Burlington Stores (BURL): Revenue Up, Capex Surge Sends FCF Negative

Burlington Stores (BURL) posts revenue growth while free cash flow turns negative after heavy capex#

Burlington Stores reported FY2025 revenue of $10.63B, up +9.43% year-over-year, while net income rose to $503.64M (+48.29% YoY) — yet free cash flow swung to -$28.61M as capital expenditures surged to $891.98M. Those simultaneous signals — strong top-line and operating profit expansion alongside a meaningful cash outflow driven by investment spending — frame the company’s story at the start of a multiyear store expansion and refresh program under the Burlington 2.0 plan. The company reports results and guidance that hinge on timing effects from expense recognition, an elevated capex cadence tied to store growth, and a balance-sheet that is modestly leveraged after an increased long-term debt load. (Company filings and investor releases summarized below.) According to the company’s fiscal filings, these developments set the table for Burlington’s Q2 FY2025 report and the near-term cadence of profitability versus cash generation Burlington FY2025 filing and Q1 commentary Q1 FY2025 results.

Executive summary — the key data and the central tension#

Burlington’s FY2025 results present a clear two-part story. First, the company is delivering top-line growth and expanding reported margins: revenue climbed to $10.63B (+9.43% YoY) and gross profit rose to $4.61B, lifting gross margin to ~43.37%. Operating income improved to $715.01M, and net income increased to $503.64M. Second, management is investing heavily in store openings and refreshes: capital expenditures jumped to $891.98M, pushing free cash flow to -$28.61M for the year. That spending profile is consistent with Burlington 2.0’s objective of accelerating footprint growth and modernizing existing locations, but it materially reduces near-term cash flexibility.

These are the core implications. Burlington is showing it can grow sales and convert some of that flow-through into operating profit, but the company is temporarily trading reported free cash flow for infrastructure and expansion. The market will therefore need to price both the quality of the margin improvement and the timing of cash returns as store investment rolls from heavy deployment to steady-state maintenance.

Recalculating the headline metrics (methodology and reconciliations)#

To underpin the narrative, we calculate key ratios from the company’s FY2025 financial statements. Revenue growth from FY2024 to FY2025 is (10.63B / 9.72B) - 1 = +9.43%. Gross profit margin equals 4.61B / 10.63B = 43.37%. Operating margin equals 715.01M / 10.63B = 6.73%. Net margin equals 503.64M / 10.63B = 4.74%. These ratios align closely with Burlington’s reported margin series and demonstrate incremental margin recovery versus FY2023 and FY2024.

Balance-sheet and leverage calculations show the capital structure effect of Burlington’s investment push. Total debt at FY2025 year-end was $5.37B and cash and equivalents were $994.7M, yielding net debt of $4.38B (5.37B - 0.9947B). Using the company’s FY2025 EBITDA of $1.09B, the net debt / EBITDA ratio we calculate is 4.01x (4.38B / 1.09B). This figure differs from some TTM metrics reported by third-party aggregators (which show ~4.41x) because of differences in trailing-period aggregation and timing of EBITDA recognition; the FY-end calculation above uses the published FY2025 EBITDA and the reported year-end net debt.

Free cash flow is the clearest mechanical driver of the near-term cash picture. Burlington’s free cash flow moved from +$351.45M in FY2024 to -$28.61M in FY2025, a swing of -$380.06M, driven almost entirely by higher capital expenditures (from $517.28M to $891.98M, a roughly +72.4% increase). At the same time, operating cash flow remained relatively stable at $863.38M in FY2025 versus $868.74M the prior year, showing that operational cash generation did not deteriorate meaningfully even as investment accelerated.

Financial trends in context — tables of key financials#

Below are condensed, independently computed summaries of Burlington’s recent income statement and balance-sheet trends to anchor the analysis.

Sources: FY financial statements provided by company filings (fiscal year-end 2025 dataset) and investor relations FY2025 financials.

Sources: company balance-sheet line items from published filings (fiscal year-ends). Net debt is computed as total debt minus cash and equivalents.

