Operator: Hello, everyone, and, welcome to Burlington Stores Inc. First Quarter 2025 Earnings Call. Please note that this call is being recorded. After the speaker’s prepared remarks, there will be a question-and-answer session. [Operator Instructions] I’d now like to hand the call over to David Glick, Group Senior Vice President, Investor Relations and Treasurer. You may now begin, sir.
David Glick: Thank you, operator, and good morning, everyone. We appreciate everyone’s participation in today’s conference call to discuss Burlington’s fiscal 2025 first 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 June 5th, 2025. We take no responsibility for inaccuracies that may appear in transcripts of this call by third parties. Our remarks and the Q&A that follows are copyrighted today by Burlington Stores. 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 in our 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 in a continuing operations basis. 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. These pre-tax costs amounted to $6 million each during the fiscal first quarters of 2025 and 2024. Now, here’s Michael.
Michael O’Sullivan: Thank you, David. Good morning, everyone, and thank you for joining us. I would like to cover four topics this morning. Firstly, I will briefly discuss our first-quarter results. Secondly, I will talk about our forward-looking guidance. Thirdly, I will comment on the two biggest drivers of uncertainty right now, the impact of tariffs and the state of the consumer. Finally, I will share some thoughts on our longer-term prospects. After that, I’ll hand it over to Kristin to walk through the financial details. Then we will be happy to respond to your questions. Let’s talk about our Q1 results. Total sales grew by 6% on top of 11% growth last year. Meanwhile, our comp sales were flat on top of 2% comp growth last year. Both metrics were at the midpoint of our guidance. As we discussed in our Q4 call in early March, the quarter started off slowly, with the trend in February being negatively impacted by unfavorable weather and a slower pace of tax refunds versus last year. We were pleased that the sales trend picked up in the March and April period once these factors began to normalize. Moving on to Q1 earnings, our EBIT margin increased 30 basis points, and our adjusted EPS was up 18% over last year despite a slack comp. There were two drivers of this ahead of plan earnings performance. Firstly, there was some timing favorability between Q1 and Q2, mostly related to receipts. We expect this favorability to flip around in Q2. Secondly, in early Q1, in anticipation of the margin pressure that we are likely to feel from tariffs later in the year, we began to aggressively go after margin and expense savings opportunities across the P&L. We were able to capture some of these savings during the first quarter. Okay, let’s talk about the rest of the year. Our comp guidance for Q2 and for the full year 2025 is flat to up 2%. In fact, our full year comp sales and earnings guidance has not changed from the outlook we shared in early March. We feel good about our ability to achieve this guidance, but we recognize that the level of external uncertainty has increased over the last couple of months. So, we are reaffirming our full-year guidance subject to a few key assumptions that Kristen will describe later in the call. I would now like to discuss the major drivers of external uncertainty, specifically the impact of import tariffs and the state of the consumer. I will start with tariffs. As I have said previously, disruptions in supply for the retail industry often turn out well for off-price. Events like financial crises, disruptive weather, economic downturns, port strikes, and other forms of disruption often lead to excess supply, which off-price retailers can benefit from. That said, we think that the potential impact of tariffs is more complex and carries greater risk than other types of disruption. The tariffs that were announced in early April were of scope and a scale well beyond the expectations of most analysts. The initial effect of these tariffs was to effectively shut down the flow of merchandise from China. If that had continued, then it would’ve been bad for consumers and bad for retailers, and that includes off-price retailers. For the past two weeks, since the tariffs on imports from China were cut from 145% to 30%, merchandise vendors have been scrambling to catch up. This stop-start surge volatility is likely to lead to shortages in some merchandise categories, but it might also create excess supply in others. We see both risks and opportunities in the months ahead, and we are managing our business accordingly. In this situation, we need to be flexible and nimble. One last point, we think