Hello, ladies and gentlemen, and welcome to the Burlington Stores Earnings Webcast. We will be starting shortly. Again, we will be starting shortly. Thank you so much. Hello, everyone. My name is Ellie. I'm going to be your operator, and welcome to the Burlington Stores Inc Second Quarter 2025 Earnings Conference and Webcast Call. Please note that this call is being recorded. After the speaker's prepared remarks, there will be a question- answer session. If you'd like to ask a question during that time, please press star followed by one on your telephone keypad. Thank you. I'd now like to hand the call over to David Glick, Group Senior Vice President, Treasurer, and Investor Relations. You may now go ahead, please. Thank you, Operator, and good morning, everyone. We appreciate everyone's participation in today's conference call to discuss Burlington fiscal 2025 Second Quarter Operating Results. Our presenters today are Michael O'Sullivan, our Chief Executive Officer, and Kristin Wolfe, our EVP and Chief Financial Officer. Before I turn the call over to Michael, I would like to inform listeners that this call may not be transcribed, recorded, or broadcast without our express permission. A replay of the call will be available until September 4th, 2025. We take no responsibility for inaccuracies that may appear in transcripts of this call by third- parties. Our remarks in the Q&A that follows are copyrighted today by Burlington Stores. Remarks made on this call concerning future expectations, events, strategies, objectives, trends, or projected financial results are subject to certain risks and uncertainties. Actual results may differ materially from those that are projected in such forward-looking statements. Such risks and uncertainties include those that are described in the company's 10-K and our other filings with the SEC, all of which are expressly incorporated herein by reference. Please note that the financial results and expectations we discussed today are on a continuing operations basis. Reconciliations of the non-GAAP measures we discussed today to the GAAP measures are included in today's press release. As a reminder, as indicated in this morning's press release, all profitability metrics discussed in this call exclude costs associated with bankruptcy-acquired leases. These pre-tax costs amounted to $11 million and $3 million, respectively, during the fiscal second quarters of 2025 and 2024, and $17 million and $9 million, respectively, for the first half of 2025 and 2024. Now, here's Michael. Thank you, David. Good morning, everyone. Thank you for joining us. I would like to cover three topics this morning. Firstly, I will briefly review our second quarter results. Then, I will discuss our third quarter and updated full-year guidance. Lastly, we believe that our exceptional performance in the second quarter can be directly attributed to Burlington 2.0 initiatives that we have pursued over the last few years. I would like to spend some time this morning providing additional color on some of these initiatives. Okay, let's talk about our second quarter results. We are pleased with our very strong sales performance in the quarter. Total sales grew 10% on top of 13% total sales growth last year. These double-digit growth rates demonstrate the power of our business to consistently take market share, even in an uncertain retail environment. In Q2, these market share gains were driven by new store openings and by very strong comparable store sales growth. Comparable store sales increased 5% on top of 5% comparable sales growth last year. The trend in Q2 started out slowly with weather in the Midwest and Northeast in May being cooler than last year, but our trend picked up in June and July as the weather normalized. We are also very pleased with our strong earnings performance in Q2. Our operating margin expanded 120 basis points versus last year. This was a very high-quality earnings beat, driven by stronger merchandise margins and expense efficiencies across the P&L. Our adjusted EPS of $1.72 was $0.42 above the high end of our guidance range. Let me move on to the outlook for the rest of the year. Despite our very strong performance in the second quarter, we remain concerned about the external outlook for the back half. We are maintaining our comparable guidance of 0%- 2% for Q3 and Q4. Let me comment on Q3 specifically. As we have discussed in the past, our strong heritage in outerwear means that we are more sensitive than most retailers to seasonal weather variations in the third quarter. If temperatures in late September through October turn out to be warmer or cooler than last year, this can have a big impact on our trend. We have terrific outerwear buys in reserve inventory, so we are well positioned to chase a stronger trend if that happens. We will manage the business cautiously and see how the trend develops. I am not planning to comment in detail on the fourth quarter at this point. We'll have more to say in November. It is worth calling out that in Q4, we will be up against 6% comp sales growth from the fourth quarter of last year. The upside in Q4 is probably limited. Moving on to earnings, we are raising our full-year guidance and passing along most of the Q2 earnings beat. We are not flowing through the entire earnings beat. This is because of incremental tariff pressure in the back half. Tariffs for most countries are higher now than when we last discussed earnings guidance on our Q1 call in May. Our updated full-year guidance assumes that we will be able to offset most, but not all, of this incremental tariff pressure. I would like to move on now and talk about the direct