Michael O’Sullivan expects discounts to be widespread in the second half of the year, so lower prices will help struggling customers and protect market share, he told analysts Thursday.

Rather than holding onto tariff refunds to beef up margins and profits, Burlington plans to put the full amount it received in Q2— some $55 million — toward lower prices.

“No. 1, it feels like the right thing to do for our customers,” CEO Michael O’Sullivan told analysts Thursday. “Over the last few years, many households, especially moderate- to lower-income families, have struggled with the higher cost of living — higher prices on essentials like groceries, rent, gas prices, etc. So our goal is to use the tariff refunds to give our customers a break.”

The move reflects a concern that the financial squeeze from rising prices is lingering well past expectations from earlier this year, when fuel price spikes seemed temporary, he said.

O’Sullivan downplayed the impact of this decision on margins. With tariff refunds factored in, Q2 gross margin expanded by 250 basis points to 46.2%. Without that $55 million, merchandise margin expanded by 70 basis points, while freight expense increased by 10 basis points as a percentage of net sales. Net income doubled, reaching $184 million; excluding a $41 million after-tax benefit of tariff refunds, net income was $151 million.

Burlington’s refund is smaller than those going to other retailers because the company avoided buying inventory in highly-levied categories, which hurt sales a year ago but protected profits, according to O’Sullivan.

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