Burlington Stores Inc

Previous wording

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 1,057 stores as of August 3, 2024 in 46 states, Washington D.C. and Puerto Rico. We have diversified our product categories by offering an extensive selection of in-season, fashion-focused merchandise at up to 60% off other retailers’ prices, including: women’s ready-to-wear apparel, menswear, youth apparel, baby, beauty, footwear, accessories, home, toys, gifts and coats. We sell a broad selection of desirable, first-quality, current-brand, labeled merchandise acquired directly from nationally-recognized manufacturers and other suppliers.

Current wording

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 1,103 stores as of November 2, 2024 in 46 states, Washington D.C. and Puerto Rico. We have diversified our product categories by offering an extensive selection of in-season, fashion-focused merchandise at up to 60% off other retailers’ prices, including: women’s ready-to-wear apparel, menswear, youth apparel, baby, beauty, footwear, accessories, home, toys, gifts and coats. We sell a broad selection of desirable, first-quality, current-brand, labeled merchandise acquired directly from nationally-recognized manufacturers and other suppliers.

Previous wording

Fiscal 2024 is defined as the 52-week year ended February 1, 2025. Fiscal 2023 is defined as the 53-week year ending February 3, 2024. The first and second quarters of Fiscal 2024 and Fiscal 2023 each consist of 13 weeks.

Current wording

Fiscal 2024 is defined as the 52-week year ended February 1, 2025. Fiscal 2023 is defined as the 53-week year ending February 3, 2024. The first, second, and third quarters of Fiscal 2024 and Fiscal 2023 each consist of 13 weeks.

Previous wording

During the six month period ended August 3, 2024, we opened 76 new stores, inclusive of 15 relocations, and permanently closed 11 stores, exclusive of the aforementioned relocations, bringing our store count as of August 3, 2024 to 1,057 stores.

Current wording

During the nine month period ended November 2, 2024, we opened 139 new stores, inclusive of 30 relocations, and permanently closed 13 stores, exclusive of the aforementioned relocations, bringing our store count as of November 2, 2024 to 1,103 stores.

Previous wording

Optimizing the Supply Chain. We believe that our transportation initiatives will lead to lower freight costs compared to recent levels, and that our efficiency and labor productivity initiatives will result in lower supply chain costs over the next several years. We also believe there are longer-term supply chain opportunities through investments in automation.

Current wording

Optimizing the Supply Chain. Our transportation initiatives have led to lower freight costs compared to recent levels, and we believe our efficiency and labor productivity initiatives will continue to result in lower supply chain costs over the next several years. We also believe there are longer-term supply chain opportunities through investments in automation.

Previous wording

A broad, protracted slowdown or downturn in the U.S. economy, an extended period of high unemployment or inflation rates, an uncertain domestic or global economic outlook or a financial crisis could adversely affect consumer spending habits resulting in lower net sales and profits than expected on a quarterly or annual basis. Conversely, if inflation continues to decline, it could benefit our core customers who have been impacted by the higher cost of living since early 2022, and if economic growth slows, it could cause moderate and higher-income shoppers to become more value conscious. Both 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 in areas including, but not limited to, taxes and healthcare. Ongoing international trade and tariff negotiations could have a direct impact on our income and an indirect impact on consumer prices. 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 Hamas-Israel war), 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.

Current wording

A broad, protracted slowdown or downturn in the U.S. economy, an extended period of high unemployment or inflation rates, an uncertain domestic or global economic outlook or a financial crisis could adversely affect consumer spending habits resulting in lower net sales and profits than expected on a quarterly or annual basis. Conversely, if inflation continues to decline, it could benefit our core customers who have been impacted by the higher cost of living since early 2022, and if economic growth slows, it could cause moderate and higher-income shoppers to become more value conscious. Both 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 in areas including, but not limited to, trade and tariffs, taxes and healthcare. In addition, trade and tariff regulations could have an indirect impact on consumer prices. 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 Hamas-Israel war), 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.

