes higher store standards and lower store. Payroll is a is a remarkable, a remarkable accomplishment? Um, Let me let me explain how we've done it. Um, it it starts with leadership and I, I don't mean me, um, I mean, our head of Stores. Um, she's assembled, a terrific team, a combination of internal promotions and external Talent.

One other one other call out when we look at our back to school businesses on a multiyear stack basis.

We're very pleased with the growth that we've seen over the last few years.

And that was driven by a deliberate strategy by our merchants, we know that compared to other retailers.

Our customers tend to have a larger family size and more kids in the household.

Over the last couple of years. She and and and this team have set higher expectations for our field leaders store, managers and Associates. Um those expectations together with improved tools, better reporting greater process discipline and a much stronger sense of accountability. Have have driven these, these great results.

I would also add.

And these customers are very focused on value.

They have been particularly hard hit by the higher cost of living over the last few years.

So our merchants have been pursuing a deliberate strategy to increase our market share of back to school I think the team has done a nice job meeting the needs of that customer by offering great value, meaning strong fashion recognizable brands terrific quality and unbeatable prices.

That our store managers and Associates have embraced these higher expectations and standards, you know, as we've communicated and rolled out, uh, this approach, we've seen significant increases in our associate engagement scores across the chain.

You look at the two or three year stack. It shows. This is worked we've gained significant market share in back to school over the last few years.

Um the final point I would like to make is that for all the progress that we've made we know there is still a lot of opportunity. We want every store to be consistently neat, clean and organized. We want them all to enable and bring to life the treasure hunt.

Michael O'sullivan: We have a long way to go, but it's already clear from the data that our customers like this vision, and they appreciate the improvements that we've made.

Great and then just a follow up for Christian can you talk a little bit about regional and category performance strengths and weaknesses that you saw in the second quarter. Thanks, So much.

That's that's the core Vision that our head of stores and her leadership. Team are going after you know we have a long way to go but it's already clear from the data that our customers like this vision and they appreciate the improvements that we've uh that we've made

David Glick: Perfect. That's great color. Maybe for Kristin, can you just provide a little bit more detail on the shortage favorability to gross margin in the quarter, and also how that dynamic may evolve into the back half? Thanks a lot.

Yes, good morning Brock.

In terms of regional performance, the southeast and the northeast were the strongest regions in the quarter all regions Comped positively the Midwest was the weakest region in the quarter and as Michael noted in the prepared remarks, whether it was a modest headwind earlier in the quarter.

Kristin Wolfe: Good morning, Alex. Yeah, it's a good question. The external environment still is challenging, continues to be challenging. We're obviously very focused here with great leadership, as Michael just described. We have made and will continue to make significant investments to mitigate shortage. As I mentioned earlier, we took physical inventory in the second quarter. This showed lower or better shortage performance than we had planned and better than last year, driving to merch margin favorability in the second quarter. We're obviously pleased with this result, although it is only one measurement at one point in time. For the back half, we plan to take another physical inventory in the fourth quarter to get the full-year measurement for 2025. We're hopeful that we continue to see the progress on shortage that we saw in Q2, given the high level of focus on this initiative across the organization.

Perfect. That’s a great color. Maybe for Kristin, can you just provide a little bit more detail on the shortage favorability to gross margin in the quarter? And also how that dynamic may evolve into the back half? Thanks a lot.

In terms of category performance, our strength was broad based across the store, we saw the strongest performance in beauty accessories and shoes that.

Good morning, Alex? Yeah, it's it's a good question. That the external environment it, it still is a challenging continue to be challenging. We're obviously, very focused here with great leadership as Michael just described and we have made and will continue to make significant Investments to mitigate shortage.

But apparel was also strong across ladies mens and kids all Comping in line with the chain.

In the quarter home performance was softer for us comping below the chain.

Great. Thanks, so much best of luck going forward. Thanks Brooks.

Question for today comes from the line of Mark <unk>.

As I mentioned earlier, we took physical inventory in the second quarter. This showed lower, or better, shortage performance than we had planned and better than last year, driving merchandise margin favorability. In the second quarter, we’re obviously pleased with this result, although it is only one measurement at one point in time.

With Baird. Your line is now open.

Good morning. Thank you for taking my question, Michael a couple for you.

Relates perhaps a bit to your commentary just a moment to going back to school, but was hoping you could update us on your elevation strategy and also speak to the opportunity and trends youre seeing with younger consumers. Thank you.