it is very important to look through the short-term disruption caused by tariffs. Whatever level these tariffs settle at, the vendor base will adjust. Production capacity will migrate to countries that have the lowest all-in costs, the lowest all-in costs including the tariffs. In some cases, vendors are already making these sourcing shifts. In other categories, it may take a year or two to adjust. My point is that the way to think about tariffs is that they are just one more thing. Yes, they are going to create uncertainty in the short-term, which we will navigate, but they are not likely to affect the longer-term structural trends in our industry. As we have discussed in the past, we see these longer-term trends as being favourable for off-price and our business. So, the next 6 to 12 months could be challenging, but when we get to the other side, if we navigate this well, we should be in good shape. In fact, we expect to come out ahead. Okay, let me talk about the other major source of uncertainty, the state of the consumer. Clearly, we saw a deceleration in our comp trend from Q4 to Q1. Our comp growth in the first quarter was flat. This was the midpoint of our comp guidance range, but please do not infer from this that we are happy with a flat comp. We are not, we expect to do better. To understand this trend, we have analysed our own internal sales data. This shows that the slowdown from Q4 to Q1 was broad-based across trade areas with different demographic characteristics. This is just one quarter, so it is too early to say if the slowdown that we saw in our trend from Q4 to Q1 is the start of a broader pullback in consumer spending. In addition to this trend, we are also somewhat concerned about macroeconomic indicators. Many economists have raised their probability estimates for a recession later this year, and there are also concerns that inflation will go up as tariffs work their way through the economy. The good news is that we have a playbook for these situations. It’s our standard playbook. We will manage our business carefully and flexibly, and we will be ready to chase the sales trend if it turns out to be stronger. I would like to wrap up with some comments on the longer-term prospects for our business. The two items that I have just discussed, the impact of tariffs and the state of the consumer, are front and centre for us and for investors right now. They create risks and opportunities in the short term that we need to navigate, but we are also focused on driving to our full potential over the longer term. As discussed before, we believe that there are longer-term structural and competitive factors that will continue to be favourable for off-price versus other forms of retail. And we believe that at Burlington in particular, we have the opportunity to significantly grow our market share, sales, and earnings over time. With that as a setup, there are two aspects of our Burlington 2.0 full potential strategy that I would like to comment on. Firstly, we have talked a lot over the last couple of years about Merchandising 2.0, the new systems, processes, and tools that we have rolled out to enable our buyers and planners to more effectively and rapidly respond to changes in the external environment. These new capabilities have been very important over the past couple of months as we have made multiple revisions to our assortment plans for the fall season, pivoting from categories that may face shortages to those with stronger supply and remixing and remodeling our margin plans to find offsets to the impact of tariffs. A couple of years ago, we would not have had the transparency and the agility to make these kinds of adjustments. We expect that as the year goes on, the environment will continue to be volatile and dynamic. Our Merchandising 2.0 capabilities are going to be very important for our buyers and planners to manage through this external volatility. Secondly, I would like to comment and provide an update on our new store pipeline. Our sales guidance for 2025 is predicated on opening 100 net new stores this year. We remain very confident in our ability to hit this number of openings. We have also been active over the last few months in building out the pipeline for 2026. We were recently able to acquire 46 leases to the bankruptcy process for JOANN’s Fabrics. We are very excited about these locations, adding these stores to the 2026 pipeline, we are optimistic about hitting our 100 net new store target for next year. The silver lining of the current volatile environment is that it is likely to drive further consolidation of bricks and mortar stores, and these closures should provide more opportunities to expand our store footprint. Okay, at this point, I would like to turn the call over to Kristin. Kristin?
