Burlington Stores' (BURL) 2.0 & Store-Growth Efforts Look Good
Burlington Stores, Inc. BURL is placed well for growth, thanks to the successful execution of its Burlington 2.0 strategy and strong fundamentals. The main objective of the 2.0 initiative is to significantly improve the execution of the off-price model. The company has also been progressing well in its store expansion efforts.
Buoyed by such endeavors, the apparel retailer’s shares have increased 37.9% in the past three months, surpassing the industry’s 18.3% growth. A Value Score of B for this current Zacks Rank #3 (Hold) company further speaks volumes.
Deeper Analysis
In an era of a competitive retail landscape, Burlington Stores has made multiple changes to its business model to adapt to the ongoing changes in the industry. The 2.0 initiative is focused on three aspects, which include marketing, merchandising and store prototype. Under the marketing aspect, Burlington Stores looks to communicate a stronger and more direct off-price value message and deliver the communication more cost-effectively. This marketing program is expected to leverage the company’s wide reach.
Concerning merchandising, management expects investing in merchandising capabilities to better execute the off-price model and boost overall growth. The 2.0 initiative further focuses on offering great customer value by effectively managing liquidity, chasing sales, buying opportunistically, lean inventories, getting fast fresh receipts to the sales floor and making the store model flexible.
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In addition, Burlington Stores is focused on store expansion to drive top-line growth. The company’s store-related efforts, including smaller store prototypes, have been on track. Over time, this smaller prototype is likely to represent the majority of the company’s new store openings. With this smaller prototype, the company aims to operate with leaner in-store inventory levels.
Markedly, the company’s store count has increased from 13 in 1980 to 927 stores in fiscal 2022. During the third quarter of fiscal 2023, Burlington Stores inaugurated 38 stores, taking the total store base to 977. For fiscal 2023, management intends to open 80 net new stores and projects capital expenditures, net of landlord allowances, of $560 million.
Management believes that there is a significant opportunity to expand the store count and is optimistic about the smaller store prototype. Apart from adding stores, it has an opportunity to relocate and downsize most of its older and less-productive outlets. It has a goal to open more than 100 net stores a year. Further, the company has bought 62 store leases directly from Bed Bath & Beyond. Such stores are expected to largely benefit the company in 2024.
Overall, management remains optimistic about the long term on greater consumer focus on value, lower levels of promotional activity, strong availability of great off-price merchandise, taking the right actions and a better expense environment.
As a result, analysts seem optimistic about the stock. The Zacks Consensus Estimate for fiscal 2023 sales and earnings per share (EPS) is currently pegged at $9.61 billion and $5.73, respectively. These estimates show an increase of 10.4% and 34.5%, respectively, year over year.
Key Picks
We have highlighted three better-ranked stocks, namely Abercrombie & Fitch ANF, Gap GPS and American Eagle Outfitters AEO.
Abercrombie & Fitch, a leading casual apparel retailer, 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 Abercrombie & Fitch’s current financial-year sales suggests growth of 13.3% from the year-ago reported figure. ANF delivered an earnings surprise of 713% in the last reported quarter.
Gap, a fashion retailer of apparel and accessories, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 137.9%, on average.
The Zacks Consensus Estimate for Gap’s current financial-year EPS suggests growth of 387.5%, from the year-ago reported figure.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently has a Zacks Rank #2 (Buy). AEO delivered an earnings surprise of 23% in each of the trailing four quarters.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year sales and EPS suggests growth of 4% and 39.2%, respectively, from the year-ago reported figures.
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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report
The Gap, Inc. (GPS) : Free Stock Analysis Report
Burlington Stores, Inc. (BURL) : Free Stock Analysis Report