link that we see between our very strong Q2 sales and earnings results and the key Burlington 2.0 initiatives that we have pursued over the last few years. Many of these initiatives are in the early stages of their potential impact. We are excited because we expect this impact to grow over time and to drive our longer-term performance. I will focus on three items: Merchandising 2.0, Stores 2.0, and the impact of recently opened stores once they join the comp base. I will start with Merchandising 2.0. As you know, Merchandising 2.0 is our collective name for the new systems, processes, and tools that we have developed and rolled out to enable our buyers and planners to more effectively and rapidly respond to changes in the external environment and the sales trend. The last several months and the uncertainty created by tariffs have provided a showcase for the power of these capabilities. In the weeks leading up to the tariff announcements in early April, we began to make multiple detailed revisions to our assortment plans for Q2 and the fall season, pivoting away from categories with the greatest tariff exposure to those with less tariff impact and with stronger, more reliable supply. These forecast revisions and scenarios also involved remixing and remodeling our margin plans to find offsets to the impact of tariffs. It seems like a long time ago now, but in April and early May, the tariff on imports from China was 145%. This rate represented an effective embargo on Chinese imports, and it created an interruption, or an air pocket, if you like, to the flow of receipts across the retail industry. There are some merchandise categories, for example, decorative bedding, cookware, and toys, but there are very few alternative sources of supply outside of China. In these merchandise categories, the interruption in imports in April and May impacted inventory levels across the retail industry in the second quarter. These categories were a drag on the sales trend in our home business during the quarter. What I am really excited about is that despite this headwind, we were able to deliver 5% comp growth across the store. Our buyers and planners deserve huge credit. They did an amazing job rapidly responding and pivoting into other businesses. The key point, though, is that Merchandising 2.0 gave them the visibility and the tools to do this. Let me move on to Stores 2.0. Historically, the customer perception of Burlington was of big, old, difficult-to-shop stores, consistent with our tote factory heritage. That is not who we are anymore. Over the last few years, you have heard us talk a lot about the actions we are taking to drive incredible value. We've talked less about stores, but in parallel, we've also been working very hard to improve the shopping experience. This starts with the standards that we set for ourselves, our store managers, and our field teams. It also involves new systems, processes, tools, and reports to drive consistency and efficiency. In the past year, we have seen the impact of these programs really start to take off. Our customer service scores are running at historical all-time highs, and we have seen improvements across all major operational metrics. Our store teams have really embraced these changes, and our associate engagement levels have risen sharply. In addition, as I mentioned during our call in May, we have reimagined and redesigned our store layout, signage, and fixturing. The objective of this redesign is to make our stores feel new and more exciting, easier to shop, more fun, more off-price, and more Burlington 2.0. At this point, we have retrofitted about half of the chain to this new design. Customer feedback has been very positive, and we are seeing a nice sales lift in these stores. This lift helped drive our 5% comp growth in the second quarter. There is more to come as we retrofit the rest of the chain in 2026. Let me move on to new stores. In fact, I want to talk specifically about the impact of recently opened stores once they turn comp. Our new stores join our comp base 15 months after opening. As we've discussed in the past, we expect new stores to ramp up over time and to comp ahead of the chain for their first few years. That is indeed what is happening. When we analyze comp stores that were opened over the last several years, we see very strong comp sales growth rates, well ahead of our original expectations. Again, these recent new store cohorts helped drive our very strong 5% comp sales growth in the second quarter. This is very exciting because as we look ahead over the next few years, the mix of younger stores in our comp base is going to grow. We anticipate that the impact of this comp tailwind will increase over time. At this point, I would like to turn the call over to Kristin. Kristin. Thank you, Michael, and good morning, everyone. I plan to cover a couple of topics this morning. I will start with some additional color on our second quarter performance. Then I will share details on our updated guidance. Starting with the second quarter, total sales grew 10% while comparable store sales increased 5%, well above the high end of our guidance range. Traffic was flattest in the quarter. Our comp was driven by a higher transaction size. Our average unit retail was up mid-single digits versus last year. The gross margin rate for the second quarter was 43.7%, an increase of 90 basis points versus last year. This was driven by a 60 basis point increase in merchandise margin and a 30 basis point decrease in freight expense. On merchandise margin, the 60 basis point expansion was driven by improvement in shortage and lower markdowns, which more than offset