Kristin Wolfe: Thank you, Michael, and good morning, everyone. I plan to cover a few topics this morning. I will start with some additional color on our first quarter performance, then I will share details on our guidance for the second quarter and for the full year. And finally, I will finish up by discussing three critical assumptions that underpin our 2025 sales and earnings guidance. Starting with the first quarter, total sales grew 6% while comp store sales were flat, which was at the midpoint of our guidance range. The gross margin rate for the first quarter was 43.8%, an increase of 30 basis points versus last year. This was driven by a 20 basis point increase in merchandise margin and a 10 basis point decrease in freight expense. Modest IMU pressure was more than offset by the benefit of faster inventory terms. Product sourcing costs were $197 million versus $183 million in the first quarter of 2024. Product sourcing costs increased 10 basis points as a percentage of sales versus last year as 10 basis points of supply chain leverage driven by productivity improvements and the timing of receipts was more than offset by increased asset protection investments. The timing of receipts benefited Q1, but will negatively impact Q2. Adjusted SG&A costs in Q1 decreased 30 basis points versus last year. A portion of this leverage on a flat comp was due to favorable timing of SOAR expenses that will shift into Q2. The balance of the SG&A leverage was due to the expense savings opportunities that Michael described earlier. Q1 adjusted EBIT margin was 6.1%, 30 basis points higher than last year, which was well above our guidance range of down 90 to down 50 basis points. Our adjusted earnings per share in Q1 was $1.67, which came in above our guidance range. This represents an 18% increase versus the prior year. At the end of the quarter, comparable SOAR inventories were down 8% versus the end of the first quarter of 2024. Our reserve inventory was 48% of our total inventory versus 40% of our inventory last year. In dollar terms, our reserve inventory was up 31% 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 we have in reserve. We ended the quarter with approximately $1.1 billion in total liquidity, which consisted of $371 million in cash and $748 million in availability on our ABL. We had $100 million outstanding -- in outstanding borrowings at the end of the quarter on our ABL. During the quarter, we took advantage of the volatility in our stock price, and we purchased $105 million in common stock. At the end of Q1, we had $158 million remaining on our share repurchase authorization, which expires August 2025. In addition, our Board of Directors just approved a new two-year $500 million share repurchase authorization. In Q1, we opened seven net new stores, bringing our store count at the end of the quarter to 1,115 stores. This includes 14 new store openings, four relocations, and three closings. I will now move on to discuss our outlook for the second quarter and for the full fiscal year. Our second quarter guidance excludes approximately $11 million of expenses associated with bankruptcy-acquired leases. We expect total sales to increase 5% to 7%. Comp store sales are assumed to be flat to plus 2%. We are expecting adjusted EBIT margin to be in the range of down 30 basis points to flat versus the second quarter of 2024. This results in an adjusted EPS outlook in the range of $1.20 to $1.30 versus last year’s second quarter adjusted earnings per share of $1.24. Excluding the roughly $12 million pre-tax timing shift, which positively impacted the first quarter, we believe second quarter earnings per share guidance would otherwise be about $0.14 higher. I will now review fiscal 2025 guidance. This guidance excludes approximately $33 million in 2025 associated with bankruptcy-acquired leases compared to $16 million in 2024. For 2025, we still expect total sales growth in the range of 6% to 8%. This assumes 100 net new store openings this year. We anticipate that most of these stores will open in the latter half of the year. We are still forecasting comp store sales to increase in the range of flat to 2%, and our adjusted EBIT margin to be in the range of flat to an increase of 30 basis points versus last year. All of this results in adjusted earnings per share guidance in the range of $8.70 to $9.30. This is consistent with our initial FY ‘25 guidance. Capital expenditures net of landlord allowances are still expected to be approximately $950 million in fiscal 2025. Let me wrap up by reinforcing the point that our sales and earnings guidance for fiscal 2025 is unchanged from the outlook that we provided in March, but we recognize that the level of uncertainty in the external environment has significantly increased since then. Of course, guidance is always subject to risks and uncertainties, but it is important to call out that our FY ‘25 guidance is contingent on three specific assumptions. First, that current tariff rates 30% on imports from China and 10% on imports from other countries do not increase through year-end. Secondly, that the inflationary impact of tariffs across the retail industry is modest and does not trigger a significant deterioration in retail sales trends, especially among our core lower-income customers. And thirdly, that the volatility and imports does not drive a material or sustained increase in ocean freight expense above our contracted rate. I will now turn the call back over to Michael.
Michael O’Sullivan: Thank you, Kristin. Before I hand it back to the operator for your questions, I would like to summarize the main points from this morning’s call. In the first quarter, our total and comp store sales growth were at the midpoint of our guidance, while our earnings were well ahead. We are maintaining our full year 2025 guidance, but we recognize that the external environment has become more uncertain. The two major sources of this uncertainty are tariffs and the state of the consumer. Tariffs are likely to create volatility in off-price supply, and we anticipate that they will pressure our merchandise margin, but at their current levels, we are well positioned to navigate these issues. As to that, we see reasons for caution on the state of the consumer, especially if there is a slowdown in the economy or a significant pickup in inflation. The good news is that in these situations, we have a playbook, and as the last couple of years have demonstrated, we have gotten better at executing this playbook. We are managing our business cautiously, focusing on offering great value to the customer, and we are ready to react if we see supply opportunities or stronger sales trends. I would now like to turn the call over for your questions,
Operator: [Operator Instructions] Your first question comes from the line of Matthew Boss of JPMorgan.