Kristin Wolfe: We plan to continue our intensified focus on reducing shortage and continue our shortage mitigation investments as well.

For the back half, we plan to take another physical inventory, in the fourth quarter, to get the full year measurement for 2025, and we're hopeful that we continue to see the progress on shortage that we saw in Q2 given the high level of focus on the initiative across the organization.

We'll plan to continue our intensified focus on reducing shortages and continue our shortage mitigation investments as well.

David Glick: Thanks so much. Good luck.

Good morning, Marc Thank you for the year.

Kristin Wolfe: Thanks, Alex.

Thanks so much. Good luck. Thanks, B.

Ellie: Question comes from the line of Brooke Roach of Goldman Sachs. Your line is now open.

Those two questions, obviously I'll start with <unk>.

An update on our elevation strategy.

Comes from the line of drip roach of Goldman Sachs. Your line is now open.

Kristin Wolfe: Good morning, and thank you for taking our question. Michael, could you provide additional color on back-to-school trends? What are you seeing in July and August so far?

Yes, we continue to be very pleased by the success.

That we've seen in our strategy to elevate the assortment.

As a reminder, we launched that strategy about a year and a half ago.

On back-to-school trends, what are you seeing in July and August so far?

Michael O'sullivan: Good morning, Brooke. Thank you for the question. We've been very pleased with our back-to-school business this year. Early back-to-school selling in July was especially strong. Now, that momentum has moderated somewhat since then, but still, for August month to date, I would describe our sales trend for back-to-school business as solid. One other call out. When we look at our back-to-school business on a multi-year stack basis, we're very pleased with the growth that we've seen over the last few years. That was driven by a deliberate strategy by our merchants. We know that compared to other retailers, our customers tend to have a larger family size and more kids in the household. These customers are very focused on value. They've been particularly hard hit by the higher cost of living over the last few years.

The core idea was to elevate the assortment by raising the fashion content the quality of the merchandise and the mix of better and more recognizable brands.

Good morning Brooke. Um, thank you for the question.

Um, we've been very pleased with our back-to-school business this year.

Um, early back-to-school selling in July was especially strong.

The objective was to was to trade the customer up by offering better value at higher price points.

What skill to do that within our good better best context.

I think our merchants have done a terrific job delivering great value at all price points within that elevated assortment and.

Um, now that that momentum has moderated somewhat since then, but still for August month to date, I would describe our sales trend for back to school businesses as as solid. Um, what what other 1 of the call outs? When we look at our back to school businesses on a multi-year stack basis,

It has clearly resonated with the customer you can see it.

The results in our comp growth and in a stronger merchandise margins. It's benefited us both in terms of sales and profitability.

I am very excited about our assortments for the back half, especially for holiday.

We're very pleased with the growth that we've seen over the last few years, and that was driven by a deliberate strategy by our Merchants. We know that, compared to other retailers, our customers tend to have a larger family size and more kids in the household.

We want our goal is to be proud of every hanger and proud of the value that we're offering on every hanger in the store.

Michael O'sullivan: Our merchants have been pursuing a deliberate strategy to increase our market share of back-to-school. I think the team has done a nice job meeting the needs of that customer by offering great value, meaning strong fashion, recognizable brands, terrific quality, and unbeatable prices. If you look at the two or three-year stack, it shows that this has worked. We've gained significant market share in back-to-school over the last few years.

Um, these customers are very focused on value. Um, they've been particularly hard hit by the higher cost of living over the last few years.

So when we developed our plans for the full merchants really focused on ways to further reinforced this elevation strategy.

Okay, I'm going to pivot now to the second.

Second question about our opportunity and any key trends with younger customers.

Now my answer here is going to overlap a little bit with my earlier comments on back to school.

So our merchants have been pursuing a deliberate strategy to increase our market share for back-to-school. I think the team has done a nice job meeting the needs of that customer by offering great value, meaning strong fashion, recognizable brands, terrific quality, and unbeatable prices. You know, if you look at the 2- or 3-year stack, it shows that this is worth.

We've gained significant market share in back-to-school over the last few years.

Let me offer a little more context and color.

Kristin Wolfe: Great. Just a follow-up for Kristin. Can you talk a little bit about regional and category performance strengths and weaknesses that you saw in the second quarter? Thanks so much.

Great. And then just

Burlington, we've always had a strong position with younger customers and young families stronger than most other retailers.

