Burlington Warns Persistent Gas Price Hikes Squeeze Core Customers

Burlington Stores Inc. shares fell on Thursday after the retailer reported fiscal 2026 second-quarter results. Strong earnings growth and margin improvement were offset by a revenue miss and weak third-quarter guidance.

Total revenue rose approximately 11% year over year to $3.002 billion, below the $3.020 billion market estimate.

Adjusted earnings per share rose 38% to $2.37, beating the $2.18 estimate. The figure excludes tariff refunds and certain costs related to leases acquired through bankruptcy proceedings.

Earnings and Margins Strengthen

GAAP net income nearly doubled from $94 million to $184 million. Diluted earnings per share increased from $1.47 to $2.88.

The quarter marked Burlington's 15th consecutive period of double-digit earnings growth.

Net sales rose 11% to $2.998 billion, with comparable store sales up 2%. Gross margin expanded 250 basis points to 46.2%.

Excluding the $55 million tariff refund benefit, merchandise margin improved 70 basis points. Adjusted EBIT margin expanded 100 basis points.

Inventory, Liquidity, and Buybacks

Merchandise inventory rose 9% to $1.541 billion. The increase reflects 149 net new stores and an 11% rise in comparable store inventory. Reserve inventory accounted for 43% of total inventory.

Burlington ended the quarter with 1,287 stores. Operating cash flow totaled $334.6 million in the first half of the year.

The retailer held $704 million in unrestricted cash, with total liquidity of $1.646 billion. Debt stood at $1.914 billion.

Burlington repurchased 270,279 shares for $87 million. It had $218 million remaining under its buyback authorization.

Full-Year Outlook Raised

Burlington raised its fiscal 2026 adjusted EPS forecast to $11.77 to $11.97 from $11.45 to $11.80. The consensus estimate was $11.78.

The company also lifted its sales outlook to $12.724 billion to $12.839 billion from a prior range of $12.607 billion to $12.838 billion. However, the new range still falls below the $12.960 billion market estimate.

Burlington plans to open approximately 115 net new stores and invest about $875 million in capital expenditures.

Disappointing Q3 Guidance

On the earnings call, CEO Michael O'Sullivan said Burlington has become more cautious in its view of the consumer. He noted that significant gas price increases beginning in March have persisted, further burdening low- and middle-income households already facing rising living costs.

For the third quarter, Burlington expects adjusted EPS of $1.60 to $1.70, below the $2.03 market estimate.

The company forecasts sales of $2.954 billion to $3.009 billion, versus the $2.981 billion consensus.

The outlook includes $55 million in tariff refunds and planned reinvestment, with a neutral impact on full-year earnings. Burlington plans to reinvest approximately 40% of the refunds in the third quarter and 60% in the fourth quarter.

BURL price action: As of Thursday's writing, Burlington Stores shares were down 6.28% at $294.27.