Key financial results

  • Total sales: Total sales grew 11% on top of 10% growth last year.Total sales grew 11% on top of 10% growth last year.
  • Comp sales: Comp store sales increased 2% in Q2 on top of 5% comp growth last year.Comp sales increased 2% in Q2 on top of 5% comp growth last year.
  • Operating margin: Operating margin expanded 100 basis points well above the high end of guidance, excluding tariff refunds.Operating margin expanded 100 basis points well above the high end of our guidance for 60 basis points of expansion.
  • EPS: Adjusted earnings per share increased 38% to $2.37 on top of 39% growth last year, excluding tariff refunds.Our Q2 adjusted earnings per share was $2.37, which also came in above our guidance range of $2.05 and to $2.20.
  • Tariff refunds: The company received approximately $55 million in tariff refunds in the second quarter, providing a $0.64 benefit to second quarter earnings per share.

Business segment results

  • Merchandise margin: Merchandise margin increased 70 basis points, driven by better markup, less tariff pressure, timing of markdowns, and a lower shortage rate.This was driven by a 70 basis point increase in merchandise margin, which was partially offset by a 10 basis point increase in freight expenses.
  • Product sourcing: Product sourcing costs were $226 million compared to $209 million in the second quarter of 2025, decreasing 20 basis points as a percentage of sales.Product sourcing costs were $226 million versus $209 million in the second quarter of 2025. Product sourcing costs decreased 20 basis points as a percentage of sales versus last year.
  • SG&A: Adjusted SG&A costs decreased 50 basis points versus last year, driven by lower store-related costs and leverage on total sales growth.Adjusted SG&A costs in Q2 decreased 50 basis points versus last year. This was primarily driven by lower store-related costs and leverage on total sales growth.
  • Inventories: Comparable store inventories increased 11% versus the end of the second quarter of 2025, with reserve inventory at 43% of total inventory.At the end of the quarter, comparable store inventories increased 11% versus the end of the second quarter of 2025.
  • Store count: In the second quarter, the company opened 51 gross new stores and relocated 6 stores, adding 45 net new stores to reach 1,287 stores.

Capital allocation

  • Liquidity: The company ended the quarter with approximately $1.6 billion in total liquidity, consisting of $704 million in cash and $942 million in availability on the ABL.We ended the quarter with approximately $1.6 billion in total liquidity, which consisted of $704 million in cash and $942 million in availability on our ABL.
  • Share repurchases: During the quarter, the company repurchased $87 million in common stock, bringing fiscal year-to-date repurchases to $167 million.During the quarter, we repurchased $87 million in common stock. We have repurchased $167 million of common stock fiscal year-to-date.
  • Authorization: The company had $218 million remaining on its share repurchase authorization at the end of Q2, which expires in May of 2027.And at the end of Q2, we had $218 million remaining on our share repurchase authorization, which expires in May of 2027.
  • Consumer environment: Management noted that consumers, especially moderate and low-income families, continue to face higher cost of living pressures such as rent, gas, and groceries.Over the last few years, the rising cost of living has made life difficult for many moderate and low-income families.
  • Retail sector: Retail results across the sector in the second quarter were generally underwhelming, even at value-oriented retailers.overall, the comp results have been weak. At all the commentary that we see and hear right now suggest that shoppers are under a lot of pressure.

Competitive landscape

  • Peer actions: Management noted that other retailers made different choices regarding tariff refunds, some using them for earnings favorability and others to offset expense pressures.it makes sense that different retailers have made different choices on this.

Macroeconomic environment

  • Gas prices: A sharp spike in gas prices occurred in March due to the situation in the Middle East and has not reversed, creating ongoing consumer pressure.

Growth opportunities and strategies

  • Tariff reinvestment: The company plans to fully reinvest the $55 million tariff refunds into the business in the back half to sharpen values for customers, expecting the direct impact to be neutral to full year earnings.We intend to fully reinvest these refunds into the business in the back half to deliver even sharper values to our customers.
  • New stores: The company front-loaded new store openings with two-thirds opening in the spring and one-third scheduled for the fall, reaching 178 gross new stores on a trailing 12-month basis.the strength of our new store pipeline has enabled us to front-load new store openings this year with 2/3 opening in the spring and 1/3 scheduled for the fall.

Financial guidance and outlook

  • Full year sales and margin: For the full year 2026, total sales are expected to increase 10% to 11%, comp store sales are expected to increase 3% to 4%, and adjusted EBIT margin is expected to expand by 20 basis points to 40 basis points.
  • Full year EPS: Full year adjusted earnings per share guidance is raised to the range of $11.77 to $11.97, up 16% to 18% versus fiscal 2025.Passing through the entire Q2 EPS upside results in adjusted earnings per share guidance in the range of $11.77 to $11.97, up 16% to 18% versus fiscal 2025
  • Q3 guidance: For the third quarter, comp sales are guided to be up 1% to 3%, total sales to increase 9% to 11%, operating margin to decrease 80 to 60 basis points due to tariff reinvestments, and adjusted EPS in the range of $1.60 to $1.70.
  • Q4 guidance: For the fourth quarter, comp sales are expected to be up 1% to 3%, total sales to increase 7% to 9%, operating margin to decrease 60 to 40 basis points due to tariff reinvestments, and adjusted EPS in the range of $5.05 to $5.15.

Q2 FY2026 results

MetricResultChange
Total sales11%Up 11% versus 10% growth last year
Comparable store sales2%Up 2% versus 5% growth last year
Adjusted earnings per share$2.37Up 38%
Adjusted EBIT margin7%Up 100 basis points
Gross margin rate44.3%Up 60 basis points

How management sounded

Balanced (+35 on our -100 to +100 scale). Management expressed high confidence in underlying earnings momentum and new store performance, despite some caution on the broader consumer environment. Management sounded more upbeat than on 20% of the 302 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.

Read the analyst Q&A summary and guidance and outlook for this call.

What to watch before the next call

  • Consumer demand trends among moderate and low-income shoppers amidst higher gas prices.
  • The execution and sales impact of reinvesting tariff refunds into sharper customer values in the back half.
  • Potential weather volatility during the fall and winter selling seasons.
  • The ongoing ramp-up and productivity gains at the new Savannah distribution center.

Earlier calls

  • Q1 FY2026 (May 28, 2026), tone Positive: Burlington Stores reported a 14% increase in total sales and 26% EPS growth, driven by a 6% comp increase and strong margin expansion.