Previous wording

Net income. We earned net income of $73.8 million during the three month period ended August 3, 2024 compared with net income of $30.9 million during the three month period ended July 29, 2023. We earned net income of $152.3 million during the six month period ended August 3, 2024 compared with a net income of $63.6 million during the six month period ended July 29, 2023. This increase was primarily driven by higher sales, as well as increased gross margin rate and leverage on selling, general and administrative expenses. Refer to the section below entitled “Results of Operations” for further explanation.

Current wording

Net income. We earned net income of $90.6 million during the three month period ended November 2, 2024 compared with net income of $48.6 million during the three month period ended October 28, 2023. We earned net income of $242.9 million during the nine month period ended November 2, 2024 compared with a net income of $112.2 million during the nine month period ended October 28, 2023. This increase was primarily driven by higher sales, as well as increased gross margin rate. Refer to the section below entitled “Results of Operations” for further explanation.

Previous wording

During the three and six months ended August 3, 2024, Adjusted Net Income increased $38.6 million to $77.5 million and increased $70.4 million to $164.3 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 and leverage on selling, general and administrative expenses. Refer to the section below entitled “Results of Operations” for further explanation.

Current wording

During the three and nine months ended November 2, 2024, Adjusted Net Income increased $36.1 million to $99.9 million and increased $106.5 million to $264.2 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. Refer to the section below entitled “Results of Operations” for further explanation.

Previous wording

The following table shows our reconciliation of net income to Adjusted Net Income for the three and six months ended August 3, 2024 compared with the three and six months ended July 29, 2023:

Current wording

The following table shows our reconciliation of net income to Adjusted Net Income for the three and nine months ended November 2, 2024 compared with the three and nine months ended October 28, 2023:

Previous wording

Fiscal 2023 amount relates to the partial repurchases of the 2025 Convertible Notes.

Current wording

Fiscal 2024 amount relates to the partial write-off of the original issue discount and deferred debt costs related to the September 2024 extension and upsize of the Term Loan Facility. Fiscal 2023 amount relates to the partial repurchases of the 2025 Convertible Notes.

Previous wording

Relates to the Term Loan Credit Agreement amendment in the second quarter of Fiscal 2023 changing from Adjusted LIBOR Rate to the Adjusted Term SOFR Rate.

Current wording

Fiscal 2024 amount relates to the September 2024 extension and upsizing of the Term Loan Facility in the third quarter of Fiscal 2024. Fiscal 2023 amount relates to the Term Loan Facility amendment in the second quarter of Fiscal 2023 changing from Adjusted LIBOR Rate to the Adjusted Term SOFR Rate.

Previous wording

During the three and six months ended August 3, 2024, Adjusted EBIT increased $47.5 million to $115.2 million and increased $90.1 million to $244.6 million, respectively, compared to the same periods in the prior year. During the three and six months ended August 3, 2024, Adjusted EBITDA increased $61.0 million and $115.1 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 and leverage on selling, general and administrative expenses. Refer to the section below entitled “Results of Operations” for further explanation.

Current wording

During the three and nine months ended November 2, 2024, Adjusted EBIT increased $41.8 million to $141.3 million and increased $132.0 million to $385.9 million, respectively, compared to the same periods in the prior year. During the three and nine months ended November 2, 2024, Adjusted EBITDA increased $53.2 million to $228.8 million and increased $168.3 million to $642.0 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. Refer to the section below entitled “Results of Operations” for further explanation.

Previous wording

The following table shows our reconciliation of net income to Adjusted EBIT and Adjusted EBITDA for the three and six months ended August 3, 2024 compared with the three and six months ended July 29, 2023:

Current wording

The following table shows our reconciliation of net income to Adjusted EBIT and Adjusted EBITDA for the three and nine months ended November 2, 2024 compared with the three and nine months ended October 28, 2023:

Previous wording

Relates to the Term Loan Credit Agreement amendment in the second quarter of Fiscal 2023 changing from Adjusted LIBOR Rate to the Adjusted Term SOFR Rate.

Current wording

Fiscal 2024 amount relates to the September 2024 extension and upsizing of the Term Loan Facility in the third quarter of Fiscal 2024. Fiscal 2023 amount relates to the Term Loan Facility amendment in the second quarter of Fiscal 2023 changing from Adjusted LIBOR Rate to the Adjusted Term SOFR Rate.