Matthew Boss : So, Michael, maybe larger picture, I’m interested in whether you think the disruption caused by tariffs is good or bad overall for off-price, and separately, any initial reactions to the recent news that tariffs have been struck down by the Court of International Trade?
Michael O’Sullivan : Good morning, Matt. Thank you for the question. I think, I should answer the last part of your question, first. I think probably like everybody else on this call, we read the news last night that the tariffs had been struck down. It feels like another curve ball that demonstrates the importance of being flexible and nimble, but candidly, we don’t yet know what it means. Is the judgment temporary or permanent? Does it cover every category? Does it cover every country? It certainly doesn’t feel like the end of the matter, but I guess we’ll get more information in the coming days. Until we know more, I think it’s probably better for me not to speculate. So, for now, our planning assumption for our guidance, comments, and our answers this morning is that tariffs remain at current levels. In other words, 30% on imports from China and 10% on imports from other countries. Once we better understand the court decision obviously, we’ll adjust and update our plans. So, with that said, let me move on to the first part of your question. Is the disruption caused by tariffs good or bad for off-price? Our view, I think is that disruption is usually good for off-price, but with tariffs, it kind of depends, and let me explain what I mean. Until a couple of weeks ago, tariffs on imports from China were 145%. At that tariff level, production and shipping of imports from China pretty much shut down. China is still an important source country across the retail industry. So if that had continued, it would likely have led to shortages in many import categories. At that point, it was very difficult to see how that shutdown was going to be good for off-price. Now, in the last two weeks, things have changed, things have changed a lot. The 90-day reduction in tariff for China from 145% to 30% has completely reversed the dynamic. There’s now a huge rush on production and shipping across the industry. Now, the court decision last night, could add to that rush. Now, as an off-price retailer, this is starting to feel like much more familiar territory instead of shortages, this topsy-turvy stop start surge has the potential to create attractive buying opportunities. Now it, you know, it’s very, the situation’s very dynamic, so it remains to be seen if that will happen, but yes, I would say compared with two weeks ago, it’s starting to look like the disruption caused by tariffs could turn out very well for off-price.
Matthew Boss: That’s great color. And maybe just to follow up on an assumption that tariffs don’t go away and remain at current levels, can you elaborate on the work that you’ve done and just why you feel confident and still hitting your original guidance despite margin pressure from tariffs?
Michael O’Sullivan: Good. Yeah, let me talk through what we’ve done in the last few months. The starting point was actually the initial round of tariffs on China. If you recall, I think it was in early February, the US announced a 10% tariff on all imports from China. That was then raised to 20% in early March. Now, at that early stage, we began to look for ways that we could absorb and offset the impact of those tariffs. Obviously the size of the challenge grew enormously as the tariffs ramped up to 145% in April. Then two weeks ago, they suddenly dropped back down to 30%, and, then based on last night’s court judgment now maybe there’ll be less. We don’t know for sure. Anyway, as I said, in early March, we began to identify and pursue numerous actions we could take that might help offset the potential impact of tariffs on our merchandise margin. So let me provide some examples of those actions. Firstly, as you might expect, we started by looking at opportunities to switch away from products or brands or categories that have more sourcing exposure to China, to those that have less exposure to China. Now, there are limits to that, but because we at Burlington directly import very little of the merchandise that we sell, we actually have a lot of flexibility. It depends on the merchandise category. Now, as part of that exercise, we work very closely with our vendors, we have thousands of vendors, and I would describe our vendors as being very entrepreneurial. It helps that at Burlington, we’re growing rapidly. So, our vendors know that they have the opportunity to win a larger slice of our business if they work hard to absorb the impact of tariffs. Another action that we started to take in early March, and Kristin referenced this in her remarks, is that we worked with vendors to find buying opportunities in the inventory that they already had here in the United States. Now, of course, this is merchandise that did not incur any tariff. In the first quarter, we were able to make some great buys, and we’ve packed those goods away and reserved, with a plan to release them later in the year. So, in addition to remixing our sales plans and working with vendors in early March, we also began a cross-functional effort to build a war chest that is actually what we’re calling it internally, and that war chest is comprised of numerous margin and expense actions. For example, we’ve tightened up our inventory plans looking for places where we can drive a faster turn and squeeze out some margin dollars. We’ve taken up plans for businesses that are naturally higher margin, where we think that we may have incremental sales opportunity. We’ve accelerated some of the savings initiatives that we are pursuing in our supply chain organization. We’ve gone after productivity and process improvements in stores, and we’ve pursued numerous savings opportunities in other SG&A line items. As I said earlier, we don’t yet know the implications of last night’s decision by the Court of International Trade, but no matter how that turns out, I think the work that we’ve done over the last few months has put us in a pretty good position. Even if the tariffs stay at current levels, 30% on imports from China and 10% for other countries with the offsetting margin and expense savings I’ve just described, we still like, feel like we have a pretty good path to our original guidance.
