Can Burlington Stores' Burlington 2.0 Strategy Deliver Real Upside?

Burlington Stores, Inc. BURL is advancing its Burlington 2.0 strategy, with a strong focus on enhanced merchandising tools, planning capabilities and supply chain efficiencies. This strategic shift is already yielding meaningful benefits for the company, as reflected in its recent performance.

In the third quarter of fiscal 2025, the total sales for the company grew 7% year over year, while the comparable-store sales increased 1%. Gross margin rose 30 basis points, reaching 44.2% compared to the last year, which is fueled by a 10-basis-point increase in merchandise margin and a 20-basis-point decrease in freight expenses. These gains highlight how Burlington 2.0 is strengthening the company’s margin structure.

Despite a weather-driven slowdown in early quarter trends, the Merchandising 2.0 approach enabled the company to maintain clean inventories and respond quickly to shifting demand. Reserve inventory accounted for 35% of total inventory and remains a key lever that allows merchants to chase emerging trends while limiting downside risk. Cost efficiency remains another pillar of Burlington 2.0. Product sourcing costs, as a percentage of net sales, improved 40 basis points, while SG&A leveraged 20 basis points compared with last year. These efficiencies contributed to an adjusted EBIT margin of 6.2%, a 60-basis point increase from the prior year.

Management raised its fiscal 2025 adjusted EBIT margin guidance, now expecting expansion in the range of 60 to 70 basis points, compared with the prior estimate of 20 to 40 basis points. Total sales are projected to grow nearly 8% compared with the earlier guided range of 7% to 8%, while comparable sales growth is expected to remain consistent with prior guidance of 1% to 2%. The company also increased its store expansion plans, targeting 104 net new stores in 2025, up from the previous estimate of 100 net new stores. It plans to open 110 net new stores in 2026. 
Overall, Burlington 2.0 appears to be driving measurable operational and margin improvements, positioning the company for steady growth and stronger profitability as it enters 2026.

BURL Faces Competition From Boot Barn & American Eagle

Boot Barn Holdings, Inc.’s BOOT net sales rose 18.7% to $505.4 million from $425.8 million, supported by strong consolidated same-store sales growth of 8.4%, including a 7.8% increase in retail and 14.4% growth in e-commerce. Boot Barn’s gross margin improved to 36.4% from 35.9%, driven by an 80-basis-point merchandise margin increase, partially offset by buying deleverage.
 

American Eagle Outfitters, Inc.’s AEO total revenue reached a record $1.4 billion, up 6%, supported by a 4% increase in comparable sales and broad-based brand strength. Gross profit rose 5% to $552 million from $527 million, reflecting solid top-line momentum. However, American Eagle saw a gross margin decline of 40 basis points to 40.5%, indicating modest pressure on profitability despite strong overall performance.

The Zacks Rundown for BURL

In the past six-month period, BURL’s shares have gained 3.1% against the industry’s decline of 3.2%. BURL carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

From a valuation standpoint, BURL trades at a forward price-to-earnings ratio of 22.86X, higher than the industry’s average of 30.06X.

The Zacks Consensus Estimate for BURL’s fiscal 2026 and 2027 earnings implies a year-over-year rise of 17.6% and 13.5%, respectively. 
 

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This article originally published on Zacks Investment Research (zacks.com).

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