122017AB2

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 January 31, 2026 (Fiscal 2025 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 of high-quality, branded merchandise at everyday low prices. 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 1,287 stores as of August 1, 2026 in 47 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 2026 is defined as the 52-week year ending January 30, 2027. Fiscal 2025 is defined as the 52-week year ended January 31, 2026. The second quarters of Fiscal 2026 and Fiscal 2025 each consist of 13 weeks. Store Openings, Closings, and Relocations During the six month period ended August 1, 2026, we opened 91 new stores, inclusive of 12 relocations, and permanently closed four stores, exclusive of the aforementioned relocations, bringing our store count as of August 1, 2026 to 1,287 stores. Ongoing Initiatives for Fiscal 2026 We continue to focus on several ongoing strategic initiatives aimed at operating with flexibility, responsiveness, and efficiency in everything we do, while delivering great value to our customers through continued improvement in the execution of our off-price model. These initiatives are outlined below. Merchandising Our merchandising strategy is centered on delivering compelling value while remaining responsive to evolving customer preferences. Key initiatives include: •focusing on fashion, quality, brand, and price to inform our buying decisions and provide customers with outstanding value on their purchases; •delivering remarkable value every day with speed and agility through a culture of customer focus and continuous learning and innovation; •enabling buyers to spend more time in the market and take data-driven actions informed by current trends and opportunities; •following the off-price principles of opportunistic buying and in-season purchasing to more effectively chase the sales trend; •building capabilities to localize the assortment by region and store; and •continuing to grow our merchandising talent base. 21 Stores We remain focused on delivering a neat, clean, easy-to-shop, organized, and consistent shopping experience for our customers while maintaining disciplined cost and inventory controls. Key initiatives include: •redesigning our stores with new interior layouts, signage and fixtures to better highlight our selection of trend-right, branded merchandise, and create an inviting environment for customers that accentuates the thrill of the treasure hunt; •reducing shortage by identifying risks and implementing innovative physical security solutions and technologies; and •getting fresh receipts out to the sales floor rapidly and efficiently. Real Estate We continue to selectively expand our store footprint in attractive locations to support long-term growth. Key initiatives include: •opening at least 100 net new stores per year and striving to exceed that, which we believe will allow us to operate 2,000 stores over the long-term; •prioritizing 25,000 square foot stores located in busy, convenient strip malls; and •downsizing and relocating select existing stores to incorporate our new store designs and reduce occupancy costs. Supply Chain We continue to invest in supply chain capabilities to support growth and improve operational efficiency. Key initiatives include: •driving cost savings through speed, flexibility, and efficiency in distribution and transportation; and •expanding and modernizing our supply chain network with flexible and efficient distribution centers purpose-built to execute our off-price business model. Marketing Our marketing efforts are focused on building a strong and renewed reputation with consumers. Key initiatives include: •communicating a strong value message to new and existing shoppers; and •investing in advertising that drives traffic to our stores. 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 2025 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 could 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 and food costs, energy and fuel 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. 22 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 declines, it could benefit our core customers who have been impacted by higher cost of living, 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 $184.3 million during the three month period ended August 1, 2026 compared with net income of $94.2 million during the three month period ended August 2, 2025. We earned net income of $299.0 million during the six month period ended August 1, 2026 compared with a net income of $195.0 million during the six month period ended August 2, 2025. These increases were primarily driven by higher sales, as well as increased gross margin rate, including a $55.5 million benefit from tariff refunds. 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. 23 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 and inducement charges; (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. 