Previous wording

We define comparable store sales as merchandise sales of those stores commencing on the first day of the fiscal month one year after the end of their grand opening activities, which normally conclude within the first two months of operations. If a store is closed for seven or more days during a month, our policy is to remove that store from our calculation of comparable store sales for any such month, as well as during the month(s) of their grand re-opening activities. To account for the shift in weeks from the 53rd week of Fiscal 2023, comparable store sales for the second quarter and first half of Fiscal 2024 are comparing the 13 weeks and 26 weeks ended August 3, 2024, respectively, to the 13 and 26 weeks ended August 5, 2023, respectively. The change in our comparable store sales was as follows:

Current wording

We define comparable store sales as merchandise sales of those stores commencing on the first day of the fiscal month one year after the end of their grand opening activities, which normally conclude within the first two months of operations. If a store is closed for seven or more days during a month, our policy is to remove that store from our calculation of comparable store sales for any such month, as well as during the month(s) of their grand re-opening activities. To account for the shift in weeks from the 53rd week of Fiscal 2023, comparable store sales for three month period ended November 2, 2024 and the nine month period ended November 2, 2024 are comparing the 13 and 39 weeks ended November 2, 2024, to the 13 and 39 weeks ended November 4, 2023, respectively. The change in our comparable store sales was as follows:

Previous wording

Gross margin as a percentage of net sales increased to 42.8% during the three month period ended August 3, 2024, compared with 41.7% during three month period ended July 29, 2023, driven primarily by decreased markdowns and decreased freight costs.

Current wording

Gross margin as a percentage of net sales increased to 43.9% during the three month period ended November 2, 2024, compared with 43.2% during three month period ended October 28, 2023, driven primarily by lower markdowns and higher markups, as well as improved freight expense. Gross margin as a percentage of net sales increased to 43.4% during the nine months ended November 2, 2024, compared with 42.4% during the nine months ended October 28, 2023, driven primarily by lower markdowns, as well as decreased freight costs and higher markups.

Previous wording

Product sourcing costs, which are included in selling, general and administrative expenses, decreased approximately 60 basis points as a percentage of net sales during the three month period ended August 3, 2024, compared with the three month period ended July 29, 2023, primarily driven by supply chain efficiency initiatives. Product sourcing costs decreased approximately 80 basis points as a percentage of net sales during the six months ended August 3, 2024, compared with the six months ended July 29, 2023, primarily driven by supply chain efficiency initiatives.

Current wording

Product sourcing costs, which are included in selling, general and administrative expenses, decreased approximately 50 basis points as a percentage of net sales during the three month period ended November 2, 2024, compared with the three month period ended October 28, 2023, primarily driven by supply chain efficiency initiatives. Product sourcing costs decreased approximately 70 basis points as a percentage of net sales during the nine months ended November 2, 2024, compared with the nine months ended October 28, 2023, primarily driven by supply chain efficiency initiatives. Product sourcing costs include the costs of processing goods through our supply chain and buying costs.

Previous wording

Inventory. Inventory at August 3, 2024 increased to $1,222.7 million compared with $1,161.5 million at July 29, 2023. The increase was attributable primarily to 118 net new stores opened since the end of the second quarter of Fiscal 2023 and an increase in comparable store inventory, partially offset by a decrease in reserve inventory.

Current wording

Inventory. Inventory at November 2, 2024 increased to $1,440.7 million compared with $1,329.1 million at October 28, 2023. The increase was attributable primarily to 126 net new stores opened since the end of the third quarter of Fiscal 2023 and an increase in reserve inventory, partially offset by a decrease in comparable store inventory.

Previous wording

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, including restricted cash and cash equivalents, decreased $265.4 million during the six months ended August 3, 2024, compared with a decrease of $358.2 million during the six months ended July 29, 2023. Refer to the section below entitled “Liquidity and Capital Resources” for further explanation.

Current wording

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 $67.6 million during the nine months ended November 2, 2024, compared with a decrease of $263.3 million during the nine months ended October 28, 2023. Refer to the section below entitled “Liquidity and Capital Resources” for further explanation.

Previous wording

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 3, 2024 and the three and six months ended July 29, 2023.