Operator: Your next question comes from the line of Ike Boruchow of Wells Fargo. Your line is now open.
Ike Boruchow : Michael, a couple non-tariff questions, if that’s okay. Curious if you could maybe dig into a little bit the cadence of the monthly comp sales trends to the first quarter, February, March, April, and also any color you can provide maybe on the trend that you’ve seen May month to date would be super helpful.
Kristin Wolfe: Good morning, Ike. It’s Kristin, I’ll actually take the non-tariff question. Back in February, our comp sales were down about 2% and as we discussed on our Q4 call in early March, we were fairly confident that the weakness in February was really attributable to two factors: the disruptive weather versus last year in our key regions in the Northeast and the Midwest. And then secondly, the timing of tax refunds versus last year, our core customers very sensitive to the timing of tax refunds, specifically as it relates to the earned income tax credit in mid-late February. But sure enough, as we got into March, our sales trend began to pick up. Our stores are closed on Easter Sunday. So, with the timing of Easter this year, we had one more day in March and one less day in April. So, from a comp sales perspective, we look at both months combined, and our comp growth for the March-April combined period was up 1%. So this is certainly better than February, but we would like to be doing better than that. And as for the last part of your question, May months to date, the trend in May has been fairly similar to that of the March and April combined trend at about the middle of our Q2 guidance range.
Ike Boruchow: Thanks, Kristin. And then maybe just one more. Can you walk us through just first quarter sources of upside, as well as the expense shift details into Q2?
Kristin Wolfe: Yes, so for Q1, adjusted EBIT margin increased 30 basis points despite a flat comp earnings per share was $1.67 that represents about a $0.30 beat to the midpoint of our guidance. And there were two drivers of that beat or that higher earnings performance. First, as you said in your question, there was a timing shift between the first and second quarter. This was primarily in supply chain receipt timing, as well as some store-related and SG&A expenses. This favorability will negatively impact Q2 and is worth about half of that $0.30 beat or about $0.14. And the second as Michael referenced just a moment ago, early in the quarter, we began to aggressively go after savings opportunities across the P&L. We did this in anticipation of the potential impact from tariff, and we were able to capture some of these savings during the first quarter, and that makes up the balance of the Q1 B. Those savings are across the P&L and will be used to help offset the anticipated cost impact of tariffs later in the year.
Operator: Your next question comes from the line of Lorraine Hutchinson of Bank of America. Your line is now open.
Lorraine Hutchinson: Thanks. Good morning. Michael, you said that the comp performance in Q1 was broad-based. Others have said lower-income consumers have actually been an area of strength for them. Are you seeing this? And I’d also be interested in any other call-outs in terms of comp trends for different demographic groups.
