Burlington Stores, Inc 10-Q for FY2026 Q1
Burlington Stores, Inc. (BURL)
About this 10-Q
Burlington Stores, Inc filed this 10-Q on May 30, 2025, covering the quarter ended May 3, 2025 (FY2026 Q1).
Headline figures
Quarter ended May 3, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.5B
- up 6.0% from $2.36B a year earlier
- Net income
- $100.83M
- up 28.4% from net income of $78.51M a year earlier
- Diluted EPS
- $1.58
- up 29.5% from $1.22 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number
(Exact name of registrant as specified in its charter)
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(State or Other Jurisdiction of Incorporation or Organization) |
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(Address of Principal Executive Offices) |
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Registrant’s Telephone Number, Including Area Code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Non-Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The registrant had
BURLINGTON STORES, INC.
INDEX
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BURLINGTON STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(All amounts in thousands, except per share data)
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Three Months Ended |
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May 3, |
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May 4, |
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2025 |
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2024 |
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REVENUES: |
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$ |
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$ |
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Other revenue |
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Total revenue |
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COSTS AND EXPENSES: |
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Cost of sales |
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Selling, general and administrative expenses |
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Costs related to debt amendments |
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— |
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Depreciation and amortization |
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Impairment charges - long-lived assets |
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Other income - net |
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Interest expense |
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Total costs and expenses |
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Income before income tax expense |
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Income tax expense |
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Net income |
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$ |
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$ |
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Net income per common share: |
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Common stock - basic |
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$ |
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$ |
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Common stock - diluted |
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$ |
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$ |
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Weighted average number of common shares: |
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Common stock - basic |
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Common stock - diluted |
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See Notes to Condensed Consolidated Financial Statements.
3
BURLINGTON STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(All amounts in thousands)
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Three Months Ended |
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May 3, |
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May 4, |
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2025 |
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2024 |
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Net income |
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$ |
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$ |
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Other comprehensive income, net of tax: |
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Interest rate derivative contracts: |
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Net unrealized (loss) gain arising during the period |
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Net reclassification into earnings during the period |
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Other comprehensive income, net of tax |
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Total comprehensive income |
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$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements.
4
BURLINGTON STORES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(All amounts in thousands, except share and per share data)
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May 3, |
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February 1, |
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May 4, |
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2025 |
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2025 |
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2024 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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$ |
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Accounts receivable—net |
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Merchandise inventories |
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Assets held for disposal |
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Prepaid and other current assets |
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Total current assets |
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Property and equipment—net |
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Operating lease assets |
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Tradenames |
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Goodwill |
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Deferred tax assets |
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Other assets |
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Total assets |
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$ |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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$ |
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Current operating lease liabilities |
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Other current liabilities |
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Current maturities of long term debt |
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Total current liabilities |
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Long term debt |
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Long term operating lease liabilities |
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Other liabilities |
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Deferred tax liabilities |
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(Note 11) |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Authorized: |
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Issued: |
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Outstanding: |
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Additional paid-in-capital |
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Accumulated earnings |
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Accumulated other comprehensive income |
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Treasury stock, at cost |
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( |
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( |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements.
5
BURLINGTON STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(All amounts in thousands)
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Three Months Ended |
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May 3, |
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May 4, |
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2025 |
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2024 |
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OPERATING ACTIVITIES |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash (used in) provided by operating activities |
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Depreciation and amortization |
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Impairment charges—long-lived assets |
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Amortization of deferred financing costs |
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Accretion of long term debt instruments |
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Deferred income taxes |
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( |
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Non-cash stock compensation expense |
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Non-cash lease expense |
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( |
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( |
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Cash received from landlord allowances |
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Changes in assets and liabilities: |
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Accounts receivable |
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( |
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( |
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Merchandise inventories |
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( |
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( |
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Prepaid and other current assets |
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( |
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Accounts payable |
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( |
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( |
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Other current liabilities |
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( |
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( |
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Other long term assets and long term liabilities |
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( |
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( |
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Other operating activities |
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( |
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( |
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Net cash (used in) provided by operating activities |
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( |
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INVESTING ACTIVITIES |
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Cash paid for property and equipment |
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( |
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( |
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Lease acquisition costs |
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( |
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( |
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Net proceeds (removal costs) from sale of property and equipment and assets held for sale |
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( |
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Net cash used in investing activities |
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( |
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( |
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FINANCING ACTIVITIES |
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Proceeds from long term debt—ABL Line of Credit |
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— |
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Principal payments on long term debt—Term Loan Facility |
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( |
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( |
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Principal payment on long term debt— 2025 Convertible Notes |
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( |
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— |
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Purchase of treasury shares |
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( |
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( |
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Proceeds from stock option exercises |
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Other financing activities |
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Net cash used in financing activities |
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( |
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( |
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Decrease in cash and cash equivalents |
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( |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Interest paid |
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$ |
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$ |
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Income tax payments - net |
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$ |
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$ |
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Non-cash investing and financing activities: |
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Finance lease modification |
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$ |
— |
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$ |
( |
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Accrued purchases of property and equipment |
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$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements.
BURLINGTON STORES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
May 3, 2025
(Unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation
As of May 3, 2025, Burlington Stores, Inc., a Delaware corporation (collectively with its subsidiaries, the Company), through its indirect subsidiary Burlington Coat Factory Warehouse Corporation (BCFWC), operated
6
These unaudited Condensed Consolidated Financial Statements include the accounts of Burlington Stores, Inc. and its subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. The Condensed Consolidated Financial Statements are unaudited, but in the opinion of management reflect all adjustments (which are of a normal and recurring nature) necessary for the fair presentation of the results of operations for the interim periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2025 (Fiscal 2024 10-K). The balance sheet at February 1, 2025 presented herein has been derived from the audited Consolidated Financial Statements contained in the Fiscal 2024 10-K. Because the Company’s business is seasonal in nature, the operating results for the three month period ended May 3, 2025 are not necessarily indicative of results for the fiscal year.
Accounting policies followed by the Company are described in Note 1, “Summary of Significant Accounting Policies,” included in Part II, Item 8 of the Fiscal 2024 10-K.
Fiscal Year
The Company defines its fiscal year as the 52 or 53-week period ending on the Saturday closest to January 31. Fiscal 2025 is defined as the 52-week year ending January 31, 2026, and Fiscal 2024 is defined as the 52-week year ended February 1, 2025. The first quarters of Fiscal 2025 and Fiscal 2024 each consist of 13 weeks.
Segment Information
The Company reports segment information in accordance with ASC Topic No. 280 “Segment Reporting,” and has
The Company is an off-price retailer that derives revenues from customers by providing a complete line of value-priced apparel, including: women’s ready-to-wear apparel, menswear, youth apparel, baby, beauty, footwear, accessories, home, toys, gifts and coats. The Company’s chief operating decision maker (CODM) is the of the Company.
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(in thousands) |
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Three Months Ended |
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May 3, |
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May 4, |
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2025 |
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2024 |
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Total revenue |
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$ |
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$ |
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Cost of sales |
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Product sourcing costs |
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Other segment expenses (a) |
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Costs related to debt amendments |
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- |
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Depreciation and amortization |
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Impairment charges - long-lived assets |
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Other income - net |
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( |
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Interest expense |
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Income tax expense |
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Net income |
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$ |
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$ |
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7
Recently Adopted Accounting Standards
There were no new accounting standards that had a material impact on the Company’s Condensed Consolidated Financial Statements and notes thereto during the three month period ended May 3, 2025.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topics 740): Improvements to Income Tax Disclosures" (ASU 2023-09) to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted and can be applied on either a prospective or retroactive basis. The Company is currently evaluating the impact of ASU 2023-09 on its disclosures in the consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of income statement expenses" (ASU 2024-03), which requires disaggregated disclosure of income statement expenses for public business entities. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of ASU 2024-03 on its disclosures in the consolidated financial statements.
2. Stockholders’ Equity
Activity for the three month periods ended May 3, 2025 and May 4, 2024 in the Company’s stockholders’ equity is summarized below:
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(in thousands, except share data) |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Treasury Stock |
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Shares |
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Amount |
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Capital |
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Earnings |
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Income |
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Shares |
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Amount |
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Total |
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Balance at February 1, 2025 |
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$ |
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$ |
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$ |
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$ |
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( |
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$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock options exercised |
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— |
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— |
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— |
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— |
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— |
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Shares used for tax withholding |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Shares issued as part of convertible debt settlement |
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( |
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— |
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— |
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— |
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— |
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( |
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Shares purchased as part of publicly announced program, inclusive of $ |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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( |
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Vesting of restricted shares |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Unrealized losses on interest rate derivative contracts, net of related taxes of $ |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Amount reclassified from accumulated other comprehensive income into earnings, net of related taxes of $ |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Balance at May 3, 2025 |
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|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||||
8
|
|
(in thousands, except share data) |
|
|||||||||||||||||||||||||||||
|
|
Common Stock |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated |
|
|
Treasury Stock |
|
|
|
|
||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Earnings |
|
|
Income |
|
|
Shares |
|
|
Amount |
|
|
Total |
|
||||||||
Balance at February 3, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
||||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Stock options exercised |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Shares used for tax withholding |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Shares purchased as part of publicly announced program, inclusive of $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Vesting of restricted shares |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Unrealized gains on interest rate derivative contracts, net of related taxes of $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Amount reclassified from accumulated other comprehensive income into earnings, net of related taxes of $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Balance at May 4, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||||
3. Lease Commitments
The Company’s leases primarily consist of stores, distribution facilities and office space under operating and finance leases that will expire principally during the next
The following is a schedule of the Company’s future lease payments:
|
|
(in thousands) |
|
|||||
Fiscal Year |
|
Operating |
|
|
Finance |
|
||
2025 (remainder) |
|
$ |
|
|
|
|
||
2026 |
|
|
|
|
|
|
||
2027 |
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
|
||
2029 |
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
|
||
Total future minimum lease payments |
|
|
|
|
|
|
||
Amount representing interest |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|||
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
||
Weighted average discount rate |
|
|
|
|
||||
Weighted average remaining lease term (years) |
|
|
|
|
|
|
||
The above schedule excludes approximately $
The following is a schedule of net lease costs for the periods indicated:
9
|
|
(in thousands) |
|
|||||
|
|
Three Months Ended |
|
|||||
|
|
May 3, 2025 |
|
|
May 4, 2024 |
|
||
Finance lease cost: |
|
|
|
|
|
|
||
Amortization of finance lease asset (a) |
|
$ |
|
|
$ |
|
||
Interest on lease liabilities (b) |
|
|
|
|
|
|
||
Operating lease cost (c) |
|
|
|
|
|
|
||
Variable lease cost (c) |
|
|
|
|
|
|
||
Total lease cost |
|
|
|
|
|
|
||
Impairment (gain) on sale and leaseback transaction (d) |
|
|
( |
) |
|
|
|
|
Less all rental income (e) |
|
|
( |
) |
|
|
( |
) |
Total net rent expense (f) |
|
$ |
|
|
$ |
|
||
Supplemental cash flow disclosures related to leases are as follows:
|
|
(in thousands) |
|
|||||
|
|
Three Months Ended |
|
|||||
|
|
May 3, 2025 |
|
|
May 4, 2024 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
||
Cash payments arising from operating lease liabilities (a) |
|
$ |
|
|
$ |
|
||
Cash payments for the principal portion of finance lease liabilities (b) |
|
$ |
|
|
$ |
|
||
Cash payments for the interest portion of finance lease liabilities (a) |
|
$ |
|
|
$ |
|
||
Supplemental non-cash information: |
|
|
|
|
|
|
||
Operating lease liabilities arising from obtaining right-of-use assets |
|
$ |
|
|
$ |
|
||
4. Long Term Debt
Long term debt consists of:
|
|
(in thousands) |
|
|||||||||
|
|
May 3, |
|
|
February 1, |
|
|
May 4, |
|
|||
|
|
2025 |
|
|
2025 |
|
|
2024 |
|
|||
Senior secured term loan facility, adjusted SOFR (with a floor of |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Convertible senior notes, |
|
|
— |
|
|
|
|
|
|
|
||
Convertible senior notes, |
|
|
|
|
|
|
|
|
|
|||
ABL senior secured revolving facility, SOFR plus spread based on average outstanding balance, matures on |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
||||
Unamortized deferred financing costs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total debt |
|
|
|
|
|
|
|
|
|
|||
Less: current maturities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Long term debt, net of current maturities |
|
$ |
|
|
$ |
|
|
$ |
|
|||
10
Term Loan Facility
BCFWC and certain of its subsidiaries and holding companies are party to a Credit Agreement (as amended, supplemented and otherwise modified, the Term Loan Facility) that provides for term loans in an aggregate principal amount as of May 3, 2025 of $
On September 24, 2024, the Company entered into an amendment to the Term Loan Facility (the "Amendment"), which among other things, (i) refinanced the outstanding $
The Term Loan Facility is collateralized by a first lien on BCFWC’s and each guarantor’s equity interests, equipment, intellectual property, and certain favorable leases and real estate, and certain related assets and proceeds thereof (subject to certain exceptions), and a second lien on BCFWC’s and each guarantor’s other assets and proceeds thereof (subject to certain exceptions).