Current wording

The following table sets forth certain items in the Condensed Consolidated Statements of Income as a percentage of net sales for the three and nine months ended November 2, 2024 and the three and nine months ended October 28, 2023.

Previous wording

Net sales improved approximately $290.7 million, or 13.4%, to $2,461.2 million during the second quarter of Fiscal 2024, primarily driven by an increase of 5% in comparable stores sales during the second quarter of Fiscal 2024, as well as the net sales of 118 net new stores since the end of the second quarter of Fiscal 2023.

Current wording

Net sales improved approximately $241.5 million, or 10.6%, to $2,526.2 million during the third quarter of Fiscal 2024, primarily driven by the net sales of 126 net new stores since the end of the third quarter of Fiscal 2023, as well as an increase of 1% in comparable stores sales during the third quarter of Fiscal 2024.

Previous wording

Cost of sales as a percentage of net sales decreased to 57.2% during the second quarter of Fiscal 2024, compared to 58.3% during the second quarter of Fiscal 2023. This decrease was primarily driven by decreased markdowns and decreased freight costs. On a dollar basis, cost of sales increased $141.9 million, or 11.2%, primarily driven by our overall increase in sales.

Current wording

Cost of sales as a percentage of net sales decreased to 56.1% during the third quarter of Fiscal 2024, compared to 56.8% during the third quarter of Fiscal 2023. This decrease was primarily driven by improved markdowns, freight expense, and initial markups. On a dollar basis, cost of sales increased $120.3 million, or 9.3%, primarily driven by our overall increase in sales.

Previous wording

During Fiscal 2023, we acquired 64 store leases directly from Bed, Bath & Beyond. We started paying rent immediately upon acquisition for all of the stores. We opened 32 of these stores during Fiscal 2023, 20 during the first quarter of Fiscal 2024, 11 during the second quarter of Fiscal 2024, and the remaining store is planned to open during the third quarter of Fiscal 2024. This transaction resulted in $3.3 million and $2.6 million of selling, general and administrative expenses during the second quarter of Fiscal 2024 and the second quarter of Fiscal 2023, respectively.

Current wording

During Fiscal 2023, we acquired 64 store leases directly from Bed, Bath & Beyond. We started paying rent immediately upon acquisition for all of the stores. We opened 32 of these stores during Fiscal 2023, 20 during the first quarter of Fiscal 2024, 11 during the second quarter of Fiscal 2024, and the remaining store during the third quarter of Fiscal 2024. This transaction resulted in $9.6 million of selling, general and administrative expenses during the third quarter of Fiscal 2023. There were no incremental costs related to acquired Bed, Bath & Beyond leases during the third quarter of Fiscal 2024.

Previous wording

Depreciation and amortization expense amounted to $86.7 million during the second quarter of Fiscal 2024 compared with $73.1 million during the second quarter of Fiscal 2023. The increase in depreciation and amortization expense was primarily driven by capital expenditures related to new and non-comparable stores, as well as our supply chain.

Current wording

Depreciation and amortization expense amounted to $87.5 million during the third quarter of Fiscal 2024 compared with $76.1 million during the third quarter of Fiscal 2023. The increase in depreciation and amortization expense was primarily driven by capital expenditures related to new and non-comparable stores, as well as our supply chain initiatives.

Previous wording

There were no impairment charges on long-lived assets during the second quarter of Fiscal 2024. Impairment charges on long-lived assets were $4.7 million during the second quarter of Fiscal 2023, related to unrecoverable fixed assets at eight underperforming stores and unrecoverable lease assets at one of those stores.

Current wording

Impairment charges on long-lived assets were $3.0 million during the third quarter of Fiscal 2024, primarily related to two stores relocated and closed before the end of the respective lease-end dates. Impairment charges on long-lived assets were $0.8 million during the third quarter of Fiscal 2023, related to unrecoverable fixed assets at eight underperforming stores.

Previous wording

There were no debt extinguishment charges during the first half of Fiscal 2024. During the first half of Fiscal 2023, we entered into separate, privately negotiated exchange agreements with certain holders of the Convertible Notes. Under the terms of the exchange agreements, the holders exchanged $110.3 million in aggregate principal amount of Convertible Notes held by them for $133.3 million in cash. These exchanges resulted in aggregate pre-tax debt extinguishment charges of $24.6 million.