Kristin Wolfe: Yes. Good morning, Brooke. In terms of regional performance, the Southeast and the Northeast were the strongest regions in the quarter. All regions comped positively. The Midwest was the weakest region in the quarter. As Michael noted in the prepared remarks, weather was a modest headwind earlier in the quarter. In terms of category performance, our strength was broad-based across the store. We saw the strongest performances in beauty, accessories, and shoes, but apparel was also strong across ladies, men's, and kids, all comping in line with the chain. In the quarter, home performance was softer for us, comping below the chain.

Performance strengths and weaknesses that you saw in the second quarter. Thanks so much.

Parents younger shoppers and young families are core and very important segments for us.

Yes. Uh, good morning Brooke.

When you walk into our stores you can see it you can see it see it when you look at the customers in our stores a lot of young people a lot of families with kids.

In terms of regional performance, the Southeast and the Northeast were the strongest regions in the quarter.

You can also see it in the assortment, we have a stronger presentation and a greater penetration of juniors young men's and kids apparel.

All regions performed positively. The Midwest was the weakest region in the quarter, and as Michael noted in the prepared remarks, weather was a modest headwind earlier in the quarter.

Salaries in footwear than most about competitors.

Now, we're doing a lot of things to attract and meet the needs of the shoppers, but but they all really boiled down to one word value.

In terms of category performance, our strength was broad-based across the store. We saw the strongest performances in Beauty, accessories, and shoes.

Young shoppers are often financially stretched and very value conscious.

But apparel was also strong across ladies', men's, and kids', all comping in line with the chain.

In the quarter home performance was south of for us camping below the chain.

No our merchants understand value does not mean cheap.

Kristin Wolfe: Great. Thanks so much. Best of luck going forward.

Kristin Wolfe: Thanks, Brooke.

<unk> is much more complex and depends on our mix of fashion quality brand and price. So for a sharper in our Juniors Department. For example, the key driver of value is likely to be fashion and style. In contrast for a young mother buying clothes for her toddler quality or brand.

David Glick: Thanks.

Great. Thanks so much. Best of luck going forward. Thanks, Brooks.

Ellie: Question for today comes from the line of Mark Altwager of Baird. Your line is now open.

Operator: Good morning. Thank you for taking my question. Michael, a couple for you relates perhaps a bit to your commentary just a moment ago on back-to-school, but was hoping you could update us on your elevation strategy and also speak to the opportunity and trends you're seeing with younger consumers. Thank you.

Question for today comes from the line of Mark Ultraair of Beard. Your line is now open.

Might be more important.

I think our merchant team.

Especially in these businesses is very skilled at building the assortment with the right mix of those value drivers.

Good morning. Thank you for taking my question. Michael, I have a couple for you. It relates, perhaps a bit to your commentary just a moment ago regarding going back to school, but I was hoping you could update us on your elevation strategy and also speak to the opportunities and trends you’re seeing with younger consumers. Thank you.

That more than anything explains our growing strength with these younger younger shoppers.

Michael O'sullivan: Good morning, Mark. Thank you for those two questions. Obviously, I'll start with an update on our elevation strategy. We continue to be very pleased by the success that we've seen in our strategy to elevate the assortment. As a reminder, we launched that strategy about a year and a half ago. The core idea was to elevate the assortment by raising the fashion content, the quality of the merchandise, and the mix of better and more recognizable brands. The objective was to trade the customer up by offering better value at higher price points, but still to do that within a good, better, best context. I think our merchants have done a terrific job delivering great value at all price points within that elevated assortment. That's clearly resonated with the customer. You can see it in the results in our comp growth and in our stronger merchandise margins.

Well, good morning, Mark. Um, thank you for the uh.

Thank you.

those 2 questions, obviously, I'll start with

Right.

Thank you that concludes our question and answer session I would now like to hand, the call back to Mr. Michael O'sullivan for final remarks.

An update on our elevation strategy. Um,

Yeah, over Q2, we continue to be very pleased by the success.

Thank you Ali let me close by thanking everyone on this call for your interest in Burlington stores.

That we've seen um, in our strategy to elevate the assortment, you know, as a reminder, we we launched that strategy about a year and a half ago.

We look forward to talking to you again in November to discuss our third quarter 2025 results.

Thank you for your time today.

Thank you for attending today's call you may now disconnect Goodbye.