Michael O’Sullivan: Oh, good morning, Lorraine. Thank you for the question. Yes, as I said in the prepared remarks, our slowdown in comp growth from Q4 to Q1 was fairly broad based affecting stores in all demographic trade areas. Now, when we look at our stores that are in lower-income trade areas, those stores outperformed the rest of the chain in Q4 and throughout 2024. And that relative outperformance continued into Q1. In other words, yes, they slowed down in from Q4 to Q1 along with the rest of the chain, but relatively speaking, their comp sales trend continued to be stronger than the chain as a whole. Now, we’ve seen that relative strength in lower-income trade areas for a couple of years now. Now, of course, for us, this is something that matters a lot. These are our core customers and those these shoppers were badly impacted in 2022 by the loss of pandemic-era benefits and by the higher cost of living, but we’ve seen a nice recovery with these customers in the last couple of years, you know, as you’d expect we’re watching the trend for those customers very closely. On the other part of your question other call outs on demographics. I know that many investors have questions about Hispanic consumers, so let me talk about what we’re seeing in the data there. In addition to segmenting our stores based on income of the trade area, we also analyze our stores based on the mix of households in the trade area that are Hispanic. Again, this is a very important customer for us, and again, the data tells quite a similar story. In 2024, our stores in high Hispanic trade areas had a slightly higher comp trend than the chain, and that slight outperformance continued in Q1. So, from Q4 to Q1, those stores slowed down along with the rest of the chain, but again, their relative outperformance continued. So no specific or unique concerns based on the data at this point. Now, the only exception to what I’ve said is actually stores along the southern border in 2024, stores along the southern border, and we have quite a few, had a significantly higher comp trend than the chain. But in Q1, they underperformed the chain. In other words, those border stores fell off significantly versus other stores. The same thing, I think, has been repeated or reported by other retailers, and I think the reasons are probably obvious and specific to the border. One last point, let me just talk about, you know, trade-down customers. As I’ve said previously, a trade-down shopper for us is not necessarily a high-income customer visiting our store for the first time. They’re just as likely or more likely to be a middle-income customer who’s coming to our store more often. So, it’s difficult to assess trade-down activity just based upon income demographics. It’s easier for us, actually, to see trade-down activity by looking at sales trends by price point in the store. So, in Q1, we continue to see strong comp trends at higher price points. In other words, the customer’s voting for elevated merchandise, especially for key brands, and we see that data as evidence of potential trade-down traffic in our stores.
Lorraine Hutchinson: Thank you. Kristin, in dollar terms reserve inventory is 31% higher than last year. Seems a little high. What has driven this increase?
Kristin Wolfe: Good morning, Lorraine. Thanks for that question. At the end of the quarter, so, a reserve inventory was 48% of total inventory, and that compares to 40% last year. So, you’re right in, in your question. In dollar terms, reserve was up 31% compared to last year. As you said, the increases due to the great deals we were able to make, to get ahead of tariffs. The goods we have in reserve are highly branded and include spring back to school and fall merchandise. And importantly, Michael referenced this earlier, these goods did not incur a tariff as they were already in the country when we acquired them. So, reserve is a very important lever we have as an off-price retailer, especially in this environment. It allows us to be more flexible, acquire branded, high-quality merchandise that we can pack away and release later when it’s seasonably appropriate. So, overall, we feel very good about the merchandise we have in reserve, both from a quantity as well as a quality standpoint.
Operator: Your next question comes from the line of John Kernan of TD Cowen.
John Kernan: I think that comp guidance for the full year, obviously no change there at flat to two. I’m wondering what you see as the potential drivers of risk to this guidance. It sounds like the macro is your biggest concern, and are there any potential drivers of comp sales upside? Are there any categories or opportunities, buying opportunities, you’re most excited about?