Current wording

During the third quarter of Fiscal 2024, debt extinguishment charges amounted to $1.4 million related to the partial write-off of the original issue discount and deferred debt costs, as a result of the September 2024 upsize and extension of our Term Loan Facility. During the third quarter of Fiscal 2023, we entered into separate, privately negotiated exchange agreements with certain holders of the 2025 Convertible Notes. Under the terms of the exchange agreements, the holders exchanged $241.2 million in aggregate principal amount of 2025 Convertible Notes held by them for $255.0 million in aggregate principal amount of 1.25% Convertible Senior Notes due 2027 (2027 Convertible Notes). These exchanges resulted in aggregate pre-tax debt extinguishment charges of $13.6 million.

Previous wording

Interest expense improved $3.0 million during the second quarter of Fiscal 2024 to $16.6 million, compared to the same period in the prior year. This improvement was primarily driven by a reduction in interest expense related to accumulated other comprehensive income on our previous interest rate swap, which was fully amortized as of the end of Fiscal 2023. Additionally, we had a lower average balance of 2025 Convertible Notes, and a lower interest rate on the 2027 Convertible Notes compared to the 2025 Convertible Notes that were extinguished, partially offset by a higher interest rate on the unhedged portion of the term loan.

Current wording

Interest expense improved $1.9 million during the third quarter of Fiscal 2024 to $17.8 million, compared to the same period in the prior year. This improvement was primarily driven by a reduction in interest expense related to accumulated other comprehensive income on our previous interest rate swap, which was fully amortized as of the end of Fiscal 2023. Additionally, we had a lower interest rate on the 2027 Convertible Notes compared to the 2025 Convertible Notes that were extinguished, partially offset by a higher average balance of the Term Loan Facility due to the September 2024 extension and upsize of the Term Loan Facility during Q3 2024.

Previous wording

The average interest rate on the Term Loan Facility was 7.4% and 7.1% for the second quarter of Fiscal 2024 and the second quarter of Fiscal 2023, respectively. The average balance on the Term Loan Facility, excluding the original issue discount, was $934.0 million and $943.8 million for the second quarter of Fiscal 2024 and the second quarter of Fiscal 2023, respectively.

Current wording

The average interest rate on the Term Loan Facility was 7.0% and 7.4% for the third quarter of Fiscal 2024 and the third quarter of Fiscal 2023, respectively. The average balance on the Term Loan Facility, excluding the original issue discount, was $1,068.6 million and $941.4 million for the third quarter of Fiscal 2024 and the third quarter of Fiscal 2023, respectively.

Previous wording

Income tax expense was $25.9 million during the second quarter of Fiscal 2024 compared with income tax expense of $11.1 million during the second quarter of Fiscal 2023. The effective tax rate for the second quarter of Fiscal 2024 was 26.0% compared with 26.4% during the second quarter of Fiscal 2023. The increase in income tax expense is due to higher pre-tax income. The decrease in tax rate is due to less tax expense from stock-based compensation.

Current wording

Income tax expense was $27.4 million during the third quarter of Fiscal 2024 compared with income tax expense of $18.3 million during the third quarter of Fiscal 2023. The effective tax rate for the third quarter of Fiscal 2024 was 23.2% compared with 27.4% during the third quarter of Fiscal 2023. The increase in income tax expense is due to higher pre-tax income. The higher tax rate in the prior period is primarily attributable to the disallowance of certain debt extinguishment costs related to the partial repurchase of the 2025 Convertible Notes and higher tax expense from stock-based compensation.

Previous wording

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 2024 resulted in an annual effective income tax rate of approximately 26% (before discrete items) as our best estimate.

Current wording

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 third quarter of Fiscal 2024 resulted in an annual effective income tax rate of approximately 26% (before discrete items) as our best estimate.