At May 3, 2025 and May 4, 2024, the Company’s borrowing rate related to the Term Loan Facility, exclusive of the impact of interest rate swaps, was
2025 Convertible Notes
On April 16, 2020, the Company issued its 2025 Convertible Notes. The 2025 Convertible Notes are general unsecured obligations of the Company. The 2025 Convertible Notes bear interest at a rate of
The 2025 Convertible Notes matured on
2027 Convertible Notes
On September 12, 2023, the Company closed the issuance of approximately $
The 2027 Convertible Notes bear interest at a rate of
Prior to the close of business on the business day immediately preceding September 15, 2027, the 2027 Convertible Notes will be convertible at the option of the holders only upon the occurrence of certain events and during certain periods. Thereafter, the 2027 Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of December 15, 2027. The 2027 Convertible Notes have an initial conversion rate of
11
Company’s common stock or a combination thereof, at its election, in respect of the remainder (if any) of the Company’s conversion obligation in excess of such aggregate principal amount. The Company will not be able to redeem the 2027 Convertible Notes prior to December 20, 2025. On or after December 20, 2025 and prior to the 21st scheduled trading day immediately preceding December 15, 2027, the Company will be able to redeem for cash all or any portion of the 2027 Convertible Notes, at its option, if the last reported sale price of the Company’s common stock is equal to or greater than
If the Company undergoes a fundamental change, subject to certain conditions, holders of the 2027 Convertible Notes may require the Company to repurchase for cash all or any portion of their 2027 New Convertible Notes. The fundamental change repurchase price will be
ABL Line of Credit
BCFWC and certain of its subsidiaries and holding companies are party to a Second Amended and Restated Credit Agreement (as amended, supplemented and otherwise modified, the ABL Line of Credit) that provides for $
On May 4, 2024, the Company had $
On May 3, 2025, the Company had $
5. Derivative Instruments and Hedging Activities
The Company accounts for derivatives and hedging activities in accordance with ASC 815, “Derivatives and Hedging” (ASC 815). As required by ASC 815, the Company records all derivatives on the balance sheet at fair value and adjusts to market on a quarterly basis. In addition, to comply with the provisions of ASC 820, “Fair Value Measurements” (ASC 820), credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements such as collateral postings, thresholds, mutual puts, and guarantees. In accordance with ASC 820, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. There is no impact of netting, because the Company has only one derivative. The Company classifies its derivative valuations in Level 2 of the fair value hierarchy.
On September 27, 2024, the Company terminated the previous $
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
12
As of May 3, 2025, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:
Interest Rate Derivative |
|
Number of |
|
Notional Aggregate |
|
Interest Swap Rate |
|
Maturity Date |
Interest rate swap contract |
|
|
$ |
|
|
Tabular Disclosure
The table below presents the fair value of the Company’s derivative financial instruments on a gross basis as well as their classification on the Company’s Condensed Consolidated Balance Sheets:
|
|
(in thousands) |
|
|||||||||||||||
|
|
Fair Values of Derivative Instruments |
|
|||||||||||||||
|
|
May 3, 2025 |
|
|
February 1, 2025 |
|
|
May 4, 2024 |
|
|||||||||
Derivatives Designated as Hedging Instruments |
|
Balance |
|
Fair |
|
|
Balance |
|
Fair |
|
|
Balance |
|
Fair |
|
|||
Interest rate swap contracts |
|
Other assets |
|
$ |
|
|
Other assets |
|
$ |
|
|
Other assets |
|
$ |
|
|||
The following table presents the unrealized gains and losses deferred to accumulated other comprehensive income resulting from the Company’s derivative financial instruments for each of the reporting periods.
|
|
(in thousands) |
|
|||||
|
|
Three Months Ended |
|
|||||
Interest Rate Derivatives: |
|
May 3, 2025 |
|
|
May 4, 2024 |
|
||
Unrealized (losses) gains, before taxes |
|
$ |
( |
) |
|
$ |
|
|
Income tax benefit (expense) |
|
|
|
|
|
( |
) |
|
Unrealized (losses) gains, net of taxes |
|
$ |
( |
) |
|
$ |
|
|
The following table presents information about the reclassification of gains and losses from accumulated other comprehensive income into earnings related to the Company’s derivative instruments for each of the reporting periods.
|
|
(in thousands) |
|
|||||
|
|
Three Months Ended |
|
|||||
Component of Earnings: |
|
May 3, 2025 |
|
|
May 4, 2024 |
|
||
Interest benefit |
|
$ |
( |
) |
|
$ |
( |
) |
Income tax expense |
|
|
|
|
|
|
||
Net reclassification into earnings |
|
$ |
( |
) |
|
$ |
( |
) |
The Company estimates that approximately $
6. Fair Value Measurements
The Company accounts for fair value measurements in accordance with ASC 820, which defines fair value, establishes a framework for measurement and expands disclosure about fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price), and classifies the inputs used to measure fair value into the following hierarchy:
Level 1: Quoted prices for identical assets or liabilities in active markets.
Level 2: Quoted market prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3: Pricing inputs that are unobservable for the assets and liabilities and include situations where there is little, if any, market activity for the assets and liabilities.
13
The inputs into the determination of fair value require significant management judgment or estimation.
The carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term nature of these instruments.
Refer to Note 5, “Derivative Instruments and Hedging Activities,” for further discussion regarding the fair value of the Company’s interest rate swap contract.
Financial Assets
The fair values of the Company’s financial assets and the hierarchy of the level of inputs as of May 3, 2025, February 1, 2025 and May 4, 2024 are summarized below:
|
|
(in thousands) |
|
|||||||||
|
|
Fair Value Measurements at |
|
|||||||||
|
|
May 3, |
|
|
February 1, |
|
|
May 4, |
|
|||
|
|
2025 |
|
|
2025 |
|
|
2024 |
|
|||
Level 1 |
|
|
|
|
|
|
|
|
|
|||
Cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Long-lived assets are measured at fair value on a non-recurring basis for purposes of calculating impairment using the fair value hierarchy of ASC 820. The fair value of the Company’s long-lived assets is calculated using a discounted cash-flow model that used level 3 inputs. In calculating future cash flows, the Company makes estimates regarding future operating results and market rent rates, based on its experience and knowledge of market factors in which the retail location is located.
Impairment charges on long-lived assets were $
During the three months ended May 3, 2025 and the three months ended May 4, 2024, the assets impaired had a remaining carrying value after impairments of $
Financial Liabilities
The fair values of the Company’s financial liabilities are summarized below:
|
|
(in thousands) |
|
|||||||||||||||||||||
|
|
May 3, 2025 |
|
|
February 1, 2025 |
|
|
May 4, 2024 |
|
|||||||||||||||
|
|
Principal |
|
|
Fair |
|
|
Principal |
|
|
Fair |
|
|
Principal |
|
|
Fair |
|
||||||
Term Loan Facility |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
2025 Convertible Notes |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
2027 Convertible Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
ABL Line of Credit (a) |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Total debt (b) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
The fair values presented herein are based on pertinent information available to management as of the respective period end dates. The estimated fair values of the Company’s debt are classified as Level 2 in the fair value hierarchy, and are based on current market quotes received from inactive markets.
7. Income Taxes
Income tax expense was $
14
quarter of Fiscal 2024. The increase in income tax expense is primarily driven by higher pre-tax income, while the decrease in the effective tax rate is mainly attributable to the tax benefit from stock-based compensation.
Net deferred taxes are as follows:
|
|
(in thousands) |
|
|||||||||
|
|
May 3, |
|
|
February 1, |
|
|
May 4, |
|
|||
|
|
2025 |
|
|
2025 |
|
|
2024 |
|
|||
Deferred tax asset |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Deferred tax liability |
|
|
|
|
|
|
|
|
|
|||
Net deferred tax liability |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Net deferred tax assets relate to Puerto Rico deferred balances that have a future net benefit for tax purposes. Net deferred tax liabilities primarily relate to intangible assets and depreciation expense where the Company has a future obligation for tax purposes.
As of May 3, 2025, the Company has a deferred tax asset related to net operating losses of $
As of May 3, 2025, the Company had tax credit carry-forwards totaling $
As of May 3, 2025, February 1, 2025 and May 4, 2024, valuation allowances totaled $
8. Capital Stock
Treasury Stock
The Company accounts for treasury stock under the cost method.