the lower markup due to tariffs. While there was significant pressure on markup from tariffs in the quarter, we took several effective offsetting actions to reduce the impact. The net result of these actions was that our Q2 markup was only modestly lower than last year. The second quarter product sourcing costs were $209 million versus $191 million in the second quarter of 2024. Product sourcing costs were flat as a percentage of sales compared to last year. Adjusted SG&A costs in Q2 decreased 30 basis points versus last year, driven by savings initiatives primarily in stores and leverage on higher comp sales. Q2 adjusted EBIT margin was 6%, 120 basis points higher than last year, which was well above our guidance range of down 30 basis points to flat. Our adjusted earnings per share in Q2 was $1.72, which came in significantly above our guidance range. This represents a 39% increase versus the prior year. At the end of the quarter, comparable store inventories were down 8% versus the end of the second quarter of 2024. Our reserve inventory was 50% of our total inventory versus 41% of our inventory last year. In dollar terms, our reserve inventory was up 43% compared to last year, reflecting the great deals we were able to make to get ahead of tariffs. We are very pleased with the quality of the merchandise and the values and brands that we have in reserve. As Michael said earlier, we are well positioned to chase if the sales trend in Q3 turns out to be stronger than guidance. During the quarter, we raised $500 million in additional term loan debt, primarily to fund the purchase of our highly automated West Coast distribution center. Additionally, we upsized and extended our ABL facility in Q2, which is now a $1 billion line that matures in July of 2030. We ended the quarter with approximately $1.7 billion in total liquidity, which consisted of $748 million in cash and $946 million in availability on our ABL, with no outstanding borrowings at the end of the quarter on the ABL. During the quarter, we repurchased $26 million in common stock, and at the end of Q2, we had $632 million remaining on our share repurchase authorization. In the second quarter, we opened 23 net new stores, bringing our store count at the end of the quarter to 1,138 stores. This includes 30 new store openings, four relocations, and three closings. We continue to expect to open 100 net new stores in fiscal 2025. I will now move on to discuss our outlook for the full fiscal year, as well as for the third quarter and fourth quarter of fiscal 2025. Based on our strong performance in the second quarter, we are increasing our full-year fiscal 2025 guidance for comp sales, total sales, adjusted EBIT margin, and adjusted earnings per share as follows. Comparable store sales are now expected to increase 1%- 2%, with total sales to increase 7%- 8% for the full year 2025. This revised full-year guidance factors in our year-to-date comp store sales, as well as our guidance for comparable store sales to increase 0%- 2% for the balance of fiscal 2025. We now expect our full-year adjusted EBIT margins to increase by 20- 40 basis points. This is up from our most recent guidance for an increase of flat to 30 basis points. This updated margin outlook now translates to a full-year 2025 adjusted earnings per share range of $9.1- $9.59, up from our original guidance of $8.70- $9.30. For the third quarter, we expect comparable store sales growth of flat to 2% and a total sales increase of 5%- 7%. This would result in an operating margin of down 20 basis points to flat versus the third quarter of 2024. This translates to earnings per share guidance for the third quarter of $1.50- $1.60. Our third quarter guidance excludes approximately $10 million of expenses associated with bankruptcy-acquired leases. For the fourth quarter of fiscal 2025, we expect comparable store sales growth of flat to 2% and total sales to increase 7%- 9%. EBIT margins to range from a decrease of 10 basis points to an increase of 30 basis points, and adjusted earnings per share in the range of $4.30- $4.60. Our fourth quarter guidance excludes approximately $7 million of expenses associated with bankruptcy-acquired leases. I will now turn the call back to Michael. Thank you, Kristin. Before I turn the call over to the operator for your questions, I would like to emphasize three key points from this morning's discussion. Firstly, we are very pleased with our exceptional performance in Q2. These very strong results demonstrate the power of our business to profitably gain market share even in an uncertain retail environment. Secondly, based on our very strong Q2 performance, we are raising our full-year guidance. The external outlook remains uncertain, and we see risks in the back half. We are managing our business cautiously, but we are ready to chase the sales trend if it turns out to be stronger. Thirdly, we believe that our exceptional performance in Q2 can be attributed to Burlington 2.0 initiatives that we have pursued over the last few years. We are excited because the impact of these initiatives is still in the early stages, and we anticipate that it will grow over time. Now, I would like to turn the call over for your questions. Opening the floor for question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. Please limit your questions to one question and one follow-up. Your first question comes from the line of Matthew Boss of JPMorgan. Your line is now open. Thanks, and congrats on a great quarter. Thank you. Michael, on your five comp in the second quarter, which is a 10 on a two-year stack, how best to think about your back half guide, which implies a material