Can Burlington Stores Keep Expanding Margins Despite Tariff Pressures?

Burlington Stores, Inc. BURL is effectively managing tariff-related pressures through disciplined cost control and operational efficiencies. Its rising gross and EBIT margins highlight the company’s resilience and reinforce confidence. In the third quarter of fiscal 2025, the EBIT margin grew 60 basis points year over year, reaching 6.2%. The gross margin also increased 30 basis points to 44.2%, with merchandise margin up by 10 basis points and freight costs down by 20 basis points. The product sourcing costs decreased 40 basis points due to supply chain and efficiency initiatives.

While adjusted selling, general, and administrative expenses (SG&A) improved by about 20 basis points thanks to store efficiencies, such as faster checkout, this benefit was offset by roughly 20 basis points of higher depreciation from increased spending on the supply chain and new stores. Overall, these factors contributed to the quarter’s EBIT margin improvement.
Management deliberately avoided broad price increases and focused instead on vendor negotiation, assortment adjustments, faster inventory turns, and distribution center productivity efforts to offset tariff-driven markup pressure.

Due to the resilient margin performance in the third quarter, management raised guidance for fiscal 2025 and the fourth quarter. For 2025, the adjusted EBIT margin is now expected to increase in the range of 60 to 70 basis points, up from the previously guided range of 20 to 40 basis points. In the fourth quarter, the adjusted EBIT margin is now expected to rise in the range of 30 to 50 basis points, with earnings per share projected to be between $4.50 and $4.70, representing a 9% to 14% increase year-over-year.

Overall, Burlington’s disciplined cost controls and operational efficiencies continue to offset tariff-related pressures, supporting steady margin expansion. With stronger full-year guidance and sustained EBIT improvement, the company appears well-positioned to maintain its profit momentum heading into 2026.

The Zacks Rundown for BURL

In the past six-month period, BURL’s shares have gained 10% compared with the industry’s rise of 0.5%. BURL carries a Zacks Rank #3 (Hold).

From a valuation standpoint, BURL trades at a forward price-to-earnings ratio of 25.42, lower than the industry’s average of 30.15.

The Zacks Consensus Estimate for BURL’s fiscal 2026 and 2027 earnings implies a year-over-year rise of 17.6% and 13%, respectively. 

Stocks to Consider

Some better-ranked stocks have been discussed below:

Five Below, Inc. FIVE operates as a specialty value retailer in the United States. At present, Five Below sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for FIVE’s current fiscal-year sales and earnings indicates growth of 19.7% and 6.8%, respectively, from the year-ago figures. FIVE delivered a trailing four-quarter earnings surprise of 62.1%, on average.

American Eagle Outfitters, Inc. AEO operates as a specialty beauty retailer in the United States, Mexico, and Kuwait. At present, Ulta Beauty flaunts a Zacks Rank of 1.

The Zacks Consensus Estimate for AEO’s current fiscal-year sales implies growth of 1.2% and earnings indicate a decline of 25.3%, respectively, from the year-ago figures. AEO delivered a trailing four-quarter earnings surprise of 35.1%, on average.

Boot Barn Holdings, Inc. BOOT operates specialty retail stores in the United States and internationally. At present, Boot Barn carries a Zacks Rank of 2 (Buy).

The Zacks Consensus Estimate for Boot Barn’s current fiscal-year sales and earnings indicates growth of 16.2% and 20.5%, respectively, from the year-ago figures. BOOT delivered a trailing four-quarter earnings surprise of 5.4%, on average.
 

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

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