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 and inducement charges; (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 and inducement charges; (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: •net favorable lease costs; •costs related to debt amendments and inducement charges; •impairment charges on long-lived assets; •amounts charged for certain litigation matters; and •other unusual, non-recurring or extraordinary expenses, losses, charges or gains. During the three and six months ended August 1, 2026, Adjusted Net Income increased $87.5 million to $189.3 million and increased $113.8 million to $318.2 million, respectively, compared to the same period in the prior year. These increases were primarily driven by higher sales, as well as increased gross margin rate, including a $55.5 million benefit from tariff refunds. 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 and six months ended August 1, 2026 compared with the three and six months ended August 2, 2025: (unaudited) (in thousands) Three Months Ended Six Months Ended August 1, August 2, August 1, August 2, 2026 2025 2026 2025 Net income $ 184,304 $ 94,185 $ 299,048 $ 195,018 Net favorable lease costs (a) 2,047 1,932 3,849 4,070 Costs related to debt amendments and inducement charges (b) — — 15,315 112 Impairment charges - long-lived assets 3,577 1,580 4,385 2,095 Litigation matters (c) — 6,750 750 6,334 Tax effect (d) (655 ) (2,690 ) (5,179 ) (3,290 ) Adjusted Net Income $ 189,273 $ 101,757 $ 318,168 $ 204,339 24 (a)Net favorable lease costs represent the non-cash expense associated with favorable and unfavorable leases that were recorded as a result of purchase accounting related to the April 13, 2006 Bain Capital acquisition of Burlington Coat Factory Warehouse Corporation (the Merger Transaction). These expenses are recorded in the line item “Selling, general and administrative expenses” in our Condensed Consolidated Statements of Income. (b)Fiscal 2026 amount represents an inducement charge related to the Company's exchange of certain of the 2027 Convertible Notes during the first quarter of Fiscal 2026. Fiscal 2025 amount relates to the settlement of the 2025 Convertible Notes during the first quarter of Fiscal 2025. (c)Relates to the final settlements and amounts charged for certain litigation matters. (d)Tax effect is calculated based on the effective tax rates (before discrete items) for the respective periods, adjusted for the tax effect for the impact of the reconciling items listed in the table above. 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: •net interest expense; •net favorable lease costs; •costs related to debt amendments and inducement charges; •impairment charges on long-lived assets; •amounts charged for certain litigation matters; •income tax expense; and •other unusual, non-recurring or extraordinary expenses, losses, charges or gains. 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 and six months ended August 1, 2026, Adjusted EBIT increased $110.4 million to $261.3 million and increased $135.7 million to $432.9 million, respectively, compared to the same periods in the prior year. During the three and six months ended August 1, 2026, Adjusted EBITDA increased $129.6 million to $375.3 million and increased $167.8 million to $651.6 million, respectively, compared to the same periods in the prior year. These increases were primarily driven by higher sales, as well as increased gross margin rate, including a $55.5 million benefit of tariff refunds. 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 and six months ended August 1, 2026 compared with the three and six months ended August 2, 2025: (unaudited) (in thousands) Three Months Ended Six Months Ended August 1, August 2, August 1, August 2, 2026 2025 2026 2025 Reconciliation of net income to Adjusted EBIT and Adjusted EBITDA Net income $ 184,304 $ 94,185 $ 299,048 $ 195,018 Interest expense 19,659 17,427 36,154 33,237 Interest income (6,140 ) (4,124 ) (12,301 ) (8,835 ) Net favorable lease costs (a) 2,047 1,932 3,849 4,070 Costs related to debt amendments and inducement charges (b) — — 15,315 112 Impairment charges - long-lived assets 3,577 1,580 4,385 2,095 Litigation matters (c) — 6,750 750 6,334 Income tax expense 57,813 33,139 85,738 65,178 Adjusted EBIT 261,260 150,889 432,938 297,209 Depreciation and amortization 114,022 94,810 218,630 186,593 Adjusted EBITDA $ 375,282 $ 245,699 $ 651,568 $ 483,802 25 (a)Net favorable lease costs represent the non-cash expense associated with favorable and unfavorable leases that were recorded as a result of purchase accounting related to the Merger Transaction. These expenses are recorded in the line item “Selling, general and administrative expenses” in our Condensed Consolidated Statements of Income. (b)Fiscal 2026 amount represents an inducement charge related to the Company's exchange of certain of the 2027 Convertible Notes during the first quarter of Fiscal 2026. Fiscal 2025 amount relates to the settlement of the 2025 Convertible Notes during the first quarter of Fiscal 2025. (c)Relates to the final settlements and amounts charged for certain litigation matters. 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. 