Michael O’Sullivan: Good morning, John. Thank you for the question. Yes, it is the macro that we’re most concerned about. But I would say in this environment, we actually see both potential drivers of risk and potential drivers of upside. I’ll start by discussing the major risks. Firstly, the economy, there are numerous external indicators right now that seem to be pointing negative, and also, many experts have raised their probability estimates for a recession. So we are a little worried about the macro environment. My view is that typically economic slowdowns hurt the rest of retail more than they hurt off-price. But in the short term, they also hurt off-price. Historically, again, I think the pattern is that all retailers are hurt in the short term as the trend slows down, but then the off-price retailers are better able to bounce back by moving quickly to take advantage of buying opportunities and turning those deals into great value for customers. Now, if that pattern, that historic pattern holds, then an economic slowdown could hurt us later this year, then, of course, we would hope to bounce back in 2026. So, that’s the macro economy. The other major risk is an increase in inflation if tariffs continue, and it seems likely that inflation will pick up as those tariffs work their way through the economy. Of course, there’s a lot of uncertainty here. We don’t know what the tariffs will settle at, but we do know that our core customer is very sensitive to inflation. We saw what happened when inflation spiked in 2022. You know, our customer, our core customer, does not have savings that they can use to cushion the impact of higher prices. Our strategy is to offer great value to the customer. So, we plan to resist on raising our own retails, but even if we keep our own prices low, our sales trend could still be impacted if a higher general cost of living squeezes the discretionary income and spending of lower-income households. Okay, so those are the risks, the economy and inflation. Let me, I think there also are some potential sources of optimism and three things that I think could drive upside to sales. Firstly, let me go back to the point on inflation. Our focus and our strategy are to find ways to offer great value to customers. If prices rise across retail because of tariffs, then I would expect the price differentiation between us and the rest of retail to grow in our favor. And if that happens, then it might drive higher traffic to stores, or it might, in some cases give us an opportunity to adjust our own retails. Secondly, and I hesitate to bring this up, but there are items in the bill that’s currently working its way through Congress that could help our customers and be a tailwind for our trend. In particular, no taxes on tips and overtime income would be a nice benefit for our customers. Let me add a third point. The macro environment is very important, but we know that our success does not just depend on the macro environment. We have agency, too. We’re doing things at Burlington that should help to drive our sales trend. For example, we continue to go after opportunities to elevate our assortment in merchandising. We are pleased with the progress we’re making to improve the localization of our assortment at a store level, and we’re very excited about the initiatives that we’re rolling out to improve customer experience and service levels in our stores. So, let me wrap up by reiterating, we feel good about our flat 2% comp guidance for the year. We see some risks to that comp range, but we also see some potential tailwinds. And right now, I think those risks and those tailwinds feel fairly well balanced.
John Kernan: Understood. Maybe just a quick follow-up question about freight. Kristin, in the prepared remarks, I think you mentioned your full year guidance is contingent on being able to hold ocean freight costs to contracted rates. Can you just expand on that, and how much of a swing factor is this in your guidance? And then any commentary in the domestic freight cost picture are also helpful, given there’s been some volatility there as well.
Kristin Wolfe: Good morning, John. Thanks for that question. It’s a good question. Maybe I’ll take the last part, first. On domestic freight, we recently secured truck and intermodal capacity at rates we feel very good about. In addition, diesel fuel rate could potentially be an expense tailwind, but that’s obviously hard to predict or count on. On international freight to the crux of your question, this is primarily captured in our merchandise margin. We’ve locked in our contracted ocean rates through the first quarter of 2026, and we feel good about those rates and our ability to meet our capacity needs. However, given the potential volatility of shipments and potential spikes as China comes back online, there is potentially a risk of spot market exposure, and so as I mentioned in the prepared remarks, our guidance assumes we do not see an increase in ocean freight expense above our contracted rates.
Operator: Your next question comes from the line of Alex Straton of Morgan Stanley. Your line is now open.
Alex Straton: I just have a couple for Kristin. Maybe first, can you just walk through first quarter comp performance by region, as well as address if weather impacted performance at all? Then I have a just quick follow-up after that.
Kristin Wolfe: Great. Good morning, Alex. In terms of regional performance, the Southeast region was -- outperformed the chain, was above the chain, while the Midwest region trailed the chain. This was likely due to the unfavorable weather in that region. In the first quarter, weather certainly had an impact on comp and traffic, particularly in February. And it had a significant impact in February on two important regions of ours, Northeast and the Midwest, but once we got into the March-April time period, weather pretty much normalized and wasn’t neutral to our March and April trend.
Alex Straton : Great. Maybe just secondly, can you also discuss comp performance in the quarter by category, if any, were weaker or stronger?
Kristin Wolfe: Great. Yes. It’s a good question. Although performance across categories was fairly broad-based in the first quarter, the only real callout I’d make is that the best-performing category in the quarter was our beauty business.
Operator: Your next question comes from the line of Brooke Roach of Goldman Sachs. Your line is now open.
Brooke Roach: Michael, in response to an earlier question, you talked about some of the actions you’re taking to drive continued comp momentum on an idiosyncratic basis. Along those lines, can you provide an update on your marketing programs?