Shares Used to Satisfy Tax Withholding
During the three month period ended May 3, 2025, the Company acquired
Share Repurchase Program
On August 15, 2023, the Company's Board of Directors authorized the repurchase of up to an additional $
Subsequent to the end of the first quarter of Fiscal 2025, the Company's Board of Directors authorized the repurchase of up to an additional $
During the three month period ended May 3, 2025, the Company repurchased
9. Net Income Per Share
Basic net income per share is calculated by dividing net income by the weighted-average number of common shares outstanding. Diluted net income per share is calculated by dividing net income by the weighted-average number of common shares and potentially dilutive securities outstanding during the period using the treasury stock method for the Company’s stock-based
15
compensation grants and the if-converted method for the 2025 Convertible Notes and the 2027 Convertible Notes.
|
|
(in thousands, except per share data) |
|
|||||
|
|
Three Months Ended |
|
|||||
|
|
|
|
|
|
|
||
|
|
May 3, |
|
|
May 4, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Basic net income per share |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Weighted average number of common shares – basic |
|
|
|
|
|
|
||
Net income per common share – basic |
|
$ |
|
|
$ |
|
||
Diluted net income per share |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Shares for basic and diluted net income per share: |
|
|
|
|
|
|
||
Weighted average number of common shares – basic |
|
|
|
|
|
|
||
Assumed exercise of stock options and vesting of restricted stock |
|
|
|
|
|
|
||
Assumed conversion of convertible debt |
|
|
|
|
|
— |
|
|
Weighted average number of common shares – diluted |
|
|
|
|
|
|
||
Net income per common share – diluted |
|
$ |
|
|
$ |
|
||
Approximately
Approximately
10. Stock Based Compensation
As of May 3, 2025, there were
Subsequent to the end of the first quarter of Fiscal 2025, the Company’s stockholders approved an amendment to the 2022 Omnibus Incentive Plan. The amendment provides for an increase in the number of shares of Company common stock subject to the 2022 Omnibus Incentive Plan by
Non-cash stock compensation expense is as follows:
|
|
(in thousands) |
|
|||||
|
|
Three Months Ended |
|
|||||
|
|
May 3, |
|
|
May 4, |
|
||
Type of Non-Cash Stock Compensation |
|
2025 |
|
|
2024 |
|
||
Restricted stock unit grants (a) |
|
$ |
|
|
$ |
|
||
Stock option grants (a) |
|
|
|
|
|
|
||
Performance stock unit grants (a) |
|
|
|
|
|
|
||
Total (b) |
|
$ |
|
|
$ |
|
||
16
Stock Options
Stock option transactions during the three month period ended May 3, 2025 are summarized as follows:
|
|
Number of |
|
|
Weighted |
|
||
Options outstanding, February 1, 2025 |
|
|
|
|
$ |
|
||
Options granted |
|
|
|
|
|
|
||
Options exercised (a) |
|
|
( |
) |
|
|
|
|
Options forfeited |
|
|
( |
) |
|
|
|
|
Options outstanding, May 3, 2025 |
|
|
|
|
|
|
||
The following table summarizes information about the stock options vested and expected to vest during the contractual term of such options as of May 3, 2025:
|
|
Options |
|
|
Weighted |
|
|
Weighted |
|
|
Aggregate |
|
||||
Options vested and expected to vest |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Options exercisable |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
The fair value of each stock option granted during the three month period ended May 3, 2025 was estimated using the Black Scholes option pricing model using the following assumptions on a weighted average basis:
|
|
|
Three Months Ended |
|
|
|
May 3, |
|
|
|
2025 |
Risk-free interest rate |
|
|
|
Expected volatility |
|
|
|
Expected life (years) |
|
|
|
Contractual life (years) |
|
|
|
Expected dividend yield |
|
|
|
Grant date fair value of options issued |
|
$ |
The expected dividend yield was based on the Company’s expectation of not paying dividends in the near term. To evaluate its volatility factor, the Company uses the historical volatility of its stock price over the expected life of the options. The risk free interest rate was based on the U.S. Treasury rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the awards being valued. The expected life of the options was estimated using historical exercise rates.
17
Restricted Stock Units
Restricted stock unit transactions during the three month period ended May 3, 2025 are summarized as follows:
|
|
Number of |
|
|
Weighted |
|
||
Non-vested awards outstanding, February 1, 2025 |
|
|
|
|
$ |
|
||
Awards granted |
|
|
|
|
|
|
||
Awards vested (a) |
|
|
( |
) |
|
|
|
|
Awards forfeited |
|
|
( |
) |
|
|
|
|
Non-vested awards outstanding, May 3, 2025 |
|
|
|
|
|
|
||
The fair value of each share of restricted stock granted during the three month period ended May 3, 2025 was based upon the closing price of the Company’s common stock on the grant date.
Performance Stock Units
The Company grants performance-based restricted stock units to its senior executives. Vesting of the performance stock units granted in Fiscal 2022 through Fiscal 2025 are based on continued service and the achievement of specified pre-established adjusted net income per share growth over a three-year performance period, as applicable for each grant. Based on the Company’s achievement of these goals, each award may be earned up to
Performance stock unit transactions during the three month period ended May 3, 2025 are summarized as follows:
|
|
Number of |
|
|
Weighted |
|
||
Non-vested awards outstanding, February 1, 2025 |
|
|
|
|
$ |
|
||
Awards granted |
|
|
|
|
|
|
||
Awards vested (a) |
|
|
( |
) |
|
|
|
|
Awards forfeited |
|
|
( |
) |
|
|
|
|
Non-vested awards outstanding, May 3, 2025 |
|
|
|
|
|
|
||
11. Commitments and Contingencies
Legal
In the course of business, the Company is party to class or collective actions alleging violations of federal and state wage and hour and other labor statutes, representative claims under the California Private Attorneys’ General Act and various other lawsuits and regulatory proceedings from time to time including, among others, commercial, product, employee, customer, intellectual property, privacy and other claims. Actions against us are in various procedural stages. Many of these proceedings raise factual and legal issues and are subject to uncertainties. While no assurance can be given as to the ultimate outcome of these matters, the Company believes that the final resolution of these actions will not have a material adverse effect on the Company’s results of operations, financial position, liquidity or capital resources.
18
Letters of Credit
The Company had letters of credit arrangements with various banks in the aggregate amount of $
Purchase Commitments
The Company had $
19
BURLINGTON STORES, INC.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion summarizes the significant factors affecting our condensed consolidated operating results, financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto included elsewhere in this report and the Consolidated Financial Statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended February 1, 2025 (Fiscal 2024 10-K).
In addition to historical information, this discussion and analysis contains forward-looking statements based on current expectations that involve risks, uncertainties and assumptions, such as our plans, objectives, expectations and intentions. Our actual results or other events may differ materially from those anticipated in these forward-looking statements due to various factors, including those discussed under the section of this Item 2 entitled “Safe Harbor Statement.”
Executive Summary
Introduction
We are a nationally recognized off-price retailer. We opened our first store in Burlington, New Jersey in 1972, selling primarily coats and outerwear. Since then, we have expanded our store base to 1,115 stores as of May 3, 2025 in 46 states, Washington D.C. and Puerto Rico. We have diversified our product categories by offering an extensive selection of in-season, high-quality branded merchandise at up to 60% off other retailers’ prices, including: fashion-focused women’s apparel, menswear, youth apparel, baby, beauty, footwear, accessories, home, toys, gifts and coats.
Fiscal Year
Fiscal 2025 is defined as the 52-week year ended January 31, 2026. Fiscal 2024 is defined as the 52-week year ending February 1, 2025. The first quarter of Fiscal 2025 and Fiscal 2024 each consist of 13 weeks.
Store Openings, Closings, and Relocations
During the three month period ended May 3, 2025, we opened 14 new stores, inclusive of four relocations, and permanently closed three stores, exclusive of the aforementioned relocations, bringing our store count as of May 3, 2025 to 1,115 stores.
Ongoing Initiatives for Fiscal 2025
We continue to focus on a number of ongoing initiatives aimed at increasing our overall profitability. These initiatives include, but are not limited to:
We strive to increase comparable store sales through the following initiatives:
20
We intend to expand and enhance our retail store base through the following initiatives:
We intend to increase our operating margins through the following initiatives:
Uncertainties and Challenges
As we strive to increase profitability, there are uncertainties and challenges that we face that could have a material impact on our revenues or income. Some of these uncertainties and challenges are summarized below. For a further discussion, please refer to the description under the heading “Risk Factors” in the Fiscal 2024 10-K and in Part II, Item 1A below.
General Economic Conditions. There remains a high level of uncertainty in the current macroeconomic and geopolitical environments, and prolonged inflationary pressures continue to negatively impact the discretionary spending of the low-income shopper, our core customer. In addition to inflation, consumer spending habits, including spending for the merchandise that we sell, are affected by, among other things, prevailing global economic conditions, the costs of basic necessities and other goods, levels of employment, salaries and wage rates, prevailing interest rates, reductions in government benefits and lower tax refunds, housing costs, energy costs, commodities pricing, income tax rates and policies, immigration policies, consumer confidence and consumer perception of economic conditions. In addition, consumer purchasing patterns are generally influenced by consumers’ disposable income, credit availability and debt levels.
21
A broad, protracted slowdown or downturn in the U.S. economy, an extended period of high unemployment or inflation rates, an uncertain domestic or global economic outlook or a financial crisis could adversely affect consumer spending habits resulting in lower net sales and profits than expected on a quarterly or annual basis. Conversely, if inflation continues to decline, it could benefit our core customers who have been impacted by the higher cost of living since early 2022, and if economic growth slows, it could cause moderate and higher-income shoppers to become more value conscious. Either of these developments, if they occur, would be expected to improve our business. Consumer confidence is also affected by the domestic and international political situation. Our financial condition and operations could be impacted by changes in government regulations, initiatives or programs in areas including, but not limited to, trade and tariffs, taxes, healthcare, and immigration. In addition, trade and tariff regulations have had and are expected to continue to have an indirect impact on consumer prices. We will continue to monitor changes in tariff policy and the impact of these changes on our industry and the economy and seek to adjust to these changes as efficiently as possible. The outbreak or escalation of war, or the occurrence of terrorist acts or other hostilities in or affecting the U.S., or public health issues such as pandemics or epidemics, could lead to a decrease in spending by consumers. In addition, natural disasters, public health issues, industrial accidents and acts of war or conflicts in various parts of the world (such as the conflict in Ukraine or the conflict in the Middle East), could have the effect of disrupting supplies and raising prices globally which, in turn, may have adverse effects on the world and U.S. economies and lead to a downturn in consumer confidence and spending.
Seasonality of Sales and Weather Conditions. Our business, like that of most retailers, is subject to seasonal influences. In the second half of the year, which includes the back-to-school and holiday seasons, we generally realize a higher level of sales and net income.
Weather continues to be a contributing factor to the sale of our merchandise. Generally, our sales are higher if the weather is cold during the Fall and warm during the early Spring. Sales of cold weather clothing are generally increased by early cold weather during the Fall, while sales of warm weather clothing are generally increased by early warm weather conditions in the Spring. Although we have diversified our product offerings, we believe traffic to our stores is still driven, in part, by weather patterns.
Competition and Margin Pressure. We believe that in order to remain competitive with retailers, including off-price retailers and discount stores, we must continue to offer brand-name merchandise at a discount to prices offered by other retailers as well as an assortment of merchandise that is appealing to our customers.
The U.S. retail apparel and home furnishings markets are highly fragmented and competitive. We compete for business with department stores, off-price retailers, internet retailers, specialty stores, discount stores, wholesale clubs, and outlet stores as well as with certain traditional, full-price retail chains that have developed off-price concepts. At various times throughout the year, traditional full-price department store chains and specialty shops offer brand-name merchandise at substantial markdowns, which can result in prices approximating those offered by us at our Burlington Stores. We anticipate that competition will increase in the future. Therefore, we will continue to look for ways to differentiate our stores from those of our competitors.
The U.S. retail industry continues to face increased pressure on margins as overall challenging retail conditions have led consumers to be more value conscious. Additionally, lower-to-moderate income shoppers continue to face economic pressure due to higher cost of living. Our strategy to chase the sales trend allows us the flexibility to purchase less pre-season merchandise with the balance purchased in-season and opportunistically. It also provides us with the flexibility to shift purchases between suppliers and categories. We believe that this enables us to obtain better terms with our suppliers, which we expect will help offset any rising costs of goods.
Key Performance and Non-GAAP Measures
We consider numerous factors in assessing our performance. Key performance and non-GAAP measures used by management include net income, Adjusted Net Income, Adjusted EBITDA, Adjusted EBIT, comparable store sales, gross margin, inventory and liquidity.
Net income. We earned net income of $100.8 million during the three month period ended May 3, 2025 compared with $78.5 million during the three month period ended May 4, 2024. This increase was primarily driven by higher sales, as well as increased gross margin rate. Refer to the section below entitled “Results of Operations” for further explanation.
Adjusted Net Income, Adjusted EBITDA and Adjusted EBIT: Adjusted Net Income, Adjusted EBITDA and Adjusted EBIT are non-GAAP financial measures of our performance.