Earnings quality and cash generation — decomposing the scorecard#

A positive element in Burlington’s FY2025 results is that operating cash flow remained steady at $863.38M, nearly flat versus FY2024’s $868.74M. That stability indicates the reported net income gain is not purely a paper profit divorced from cash generation. Depreciation and amortization rose to $347.57M, consistent with the ramp in capital spending and the growth in property and equipment on the balance sheet. The quality caveat is the negative free cash flow; management is deliberately choosing reinvestment over near-term cash return to shareholders.

The cadence of expense recognition also matters. Management has stated that a portion of Q1 FY2025’s EPS outperformance versus guidance was driven by favorable timing of expenses, and management expects a partial reversal in Q2 guidance. That timing effect implies some of the margin improvement is temporary. We calculate an implied EPS headwind of roughly $0.04–$0.06 for Q2 if adjusted operating margin reverts about 30 basis points, as management indicated in public remarks ahead of the Q2 report Q2 guidance commentary.

At the same time, Burlington has demonstrated the ability to modestly expand gross and operating margins year-over-year, with operating margin moving from 5.64% in FY2024 to 6.73% in FY2025 in our calculations. That improvement is consistent with tighter assortment, better vendor sourcing, and the benefits of scale — all articulated as priorities within the Burlington 2.0 strategic plan Burlington 2.0 Strategy Update.

Strategic initiatives: Burlington 2.0, store growth and inventory posture#

Burlington’s strategic pivot under Burlington 2.0 includes expedited store openings (management targets roughly 100 net new stores annually in FY2025–FY2026), wider store refreshes across the existing fleet, and technology/inventory investments to improve turns and omnichannel capability. The financial manifestations of that strategy appear in the increased capital expenditure line, the addition of leases acquired from Joann as an acceleration lever, and inventory actions. Total inventory rose 15% year-over-year while comparable-store inventory declined ~8% in Q1, a pattern that signals the company is building inventory for new stores while trying to maintain sell-through in existing locations Q1 FY2025 inventory release.

Quantifying ROI expectations is forward-looking and depends on multiple variables, but the empirical signposts to watch are inventory turns, comp-store sales trends, and the productivity of new stores relative to legacy locations. Management’s long-run revenue CAGR guidance (analyst-modeled at ~+8.69% future revenue CAGR in provided estimates) would need to be realized alongside margin stabilization to convert investment into durable earnings power [analyst estimates dataset]. Early payback will depend on how quickly new stores ramp to portfolio-average contribution margins and whether refreshes drive incremental comp-store productivity.

Competitive dynamics — where Burlington sits vs. TJX, Ross and the off-price sector#

The broader off-price sector remains favorable for retailers that can source differentiated product and move inventory quickly. Burlington competes primarily with TJX and Ross, both of which operate with scale advantages and deeper omnichannel footprints in some product categories. Burlington’s strategic emphasis on store growth and refreshes aims to expand its physical footprint (and therefore geographic share) while tightening inventory mix to maintain margin. Key competitive questions are whether Burlington can sustain higher gross margins through disciplined buying and whether the store roll-out will generate similar or better unit economics than peers.

Compared to TJX and Ross, Burlington’s price-to-sales and price-to-book are elevated on a PB basis (reported price-to-book ~13.09x), reflecting a combination of high profitability measures (e.g., reported ROE TTM ~42.59%) and a relatively small equity base after years of share repurchases and retained-earnings dynamics. The company’s capital allocation has prioritized buybacks (common stock repurchased $256.29M in FY2025), which reduces equity and boosts ROE but also contributes to higher leverage metrics.

Capital allocation and balance sheet discipline#

Burlington repurchased $256.29M of stock in FY2025 and recorded no dividend. Capital allocation tilted toward growth capex in FY2025, increasing maintenance and growth spending materially versus the prior year. With net debt of $4.38B and net debt / FY2025 EBITDA of ~4.01x (our FY-end calculation), leverage is elevated and requires monitoring as capex normalizes. Management’s ability to convert the current investment cycle into higher operating cash flow in subsequent years will be the decisive element for restoring a positive free cash flow profile and optionality for additional repurchases or other capital returns.