Previous wording

We earned net income of $73.8 million for the second quarter of Fiscal 2024 compared with $30.9 million for the second quarter of Fiscal 2023. This increase was primarily driven by higher sales, as well as increased gross margin rate and leverage on selling, general and administrative expenses. Net income included $2.5 million and $1.9 million of expense, net of income taxes, for the second quarter of Fiscal 2024 and the second quarter of Fiscal 2023, respectively, related to recently acquired leases from Bed Bath & Beyond.

Current wording

We earned net income of $90.6 million for the third quarter of Fiscal 2024 compared with $48.6 million for the third quarter of Fiscal 2023. This increase was primarily driven by higher sales, as well as increased gross margin rate. Net income included $7.0 million of expense, net of income taxes, for the third quarter of Fiscal 2023 related to the leases acquired from Bed Bath & Beyond.

Previous wording

Net sales improved approximately $515.3 million, or 12.0%, to $4,818.5 million during the first half of Fiscal 2024, primarily driven by an increase of 3% in comparable stores sales during the first half of Fiscal 2024, as well as the net sales of 118 net new stores since the end of the second quarter of Fiscal 2023.

Current wording

Net sales improved approximately $756.8 million, or 11.5%, to $7,344.7 million during the nine month period ended November 2, 2024, primarily driven by the net sales of 126 net new stores opened since the end of the third quarter of Fiscal 2023, as well as an increase of 2% in comparable stores sales during the nine month period ended November 2, 2024.

Previous wording

Cost of sales as a percentage of net sales decreased to 56.8% during the first half of Fiscal 2024, compared to 58.0% during the first half of Fiscal 2023. This decrease was primarily driven by decreased markdowns and decreased freight costs. On a dollar basis, cost of sales increased $241.0 million, or 9.6%, primarily driven by our overall increase in sales.

Current wording

Cost of sales as a percentage of net sales decreased to 56.6% during the nine month period ended November 2, 2024, compared to 57.6% during the nine month period ended October 28, 2023. This decrease was primarily driven by decreased markdowns, as well as lower freight costs and higher initial markups. On a dollar basis, cost of sales increased $361.3 million, or 9.5%, primarily driven by our overall increase in sales.

Previous wording

Selling, general and administrative expenses as a percentage of net sales decreased to 35.1% during the second quarter of Fiscal 2024, compared to 35.7% during the second quarter of Fiscal 2023. The decrease was primarily driven by an improvement in product sourcing costs, resulting from supply chain efficiency initiatives, as well as an improvement in occupancy costs and corporate costs, partially offset by investments in store payroll costs. On a dollar basis, selling, general and administrative expenses increased by $88.7 million, or 11.4%, to $864.0 million during the second quarter of Fiscal 2024. The increase was primarily driven by our 118 net new stores opened since the end of the second quarter of Fiscal 2023.

Current wording

Selling, general and administrative expenses as a percentage of net sales decreased to 35.2% during the nine month period ended November 2, 2024, compared to 35.8% during the nine month period ended October 28, 2023. The decrease was primarily driven by an improvement in product sourcing costs, resulting from supply chain efficiency initiatives, partially offset by investments in store payroll costs. On a dollar basis, selling, general and administrative expenses increased by $224.6 million, or 9.5%, to $2,582.3 million during the nine month period ended November 2, 2024. The increase was primarily driven by our 126 net new stores opened since the end of the third quarter of Fiscal 2023.

Previous wording

Our acquisition of the Bed, Bath & Beyond store leases resulted in $9.4 million and $2.6 million of selling, general and administrative expenses during the first half of Fiscal 2024 and the first half of Fiscal 2023, respectively.

Current wording

Our acquisition of the Bed, Bath & Beyond store leases resulted in $9.4 million and $12.3 million of selling, general and administrative expenses during the nine month period ended November 2, 2024 and the nine month period ended October 28, 2023, respectively.

Previous wording

Depreciation and amortization expense amounted to $168.6 million during the first half of Fiscal 2024 compared with $143.7 million during the first half of Fiscal 2023. The increase in depreciation and amortization expense was primarily driven by capital expenditures related to new and non-comparable stores, as well as our supply chain.

Current wording

Depreciation and amortization expense amounted to $256.1 million during the nine month period ended November 2, 2024 compared with $219.7 million during the nine month period ended October 28, 2023. The increase in depreciation and amortization expense was primarily driven by capital expenditures related to new and non-comparable stores, as well as our supply chain initiatives.