drop-off from there? Should we think of this as your usual playbook to plan conservatively and chase, or are you seeing something that's causing you concern about sales in the back half of the year? Good morning, Matt. Thank you for the question. The direct answer to your question is this is just our standard playbook. We are planning and managing our business cautiously, and we are ready to chase a stronger trend. I should add that we are especially confident in our ability to do this right now because merchandise supply is very strong, and we also have some great deals packed away in reserve inventory. Add to that, you know, we have just demonstrated in the second quarter that we are very good at flexing up and chasing a stronger sales trend. With all that, it makes sense to stick with our standard playbook, and we are very confident in our ability to execute it. With that said, I want to be careful in answering your question. I do not want to understate the external risks. We have just reported an extraordinarily strong Q2, but as you know, in our business, you cannot just extrapolate from that. External headwinds can emerge in individual quarters to throw off the trend. As I mentioned in the remarks, the most obvious risk is weather. Until recently, coats were literally our middle name. I love this heritage when September and October are colder than last year, but not so much when they are unseasonably warm. On a multi-year basis, the weather averages out, but in an individual quarter, in an individual year, it matters. Of course, the risks in the back half are not just limited to weather. There are plenty of macroeconomic and other external variables that can have an impact on retail sales. Higher unemployment, rising inflation, changes in consumer outlook. For the back half of this year, all of those risks are real. At a high level, I would say there are many experts and analysts who are predicting that tariffs are going to have a significant and potentially negative effect on the economy. Those effects have not really happened yet, and they are highly, highly unpredictable. The good news for us is that as an off-price retailer, we do not have to take a position on these risks. We do not have to predict the future. What we have to do is manage our business to be nimble and flexible so we can react no matter what happens. That is our standard playbook. It is what our standard playbook is designed to do. At the risk of sounding like a broken record, we will manage our business cautiously and aggressively chase the trend. Great. A follow-up for Kristin to stay on guidance. It looks like you passed most of your second quarter upside through to the updated annual guide. Could you walk us through the puts and takes on your new fall guidance, impact of tariffs, offsets you have in place, and any color on the difference between the third and fourth quarter operating margin year- over- year? Good morning, Matt. It's a very good question. Let me split the answer into two parts. First, on tariffs, as Michael mentioned in the prepared remarks, we do have incremental tariff risk in the fall. Tariffs for many countries are at a higher rate now than they were when we last issued guidance back in May. Our updated guidance assumes that we will offset most of, but not all of, this additional tariff pressure. Essentially, our fall guidance reflects our best estimation of the net impacts of tariffs. Tariffs put significant pressure on markup, but we've worked very hard to identify offsetting actions. These offsets include continuously working and negotiating with our vendor partners on cost, adjusting and remixing our assortment, selectively raising retails, driving a faster inventory turn to drive lower markdowns, accelerating planned savings initiatives, and aggressively going after incremental expense savings across the P&L. On the second part of your question, I can provide some additional color on the specific quarters. For the third quarter, we are assuming gross margin rate to be lower year- over- year due to the impact of tariffs on merch margin. This should more than offset modest year-on-year favorability in freight. In product sourcing costs, we are expecting supply chain savings initiatives to drive leverage. In SG&A, we expect that our savings initiatives will enable us to show some modest leverage on the high end of our flat to 2% comp outlook. Finally, for Q4, the story line is similar, but there are a couple of line items that are more pronounced. We're expecting more pressure on merch margin from tariffs in the fourth quarter. Offsetting that pressure, we do expect supply chain savings initiatives to drive leverage in product sourcing costs and greater SG&A leverage due to savings initiatives, but also the lapping of last year's higher incentive comp accrual in the fourth quarter of 2024. Because of that, we expected EBIT expansion to be somewhat higher in Q4 relative to Q3. Question comes from the line of Ike Boruchow of Wells Fargo. Your line is now open. Hey, good morning, Michael, Kristin, David. I think this first question, a bigger picture for me, is about pricing. At an industry level, maybe Michael or Kristin, I'm curious, what have you guys seen in terms of competitors taking up AURs? What are you expecting in the back half? I guess what's the potential to raise prices in the fall as a way to offset some of this tariff pressure you're talking about? Good morning, Ike. Thank you for the question. On the first part of your question, industry-level pricing, the answer is yes, we are hearing, and in some cases, we are seeing that competitors are taking up retail prices. So far, though, I