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Burlington Stores Hits 52-Week High: What's Driving It?

Zacks Equity Research

Burlington Stores, Inc. BURL hit a 52-week high of $184.57, before closing the session a tad bit lower at $179.34 on Jul 15. Shares of this Burlington, NJ-based company have rallied approximately 12% in past three months compared with the industry’s rise of 9.6%. This Zacks Rank #3 (Hold) stock has also comfortably outperformed the Retail-Wholesale sector and the S&P 500 Index that advanced 3% each in the said time frame. With a long-term earnings growth rate of 17% and a VGM score of B, the company is positioned to attain new highs.

Factors Narrating Burlington Stores’ Growth Story

Burlington Stores has made multiple changes to its 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, the company has increased vendor counts, made technological advancements, initiated better marketing approach and focused on localized assortments over the years.

The company’s long-term strategies include enhancement of assortments with primary focus on underpenetrated categories, particularly home, beauty and gifts, in order to make business less weather sensitive. With regards to its marketing endeavors, Burlington Stores is experiencing favorable results from its multichannel engagement strategy.

Moreover, the company is gradually expanding its store fleet. Its store count has increased from 13 in 1980 to 675 in fiscal 2018. Further, it plans to open 50 net new stores in fiscal 2019. It plans to remodel 28 stores in the same time frame. It also believes that there is room to increase the store count to 1,000.

The company intends to improve operating margin and lower the gap of the same compared with its peers by augmenting sales, optimizing markdowns, effectively managing inventory and focus on SG&A expenses.

Apart from these, the company has been doing quite well on the revenue front. Its revenues have not only outpaced the estimates in 10 out of the 13 trailing quarters but have also shown constant improvement over the past few quarters. In the first quarter of fiscal 2019, the top line improved 7.3%.

For fiscal 2019, management expects total sales to increase 8.5-9.2% with comparable store sales growth anticipated to be 1.3-2.1%. The company expects second-quarter sales to increase 8-9%. Adjusted earnings are anticipated in the range of $6.93-$7.01 for fiscal 2019 and $1.11-$1.15 for second quarter.

Key Picks

Dollar General Corporation DG has a long-term earnings growth rate of 10.9% and carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ross Stores, Inc. ROST has a long-term earnings growth rate of 10.4% and a Zacks Rank #2.

The TJX Companies, Inc. TJX has a long-term earnings growth rate of 10.9% and a Zacks Rank #2.

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