Previous wording

Impairment charges on long-lived assets were $8.2 million during the first half of Fiscal 2024, related to one owned store selling below carrying value in a sale-leaseback transaction. Impairment charges on long-lived assets were $5.6 million during the first half of Fiscal 2023, related to unrecoverable fixed assets at ten underperforming stores and unrecoverable lease assets at three of those stores

Current wording

Impairment charges on long-lived assets were $11.3 million during the nine month period ended November 2, 2024, related to one owned store selling below carrying value in a sale-leaseback transaction and two stores relocating and planned to close before the end of the respective lease-end dates. Impairment charges on long-lived assets were $6.4 million during the nine month period ended October 28, 2023, related to unrecoverable fixed assets at 11 underperforming stores and unrecoverable lease assets at three of those stores.

Previous wording

Interest expense improved $5.7 million during the first half of Fiscal 2024 to $33.2 million, compared to the same period in the prior year. This improvement was primarily driven by a reduction in interest expense related to accumulated other comprehensive income on our previous interest rate swap, which was fully amortized as of the end of Fiscal 2023. Additionally, we had a lower average balance of 2025 Convertible Notes, and a lower interest rate on the 2027 Convertible Notes compared to the 2025 Convertible Notes that were extinguished, partially offset by a higher interest rate on the unhedged portion of the term loan.

Current wording

Interest expense improved $7.6 million during the nine month period ended November 2, 2024 to $51.0 million, compared to the same period in the prior year. This improvement was primarily driven by a reduction in interest expense related to accumulated other comprehensive income on our previous interest rate swap, which was fully amortized as of the end of Fiscal 2023. Additionally, we had a lower average balance of 2025 Convertible Notes, and a lower interest rate on the 2027 Convertible Notes compared to the 2025 Convertible Notes that were extinguished, partially offset by a higher average balance due to the September 2024 extension and upsize of the Term Loan Facility during Q3 2024, as well as a higher interest rate on the unhedged portion of the Term Loan Facility.

Previous wording

The average interest rate on the Term Loan Facility was 7.4% and 6.9% for the first half of Fiscal 2024 and the first half of Fiscal 2023, respectively. The average balance on the Term Loan Facility, excluding the original issue discount, was $935.3 million and $945.0 million for the first half of Fiscal 2024 and the first half of Fiscal 2023, respectively.

Current wording

The average interest rate on the Term Loan Facility was 7.3% and 7.1% for the nine month period ended November 2, 2024 and the nine month period ended October 28, 2023, respectively. The average balance on the Term Loan Facility, excluding the original issue discount, was $979.7 million and $943.8 million for the nine month period ended November 2, 2024 and the nine month period ended October 28, 2023, respectively.

Previous wording

At the end of each interim period we are required to determine the best estimate of our annual effective tax rate and then apply that rate in providing for income taxes on a current year-to-date (interim period) basis. Use of this methodology during the first half of Fiscal 2024 resulted in an annual effective income tax rate of approximately 26% (before discrete items) as our best estimate.

Current wording

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 nine month period ended November 2, 2024 resulted in an annual effective income tax rate of approximately 26% (before discrete items) as our best estimate.

Previous wording

We earned net income of $152.3 million for the first half of Fiscal 2024 compared with $63.6 million for the first half of Fiscal 2023. This increase was primarily driven by higher sales, as well as increased gross margin rate and leverage on selling, general and administrative expenses. Net income included $6.8 million and $1.9 million of expense, net of income taxes, for the first half of Fiscal 2024 and the first half of Fiscal 2023, respectively, related to recently acquired leases from Bed Bath & Beyond.

Current wording

We earned net income of $242.9 million for the nine month period ended November 2, 2024 compared with $112.2 million for the nine month period ended October 28, 2023. This increase was primarily driven by higher sales, as well as increased gross margin rate. Net income included $6.8 million and $9.1 million of expense, net of income taxes, for the nine month period ended November 2, 2024 and the nine month period ended October 28, 2023, respectively, related to the leases acquired from Bed Bath & Beyond.