The core idea was to elevate the assortment by raising the fashion content, the quality of the merchandise, and the mix of better and more recognizable brands.

The objective was to trade the customer up by offering better value at higher price points.

But still to do that within a good, better, best context.

Michael O'sullivan: It's benefited us both in terms of sales and profitability. Now, I'm very excited about our assortments for the back half, especially for holiday. Our goal is to be proud of every hanger and proud of the value that we're offering on every hanger in the store. When we developed our plans for the fall, our merchants really focused on ways to further reinforce this elevation strategy. I'm going to pivot now to your second question about our opportunity and any key trends with younger customers. My answer here is going to overlap a little bit with my earlier comments on back-to-school, but let me offer a little more context and color. At Burlington Stores, Inc., we've always had a strong position with younger customers and young families, stronger than most other retailers. Parents, younger shoppers, and young families are our core and very important segments for us.

I think our merchants have done a terrific job delivering great value at all price points within that elevated assortment, and that's clearly resonated with the customer. You can see it in the results in our comp growth and in our stronger merchandise margins. It's benefited us both in terms of sales and profitability. Now, I'm very excited about our assortments for the back half, especially for holiday.

You know, our goal is to be proud of every hanger and proud of the value that we're offering on every hanger in the store.

So when we developed our plans for the fall, our Merchants really focused on ways to further reinforce, um, this elevation strategy.

Okay, I'm going to Pivot now to the second. Uh qu your second question about our opportunity and any key trends with with younger customers,

Michael O'sullivan: When you walk into our stores, you can see it. You can see it when you look at the customers in our stores. A lot of young people, a lot of families with kids. You can also see it in the assortment. We have a stronger presentation and a greater penetration of juniors, young men's, and kids' apparel, accessories, and footwear than most of our competitors. We're doing a lot of things to attract and meet the needs of these shoppers, but they all really boil down to one word: value. Young shoppers are often financially stretched and very value conscious. Our merchants understand value does not mean cheap. Value is much more complex and depends on a mix of fashion, quality, brand, and price. For a shopper in our juniors department, for example, the key driver of value is likely to be fashion and style.

Now my answer here is going to overlap a little bit with my earlier comments on back to school, but let me offer a little more context on Burlington. We've always had a strong position with younger customers and young families, stronger than most other retailers. You know, parents, younger shoppers, and young families are core and very important segments for us.

When you walk into our stores, you can see it. You can see it. See it. When you look at the customers in our stores, there are a lot of young people and a lot of families with kids.

You can also see it in the assortment. We have a stronger presentation and a greater penetration of Juniors, young men's and kids' apparel, accessories, and footwear than most of our competitors. Um, now we're doing a lot of things to attract and meet the needs of these shoppers, but they all really boil down to one word: value. Um, young shoppers are often financially stretched and very value conscious.

Michael O'sullivan: In contrast, for a young mother buying clothes for her toddler, quality or brand might be more important. I think our merchant team, especially in these businesses, is very skilled at building the assortment with the right mix of those value drivers. That, more than anything, explains our growing strength with these younger shoppers.

Now our merchants understand that value does not mean cheap. Value is much more complex and depends on a mix of fashion, quality, brand, and price. So for a shopper in our Juniors department, for example, the key driver of value is likely to be fashion and style. In contrast, for a young mother buying clothes for her toddler, quality or brand might be more important. Um, I think our merchants team...

Um in especially in these businesses is very skilled at building the assortment with the right mix of those value drivers. And that more than anything explains our our growing strength with these younger younger shoppers.

John Kernan: Thank you.

Thank you.

Ellie: Thank you. That concludes our question and answer session. I'd now like to hand the call back to Mr. Michael O'Sullivan for final remarks.

Thank you. That concludes our question and answer session. I'd now like to hand the call back to Mr. Michael O'Sullivan for our final remarks.

Michael O'sullivan: Thank you, Ellie. Let me close by thanking everyone on this call for your interest in Burlington Stores, Inc. We look forward to talking to you again in November to discuss our third quarter 2025 results. Thank you for your time today.

Thank you, Ellie. Uh, let me close by thanking everyone on this call for your interest in Burlington Stores. We look forward to talking to you again in November to discuss our third quarter 2025 results.

Thank you for your time today.

Ellie: Thank you for attending today's call. You may now disconnect. Goodbye.

Thank you for attending today's call. You may now disconnect. Goodbye.