Michael O’Sullivan: Sure. Good morning, Brooke, thank you for the question. Actually, I’m really glad that you asked that question. It gives me a chance to describe some of the things that are going on in marketing. I would say that over the last few years, our marketing programs have evolved to play a really important role in supporting Burlington 2.0. Our marketing and strategy teams are much more integrated now in driving our business than they ever used to be. Maybe the best way for me to illustrate that is to talk about a few things. Firstly, our marketing message. Secondly, I’ll talk about external marketing. And then thirdly, our in-store marketing. Let’s start with our marketing message. Our marketing message is now focused on one thing: value. I would say it used to be that our marketing message was broader, more diffuse, and less clear. But our marketing team has done a really nice job building excitement around and really focusing the message on great value. Now, if you see any of our marketing, it’s all about deals, brands, wow. Secondly, external marketing. We know that our customers are passionate about finding a great deal. When our customers find a great brand, a great fashion, a great deal in our runs, they don’t keep it a secret, they tell all their friends. That’s much more powerful than traditional broadcast advertising. Our marketing team, again, has found some really great ways to encourage and amplify this word of mouth advertising in social media and elsewhere. Thirdly, let me talk about in-store marketing. If you walk into one of our new or recently remodeled stores, you will see an environment that’s very different to historic Burlington. We call this Store Experience 2.0, and about half of our stores have now been converted to Store Experience 2.0. The other half will be converted by the end of 2026. Now, instead of a difficult-to-navigate an endless sea of racks, you’ll find a store layout that’s much more welcoming, inviting, exciting, and off-price, a layout that’s much more deals, brands, wow. Our stores, our store team, our merchandising team and our marketing teams all collaborated on this new layout and design for our stores. We’re really excited about it. It reinforces who we are. It reinforces Burlington 2.0.
Brooke Roach: Great. And then just one follow-up for you, Michael. As you contemplate in mitigation actions for current tariffs, are there any useful lessons from 2018 when tariffs on China were initially introduced during the first Trump administration?
Michael O’Sullivan: Yeah, it’s a good question. I remember living through that, and actually I remember being quite worried at the time, but, as it turned out, those tariffs really had very little impact on the supply or the cost of off-price merchandise. The key difference, of course, is that those tariffs were on a much smaller scale than the tariffs we’ve been contemplating over the last couple of months, and they covered, I want to say that the tariffs back then ran from 10% to 25% that order of magnitude, and they were on a limited number of categories, mostly in the home business. Now, for sure, there were a big headache for the merchants in those categories, but overall the impact was fairly modest and we were able to find offsets. Now, in contrast, the tariffs that were announced in April were on everything from everywhere all at once. Now, again, last night’s court judgment, we don’t know if the tariffs will continue or not, but clearly their potential, based upon the rates that were set in April is much more significant than it was in 2018. That said, there’s a lesson from back then. I think it’s that as an off-price retailer, we have a level of flexibility that other retailers do not have. So, tariffs are likely to, if tariffs continue, they’re likely to be a challenge for all retailers. But we are in a better position to react and adjust and we really need to play to those strengths in this environment.
Operator: Your next question comes from the line of Dana Telsey of Telsey Advisory Group. Your line is now open.
Dana Telsey: Hi, good morning, everyone. As you think about real estate and Michael, that’s exciting about the new layout. Kristin, when will the 100 stores in 2025 open, spring versus fall, and given the landscape where you acquired, I believe around 46 stores from JOANN’s, how are you thinking of those openings, and will they be in the new layout also? Thank you.
Kristin Wolfe: Good morning, Dana, thanks for the question. For 2025, we still have a lot of confidence in our 100 net new stores. That assumes 100 net new and about 130 or so growth new store openings. We expect about 25% of stores to open in the first half of the year, and 75% or the majority will be opening in the second half, but those will almost all be in the third quarter in 2025. And then you mentioned in your question, yes, we’re excited, we recently acquired the leases of 46 former JOANN stores, because we recently acquired those leases, we’re paying rent on those stores now. So we’re focused on getting them open as quickly as possible. Right now, we’re expecting those stores to open in spring of 2026, and most will likely open in the first quarter of next year.
Operator: Thank you so much. I would now like to hand the call back to Michael O’Sullivan for final remarks.
Michael O’Sullivan: Let me close by thanking everyone on this call for your interest in Burlington Stores. We look forward to talking to you again in August to discuss our second quarter 2025 results. Thank you for your time today
Operator: Thank you for attending today’s call. You may now disconnect. Goodbye.