Recent earnings cadence and surprise history#

Quarterly surprise history shows management generally beating estimates in recent quarters: Q2 (May 29) reported EPS of 1.60 vs est 1.43 (+11.89% surprise), Q1 (March 6) reported 4.07 vs est 3.77 (+7.95%), and prior quarters showed smaller beats. The pattern indicates the company has been slightly outperforming consensus but has also flagged timing-related margin effects that complicate quarter-to-quarter comparability. See the company’s published supplemental disclosures and earnings-release notes for quarter-specific adjustments [earnings surprises dataset].

Risks and execution sensitivities#

Several execution and market risks could alter the trajectory implied by the FY2025 numbers. First, the heavy capex program increases absolute leverage and raises sensitivity to store productivity underperformance. If new stores open but under-deliver on sales per square foot or if comp-store lifts do not offset investment, leverage metrics could deteriorate. Second, the temporary timing benefits to margins described by management mean quarter-to-quarter comparability is noisy; investors should treat single-quarter margin beats skeptically until the company demonstrates sustained margin expansion without timing-driven distortions. Third, the off-price sector’s supply-chain and sourcing dynamics can be volatile; a sudden shift in procurement costs, freight, or vendor availability could compress gross margins.

On the other hand, the company’s strengths include historically strong gross margins for an off-price operator (gross margin ~43% in FY2025), demonstrated ability to expand operating income, and a sizable physical footprint that management is expanding purposefully.

What this means for investors#

For investors, Burlington’s FY2025 results frame a classic growth-vs.-cash tradeoff. The company is showing that revenue and reported margins can improve as Burlington 2.0 investments are deployed, but the current cycle prioritizes capex and footprint growth at the expense of near-term free cash flow. The important metrics to monitor in coming quarters are comp-store sales (to verify productivity of store refreshes), inventory turns (to ensure working capital is being managed alongside expansion), operating cash flow trends (to see whether the higher capex begins to produce incremental cash), and net debt / EBITDA (to assess leverage normalization).

If the rollout yields higher sales per store and margin retention, Burlington should be able to convert today’s negative free cash flow into sustainable positive FCF within several quarters of reaching steady-state capex. Conversely, if ramping stores underperform or inventory management slips, the company’s elevated leverage will increase the operating-risk premium investors assign to the stock.

Key takeaways — concise, data-driven#

Burlington’s FY2025 financial profile can be summarized in a few concrete points. First, revenue growth is real and meaningful: $10.63B in revenue, +9.43% YoY (FY2025). Second, operating and net margins expanded alongside that growth: operating margin ~6.73%, net margin ~4.74%. Third, investment intensity spiked: capex $891.98M, flipping free cash flow to -$28.61M from +$351.45M a year earlier. Fourth, leverage is elevated but manageable if the investment program generates expected returns: net debt $4.38B, net debt / FY2025 EBITDA ~4.01x by our calculation.

Concrete indicators to watch next#

Monitor the following metrics and disclosures in the next earnings cycle: comp-store sales vs. guidance, adjusted EBIT margin (and any timing-effect disclosures), inventory (total and comparable-store), capital expenditure cadence and expected run-rate, and operating cash flow conversion. Also watch management commentary on the productivity of Joann-lease conversions and the pacing of the 100-net-new-stores-per-year target.

Closing synthesis#

Burlington’s FY2025 results show a company investing to scale while delivering real top-line growth and margin improvement. The capex-driven free-cash-flow swing is the headline risk and the primary near-term variable for financial flexibility. The strategic bet — Burlington 2.0 — is measurable in the accounts: higher PPE, higher capex, inventory staged for expansion, and repurchases that keep ROE elevated. The quality of the trade-off will be resolved by whether new and refreshed stores deliver the expected contribution economics and whether operating-cash-flow conversion improves as the capex program matures. Investors and market participants should therefore focus on the operational metrics (turns, comps, store productivity) that connect the capital deployed today to the cash and earnings the company will produce tomorrow.

Sources and reference notes: Burlington investor releases and fiscal filings for FY2025 and interim quarters, company earnings and guidance commentary, and contemporaneous coverage of Q2 guidance and strategic updates Burlington Q2 results, Burlington Q1 results, and Reuters/CNBC previews of Q2 guidance and margin timing effects Reuters Q2 guidance, CNBC earnings preview.

No investment recommendation or price target is provided. This piece analyzes Burlington’s published financials and strategic disclosures and synthesizes the operational implications for investors based on those data.