would say that those price increases have been quite selective and quite restrained. I suspect there are a few reasons for that. Part of it may just be the time lag between imports arriving in the country and those goods showing up in stores. Also, my sense is that wholesalers and retailers have been reluctant to make decisions on raising prices until they know what the final tariff rates are going to be. It does feel like there is more clarity on this now than there was a couple of months ago. It would not be surprising if retail prices were to go up across the industry in the back half of the year. Of course, we know that our customer is very, very price-sensitive. We saw what happened with their discretionary spending levels when the cost of living increased in 2022. It was not good for us. The prospect of higher inflation, especially if it spreads to non-discretionary categories like groceries, makes us very nervous, and it is another reason to be cautious on the rest of the year. I think that is a good segue to the second part of your question. How are we thinking about the potential to raise our own retails? Of course, as a business, we need to deal with economic reality. As a retailer that is focused on delivering value, we also need to tread very, very carefully. The important thing, I think, to understand is that in our business, as an off-price retailer, there is a broader competitive reference set. Our strategy is to offer significantly lower prices than traditional retailers. If those retailers raise prices, then this could provide some relief for us. It could potentially drive additional traffic to our stores, or it could take some pressure off our own retails. The answer to your question is I think we are going to have to wait and see what impact tariffs have on price levels across the retail industry, and then make a decision about our own prices. Got it. Thanks, Michael. Maybe Kristin, a follow-up. On the Q1 call in May, I think you described some expense timing shifts into Q2, but I think you guided margin flat, but you did really well. I think it was up to 120 bps. Could you walk us through the drivers of the Q2 margin, what you saw in the quarter, and basically the drivers of upside? Great. Yes. Good morning, Ike. Thanks for the question. We're really pleased with the margin performance in the quarter. The drivers of that expansion were really broad-based, and I think the team did a really nice job executing and tightly managing costs in the quarter. Let me walk through the key drivers. On the top line, the 5% comp, which was 300 basis points above the high end of the guide, helped drive a faster inventory turn, which drove lower markdowns in the quarter. Secondly, we took physical inventory in Q2, and the results were better than we had planned. This meaningfully contributed to the merch margin increase in the quarter. Lower shortage, combined with lower markdowns from faster turns, more than offset markup pressure from tariffs in the quarter to drive the 60 basis points of merch margin expansion. As I mentioned in the prepared remarks, markup was only modestly lower than last year because we took several effective actions to reduce the impact of tariffs. Additionally, in gross margin, freight levered 30 basis points. This was really due to savings initiatives and transportation, as well as operational efficiencies helped by a higher AUR. Product sourcing costs were slightly better than what we had embedded in our guidance due to savings initiatives and supply chain. Finally, SG&A. SG&A levered 30 basis points despite those Q1 expense timing shifts you referenced. The drivers of the SG&A were twofold. First, leverage on the higher comp sales, and then operational savings initiatives we put in place to offset some of the tariff pressures. Taking all these line items together drove 120 basis points of EBIT expansion in the quarter. Got it. Thanks so much. Thanks, Ike. Our next question comes from the line of Lorraine Hutchinson of Bank of America. Your line is now open. Thank you. Good morning. Michael, I'm wondering what trends you're seeing with different demographic groups. The second quarter was very strong, but is there any additional color you can share about lower-income consumers, Hispanic customers, or any other segments that stand out in the data? Sure. Good morning, Lorraine. Thank you for the question. Overall, I would describe our comp performance in Q2 as broad-based. As usual, in Q2, we monitored and analyzed the sales trend of our stores based on the demographics of their local trade area. Between the first quarter and the second quarter, we saw an improvement in trend in all demographic trade areas. Let me talk specifically about the lower-income customer. The lower-income customer, as you know, is especially important to us. When we look at stores in lower-income trade areas, they continue to perform very well, with comp sales growth just above the chain average. Lower-income stores have performed well for us for the last few years, and that strength is continuing. Let me move on to the Hispanic customer. Hispanic customer also, as you know, is very important to us. My answer here is a little more nuanced. When you look at stores in high Hispanic trade areas, to make the data meaningful, it's important to pull out Puerto Rico. Our Puerto Rico stores have been performing very, very strongly, so they kind of distort the number a little bit. It also makes sense to pull out our stores on the southern border. In contrast, those are high-volume stores, but given the issues at the border, they've been comping below the chain this year. What you're left with