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 a specified period of time during a month, the store is removed 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 Six Months Ended August 1, 2026 2% 4% August 2, 2025 5% 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 46.2% during the three month period ended August 1, 2026, compared with 43.7% during the three month period ended August 2, 2025. Gross margin as a percentage of net sales increased to 45.1% during the six month period ended August 1, 2026, compared with 43.8% during the six month period ended August 2, 2025. This improvement was primarily driven by $55.5 million of tariff refunds as well as improved merchandise margin. Product sourcing costs, which are included in selling, general and administrative expenses, improved 20 and 30 basis points as a percentage of net sales during the three and six month periods ended August 1, 2026 compared with the three and six month periods ended August 2, 2025, respectively. These improvements were primarily driven by supply chain efficiency initiatives. Inventory. Inventory as of August 1, 2026 increased to $1,541.3 million compared with $1,414.8 million as of August 2, 2025. The increase was attributable primarily to an 11% increase in comparable store inventory and new store inventory at 149 net new stores opened since the end of the second quarter of Fiscal 2025, partially offset by a decrease in reserve inventory. 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 43% of total inventory at the end of the second quarter of Fiscal 2026 compared to 50% at the end of the second quarter of Fiscal 2025. 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 $528.8 million during the six months ended August 1, 2026, compared with a decrease of $247.1 million during the six months ended August 2, 2025. Refer to the section below entitled “Liquidity and Capital Resources” for further explanation. 26 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 and six months ended August 1, 2026 and the three and six months ended August 2, 2025. Percentage of Net Sales Three Months Ended Six Months Ended August 1, August 2, August 1, August 2, 2026 2025 2026 2025 Net sales 100.0 % 100.0 % 100.0 % 100.0 % Other revenue 0.1 0.1 0.1 0.2 Total revenue 100.1 100.1 100.1 100.2 Cost of sales 53.8 56.3 54.9 56.2 Selling, general and administrative expenses 34.0 35.2 34.3 35.0 Costs related to debt amendments and inducement charges — — 0.3 0.0 Depreciation and amortization 3.8 3.5 3.7 3.6 Impairment charges - long-lived assets 0.1 0.1 0.1 — Other income - net (0.1 ) (0.1 ) (0.1 ) (0.1 ) Interest income (0.2 ) (0.1 ) (0.2 ) (0.2 ) Interest expense 0.7 0.6 0.6 0.6 Total costs and expenses 92.1 95.5 93.6 95.1 Income before income tax expense 8.0 4.6 6.5 5.1 Income tax expense 1.9 1.2 1.5 1.3 Net income 6.1 % 3.4 % 5.0 % 3.8 % Three Month Period Ended August 1, 2026 Compared With the Three Month Period Ended August 2, 2025 Net sales Net sales improved $296.8 million, or 11.0%, to $2,997.8 million during the second quarter of Fiscal 2026, primarily driven by both an increase in net sales of $254.8 million from our 149 net new stores opened since the end of the second quarter of Fiscal 2025 and non-comparable stores, as well as an increase of 2%, or $42.0 million, in comparable stores sales during the six month period ended August 1, 2026. Cost of sales Cost of sales as a percentage of net sales decreased to 53.8% during the second quarter of Fiscal 2026, compared to 56.3% during the second quarter of Fiscal 2025. This improvement was driven primarily by $55.5 million of tariff refunds as well as improved merchandise margin. On a dollar basis, cost of sales increased $94.4 million, or 6.2%, primarily driven by our overall increase in sales, partially offset by tariff refunds. Selling, general and administrative expenses Selling, general and administrative expenses as a percentage of net sales decreased to 34.0% during the second quarter of Fiscal 2026, compared to 35.2% during the second quarter of Fiscal 2025. The decrease was primarily driven by improvements in occupancy, selling supplies, legal reserve, and product sourcing costs. On a dollar basis, selling, general and administrative expenses increased by $69.2 million, or 7.3%, to $1,019.2 million during the second quarter of Fiscal 2026. The increase was primarily driven by our 149 net new stores opened since the end of the second quarter of Fiscal 2025. During the second quarter of Fiscal 2026, we incurred costs related to leases acquired through bankruptcy proceedings. The acquisition of these leases resulted in $4.4 million and $10.8 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 second quarter of Fiscal 2026 and the second quarter of Fiscal 2025, respectively. 