We define Adjusted Net Income as net income, exclusive of the following items, if applicable: (i) net favorable lease costs; (ii) costs related to debt amendments; (iii) impairment charges; (iv) amounts related to certain litigation matters; and (v) other unusual or non-recurring expenses, losses, charges or gains, all of which are tax effected to arrive at Adjusted Net Income.
22
We define Adjusted EBITDA as net income, exclusive of the following items, if applicable: (i) interest expense; (ii) interest income; (iii) costs related to debt amendments; (iv) income tax expense; (v) depreciation and amortization; (vi) net favorable lease costs; (vii) impairment charges; (viii) amounts related to certain litigation matters; and (ix) other unusual or non-recurring expenses, losses, charges or gains.
We define Adjusted EBIT as net income, exclusive of the following items, if applicable: (i) interest expense; (ii) interest income; (iii) costs related to debt amendments; (iv) income tax expense; (v) impairment charges; (vi) net favorable lease costs; (vii) amounts related to certain litigation matters; and (viii) other unusual or non-recurring expenses, losses, charges or gains.
We present Adjusted Net Income, Adjusted EBITDA and Adjusted EBIT because we believe they are useful supplemental measures in evaluating the performance of our business and provide greater transparency into our results of operations. In particular, we believe that excluding certain items that may vary substantially in frequency and magnitude from what we consider to be our core operating results are useful supplemental measures that assist investors and management in evaluating our ability to generate earnings and leverage sales, and to more readily compare core operating results between past and future periods.
We believe that these non-GAAP measures provide investors helpful information with respect to our operations and financial condition. Other companies in the retail industry may calculate these non-GAAP measures differently such that our calculation may not be directly comparable.
Adjusted Net Income has limitations as an analytical tool, and should not be considered either in isolation or as a substitute for net income or other data prepared in accordance with GAAP. Among other limitations, Adjusted Net Income does not reflect the following items, net of their tax effect:
During the three months ended May 3, 2025, Adjusted Net Income increased $15.8 million to $102.6 million compared to the same period in the prior year. This increase was primarily driven by higher sales, as well as increased gross margin rate. Refer to the section below entitled “Results of Operations” for further explanation.
The following table shows our reconciliation of net income to Adjusted Net Income for the three months ended May 3, 2025 compared with the three months ended May 4, 2024:
|
|
|
|
|||||
|
|
(in thousands) |
|
|||||
|
|
Three Months Ended |
|
|||||
|
|
May 3, |
|
|
May 4, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Reconciliation of net income to Adjusted Net Income: |
|
|
|
|
|
|
||
Net income |
|
$ |
100,833 |
|
|
$ |
78,514 |
|
Net favorable lease costs (a) |
|
|
2,138 |
|
|
|
2,970 |
|
Costs related to debt amendments (b) |
|
|
112 |
|
|
|
— |
|
Impairment charges - long-lived assets |
|
|
516 |
|
|
|
8,210 |
|
Litigation matters (c) |
|
|
(416 |
) |
|
|
— |
|
Tax effect (d) |
|
|
(601 |
) |
|
|
(2,881 |
) |
Adjusted Net Income |
|
$ |
102,582 |
|
|
$ |
86,813 |
|
23
Adjusted EBIT and Adjusted EBITDA have limitations as analytical tools, and should not be considered either in isolation or as a substitute for net income or other data prepared in accordance with GAAP. Among other limitations, Adjusted EBIT does not reflect:
Adjusted EBITDA is further adjusted for depreciation and amortization. Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will likely have to be replaced in the future.
During the three months ended May 3, 2025, Adjusted EBIT increased $16.9 million to $146.3 million compared to the same period in the prior year. Adjusted EBITDA increased $26.7 million to $238.1 million compared to the same period in the prior year. These increases were primarily driven by higher sales, as well as increased gross margin rate. Refer to the section below entitled “Results of Operations” for further explanation.
The following table shows our reconciliation of net income to Adjusted EBIT and Adjusted EBITDA for the three months ended May 3, 2025 compared with the three months ended May 4, 2024:
|
|
(unaudited) |
|
|||||
|
|
|
|
|||||
|
|
Three Months Ended |
|
|||||
|
|
May 3, |
|
|
May 4, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Reconciliation of net income to Adjusted EBIT and Adjusted EBITDA |
|
|
|
|
|
|
||
Net income |
|
$ |
100,833 |
|
|
$ |
78,514 |
|
Interest expense |
|
|
15,810 |
|
|
|
16,649 |
|
Interest income |
|
|
(4,712 |
) |
|
|
(8,072 |
) |
Net favorable lease costs (a) |
|
|
2,138 |
|
|
|
2,970 |
|
Costs related to debt amendments (b) |
|
|
112 |
|
|
|
— |
|
Impairment charges - long-lived assets |
|
|
516 |
|
|
|
8,210 |
|
Litigation matters (c) |
|
|
(416 |
) |
|
|
— |
|
Income tax expense |
|
|
32,039 |
|
|
|
31,125 |
|
Adjusted EBIT |
|
|
146,320 |
|
|
|
129,396 |
|
Depreciation and amortization |
|
|
91,783 |
|
|
|
81,965 |
|
Adjusted EBITDA |
|
$ |
238,103 |
|
|
$ |
211,361 |
|
|
|
|
|
|
|
|
||
Comparable Store Sales. Comparable store sales measure performance of a store during the current reporting period against the performance of the same store in the corresponding period of a prior year. The method of calculating comparable store sales varies across the retail industry. As a result, our definition of comparable store sales may differ from other retailers.
24
We define comparable store sales as merchandise sales of those stores commencing on the first day of the fiscal month one year after the end of their grand opening activities, which normally conclude within the first two months of operations. If a store is closed for seven or more days during a month, our policy is to remove that store from our calculation of comparable store sales for any such month, as well as during the month(s) of their grand re-opening activities. The change in our comparable store sales was as follows:
|
|
Three Months Ended |
May 3, 2025 |
|
0% |
May 4, 2024 |
|
2% |
Various factors affect comparable store sales, including, but not limited to, weather conditions, current economic conditions, the timing of our releases of new merchandise and promotional events, the general retail sales environment, consumer preferences and buying trends, changes in sales mix among distribution channels, competition, and the success of marketing programs.
Gross Margin. Gross margin is the difference between net sales and the cost of sales. Our cost of sales and gross margin may not be comparable to those of other entities, since some entities may include all of the costs related to their buying and distribution functions, certain store-related costs and other costs, in cost of sales. We include certain of these costs in the line items “Selling, general and administrative expenses” and “Depreciation and amortization” in our Condensed Consolidated Statements of Income. We include in our “Cost of sales” line item all costs of merchandise (net of purchase discounts and certain vendor allowances), inbound freight, distribution center outbound freight and certain merchandise acquisition costs, primarily commissions and import fees.
Gross margin as a percentage of net sales increased to 43.8% during the three month period ended May 3, 2025, compared with 43.5% during three month period ended May 4, 2024, driven primarily by improved merchandise margins and freight costs.
Product sourcing costs, which are included in selling, general and administrative expenses, increased approximately 10 basis points as a percentage of net sales. Supply chain leverage driven by productivity improvements and the timing of receipts was more than offset by increased asset protection investments.
Inventory. Inventory at May 3, 2025 increased to $1,315.3 million compared with $1,140.8 million at May 4, 2024. The increase was attributable primarily to an increase in reserve inventory and 94 net new stores opened since the end of the first quarter of Fiscal 2024. Comparable store inventories decreased 8% compared to the first quarter of Fiscal 2024.
Reserve inventory includes all inventory that is being stored for release either later in the season, or in a subsequent season. We intend to use our reserve merchandise to effectively chase sales trends. Reserve inventory was 48% of total inventory at the end of the first quarter of Fiscal 2025 compared to 40% at the end of the first quarter of Fiscal 2024.
In order to better serve our customers and maximize sales, we continue to refine our merchandising mix and inventory levels within our stores. By appropriately managing our inventories, we believe we will be better able to deliver a continual flow of fresh merchandise to our customers.
Liquidity. Liquidity measures our ability to generate cash. Management measures liquidity through cash flow, which is the measure of cash generated from or used in operating, financing, and investing activities. Cash and cash equivalents decreased $623.6 million during the three months ended May 3, 2025, compared with a decrease of $183.0 million during the three months ended May 4, 2024. On May 3, 2025, we also had $748.2 million available under the ABL Line of Credit with $100.0 million of borrowings. Refer to the section below entitled “Liquidity and Capital Resources” for further explanation.
25
Results of Operations
The following table sets forth certain items in the Condensed Consolidated Statements of Income as a percentage of net sales for the three months ended May 3, 2025 and the three months ended May 4, 2024.
|
|
Percentage of Net Sales |
|
|||||
|
|
Three Months Ended |
|
|||||
|
|
May 3, |
|
|
May 4, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Net sales |
|
|
100.0 |
% |
|
|
100.0 |
% |
Other revenue |
|
|
0.2 |
|
|
|
0.2 |
|
Total revenue |
|
|
100.2 |
|
|
|
100.2 |
|
Cost of sales |
|
|
56.2 |
|
|
|
56.5 |
|
Selling, general and administrative expenses |
|
|
34.7 |
|
|
|
35.0 |
|
Costs related to debt amendments |
|
|
0.0 |
|
|
|
— |
|
Depreciation and amortization |
|
|
3.7 |
|
|
|
3.5 |
|
Impairment charges - long-lived assets |
|
|
0.0 |
|
|
|
0.3 |
|
Other income - net |
|
|
(0.4 |
) |
|
|
(0.5 |
) |
Interest expense |
|
|
0.6 |
|
|
|
0.7 |
|
Total costs and expenses |
|
|
94.8 |
|
|
|
95.5 |
|
Income before income tax expense |
|
|
5.4 |
|
|
|
4.7 |
|
Income tax expense |
|
|
1.3 |
|
|
|
1.3 |
|
Net income |
|
|
4.1 |
% |
|
|
3.4 |
% |
Three Month Period Ended May 3, 2025 Compared With the Three Month Period Ended May 4, 2024
Net sales
Net sales improved approximately $142.8 million, or 6.1%, to $2,500.1 million during the first quarter of Fiscal 2025, primarily driven by net sales from our 94 net new stores opened since the end of the first quarter of Fiscal 2024. Comparable store sales were flat.
Cost of sales
Cost of sales as a percentage of net sales decreased to 56.2% during the first quarter of Fiscal 2025, compared to 56.5% during the first quarter of Fiscal 2024. This decrease was primarily driven by improved merchandise margins and freight costs. On a dollar basis, cost of sales increased $74.4 million, or 5.6%, primarily driven by our overall increase in sales.
Selling, general and administrative expenses
Selling, general and administrative expenses as a percentage of net sales decreased to 34.7% during the first quarter of Fiscal 2025, compared to 35.0% during the first quarter of Fiscal 2024. The decrease was primarily driven by lower incentive compensation and store payroll costs. On a dollar basis, selling, general and administrative expenses increased by $42.8 million, or 5.2%, to $868.1 million during the first quarter of Fiscal 2025. The increase was primarily driven by our 94 net new stores opened since the end of the first quarter of Fiscal 2024.
During the first quarter of Fiscal 2025 and Fiscal 2024, the Company incurred costs related to leases acquired through bankruptcy proceedings. The acquisition of these leases resulted in $5.8 million and $6.0 million of pre-opening costs that are recorded in the line item, “Selling, general and administrative expenses” in our Condensed Consolidated Statements of Income during the first quarter of Fiscal 2025 and Fiscal 2024, respectively.
