Can Burlington Stores Replicate '17 Performance in 2018?

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In an intensely competitive retail landscape, Burlington Stores, Inc.BURL has done exceedingly well and emerged as a strong contender to be an investment choice. This is quite evident from the stock's performance in a year. In the said period, the stock has surged 34.6% compared with the industry 's gain of 7.4%.

We believe there is still momentum left in this Zacks Rank #2 (Buy) stock, which is reflected from its long-term impressive earnings growth rate of 12% and VGM Score of A. Stocks such as Big Lots, Inc. BIG , Costco Wholesale Corporation COST and Dollar General Corporation DG which belong to the same industry has witnessed a gain of 0.4%, 15.5% and 19% in a year, respectively. Let's delve deeper and find out the reason that kept Burlington Stores ahead of its peers in 2017.

Changes in Business Model Driving Growth

Burlington Stores has made multiple changes to business model to adapt to the ongoing changes in the industry. The company which started business as a coat-focused off-price retailer is now focusing on "open to buy" off-price model. The current model is helping customers to get nationally branded, fashionable, high quality as well as right priced products. Further, over the years the company has increased vendor counts, made technological advancements, initiated better marketing approach and focused on localized assortments.

In order to drive top-line growth, Burlington Stores has been focusing on store expansion. The company's store count has increased from 13 in 1980 to 592 stores in fiscal 2016. In fiscal 2014, 2015 and 2016, the company has opened 24, 28 and 30 stores, respectively. In fiscal 2017, the company stated that it plans to open 37 net new stores up from 30 net stores estimated previously. It also believes that there is room to increase the store count to 1,000.

Results Showing Constant Improvement

The company's changes to its business model are well reflected on quarterly results. In third-quarter fiscal 2017, the company's earnings not only surpassed the Zacks Consensus Estimate for 12 successive quarters but also surged 37% year over year. Moreover, we noted that the bottom line has shown constant improvement in the past several quarters. In both the second and first quarter of fiscal 2017, earnings have increased 85% year over year following an increase of 20%, 100%, 105% and 39% in the fourth, third, second and first quarters of fiscal 2016, respectively.

The company now envisions fiscal 2017 adjusted earnings in the range of $4.23-$4.27 per share compared with $3.24 reported in the prior year. For the fourth quarter, earnings are expected to come within the range of $2.02-$2.06 per share compared with $1.78 reported in the prior-year period.

Burlington Stores has been doing quite well on the revenue front. The company's revenues have not only outpaced the estimates in five of the seven trailing quarters but have also shown constant improvement in the past few quarters. In third-quarter fiscal 2017, revenues increased 7.1% following an increase of 8.6% and 5% in the second and first quarter, respectively. Meanwhile, we noted that comparable store sales have increased 4.5%, 2.1%, 4.9%, 4.7% and 1.2% in fiscal 2016, 2015, 2014, 2013 and 2012, respectively.

Margins Continues to Surge

In an era of high promotional initiatives due to stiff competition most of the retailers are struggling with dwindling margins. However, Burlington Stores has kept itself afloat amid a competitive environment. Improvement in gross margin can be attributed to the company's efforts toward managing inventory as well as effective cost management and merchandising margin. Gross margin increased 80, 30, 60 and 30 basis points (bps) to 40.8%, 40%, 39.7%, 39.1% and 38.8%, in fiscal 2016, 2015, 2014, 2013 and 2012, respectively. In the first, second and third quarter of fiscal 2017, gross margin expanded 80, 110 and 100 bps to 40.9%, 40.7% and 42.2%, respectively.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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Dollar General Corporation (DG): Free Stock Analysis Report

Costco Wholesale Corporation (COST): Free Stock Analysis Report

Big Lots, Inc. (BIG): Free Stock Analysis Report

Burlington Stores, Inc. (BURL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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