Burlington (BURL)

Off-price retail company Burlington Stores (NYSE:BURL) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 9.7% year on year to $2.71 billion. On the other hand, next quarter’s revenue guidance of $2.68 billion was less impressive, coming in 2.1% below analysts’ estimates. Its non-GAAP profit of $1.72 per share was 33.1% above analysts’ consensus estimates.

Company Overview

Founded in 1972 as a discount coat and outerwear retailer, Burlington Stores (NYSE:BURL) is now an off-price retailer that has broadened into general apparel, footwear, and home goods.

Discount retailers understand that many shoppers love a good deal, and they focus on providing excellent value to shoppers by selling general merchandise at major discounts. They can do this because of unique purchasing, procurement, and pricing strategies that involve scouring the market for trendy goods or buying excess inventory from manufacturers and other retailers. They then turn around and sell these snacks, paper towels, toys, clothes, and myriad other products at highly enticing prices. Despite the unique draw and lure of discounts, these discount retailers must also contend with the secular headwinds of online shopping and challenged retail foot traffic in places like suburban strip malls.

Off-price and discount retail competitors include TJX (NYSE:TJX), Ross Stores (NASDAQ:ROST), and Ollie’s Bargain Outlet (NASDAQ:OLLI).

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $11.02 billion in revenue over the past 12 months, Burlington is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.

As you can see below, Burlington’s sales grew at a mediocre 8% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts), but to its credit, it opened new stores and increased sales at existing, established locations.

This quarter, Burlington reported year-on-year revenue growth of 9.7%, and its $2.71 billion of revenue exceeded Wall Street’s estimates by 2.5%. Company management is currently guiding for a 6% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 8.6% over the next 12 months, similar to its six-year rate. This projection is particularly noteworthy for a company of its scale and indicates the market sees success for its products.

Number of Stores

A retailer’s store count often determines how much revenue it can generate.

Burlington operated 1,138 locations in the latest quarter. It has opened new stores at a rapid clip over the last two years, averaging 10% annual growth, much faster than the broader consumer retail sector. This gives it a chance to become a large, scaled business over time.

When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.

Same-Store Sales

A company's store base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales is an industry measure of whether revenue is growing at those existing stores and is driven by customer visits (often called traffic) and the average spending per customer (ticket).

Burlington’s demand has been spectacular for a retailer over the last two years. On average, the company has increased its same-store sales by an impressive 3.4% per year. This performance suggests its rollout of new stores is beneficial for shareholders. We like this backdrop because it gives Burlington multiple ways to win: revenue growth can come from new stores, e-commerce, or increased foot traffic and higher sales per customer at existing locations.

In the latest quarter, Burlington’s same-store sales rose 5% year on year. This growth was an acceleration from its historical levels, which is always an encouraging sign.

Burlington has great unit economics for a retailer, giving it ample room to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged an excellent 43.4% gross margin over the last two years. That means for every $100 in revenue, only $56.62 went towards paying for inventory, transportation, and distribution.

Burlington produced a 43.8% gross profit margin in Q2, in line with the same quarter last year and exceeding analysts’ estimates by 2.3%. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting it strives to keep prices low for customers and has stable input costs (such as labor and freight expenses to transport goods).

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Burlington was profitable over the last two years but held back by its large cost base. Its average operating margin of 7.3% was weak for a consumer retail business. This result is surprising given its high gross margin as a starting point.

On the plus side, Burlington’s operating margin rose by 1.6 percentage points over the last year, as its sales growth gave it operating leverage.

This quarter, Burlington generated an operating margin profit margin of 8.7%, up 4 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, and administrative overhead.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Burlington’s EPS grew at an unimpressive 4.2% compounded annual growth rate over the last six years, lower than its 8% annualized revenue growth. We can see the difference stemmed from higher interest expenses or taxes as the company actually improved its operating margin and repurchased its shares during this time.

In Q2, Burlington reported adjusted EPS of $1.72, up from $1.20 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Burlington’s full-year EPS of $8.54 to grow 14.8%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Burlington broke even from a free cash flow perspective over the last two years, giving the company limited opportunities to return capital to shareholders.

Taking a step back, we can see that Burlington’s margin dropped by 6.5 percentage points over the last year. This decrease came from the higher costs associated with opening more stores.

Burlington broke even from a free cash flow perspective in Q2. This result was good as its margin was 1.4 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Burlington historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 9.3%, somewhat low compared to the best consumer retail companies that consistently pump out 25%+.

Burlington reported $747.6 million of cash and $5.84 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.16 billion of EBITDA over the last 12 months, we view Burlington’s 4.4× net-debt-to-EBITDA ratio as safe. We also see its $12.64 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Burlington beat analysts’ EPS expectations this quarter. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. On the other hand, its EPS guidance for next quarter missed and its revenue guidance for next quarter fell short of Wall Street’s estimates. Overall, this print was mixed but still had some key positives. The stock traded up 8.8% to $305 immediately following the results.

Updated: November 14, 2025 at 9:38 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Burlington, you should also grasp the company’s longer-term business quality and valuation.

Burlington has a few positive attributes, but it doesn’t top our wishlist. Although its revenue growth was a little slower over the last six years, its new store openings have increased its brand equity. Investors should tread carefully with this one, however, as Burlington’s relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Burlington’s P/E ratio based on the next 12 months is 28.2x. Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $348.44 on the company (compared to the current share price of $281.60).