Burlington Stores, Inc. BURL has seen an impressive surge in its stock price over the past year, which climbed 102.7% and surpassed the Zacks Retail-Discount Stores industry’s 45.3% growth. This is owing to the company’s effective inventory management and focus on full-price selling, which has also helped it to outperform the broader Retail-Wholesale sector and the S&P 500 index’s respective growth of 30.3% and 31.2% in the same period.
This impressive uptick has left many investors wondering if they missed out on a lucrative opportunity or if there is still potential for growth. Closing at $271.98 on Monday, BURL stock is inching toward its 52-week high of $282.49 attained on Aug. 29, 2024, thus reflecting strong investor confidence and market optimism about the retailer's future.
Technical indicators are supportive of Burlington’s strong performance. The stock is trading above both its 50-day and 200-day moving averages, indicating robust upward momentum and price stability. This technical strength reflects positive market perception and confidence in the company’s financial health and prospects.
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From a valuation perspective, the stock presents an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-sales ratio of 1.52, which is below the five-year industry average of 1.75, the stock offers compelling value for investors seeking exposure to the sector. It currently has a Value Score of A, further validating its appeal.
Burlington Thrives on Strategic Expansion and Efficiency
Burlington is a leading off-price retailer in the United States, focusing on delivering high-quality merchandise at value prices. The company’s growth strategy emphasizes aggressive store expansion, operational efficiency and effective inventory management, which are crucial for enhancing its market presence. Ongoing investments in supply-chain improvements further support its long-term growth.
In the second quarter of fiscal 2024, Burlington achieved a notable 13.4% increase in total sales, surpassing the year-ago quarter’s 9% growth. This was driven by the addition of 36 net new stores, which raised the total store count to 1,057. It plans to open another 100 new stores and relocate 30 more by the end of fiscal 2024.
The company reported robust 5% growth in comparable store sales (comp sales), exceeding its guided range of flat to 2%. This growth is attributed to a strong focus on full-price selling, which rose 7% year over year, and reduced markdowns in the fiscal second quarter. Despite challenges like new store cannibalization, effective merchandising strategies and improved customer engagement helped maintain sales momentum.
Also, Burlington’s operating margins increased 160 basis points, driven by rising gross margins and supply-chain efficiencies. The gross margin rose 110 basis points to 42.8%, supported by faster inventory turnover and fewer markdowns.
Burlington’s Encouraging Outlook Ahead
Burlington’s revised projections for fiscal 2024 indicate a more positive outlook. Total sales are expected to rise in the band of 9-10%, slightly up from the previous estimated range of 8-10%. Comp sales are projected to grow in the band of 2-3%, an improvement from the earlier forecasted range of 0-2%. The adjusted EBIT margin is anticipated to increase in the range of 50-70 basis points compared with the prior estimate of 40-60 basis points. Adjusted earnings per share (EPS) are now expected to be between $7.66 and $7.96, up from the previous anticipated range of $7.35- $7.75.
For the fiscal third quarter, total sales are anticipated to increase in the band of 10-12%, with comp sales expected to rise 0-2%. The adjusted EBIT margin is projected to improve 60-80 basis points. For the fourth quarter, comp sales may remain flat or grow up to 2% while total sales are forecasted to increase in the band of 5-7%.
Estimate Revisions Favor BURL Stock
The Zacks Consensus Estimate for EPS has been revised upward, reflecting the positive sentiment around Burlington. Over the past 30 days, analysts have increased their estimates for the current year by 21 cents to $7.91 per share and the next year by 25 cents to $9.55. These estimates indicate year-over-year growth of 30.5% and 20.7%, respectively.
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Conclusion
Investors should consider BURL stock due to its robust growth strategy focused on operational efficiency and effective inventory management. The company’s emphasis on full-price selling has boosted sales and profit margins while ongoing store expansions and supply-chain investments signal strong long-term growth potential. Positive technical indicators reflect price stability and upward momentum. Furthermore, Burlington's attractive valuation relative to industry benchmarks, combined with favorable earnings revisions and strong analyst sentiment, makes it a compelling investment opportunity in the retail sector. It currently has a Zacks Rank #2 (Buy).
Other Stocks to Consider
Other top-ranked stocks are Nordstrom Inc. JWN, Abercrombie & Fitch Co. ANF and Crocs, Inc. CROX.
Nordstrom is a leading fashion specialty retailer in the United States. The company offers an extensive selection of both branded and private-label merchandise. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Nordstrom’s fiscal 2024 sales indicates growth of 0.6% from the fiscal 2023 figure. JWN has a negative trailing four-quarter average earnings surprise of 17.8%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present. ANF delivered a 16.8% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 63.4% and 13.1%, respectively, from the fiscal 2024 reported levels. ANF has a trailing four-quarter average earnings surprise of 28%.
Crocs offers a wide variety of footwear products, including sandals, wedges, flips and slides that cater to people of all ages. It currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Crocs’ 2024 earnings and sales indicates growth of 6.8% and 4%, respectively, from 2023’s reported figures. CROX has a trailing four-quarter average earnings surprise of 14.9%.
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