27 Depreciation and amortization Depreciation and amortization expense amounted to $114.0 million during the second quarter of Fiscal 2026 compared with $94.8 million during the second quarter of Fiscal 2025. The increase in depreciation and amortization expense was primarily driven by new and non-comparable stores, as well as capital expenditures related to investments in our supply chain infrastructure. Impairment charges – long-lived assets Impairment charges on long-lived assets were $3.6 million during the second quarter of Fiscal 2026, related to unrecoverable store assets at underperforming stores and impairment of assets held-for-sale. Impairment charges on long-lived assets were $1.6 million during the second quarter of Fiscal 2025, related to unrecoverable store assets. 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. Interest expense Interest expense increased $2.2 million during the second quarter of Fiscal 2026 to $19.7 million, compared to the same period in the prior year, which was driven by an increase in net borrowings. Income tax expense Income tax expense was $57.8 million during the second quarter of Fiscal 2026 compared with income tax expense of $33.1 million during the second quarter of Fiscal 2025. The effective tax rate for the second quarter of Fiscal 2026 was 23.9% compared with 26.0% during the second quarter of Fiscal 2025. The increase in income tax expense is due to higher pre-tax income. The lower effective tax rate is primarily driven by the purchase of federal energy tax credits. 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 second quarter of Fiscal 2026 resulted in an annual effective income tax rate of approximately 27% (before discrete items) as our best estimate. Net income We earned net income of $184.3 million for the second quarter of Fiscal 2026 compared with $94.2 million for the second quarter of Fiscal 2025. This increase was primarily driven by higher sales, as well as increased gross margin rate. Net income included $41.3 million, net of income taxes, for the second quarter of Fiscal 2026 related to tariff refunds. Net income also included $3.3 million and $8.1 million, net of income taxes, for the second quarter of Fiscal 2026 and for the second quarter of Fiscal 2025, respectively, related to the bankruptcy acquired leases. Six Month Period Ended August 1, 2026 Compared With the Six Month Period Ended August 2, 2025 Net sales Net sales improved $649.0 million, or 12.5%, to $5,850.1 million during the six month period ended August 1, 2026, primarily driven by both an increase in net sales of $451.7 million from our 149 net new stores opened since the end of the second quarter of Fiscal 2025, as well as an increase of 4%, or $197.3 million, in comparable stores sales during the six month period ended August 1, 2026. Cost of sales Cost of sales as a percentage of net sales decreased to 54.9% during the six month period ended August 1, 2026, compared to 56.2% during the six month period ended August 2, 2025. This improvement was driven primarily by $55.5 million of tariff refunds as well as improved merchandise margin. On a dollar basis, cost of sales increased $284.1 million, or 9.7%, primarily driven by our overall increase in sales. 28 Selling, general and administrative expenses Selling, general and administrative expenses as a percentage of net sales decreased to 34.3% during the six month period ended August 1, 2026, compared to 35.0% during the six month period ended August 2, 2025. The decrease was primarily driven by an improvement in occupancy costs and product sourcing costs, partially offset by an increase in incentive compensation. On a dollar basis, selling, general and administrative expenses increased by $190.6 million, or 10.5%, to $2,008.5 million during the six month period ended August 1, 2026. The increase was primarily driven by our 149 net new stores opened since the end of the second quarter of Fiscal 2025. During the six month period ended August 1, 2026 and August 2, 2025, we incurred costs related to leases acquired through bankruptcy proceedings. The acquisition of these leases resulted in $11.8 million and $16.6 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 six month period ended August 1, 2026 and August 2, 2025, respectively. Depreciation and amortization Depreciation and amortization expense amounted to $218.6 million during the six month period ended August 1, 2026 compared with $186.6 million during the six month period ended August 2, 2025. The increase in depreciation and amortization expense was primarily driven by new and non-comparable stores. Impairment charges – long-lived assets Impairment charges on long-lived assets were $4.4 million during the six month period ended August 1, 2026, related to unrecoverable store assets at underperforming stores and impairment of assets held-for-sale. Impairment charges on long-lived assets were $2.1 million during the six month period ended August 2, 2025, related to unrecoverable store assets. 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. Interest expense Interest expense increased $2.9 million during the six month period ended August 1, 2026 to $36.2 million, compared to the same period in the prior year, which was driven by an increase in net borrowings. Income tax expense Income tax expense was $85.7 million during the six month period ended August 1, 2026 compared with income tax expense of $65.2 million during the six month period ended August 2, 2025. The effective tax rate for the six month period ended August 1, 2026 was 22.3% compared with 25.0% during the six month period ended August 2, 2025. The increase in income tax expense is due to higher pre-tax income. The lower effective tax rate is mainly driven by the tax benefit from stock-based compensation and purchase of federal energy tax credits. 