Depreciation and amortization
Depreciation and amortization expense amounted to $91.8 million during the first quarter of Fiscal 2025 compared with $82.0 million during the first quarter of Fiscal 2024. The increase in depreciation and amortization expense was primarily driven by capital expenditures related to our supply chain, as well as new and non-comparable stores.
26
Impairment charges – long-lived assets
Impairment charges on long-lived assets were $0.5 million during the first quarter of Fiscal 2025, related to unrecoverable assets at three underperforming stores and three relocating stores, and lease asset impairment charges related to one of those stores. Impairment charges on long-lived assets were $8.2 million during the first quarter of Fiscal 2024, primarily related to one owned store selling below carrying value in a sale-leaseback transaction.
The recoverability assessment related to these store-level assets requires various judgments and estimates, including estimates related to future revenues, gross margin rates, store expenses and other assumptions. We base these estimates upon our past and expected future performance. We believe our estimates are appropriate in light of current market conditions. However, future impairment charges could be required if we do not achieve our current revenue or cash flow projections for each store. Refer to Note 6, “Fair Value Measurements,” for further discussion regarding impairment charges.
Other income - net
Other income - net decreased $0.6 million to $10.2 million during the first quarter of Fiscal 2025, compared to the same period in the prior year. The decrease was primarily driven by decreased interest income, partially offset by gain on fixed assets related to a sale leaseback as well as a legal settlement gain.
Interest expense
Interest expense improved $0.8 million during the first quarter of Fiscal 2025 to $15.8 million, compared to the same period in the prior year. This improvement was primarily driven by lower interest rates, partially offset by a higher average balance due to the extension and upsize of the Term Loan Facility during the third quarter of Fiscal 2024.
The average interest rate on the Term Loan Facility was 6.1% and 7.4% for the first quarter of Fiscal 2025 and the first quarter of Fiscal 2024, respectively. The average balance on the Term Loan Facility, excluding the original issue discount, was $1,245.7 million and $936.5 million for the first quarter of Fiscal 2025 and the first quarter of Fiscal 2024, respectively.
The average interest rate on the ABL Line of Credit was 5.5% for the first quarter of Fiscal 2025. The average balance on the ABL Line of Credit was $23.6 million for the first quarter of Fiscal 2025. There were no borrowings under the ABL Line of Credit during the three month period ended May 4, 2024.
Income tax expense
Income tax expense was $32.0 million during the first quarter of Fiscal 2025 compared with income tax expense of $31.1 million during the first quarter of Fiscal 2024. The effective tax rate for the first quarter of Fiscal 2025 was 24.1% compared with 28.4% during the first quarter of Fiscal 2024. The increase in income tax expense is primarily driven by higher pre-tax income, while the decrease in the effective tax rate is mainly attributable to the tax benefit from stock-based compensation.
At the end of each interim period we are required to determine the best estimate of our annual effective tax rate and then apply that rate in providing for income taxes on a current year-to-date (interim period) basis. Use of this methodology during the first quarter of Fiscal 2025 resulted in an annual effective income tax rate of approximately 26% (before discrete items) as our best estimate.
Net income
We earned net income of $100.8 million for the first quarter of Fiscal 2025 compared with $78.5 million for the first quarter of Fiscal 2024. This increase was primarily driven by higher sales, as well as increased gross margin rate. Net income included $4.3 million of expense, net of income taxes, for both the first quarter of Fiscal 2025 and Fiscal 2024 related to the bankruptcy acquired leases.
Liquidity and Capital Resources
Our ability to satisfy interest payment and future principal payment obligations on our outstanding debt will depend largely on our future performance which, in turn, is subject to prevailing economic conditions and to financial, business and other factors beyond our control. If we do not have sufficient cash flow to service interest payment and future principal payment obligations on our outstanding indebtedness and if we cannot borrow or obtain equity financing to satisfy those obligations, our business and results of operations will be materially adversely affected. We cannot be assured that any replacement borrowing or equity financing could be successfully completed on terms similar to our current financing agreements, or at all.
27
We believe that cash generated from operations, along with our existing cash and our ABL Line of Credit, will be sufficient to fund our expected cash flow requirements and planned capital expenditures for at least the next twelve months as well as the foreseeable future. However, there can be no assurance that we would be able to offset declines in our comparable store sales with savings initiatives.
As market conditions warrant, we may, from time to time, repurchase our outstanding debt securities in the open market, in privately negotiated transactions, by tender offer, by exchange transaction or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity and other factors and may be commenced or suspended at any time. The amounts involved and total consideration paid may be material.
From time to time, we evaluate options to opportunistically increase, refinance or extend our debt. Our assessment will be based on our capital needs for, among other things, facility purchases, capital improvements and expenditures. No assurance can be given that we will enter into such agreements.
Cash Flow for the Three Month Period Ended May 3, 2025 Compared With the Three Month Period Ended May 4, 2024
We used $623.6 million of cash during the three month period ended May 3, 2025 compared with $183.0 million during the three month period ended May 4, 2024.
Net cash used in operating activities amounted to $28.9 million during the three month period ended May 3, 2025, compared with net cash provided of $49.4 million during the three month period ended May 4, 2024. The decrease in our operating cash flows was primarily driven by changes in working capital, which more than offset improved net income.
Net cash used in investing activities was $412.7 million during the three month period ended May 3, 2025 compared with $165.5 million during the three month period ended May 4, 2024. This change was primarily the result of an increase in capital expenditures related to supply chain costs from the purchase and build-out of distribution centers as well as increased store openings.
Net cash used in financing activities was $182.0 million during the three month period ended May 3, 2025 compared with $66.9 million during the three month period ended May 4, 2024. This change was primarily driven by settlement of the 2025 Convertible Notes and an increase in treasury stock repurchases, partially offset by ABL borrowings.
Changes in working capital also impact our cash flows. Working capital equals current assets minus current liabilities. We had working capital at May 3, 2025 of $115.3 million compared with $140.8 million at May 4, 2024. The decrease in working capital was primarily due to decreased cash balance, partially offset by decreased current maturities of long term debt related to the settlement of the 2025 Convertible Notes as well as increased inventory. We had working capital at February 1, 2025 of $356.3 million.
Capital Expenditures
For the three month period ended May 3, 2025, capital expenditures, net of $7.8 million of landlord allowances, amounted to $412.2 million (inclusive of accrued capital expenditures).
We estimate that we will spend approximately $950 million, net of approximately $55 million of landlord allowances, in capital expenditures during Fiscal 2025, including approximately $445 million, net of the previously mentioned landlord allowances, for store expenditures (new stores, relocations, downsizes and other store expenditures). In addition, we estimate that we will spend approximately $415 million to support our supply chain initiatives, with the remaining capital used to support our information technology and other business initiatives.
Share Repurchase Program
On August 15, 2023, our Board of Directors authorized the repurchase of up to $500 million of common stock, which is authorized to be executed through August 2025.
Subsequent to the end of the first quarter of Fiscal 2025, our Board of Directors authorized the repurchase of up to an additional $500.0 million of common stock, which is authorized to be executed through May 2027. This was authorized on May 20, 2025.
During the first quarter of Fiscal 2025, we repurchased 445,285 shares of common stock for $105.2 million under these repurchase programs. As of May 3, 2025, we had $157.9 million remaining under our share repurchase authorization.
We are authorized to repurchase shares of our outstanding common stock from time to time on the open market or in privately negotiated transactions under our repurchase program. The timing and amount of stock repurchases will depend on a variety of factors, including the market conditions as well as corporate and regulatory considerations. Our share repurchase program may be
28
suspended, modified or discontinued at any time, and we have no obligation to repurchase any amount of our common stock under the program.
Dividends
We currently do, and intend to continue to, retain all available funds and any future earnings to fund all of the Company's capital expenditures, business initiatives, and to support any potential opportunistic capital structure initiatives. Therefore, at this time, we do not anticipate paying cash dividends in the near term. Our ability to pay dividends on our common stock will be limited by restrictions on the ability of our subsidiaries to pay dividends or make distributions under the terms of current and any future agreements governing our indebtedness. Any future determination to pay dividends will be at the discretion of our Board of Directors, subject to compliance with covenants in our current and future agreements governing our indebtedness, and will depend upon our results of operations, financial condition, capital requirements and other factors that our Board of Directors deems relevant.
In addition, since we are a holding company, substantially all of the assets shown on our Condensed Consolidated Balance Sheets are held by our subsidiaries. Accordingly, our earnings, cash flow and ability to pay dividends are largely dependent upon the earnings and cash flows of our subsidiaries and the distribution or other payment of such earnings to us in the form of dividends.
Operational Growth
During the three month period ended May 3, 2025, we opened 14 new stores, inclusive of four relocations, and closed three stores, exclusive of the aforementioned relocations, bringing our store count as of May 3, 2025 to 1,115 stores. During Fiscal 2025, we plan to open approximately 100 net new stores.
Debt and Hedging
As of May 3, 2025, our obligations, inclusive of original issue discount, include $1,236.1 million under our Term Loan Facility, $297.1 million of 2027 Convertible Notes, and outstanding borrowings on our ABL Line of Credit of $100.0 million. Our debt obligations also include $24.4 million of finance lease obligations as of May 3, 2025.
Term Loan Facility
BCFWC and certain of its subsidiaries and holding companies are party to a Credit Agreement (as amended, supplemented and otherwise modified, the Term Loan Facility) that provides for term loans in an aggregate principal amount as of May 3, 2025 of $1,243.8 million maturing on September 24, 2031.
On September 24, 2024, we entered into an amendment to the Term Loan Facility dated as of February 24, 2011 (the "Amendment"), which among other things, (i) refinanced the outstanding $933 million principal amount of Term B-6 Loans with Term B-7 Loans in an aggregate principal amount of $1,250 million, which includes incremental term loans in an aggregate principal amount of $317 million, (ii) extended the maturity date from June 24, 2028 to September 24, 2031, and (iii) reduced the interest rate margins applicable to our term loan facility from 1.00% to 0.75%, in the case of prime rate loans, and from 2.00% to 1.75%, in the case of SOFR loans, with a 0.00% SOFR floor, and removed the SOFR adjustment. The Term B-7 Loans were issued with an original issue discount of 99.5.
The Term Loan Facility is collateralized by a first lien on BCFWC’s and each guarantor’s equity interests, equipment, intellectual property, and certain favorable leases and real estate, and certain related assets and proceeds thereof (subject to certain exceptions), and a second lien on BCFWC’s and each guarantor’s other assets and proceeds thereof (subject to certain exceptions).
At May 3, 2025, our borrowing rate related to the Term Loan Facility was 6.1%.
ABL Line of Credit
BCFWC and certain of its subsidiaries and holding companies are party to a Second Amended and Restated Credit Agreement (as amended, supplemented and otherwise modified, the ABL Line of Credit) that provides for $900.0 million of revolving commitments (subject to a borrowing base limitation) maturing on December 22, 2026, and, subject to the satisfaction of certain conditions, BCFWC can increase the aggregate amount of commitments up to $1,200 million. The interest rate margin applicable under the ABL Line of Credit is 1.125% to 1.375% in the case of a daily SOFR rate or a term SOFR rate (in each case, plus a credit spread adjustment of 0.10%), and 0.125% to 0.375% in the case of a prime rate, depending on the average daily availability of the lesser of (a) the total commitments or (b) the borrowing base. The ABL Line of Credit is collateralized by a first priority lien on
29
BCFWC’s and each guarantor's inventory, receivables, bank accounts, and certain related assets and proceeds thereof (subject to certain exceptions), and a second priority lien on BCFWC’s and each guarantor's other assets and proceeds thereof (other than real estate and subject to certain exceptions).
At May 3, 2025, we had $748.2 million available under the ABL Line of Credit and borrowings of $100.0 million.