is still a large group of stores that are in high Hispanic trade areas, but exclude Puerto Rico and the southern border. The bottom line is, in Q2, the trend in those stores was also slightly above the chain. The data I've just described, I think, is very encouraging. I know that investors have been concerned, understandably, about lower-income shoppers and about Hispanic shoppers. Those shoppers are very important to us, and they're very sensitive to economic headwinds such as inflation. Based on our second quarter data, we are not seeing any issues at this point. Thank you. How would you characterize off-price availability overall? Do you have any concerns about merchandise availability in half? What are you seeing from the vendors in terms of tariff-related cost pressure? Does that pressure create risk to merchandise supply or to merchandise margin in the second half? Yeah, it's a good question, Lorraine. I'll start with availability, with merchandise availability. Overall, merchandise availability in the off-price channel is very strong right now across the store. As I mentioned in the prepared remarks, there were a few specific categories in home where inventory levels across the industry dipped in Q2. That was driven by tariff disruption back in April and May. The situation even in those categories has caught up and is largely back to normal now. More broadly, across the store, I would say that we are seeing plenty of merchandise. We've been able to take advantage of some great deals that we've packed away in reserve. Most of that reserve inventory, by the way, was bought at pre-tariff pricing. We're looking forward to flowing those great values to our stores in the back half. Leaving aside reserve, there's strong availability across the board. As evidence of that, actually, I would point to the fact that we were able to chase from our guidance range of 0%- 2% comp in Q2 to an actual comp of 5%. We had no problem finding great deals to fuel that trend. Let me move on to the second part of your question, the cost pressure from tariffs. I know we just crushed margin guidance and earnings expectations in Q2, but I want to emphasize that the cost pressure from tariffs is real. We were only able to drive earnings in Q2 because we rapidly and aggressively took actions to offset that cost pressure. Now, as Kristin described earlier, those offsetting actions included a number of things: working closely and negotiating with our vendor partners on cost, adjusting and remixing our assortment, selectively raising retails, driving faster turns to reduce markdowns, accelerating planned savings initiatives, and aggressively going after other expense savings across the P&L. As you can see in the numbers, that approach worked very well for us in Q2. For the back half, assuming tariffs don't increase from their current recently announced levels, we are confident that we can meet or beat our updated guidance. As Kristin said, that updated guidance builds in the additional pressure from tariffs and the impact of numerous offsetting actions and savings that we've identified for the back half. Thank you. Thank you, Lorraine. Question comes from the line of John Kernan of TD Cowen. Your line is now open. Good morning. Nice job on the quarter Thank you, John. Have a couple of questions about inventory following your comments to Lorraine's question. I think the remarks, you said that comp store inventory was down 8% at the end of the quarter, but that reserve inventory was up significantly year over year. I think it was up to 50% of total inventory. Can you provide any additional commentary on these inventory levels and the composition? Sure. Good morning, John. It's Kristin. I'll take that question. Comp store inventory was down 8% at the end of the second quarter, as we noted. I'll just provide a little more commentary on comp store inventory. Comp store inventory is what is available to sell in stores. We manage this inventory level very tightly. It's obviously important for sales and markdowns. We made the deliberate decision in the March-April timeframe to plan faster inventory turns in Q2 and for the rest of the year. This is driving lower markdowns and is helping to offset margin pressure from tariffs. This strategy worked very well in the second quarter. The most important thing about in-store inventory is not necessarily the level, it's the content. In Q2, we had the right content, and we were able to drive higher sales, faster turns, and lower markdowns. Our in-store inventory levels on a comp store basis are planned down for the rest of the year as we continue this strategy. Now, to your question about reserve, and Michael spoke to it just a few minutes ago, we approach reserve differently. We buy reserve merchandise knowing we're going to pack it away and release it at a later date. The level of reserve inventory really depends on the deals we find in the market. This year, to get ahead of tariffs, we encouraged our merchants to buy up great pre-tariff merchandise. This is what's really driven up the level of reserve inventory. We're really happy with these goods in terms of quality, values, and brands that we have in reserve. Apart from enabling great deals, reserve inventory also gives us more flexibility in the chase. We know that if we plan our business cautiously, but then the sales trend takes off, we have goods in reserve that we can flow. That's helpful. Thanks. Just a second question on the balance sheet again. David, Kristin, looks like you were busy in Q2 from a capital structure perspective. Can you walk us through the changes to the debt structure? Whether you expect any additional changes