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 six month period ended August 1, 2026 resulted in an annual effective income tax rate of approximately 27% (before discrete items) as our best estimate. Net income We earned net income of $299.0 million for the six month period ended August 1, 2026 compared with $195.0 million for the six month period ended August 2, 2025. This increase was primarily driven by higher sales, as well as increased gross margin rate. Net income included $41.3 million, net of income taxes, for the first half of Fiscal 2026 related to tariff refunds. Net income also included $8.8 million and $12.4 million, net of income taxes, for the first half of Fiscal 2026 and for the first half of Fiscal 2025, respectively, related to the bankruptcy acquired leases. 29 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. 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 Six Month Period Ended August 1, 2026 Compared With the Six Month Period Ended August 2, 2025 We used $528.8 million of cash during the six month period ended August 1, 2026 compared with a use of $247.1 million during the six month period ended August 2, 2025. Net cash provided by operating activities amounted to $334.6 million during the six month period ended August 1, 2026, compared with $150.5 million during the six month period ended August 2, 2025. The increase in our operating cash flows was primarily driven by improved sales and gross margin, including a $55.5 million benefit of tariff refunds, partially offset by changes in working capital. Net cash used in investing activities was $537.7 million during the six month period ended August 1, 2026 compared with $581.4 million during the six month period ended August 2, 2025. This change was primarily the result of the timing of spend related to investments in our supply chain infrastructure. Net cash used in financing activities was $325.7 million during the six month period ended August 1, 2026 compared with net cash provided by financing activities of $183.8 million during the six month period ended August 2, 2025. This change was primarily driven by the term loan upsize during the second quarter of Fiscal 2025. Changes in working capital also impact our cash flows. Working capital equals current assets minus current liabilities. We had working capital at August 1, 2026 of $380.3 million compared with $480.3 million at August 2, 2025. The decrease in working capital was primarily due to increased accounts payable, decreased prepaid assets, increased current operating lease liabilities, and decreased cash, partially offset by increased inventory. We had working capital at January 31, 2026 of $522.3 million. Capital Expenditures For the six month period ended August 1, 2026, capital expenditures, net of $28.3 million of landlord allowances, amounted to $426.7 million (inclusive of accrued capital expenditures). We estimate that we will spend approximately $875 million, net of approximately $55 million of landlord allowances, in capital expenditures during Fiscal 2026, 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 $290 million to support our supply chain initiatives, with the remaining capital used to support our information technology and other business initiatives. We are in the process of selecting a site for relocation of our corporate headquarters. The timing and amount of expenditures related to this relocation are still uncertain. Thus, the above estimated capital expenditures exclude any potential costs related to the relocation that could be incurred during Fiscal 2026. 30 Share Repurchase Program On May 20, 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 20, 2027. During the six month period ended August 1, 2026, we repurchased 528,185 shares of common stock for $167.4 million under these repurchase programs. As of August 1, 2026, we had $217.6 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 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 six month period ended August 1, 2026, we opened 91 new stores, inclusive of 12 relocations, and closed four stores, exclusive of the aforementioned relocations, bringing our store count as of August 1, 2026 to 1,287 stores. Debt and Hedging As of August 1, 2026, our obligations, inclusive of original issue discount, include $1,711.7 million under our Term Loan Facility, $186.1 million of our 2027 Convertible Notes and no outstanding borrowings on our ABL Line of Credit. Our debt obligations also include $21.8 million of finance lease obligations as of August 1, 2026. 