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Here's Why Burlington Stores (BURL) Rallies Ahead of Industry

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·3 min read
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Burlington Stores, Inc. BURL is a promising stock for your portfolio, thanks to the successful execution of its Burlington 2.0 strategy and strong growth prospects. The company has also been progressing well on its store-expansion efforts for a while now. Benefiting from such tailwinds, this presently Zacks Rank #1 (Strong Buy) stock has surged 64.2%, surpassing the industry’s 38.3% rally over the course of a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Detailing Growth Efforts

Burlington Stores focuses on three aspects including marketing, merchandising and store prototype through its 2.0 strategy. Under the marketing aspect, it looks to communicate a stronger and more direct off-price value message and deliver the communication in a more cost-effective manner. This marketing program is expected to leverage the company’s wide reach and expenditure in the upcoming years.

Management expects to invest in the merchandising capabilities to better execute the off-price model and boost overall growth. Burlington Stores is focused on store expansion to drive its top line. It had earlier raised its long-term store target to 2,000 stores from 1,000, given the smaller store format enabled by the 2.0 strategy. The company is mainly focusing on the latest store prototype. It expects to open 43 net stores during the second half of fiscal 2021.

Via its 2.0 initiative, the company is focused on offering great customer value by effectively managing liquidity, boosting supply chain, chasing sales, buying opportunistically and making the store model flexible. In fact, the successful execution of its Burlington 2.0 initiative primarily aided the company’s first-quarter fiscal 2021 results.

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We note that the apparel retailer made multiple alterations to its business model to adapt to the ongoing changes in the industry. Over the years, the company increased vendor counts, made technological advancements, initiated a better marketing approach and focused on localized assortments.

More Strengths

Burlington Stores’ comparable-store sales (comps) were impressive during the first quarter of fiscal 2021. The metric grew 20% from the level registered in the first quarter of fiscal 2019. Gains from stimulus checks, rapid pace of vaccination, pent-up consumer demand and a solid execution fueled comps. The company experienced broad-based strength with respect to category and regional performance. All its key merchandise categories were robust.

Management had raised internal baseline comp sales guidance to a positive 10% for the fiscal second quarter. It further stated that if the comp trend during the fiscal second quarter surpasses 10%, then it will have the ability to pursue a higher sales trend. Growth in new store and non-comp sales along with the comp baseline assumption of 7% will boost nearly 20% sales growth for fiscal 2021.

The confidence in the stock is backed by higher revisions of the company’s earnings estimates. The Zacks Consensus Estimate for earnings currently stands at $8.69 for fiscal 2021 and $10.21 for fiscal 2022, which increased 1.8% and 1.1%, respectively, in the past 30 days. The consensus mark of $1.30 for fiscal second-quarter earnings moved 2.4% north in the same time frame.

More Key Picks in Retail

Abercrombie & Fitch ANF has a long-term earnings growth rate of 18% and a Zacks Rank #1, currently.

L Brands LB, presently a Zacks #1 Ranked stock, has a long-term earnings growth rate of 13%.

Dollar General DG has a long-term earnings growth rate of 11.3% and a Zacks Rank #2 (Buy) at present.

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Dollar General Corporation (DG) : Free Stock Analysis Report

Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report

L Brands, Inc. (LB) : Free Stock Analysis Report

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

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