in the near and intermediate term, and how should we think about the direction of interest expense? Thank you. Sure. I'll take that one. Good morning, John. Thanks for the question. We took several steps during the quarter to strengthen our balance sheet and enhance our liquidity. First, we raised $500 million in additional term loan debt, primarily to fund the purchase of one of our most automated West Coast DC, we call it the Cactus DC, as well as to retire the 2025 converts, which matured back in April. In addition, we also extended and upsized our ABL facility in July. It's now a $1 billion line, up from $900 million, and we extended the maturity by five years out to July 2030. Given our growth, we now have the borrowing base to support a bigger line and enhance our liquidity. As a reminder, we paid down the ABL facility to zero during Q2, and there were no borrowings on the ABL facility at the end of the quarter. We don't anticipate borrowing on the ABL facility for the balance of the year. Related to the term loan, we hedged $300 million of the $500 million issued, and that's keeping our total hedge ratio around 65%. We were able to lock in rates below current SOFR. Given the level of activity in the quarter, we aren't expecting any changes in the near term and continue to expect to return excess cash to shareholders in the form of share repurchases. We did update our interest expense forecast to $50 million in the quarter. It's a little bit lower based on the decision to purchase our Cactus DC, and there was some capitalized interest and a lot of puts and takes. We can certainly take that offline in our follow-up to walk you through that. Our updated forecast is at $50 million. Understood. Thank you. Thanks, John. Excellent. Question comes from the line of Alex Straton of Morgan Stanley. Your line is now open. Perfect. Thanks so much. Congrats on a great quarter. I've got a couple, and first one for Michael. Can you maybe provide some color on the improvements that you made in store standards and conditions? I have a quick follow-up for Kristin. Good morning, Alex. Thank you. I'm glad you asked this question. I would describe the improvement in standards in our stores over the past couple of years as extraordinary. As I mentioned in the script, customer service scores are running at historical all-time highs, and we've seen significant improvements in all major operating metrics in stores. We've also seen a recent improvement in shortage, and at the same time, our productivity levels in stores have improved. In other words, we're leveraging store payroll. That combination of outcomes, higher store standards, and lower store payroll is a remarkable accomplishment. Let me explain how we've done it. It starts with leadership, and I don't mean me. I mean our Head of Stores. She's assembled a terrific team, a combination of internal promotions and external talent. Over the last couple of years, she and this team have set higher expectations for our field leaders, Store Managers, and associates. Those expectations, together with improved tools, better reporting, greater process discipline, and a much stronger sense of accountability, have driven these great results. I would also add that our Store Managers and associates have embraced these higher expectations and standards. As we've communicated and rolled out this approach, we've seen significant increases in our associate engagement scores across the chain. The final point I would like to make is that for all the progress that we've made, we know there is still a lot of opportunity. We want every store to be consistently neat, clean, and organized. We want them all to enable and bring to life the treasure hunt. That's the core vision that our Head of Stores and her leadership team are going after. We have a long way to go, but it's already clear from the data that our customers like this vision, and they appreciate the improvements that we've made. Perfect. That's great color. Maybe for Kristin, can you just provide a little bit more detail on the shortage favorability to gross margin in the quarter, and also how that dynamic may evolve into the back half? Thanks a lot. Good morning, Alex. Yeah, it's a good question. The external environment, it still is challenging, continues to be challenging. We're obviously very focused here with great leadership, as Michael just described, and we have made and will continue to make significant investments to mitigate shortage. As I mentioned earlier, we took physical inventory in the second quarter. This showed lower or better shortage performance than we had planned and better than last year, driving to merch margin favorability in the second quarter. We're obviously pleased with this result, although it is only one measurement at one point in time. For the back half, we plan to take another physical inventory in the fourth quarter to get the full-year measurement for 2025. We're hopeful that we continue to see the progress on shortage that we saw in Q2, given the high level of focus on this initiative across the organization. We plan to continue our intensified focus on reducing shortage and continue our shortage mitigation investments as well. Thanks so much. Good luck. Thanks, Alex. Question comes from the line of Brooke Roach of Goldman Sachs. Your line is now open. Good morning, and thank you for taking our question. Michael, could you provide additional color on back-to-school trends? What are you seeing in July and August so far? Good morning, Brooke. Thank you for the question. We've been very pleased with our back-to-school business this year. Early back-to-school selling in July was