2025 Convertible Notes
On April 16, 2020, we issued the 2025 Convertible Notes. The 2025 Convertible Notes are general unsecured obligations. The 2025 Convertible Notes bear interest at a rate of 2.25% per year, payable semi-annually in cash, in arrears, on April 15 and October 15 of each year.
The 2025 Convertible Notes matured on April 15, 2025. Prior to maturity, holders of the 2025 Convertible Notes submitted conversion notices with respect to approximately $155.5 million aggregate principal amount of the 2025 Convertible Notes. On the conversion settlement date, the Company paid to the converting holders the aggregate principal amount of 2025 Convertible Notes subject to conversion, and issued and delivered to such holders 57,149 shares of common stock, in respect of the remainder of its conversion obligation in excess of such aggregate principal amount. At maturity, the Company paid in cash the principal balance of and related accrued and unpaid interest on the 2025 Convertible Notes not previously converted. There was no resulting debt extinguishment charge from this transaction.
2027 Convertible Notes
On September 12, 2023, we closed the issuance of approximately $297.1 million aggregate principal amount of our 2027 Convertible Notes pursuant to separate, privately negotiated exchange and subscription agreements with a limited number of holders of our 2025 Convertible Notes and certain investors, in each case pursuant to exemptions from registration under the Securities Act of 1933. An aggregate of up to 1,422,568 shares of common stock may be issued upon conversion of the 2027 Convertible Notes, which number is subject to adjustment up to an aggregate of 1,911,372 shares following certain corporate events that occur prior to the maturity date or if we issue a notice of redemption, and which is also subject to certain anti-dilution adjustments.
The 2027 Convertible Notes will bear interest at a rate of 1.25% per year, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2023. The 2027 Convertible Notes will mature on December 15, 2027, unless earlier converted, redeemed or repurchased.
Prior to the close of business on the business day immediately preceding September 15, 2027, the 2027 Convertible Notes will be convertible at the option of the holders only upon the occurrence of certain events and during certain periods. Thereafter, the 2027 Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The 2027 Convertible Notes have an initial conversion rate of 4.8560 shares per $1,000 principal amount of 2027 Convertible Notes (equivalent to an initial conversion price of approximately $205.93 per share of our common stock), subject to adjustment if certain events occur. The initial conversion price represents a conversion premium of approximately 32.50% over $155.42 per share, the last reported sale price of our common stock on September 7, 2023 on The New York Stock Exchange. Upon conversion, we will pay cash up to the aggregate principal amount of 2027 Convertible Notes being converted, and pay (and deliver, if applicable) cash, shares of our common stock or a combination thereof, at its election, in respect of the remainder (if any) of our conversion obligation in excess of such aggregate principal amount. We will not be able to redeem the 2027 Convertible Notes prior to December 20, 2025. On or after December 20, 2025 and prior to the 21st scheduled trading day immediately preceding December 15, 2027, we will be able to redeem for cash all or any portion of the 2027 Convertible Notes, at its option, if the last reported sale price of our common stock is equal to or greater than 130% of the conversion price for a specified period of time, at a redemption price equal to 100% of the aggregate principal amount of the 2027 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
30
If we undergo a fundamental change, subject to certain conditions, holders of the 2027 Convertible Notes may require us to repurchase for cash all or any portion of our 2027 New Convertible Notes. The fundamental change repurchase price will be 100% of the aggregate principal amount of the 2027 Convertible Notes to be repurchased plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
Hedging
We have interest rate swaps which hedge $800 million of variable rate exposure under our Term Loan Facility. The interest rate swaps are designated as cash flow hedges and expire on September 24, 2031. Refer to Note 5, “Derivative Instruments and Hedging Activities,” for further discussion regarding our derivative transactions.
Certain Information Concerning Contractual Obligations
We had $1,980.1 million of purchase commitments related to goods that were not received as of May 3, 2025, and had $4,703.8 million of future minimum lease payments under operating leases as of May 3, 2025. See Note 4, “Long Term Debt" for additional information related to our debt transactions. Other than the items disclosed here, and in the "Debt and Hedging" section above, there were no other significant changes regarding our obligations to make future payments under current contracts from those included in our Fiscal 2024 10-K.
Critical Accounting Policies and Estimates
Our Condensed Consolidated Financial Statements have been prepared in accordance with GAAP. We believe there are several accounting policies that are critical to understanding our historical and future performance as these policies affect the reported amounts of revenues and other significant areas that involve management’s judgments and estimates. The preparation of our Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities; (ii) the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements; and (iii) the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to revenue recognition, inventories, long-lived assets, intangible assets, goodwill, insurance reserves, leases and income taxes. Historical experience and various other factors that are believed to be reasonable under the circumstances form the basis for making estimates and judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods. A critical accounting estimate meets two criteria: (1) it requires assumptions about highly uncertain matters and (2) there would be a material effect on the Condensed Consolidated Financial Statements from either using a different, although reasonable, amount within the range of the estimate in the current period or from reasonably likely period-to-period changes in the estimate.
Our critical accounting policies and estimates are consistent with those disclosed in Note 1, “Summary of Significant Accounting Policies,” to the audited Consolidated Financial Statements, included in Part II, Item 8 of the Fiscal 2024 10-K.
Safe Harbor Statement
This report contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, the industry in which we operate and other matters, as well as management’s beliefs and assumptions and other statements regarding matters that are not historical facts. For example, when we use words such as “projects,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “should,” “would,” “could,” “will,” “opportunity,” “potential” or “may,” variations of such words or other words that convey uncertainty of future events or outcomes, we are making forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). Such statements may include, but are not limited to, future impacts of current macroeconomic conditions, proposed store openings and closings, proposed capital expenditures, ongoing strategic initiatives and the intended results of those initiatives, future performance or results, the effect of the adoption of recent accounting pronouncements on our condensed consolidated financial position, results of operations and cash flows, and the outcome of contingencies such as legal proceedings. Our forward-looking statements are subject to risks and uncertainties. Actual events or results may differ materially from the results anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors that could cause actual events or results to differ materially from those we expected include: general economic conditions, such as inflation, and the domestic and international political situation and the related impact on consumer confidence and spending; competitive factors, including the scale and potential consolidation of some of our competitors, rise of e-commerce spending, pricing and promotional activities of major competitors, and an increase in competition within the markets in which we compete; seasonal fluctuations in our net sales, operating income and inventory levels; the reduction in traffic to, or the closing of, the other destination
31
retailers in the shopping areas where our stores are located; our ability to identify changing consumer preferences and demand; our ability to meet evolving regulatory requirements and stakeholder expectations regarding our environmental, social or governance matters; extreme and/or unseasonable weather conditions caused by climate change or otherwise adversely impacting demand; effects of public health crises, epidemics or pandemics; our ability to sustain our growth plans or successfully implement our long-range strategic plans; our ability to execute our opportunistic buying and inventory management process; our ability to optimize our existing stores or maintain favorable lease terms; the availability, selection and purchasing of attractive brand name merchandise on favorable terms; our ability to attract, train and retain quality employees and temporary personnel in sufficient numbers; labor costs and our ability to manage a large workforce; the solvency of parties with whom we do business and their willingness to perform their obligations to us; import risks, including tax and trade policies, tariffs and government regulations; disruption in our distribution network; our ability to protect our information systems against service interruption, misappropriation of data, breaches of security, or other cyber-related attacks; risks related to the methods of payment we accept; the success of our advertising and marketing programs in generating sufficient levels of customer traffic and awareness; damage to our corporate reputation or brand; impact of potential loss of executives or other key personnel; our ability to comply with existing and changing laws, rules, regulations and local codes; lack of or insufficient insurance coverage; issues with merchandise safety and shrinkage; our ability to comply with increasingly rigorous privacy and data security regulations; impact of legal and regulatory proceedings relating to us; use of social media by us or by third parties at our direction in violation of applicable laws and regulations; our ability to generate sufficient cash to fund our operations and service our debt obligations; our ability to comply with covenants in our debt agreements; the consequences of the possible conversion of our convertible notes; our reliance on dividends, distributions and other payments, advance and transfers of funds from our subsidiaries to meet our obligations; the volatility of our stock price; the impact of the anti-takeover provisions in our governing documents; impact of potential shareholder activism and other risks discussed from time to time in our filings with the Securities and Exchange Commission (SEC), including those under the heading “Risk Factors” in the Fiscal 2024 10-K.
Many of these factors are beyond our ability to predict or control. In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. The cautionary statements referred to in this section also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law, even if experience or future changes make it clear that any projected results expressed or implied in such statements will not be realized. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements.
Recent Accounting Pronouncements
Refer to Note 1, “Summary of Significant Accounting Policies,” to our Condensed Consolidated Financial Statements in Part I, Item 1 for a discussion of recent accounting pronouncements and their impact on our Condensed Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There were no material changes to our quantitative and qualitative disclosures about market risk from those included in the Fiscal 2024 10-K.
Item 4. Controls and Procedures.
Our management team, under the supervision and with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act, as of the last day of the fiscal period covered by this report, May 3, 2025. The term disclosure controls and procedures means our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of May 3, 2025.
During the quarter ended May 3, 2025, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
32
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
In the course of business, the Company is party to class or collective actions alleging violations of federal and state wage and hour and other labor statutes, representative claims under the California Private Attorneys’ General Act and various other lawsuits and regulatory proceedings from time to time including, among others, commercial, product, employee, customer, intellectual property, privacy and other claims. Actions against us are in various procedural stages. Many of these proceedings raise factual and legal issues and are subject to uncertainties. Refer to Note 11, "Commitments and Contingencies," to our Condensed Consolidated Financial Statements for further detail.
Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the factors discussed under Item 1A, "Risk Factors" and elsewhere in the Fiscal 2024 Form 10-K. These risks and uncertainties could materially and adversely affect our business, consolidated financial condition, results of operations, or cash flows. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently do not consider material to our business. There have been no material changes in the risk factors discussed in the Fiscal 2024 Form 10-K except as set forth below.
The risk factor set forth in the Fiscal 2024 Form 10-K under the heading “A downturn in general economic conditions or consumer spending or inflationary conditions could adversely affect our business” is replaced in its entirety with the new risk factor set forth below:
A downturn in general economic conditions or consumer spending or inflationary conditions could adversely affect our business.
Consumer spending levels and shopping behaviors are affected by various economic conditions, which can affect our business or the retail industry generally as a result. These factors include, among other things, prevailing global economic conditions, inflation (including the costs of basic necessities and other goods), levels of employment, salaries and wage rates, prevailing interest rates, housing costs, energy costs, commodities pricing, income tax rates and policies, immigration policies, consumer confidence and consumer perception of economic conditions. In addition, consumer purchasing patterns may be influenced by consumers’ disposable income, credit availability and debt levels. Slowdown in the U.S. economy, an uncertain global economic outlook, interest rate volatility, or a credit crisis could adversely affect consumer spending habits, resulting in lower net sales and profits than expected on a quarterly or annual basis. Consumer confidence is also affected by the domestic and international political situation and periods of social unrest. The occurrence of terrorist acts or other hostilities in or affecting the U.S. could lead to a decrease in spending by consumers. In addition, natural disasters, industrial accidents, acts of war or global international conflicts (such as the conflict in Ukraine or the conflict in the Middle East), and public health issues (such as pandemics or epidemics) have in the past and may in the future have the effect of disrupting supplies and raising prices globally which, in turn, may have adverse effects on the world and U.S. economies and lead to a downturn in consumer confidence and spending. Certain of these risks, such as risks arising from economic volatility, have been enhanced in 2025 in light of the recent change in trade and tariff policies. General uncertainty regarding the overall future political and economic environment and adverse economic changes could reduce consumer confidence and could negatively affect our operating results. We cannot predict when macroeconomic uncertainty may arise, whether or when such circumstances may improve or worsen or what impact such circumstances could have on our business.
