Story Stocks^®

Burlington Stores (BURL) is trading sharply lower after reporting its Q1 (Apr) results this morning. The off-price retailer delivered a solid EPS beat, while revenue growth accelerated, increasing 14.1% yr/yr to $2.85 bln, also nicely above expectations. Its outlook was also encouraging, with BURL passing through the upside from the first quarter to the full year. BURL now expects FY27 EPS of $11.45-11.80, while revenue is expected to grow 9-11%, both in line with expectations.

• Comp sales accelerated to +6%, well above guidance for +2-4%. Importantly, comp trends were broad-based across businesses and geographies. BURL noted that higher tax refunds added about 1.5-2 pts to comp growth.
• Encouragingly, BURL continued to describe its customer as resilient, with key indicators remaining positive across demographics and income bands. While management is staying wary of higher gas prices and potential inflation pressure, it has not seen much disruption yet.
• New store growth also remains a key driver, with BURL opening 30 net new stores in Q1. It now expects 115 net new stores for FY27. BURL also said that relocations and smaller-format stores have provided a boost, supporting productivity and giving BURL more flexibility as it expands.
• Gross margin expanded 30 bps yr/yr to 44.1%, driven by a 20 bps increase in merchandise margin and a 10 bps decrease in freight expenses.
• While BURL is guiding for +1-3% comp growth in Q2, it is also lapping its strongest comp from last year. Management sounded more upbeat on the back half, citing potential upside in Q3 and even Q4. Importantly, even with modest Q2 comp guidance, BURL expects EPS growth of 19-28%, reflecting strong earnings leverage.

Briefing.com Analyst Insight

While shares are trading lower, this was not necessarily a weak report from BURL. Expectations were elevated heading into the report following beat-and-raise results from peers TJX and ROST last week. What was encouraging was the acceleration in comps, the strong beat, and the company passing through the full upside from Q1 to its FY27 guidance. While Q1 did get a boost from higher tax refunds, underlying comps still increased at a mid-single-digit pace. Additionally, while Q2 comp guidance of +1-3% may look softer, BURL is lapping its toughest comparison from last year, and management remained bullish on the back half. Customer behavior also remained encouraging, reinforcing the strength of off-price demand and BURL's ability to benefit from a value-focused consumer. Overall, the stock reaction seems more tied to expectations running hot into the report than a disappointing quarter. The report still reinforced the strength of the off-price backdrop, but it will be important to see if BURL can continue to follow its chase playbook and sustain comp momentum through the back half of the year.