especially strong. Now, that momentum has moderated somewhat since then, but still, for August month to date, I would describe our sales trend for back-to-school business as solid. One other call-out: when we look at our back-to-school business on a multi-year stack basis, we're very pleased with the growth that we've seen over the last few years. That was driven by a deliberate strategy by our merchants. We know that compared to other retailers, our customers tend to have a larger family size and more kids in the household. These customers are very focused on value. They've been particularly hard hit by the higher cost of living over the last few years. Our merchants have been pursuing a deliberate strategy to increase our market share of back-to-school. I think the team has done a nice job meeting the needs of that customer by offering great value, meaning strong fashion, recognizable brands, terrific quality, and unbeatable prices. If you look at the two or three-year stack, it shows that this has worked. We've gained significant market share in back-to-school over the last few years. Great. Just a follow-up for Kristin. Can you talk a little bit about regional and category performance strengths and weaknesses that you saw in the second quarter? Thanks so much. Yes. Good morning, Brooke. In terms of regional performance, the Southeast and the Northeast were the strongest regions in the quarter. All regions comped positively. The Midwest was the weakest region in the quarter. As Michael noted in the prepared remarks, weather was a modest headwind earlier in the quarter. In terms of category performance, our strength was broad-based across the store. We saw the strongest performances in beauty, accessories, and shoes, but apparel was also strong across ladies, men's, and kids, all comping in line with the chain. In the quarter, home performance was softer for us, comping below the chain. Great. Thanks so much. Best of luck going forward. Thanks, Brooke. Question for today comes from the line of Mark Altschwager of Baird. Your line is now open. Good morning. Thank you for taking my question. Michael, a couple for you relates perhaps a bit to your commentary just a moment ago on back-to-school, but was hoping you could update us on your elevation strategy and also speak to the opportunity and trends you're seeing with younger consumers. Thank you. Good morning, Mark. Thank you for those two questions. Obviously, I'll start with an update on our elevation strategy. We continue to be very pleased by the success that we've seen in our strategy to elevate the assortment. As a reminder, we launched that strategy about a year and a half ago. The core idea was to elevate the assortment by raising the fashion content, the quality of the merchandise, and the mix of better and more recognizable brands. The objective was to trade the customer up by offering better value at higher price points, but still to do that within a good, better, best context. I think our merchants have done a terrific job delivering great value at all price points within that elevated assortment, and that's clearly resonated with the customer. You can see it in the results in our comp growth and in our stronger merchandise margins. It's benefited us both in terms of sales and profitability. I'm very excited about our assortments for the back half, especially for holiday. Our goal is to be proud of every hanger and proud of the value that we're offering on every hanger in the store. When we developed our plans for the fall, our merchants really focused on ways to further reinforce this elevation strategy. I'm going to pivot now to your second question about our opportunity and any key trends with younger customers. My answer here is going to overlap a little bit with my earlier comments on back-to-school, but let me offer a little more context and color. At Burlington, we've always had a strong position with younger customers and young families, stronger than most other retailers. Parents, younger shoppers, and young families are core and very important segments for us. When you walk into our stores, you can see it. You can see it when you look at the customers in our stores, a lot of young people, a lot of families with kids. You can also see it in the assortment. We have a stronger presentation and a greater penetration of juniors, young men's, and kids' apparel, accessories, and footwear than most of our competitors. We're doing a lot of things to attract and meet the needs of these shoppers, but they all really boil down to one word: value. Young shoppers are often financially stretched and very value-conscious. Our merchants understand value does not mean cheap. Value is much more complex and depends on a mix of fashion, quality, brand, and price. For a shopper in our juniors department, for example, the key driver of value is likely to be fashion and style. In contrast, for a young mother buying clothes for her toddler, quality or brand might be more important. I think our merchant team, especially in these businesses, is very skilled at building the assortment with the right mix of those value drivers. That, more than anything, explains our growing strength with these younger shoppers. Thank you. Thank you. That concludes our question and answer session. I'd now like to hand the call back to Mr. Michael O'Sullivan for final remarks. Thank you, Ellie. Let me close by thanking everyone on this call for your interest in Burlington Stores. We look forward to talking to you again in November to discuss our third quarter 2025 results. Thank you for your time today. Thank you for attending today's call. You may now disconnect. Goodbye.