Recent actions by the U.S., including the imposition of significant tariffs on imports from certain countries, have heightened uncertainty in the global trade environment. These tariffs, along with potential retaliatory measures by other countries, may increase inflationary pressure and raise the costs of our merchandise.
There can be no assurance that we will be able to offset inflationary pressure and other fluctuations in costs in the future, or that consumer behavior or our business, operations, liquidity, and/or financial results, will not be negatively affected by continued inflation in the future. We may not be able to adequately increase our prices over time to offset increased costs, whether due to inflation, tariffs or otherwise. Any decreases in consumer discretionary spending could result in a decrease in store traffic and same store sales, all of which could negatively affect the Company’s business, operations, liquidity, financial results and/or stock price, particularly if consumer spending levels are depressed for a prolonged period of time.
The risk factor set forth in the Fiscal 2024 Form 10-K under the heading “Many of our vendors produce merchandise overseas, and our business is exposed to the risk of foreign and domestic operations and international tax policies and trade relations” is replaced in its entirety with the new risk factor set forth below:
Many of our vendors produce merchandise overseas, and our business is exposed to the risk of foreign and domestic operations and international tax and tariff policies and trade relations.
33
We do not own or operate any manufacturing facilities. As a result, we are dependent upon the timely receipt of quality merchandise from vendors, many of which produce merchandise overseas. Factors which affect overseas production could affect our vendors and, in turn, our ability to obtain inventory and the price levels at which they may be obtained. Factors that cause an increase in merchandise costs or a decrease in supply could lead to generally lower sales and gross margins in the retail industry.
Such factors include:
Any of the foregoing factors, or a combination thereof, could have a material adverse effect on our business.
Over the past few years, uncertainty has increased with respect to tax and trade policies, tariffs and government regulations affecting trade between the U.S. and other countries. Although we source the majority of our merchandise from third party vendors located in the U.S., the production of that merchandise occurs primarily overseas. As a result, we have been impacted by the volatility in effective tariffs, including new tariffs that have commenced in 2025, especially those impacting imports from China, retaliatory tariffs and other restrictions on trade that have resulted and may result in the future. We can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful.
In addition, other major developments in tax policy or trade relations, such as the disallowance of tax deductions for imported merchandise or the imposition of additional unilateral tariffs on imported products, could increase the cost of products purchased from suppliers in such countries or restrict the importation of products from such countries. It remains unclear how tax or trade policies, tariffs or trade relations may change in the future, and additional changes in turn could have a material adverse effect on our business, results of operations and liquidity.
34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table provides information regarding our purchases of common stock during the three fiscal months ended May 3, 2025:
Month |
|
Total Number |
|
|
Average Price |
|
|
Total Number |
|
|
Approximate |
|
||||
February 2, 2025 through March 1, 2025 |
|
|
81,813 |
|
|
$ |
252.68 |
|
|
|
81,813 |
|
|
$ |
242,488 |
|
March 2, 2025 through April 5, 2025 |
|
|
294,404 |
|
|
$ |
234.57 |
|
|
|
294,404 |
|
|
$ |
173,430 |
|
April 6, 2025 through May 3, 2025 |
|
|
69,068 |
|
|
$ |
224.18 |
|
|
|
69,068 |
|
|
$ |
157,946 |
|
Total |
|
|
445,285 |
|
|
|
|
|
|
445,285 |
|
|
|
|
||
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
On
During the three-month period ended May 3, 2025, other than the trading arrangement noted above, no director or officer of the Company
Executive Change in Control Severance Plan
On May 27, 2025, the Compensation Committee of the Board of Directors (the “Board”) of the Company adopted the Burlington Stores, Inc. Executive Change in Control Severance Plan (the “CIC Severance Plan”). Each of the executive officers of the Company, including its named executive officers, is a participant in the CIC Severance Plan.
The CIC Severance Plan provides for the following severance benefits upon a termination of employment by the Company without “cause” or by the participant for “good reason,” in either case, within the two year period following a “change in control” (each as defined in the CIC Severance Plan): (i) a lump-sum cash amount equal to two times (two and a half times for the Chief Executive Officer of the Company) the sum of the participant’s annual base salary and the participant’s target annual bonus; (ii) a cash amount equal to the participant’s prorated target bonus for the year in which the termination occurs; (iii) benefits continuation for a
35
number of years equal to the participant’s severance multiple; and (iv) outplacement services for a period of six months. As a condition to receive the severance payments and benefits, the CIC Severance Plan requires that each participant execute and not revoke a general release of claims against the Company and reaffirm compliance with any written agreement evidencing restrictive covenants in favor of the Company.
If any payments or benefits would cause a participant to become subject to the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended, then the payments and benefits under the CIC Severance Plan will be reduced to the extent required so that the participant would not be subject to the excise tax if such a reduction would put the participant in a more favorable after-tax position than if the participant were to pay the excise tax.
The description of the CIC Severance Plan set forth under this Item 5 does not purport to be complete and is qualified in its entirety by reference to the full text of the CIC Severance Plan, which is attached as Exhibit 10.2 to this Quarterly Report on Form 10-Q and incorporated by reference herein.
Item 6. Exhibits.
Exhibit |
|
Incorporated by Reference |
|
Number |
Exhibit Description |
Form |
Filing Date |
10.1+ |
First Amendment to the Burlington Stores, Inc. 2022 Omnibus Incentive Plan. |
Current Report on Form 8-K |
May 27, 2025 |
10.2†+
|
Burlington Stores, Inc. Executive Change in Control Severance Plan. |
|
|
31.1† |
|
|
|
31.2† |
|
|
|
32.1† |
|
|
|
32.2† |
|
|
|
101.INS† |
Inline XBRL Instance Document – the instance document does not appear in Interactive Data File, because its XBRL tags are embedded within the Inline XBRL document. |
|
|
101.SCH† |
Inline XBRL Taxonomy Extension Schema Document |
|
|
101.CAL† |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
101.DEF† |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
101.LAB† |
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
101.PRE† |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
104† |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
|
|
† Filed or furnished herewith.
36
+ Indicates management contract or compensatory plan or arrangement.
37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BURLINGTON STORES, INC. |
|
/s/ Michael O’Sullivan |
Michael O’Sullivan Chief Executive Officer (Principal Executive Officer) |
|
/s/ Kristin Wolfe |
Kristin Wolfe Chief Financial Officer (Principal Financial Officer) |
Date: May 29, 2025
38
Exhibit 10.2
BURLINGTON STORES, INC.
EXECUTIVE CHANGE IN CONTROL SEVERANCE PLAN
Effective May 27, 2025
PURPOSE
This Burlington Stores, Inc. Executive Change in Control Severance Plan (the “Plan”) provides severance benefits to Eligible Executives upon certain qualifying terminations of employment in connection with a Change in Control (as defined herein) of the Company. The Plan is effective May 27, 2025 (the “Effective Date”).
The Plan is intended (1) to be exempt from Code section 409A, and (2) to be a welfare plan which is unfunded and is maintained by an employer for the purpose of providing benefits for a select group of management or “highly compensated employees” within the meaning of Department of Labor Regulation section 2520.104-24. Notwithstanding any other provision of this Plan, this Plan shall be interpreted, operated and administered in a manner consistent with these intentions.
DEFINED TERMS
Whenever used in the Plan, the following terms shall have the meanings set forth below:
“Board” means the Board of Directors of the Company.
“Cause” means, with respect to an Eligible Executive’s termination of employment, the following: (a) in the case where there is no Individual Agreement in effect between the Company or any of its subsidiaries and the Eligible Executive (or where there is such Individual Agreement but it does not define “cause” (or words of like import)), termination due to an Eligible Executive’s insubordination, dishonesty, fraud, incompetence, moral turpitude, willful misconduct, refusal to perform the Eligible Executive’s duties or responsibilities for any reason other than illness or incapacity or materially unsatisfactory performance of the Eligible Executive’s duties for the Company or any of its subsidiaries, as determined by the Committee in its good faith discretion; or (b) in the case where there is an Individual Agreement in effect between the Company or any of its subsidiaries and the Eligible Executive that defines “cause” (or words of like import), “cause” as defined under such agreement.
“Change in Control” shall be deemed to occur upon the occurrence of any of the following events:
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Notwithstanding the foregoing, an event shall not be considered to be a Change in Control under the Plan unless such event is also a “change in ownership,” a “change in effective control” or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code.
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“COBRA” means the Consolidated Omnibus Budget Reconciliation Action of 1985, as amended.
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Committee” shall mean the Compensation Committee or any other committee of the Board duly authorized by the Board to administer the Plan. .
“Company” shall mean Burlington Stores, Inc.
“Compensation Committee” shall mean the Compensation Committee of the Board.
“Effective Date” shall have the meaning set forth in Article I.
“Eligible Executive” shall have the meaning set forth in Article III.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.
“Good Reason” means the occurrence of any of the following events without the written consent of the Eligible Executive: (a) in the case where there is no Individual Agreement in effect between the Company or any of its subsidiaries and the Eligible Executive (or where there is an Individual Agreement but it does not define “good reason”), (i) a material diminution of the Eligible Executive’s duties or the assignment to the Eligible Executive of duties that are inconsistent in any substantial respect with the position, authority or responsibilities associated with the Eligible Executive’s position, other than any such authorities, duties or responsibilities assigned at any time which are by their nature, or which are identified at the time of assignment, as being temporary or short-term, (ii) the Company’s or a subsidiary’s (as applicable) requiring the Eligible Executive to be based at a location which is fifty (50) or more miles from the Eligible Executive’s principal office location on the date the Eligible Executive commences employment, or (iii) a material diminution of the Eligible Executive’s annual compensation; provided, however, no condition enumerated in the preceding shall be deemed to be “Good Reason” unless within thirty (30) days of the initial existence of such condition, the Eligible Executive shall have given the Company written notice thereof specifically describing the condition giving rise to “Good Reason” and allowing the Company or its subsidiary (as applicable) a period of at least thirty (30) days from the date of receipt of the notice to remedy such condition; or (b) in the case where there is an Individual Agreement in effect between the Company or any of its subsidiaries and the Eligible Executive that defines “good reason,” “good reason” as defined under such agreement. Notwithstanding the foregoing, but subject to any more favorable standard provided under an applicable Individual Agreement, in no event will a condition give rise to “Good Reason” hereunder unless within ten (10) days after the expiration of the period provided in the Eligible Executive’s notice for the Company or subsidiary (as applicable) to remedy said condition but in no event later than one hundred and twenty (120) days after initial existence of said condition, the Eligible Executive shall have actually terminated his or her employment with the Company or subsidiary by giving written notice of resignation for failure of the Company or subsidiary (as applicable) to remedy such condition.
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“Individual Agreement” shall mean an employment agreement, consulting agreement, change in control agreement, severance agreement or similar agreement between the Company or any of its subsidiaries an Eligible Executive (excluding any equity award agreement).
“Non-Change in Control Severance Plan” shall mean, collectively, the Burlington Stores, Inc. Executive Severance Plan (Merchandising & Planning) and the Burlington Stores, Inc. Executive Severance Plan, in either case, as amended from time to time.
“Participation Agreement” shall mean the written agreement evidencing participation under this Plan between the Company and the applicable employee.
“Plan” shall mean this Burlington Stores, Inc. Executive Change in Control Severance Plan, as amended from time to time.