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 August 1, 2026 of $1,721.8 million maturing on September 24, 2031. On June 11, 2025, we entered into an amendment to the Term Loan Facility, which among other things, provided for $500.0 million of incremental term loans under the Term Loan Credit Agreement as additional Term B-7 Loans. The incremental term loans were issued with an original issue discount of 99.0 and are otherwise on terms identical to, and fungible with, the existing Term B-7 Loans. 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 August 1, 2026 and August 2, 2025, the interest rate related to the Term Loan Facility was 5.5% and 6.1%, respectively. ABL Line of Credit 31 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 $1,000.0 million of revolving commitments (subject to a borrowing base limitation) maturing on July 25, 2030, and, subject to the satisfaction of certain conditions, BCFWC can increase the aggregate amount of commitments up to an amount not to exceed the sum of (i) the greater of (x) $300.0 million and (y) the amount by which the Borrowing Base exceeds the aggregate Commitments, plus (iii) the amount of all permanent reductions in commitments after July 25, 2025. 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, 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 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). On July 25, 2025, we entered into an amendment to the ABL Line of Credit in order to, among other things, (i) increase the aggregate principal amount of the commitments from $900.0 million to $1,000.0 million and (ii) extend the maturity date of the commitments and loans from December 22, 2026 to July 25, 2030. On August 2, 2025, we had $945.7 million available under the ABL Line of Credit. Average borrowings during the three and six months ended August 2, 2025 amounted to $57.1 million and $40.4 million, respectively, at an average interest rate of 5.5% for both periods. On August 1, 2026, we had $942.0 million available under the ABL Line of Credit. There were no borrowings under the ABL Line of Credit during the three and six months ended August 1, 2026. 2025 Convertible Notes On April 16, 2020, we issued our 2.25% Convertible Senior Notes due 2025 (the "2025 Convertible Notes"), which matured on April 15, 2025. The 2025 Convertible Notes were general unsecured obligations of the Company and bore 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. 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, we 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, we paid in cash the principal balance 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 1.25% Convertible Senior Notes due 2027 (the "2027 Convertible Notes" and, together with the 2025 Convertible Notes, the "Convertible Notes").The 2027 Convertible Notes bear interest at a rate of 1.25% per year, payable semi-annually in arrears on June 15 and December 15 of each year. 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 for 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 our election, in respect of the remainder (if any) of our conversion obligation in excess of such aggregate principal amount. 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 our option, if the last reported sale price of our common stock is equal to or greater than 32 130% 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. 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. The effective interest rate is 1.7%. During the first quarter of Fiscal 2026, we entered into separate, privately negotiated exchange agreements with certain holders of the 2027 Convertible Notes. Under the terms of the Exchange Agreements, the holders agreed to exchange $111.0 million in aggregate principal amount of 2027 Convertible Notes held by them for a combination of an aggregate of $128.6 million in cash and 150,831 shares of our common stock. These exchange transactions closed on March 19, 2026. We evaluated the accounting for this transaction under ASC 470‑20, “Debt—Debt with Conversion and Other Options,” as amended by ASU 2024‑04, “Clarifying the Accounting for Induced Conversions of Convertible Debt Instruments,” which was effective beginning in Fiscal 2026. These exchanges resulted in an inducement charge of $14.6 million, as well as legal and other transaction related fees of $0.7 million. Hedging During the second quarter of Fiscal 2025, we entered into a $200.0 million interest rate swap agreement with a fixed interest rate of 3.76%. On the same date, we also entered into a $100.0 million interest rate swap agreement with a fixed interest rate of 3.73%. In total, we have interest rate swaps which hedge $1,100.0 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 $2,558.5 million of purchase commitments related to goods that were not received as of August 1, 2026, and had $5,124.6 million of future minimum lease payments under operating leases as of August 1, 2026. 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 2025 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 2025 10-K. 33 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 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 2025 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.