“Protection Period” means the twenty-four (24) months following the occurrence of a Change in Control.
“Qualifying Termination” shall mean a Termination of Employment of the Eligible Executive by the Company without Cause or the Eligible Executive’s Termination of Employment for Good Reason, in each case during the Protection Period and on or following the Effective Date of the Plan.
“Restrictive Covenant Agreement” shall mean any written agreement evidencing the restrictive covenants between the Company and the applicable employee.
“Severance Multiple” means (i) 2.5 in the case of the Company’s Chief Executive Officer and (ii) 2 in the case of any other Eligible Executive.
“Target Bonus” means an Eligible Executive’s target annual cash incentive bonus pursuant to any bonus or incentive plan maintained by the Company in respect of the fiscal year in which the Qualifying Termination occurs.
“Termination of Employment” shall mean an individual’s termination of employment with the Company and all of its subsidiaries and affiliates, and to the extent Code section 409A applies to an Eligible Executive’s severance pay benefits, as described in Section 4.2, “Termination of Employment” means a “separation from service” within the meaning of Code section 409A.
ELIGIBILITY
Each full-time employee of the Company or any of its subsidiaries who (i) is the Chief Executive Officer of the Company, or (ii) has been designated by the Board as an Executive Vice President of the Company or above and, in each case, enters into a Participation Agreement within 30 days of such agreement being delivered to employee, shall be eligible for participation in the Plan and considered an “Eligible Executive.”
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SEVERANCE BENEFITS
An Eligible Executive who (a) has a Qualifying Termination, (b) has not breached as of the date of the Eligible Executive’s Termination of Employment any covenant or restriction under a Restrictive Covenant Agreement, and (c) signs and does not revoke a separation agreement in accordance with the timeframe established by the Committee, will be entitled to receive benefits under this Article IV; provided that all such steps must be completed within 60 days of the Eligible Executive’s Termination of Employment. Such separation agreement shall contain a release of claims against the Company and its subsidiaries and a reaffirmation of such restrictive covenants under any Restrictive Covenant Agreement. Such separation agreement shall also provide that the benefits under this Article IV shall terminate upon the occurrence of a breach by the Eligible Executive of any restrictive covenant under a Restricitive Covenant Agreement. To the extent that an Eligible Executive becomes entitled to receive severance amounts or benefits under this Plan, the Eligible Executive shall not be entitled to receive severance amounts or benefits under a Non-Change in Control Severance Plan or an Individual Agreement.
Severance pay benefits shall be paid only after satisfaction of the requirements in Section 4.1. An Eligible Executive entitled to benefits under this Article IV will receive a severance pay benefit equal to the sum of Eligible Executive’s annual base salary and Target Bonus on the date of his Termination of Employment multiplied by the Eligible Executive’s Severance Multiple, and such severance pay benefit shall be paid on the sixty-first (61st) date following the date of the Termination of Employment (the “Payment Date”).
An Eligible Executive entitled to severance pay benefits under Section 4.1 will be eligible for an additional payment equal to a “pro rata” portion of the Target Bonus. For purposes of this Section 4.3, the pro rata Target Bonus shall be equal to (i) the Target Bonus multiplied by (ii) the fraction the numerator of which is the actual number of days employed during the fiscal year prior to the Eligible Executive’s Termination of Employment divided by the number of days in such fiscal year (the “Pro rata Bonus”). The Pro rata Bonus contemplated by this Section 4.3 will be paid in a lump sum on the Payment Date.
To the extent unpaid as of the Eligible Executive’s Termination of Employment, an Eligible Executive entitled to severance pay benefits under Section 4.1 will also be entitled to receive the bonus (if any) that would otherwise have been earned by the Eligible Executive under the annual incentive plan of the Company or one of its subsidiaries in which the Eligible Executive participated for the fiscal year prior to the year of his or her Termination of Employment assuming he or she had remained employed through the date bonuses are paid under such plan for that fiscal year. Such bonus (if any) will be paid in a lump sum when the annual bonuses are paid to active employees under the terms of the applicable annual incentive plan.
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If an Eligible Executive is entitled to severance pay benefits under Sections 4.2 and 4.3 and dies before receiving such amounts, the remaining portion will be paid to the Eligible Executive’s spouse, or, if the Eligible Executive is not married at the time of death, the remainder of the benefits will be paid to the Eligible Executive’s estate.
An Eligible Executive entitled to benefits under the Plan will receive continued welfare benefits (including medical, dental, and vision coverage) for the number of years equal to the Eligible Executive’s Severance Multiple. Such welfare benefits will be provided on the same terms and conditions, including contributions required of the Eligible Executive for such benefits, as those which the Eligible Executive was receiving immediately prior to his or her Termination of Employment (the “Subsidized Coverage”). Such coverage will count toward, and run concurrently with the Eligible Executive’s period of COBRA coverage. Accordingly, the Eligible Executive shall be receiving COBRA continuation coverage effectively at the active employee premium contribution rate in effect at the time of the Eligible Executive’s Termination of Employment. In addition, the Committee will provide an Eligible Executive entitled to benefits under the Plan with outplacement assistance for 6 months.
An Eligible Executive who becomes employed by another employer while receiving Subsidized Coverage, and is eligible to receive medical, dental and vision coverage from such other employer, will cease to be entitled to the continued Subsidized Coverage as provided in Section 4.5 of this Plan as of the date of his or her eligibility for benefits in such other employer’s plan. All benefits under the Plan will cease if an Eligible Executive becomes re-employed by the Company.
Notwithstanding anything in this Plan to the contrary, in the event any benefit paid to a participant under the Plan constitutes “deferred compensation” for purposes of Section 409A of the Code, all payments to such Eligible Executive shall be paid as provided in this Section 4.7. Section 409A of the Code places certain restrictions on when severance pay benefits may be distributed if the Eligible Executive is considered a “specified employee” under Section 409A of the Code (generally, “specified employees” are the 50 highest-paid U.S. employees of the Company in a given year) and the severance pay benefits are considered “deferred compensation” under Section 409A of the Code. Not all severance pay under this Plan, however, is considered deferred compensation for these purposes.
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ADMINISTRATION OF THE PLAN
The Committee shall be responsible for the operation and administration of the Plan and for carrying out the provisions hereof. The Committee shall have the full authority and discretion to make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions, including interpretations of this Plan, as may arise in connection with this Plan. Any such action taken by the Committee shall be final and conclusive on any party. To the extent the Committee has been granted discretionary authority under the Plan, the Committee’s prior exercise of such authority shall not obligate it to exercise its authority in a like fashion thereafter. The Committee shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by the Company with respect to the Plan. The Committee may, from time to time, employ agents and delegate to such agents, including employees of the Company, such administrative or other duties as it sees fit.
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If the claimant fails to file a request for review within 60 days of the denial notification, the claim will be deemed abandoned and the claimant precluded from reasserting it. If the claimant does file a request for review, his request must include a description of the issues and evidence he deems relevant. Failure to raise issues or present evidence on review will preclude those issues or evidence from being presented in any subsequent proceeding or review of the claim.
A decision will be rendered no more than 60 days after the Committee’s receipt of the request for review, except that such period may be extended for an additional 60 days if the Committee determines that special circumstances (such as for a hearing) require such extension. If an extension of time is required, written notice of the extension will be furnished to the claimant before the end of the initial 60-day period.
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To the extent not covered by insurance, the Company shall indemnify the Committee, each employee, officer, director, and agent of the Company, and all persons formerly serving in such capacities, against any and all liabilities or expenses, including all legal fees relating thereto, arising in connection with the exercise of their duties and responsibilities with respect to the Plan; provided, however, that the Company shall not indemnify any person for liabilities or expenses due to that person’s own gross negligence or willful misconduct.
TERMINATION AND AMENDMENT OF PLAN
The Board or the Compensation Committee may terminate the Plan at any time, without prior notice; provided, however, in the event of a Change in Control, neither the Company nor any successor pursuant to Section 6.3, shall have the right to terminate the Plan during the two-year period following such Change in Control. Upon termination of the Plan, except with respect to benefits due resulting from a Termination of Employment prior to such Plan termination, all rights to benefits hereunder, if any, shall cease. Any separation agreement executed by an Eligible Executive under Section 4.1 shall survive the Plan’s termination.
The severance benefits provided for in the Plan are not vested benefits. Accordingly, the Company reserves the right in its sole and absolute discretion, to amend or modify the Plan at any time, in whole or in part, including any or all of the provisions of the Plan, by action of its Board of Directors or the Compensation Committee, in its sole discretion, without prior notice; provided, however, in the event of a Change in Control, neither the Company nor any successor pursuant to Section 6.3, shall have the right to amend the Plan during the two-year period following such Change in Control in a manner that would impair the benefits available under the Plan as of the Change in Control.
The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform the Company’s obligations under this Plan in the same
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manner and to the same extent that the Company would be required to perform them if such succession had not taken place.
MISCELLANEOUS
The benefits provided herein shall be funded by the Company’s general assets. The Plan shall constitute an unfunded mechanism for the Company to pay Plan benefits to Eligible Executives determined to be entitled to payments hereunder. No fund or trust is created with respect to the Plan, and no Eligible Executive shall have any security or other interest in the assets of the Company.
The Plan does not constitute or imply the existence of an employment contract between the Company or any affiliate and any Eligible Executive. Employment with the Company is “at will,” unless an employment contract in fact exists.
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To the extent not governed by federal law, the Plan shall be interpreted under the laws of the State of Delaware notwithstanding any conflict of law principles. Eligible Executive agrees that any dispute, controversy or claim arising out of or related to this Plan, including the validity of this arbitration clause, or any breach of this Plan shall be submitted to and decided by binding arbitration. Arbitration shall be conducted in accordance with the American Arbitration Association’s Employment Arbitration Rules then in effect, as modified by the Company’s Early Dispute Resolution Program Rules and Procedures (STEPS) then in effect. Any arbitral award determination shall be final and binding upon the parties and may be entered as a judgment in a court of competent jurisdiction.
In the event any provision of the Plan shall be held invalid or illegal for any reason, any illegality or invalidity shall not affect the remaining parts of the Plan, but the Plan shall be construed and enforced as if the illegal or invalid provision had never been inserted.
Words in the masculine gender shall include the feminine and the singular shall include the plural, and vice versa, unless qualified by the context. Any headings used herein are included for ease of reference only, and are not to be construed so as to alter the terms hereof.
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IN WITNESS WHEREOF, Burlington Stores, Inc. has caused this Plan to be executed by its duly authorized officer this 27th day of May, 2025.
BURLINGTON STORES, INC.
By: /s/ Matt Pasch____
Name: Matt Pasch
Title: EVP and Chief Human Resources Officer
Exhibit 31.1
I, Michael O’Sullivan, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Burlington Stores, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 29, 2025 |
|
/s/ Michael O’Sullivan |
Michael O’Sullivan |
Chief Executive Officer |
(Principal Executive Officer) |
Exhibit 31.2
I, Kristin Wolfe, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Burlington Stores, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 29, 2025 |
|
/s/ Kristin Wolfe |
Kristin Wolfe |
Chief Financial Officer |
(Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Burlington Stores, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended May 3, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael O’Sullivan, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial position and results of operations of the Company.
Date: May 29, 2025 |
|
/s/ Michael O’Sullivan |
Michael O’Sullivan |
Chief Executive Officer |
(Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Burlington Stores, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended May 3, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kristin Wolfe, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial position and results of operations of the Company.
Date: May 29, 2025 |
|
/s/ Kristin Wolfe |
Kristin Wolfe |
Chief Financial Officer |
(Principal Financial Officer) |