Burlington Yet To Capitalize On Off-Price Tailwinds, Analysts Say

Shares of Burlington Stores Inc BURL opened nearly 3% higher on Friday after the company issued an upbeat second-quarter earnings report.

Here's what you need to know about the print and what prominent retail analysts think about the stock.

By The Numbers: The New Jersey-based retailer issued earnings of 60 cents per share, ahead of the 43 cent estimate, on revenues of $2.175 billion, slightly above the $2.17 billion Street estimates.

The company lowered its full-year guidance, adjusting its EPS to a range of $5.60 to $5.90, from its prior forecast of $5.50 to $6.00.

Here’s what Wall Street analysts are saying:

The TAG Analyst: Telsey Advisory Group maintained an Outperform rating on the stock, with a price target of $225.

Telsey's sentiments stemmed from Burlington’s performance over the quarter, characterized by a topline growth and an improved gross margin. Telsey noted the added expense due to Burlington’s purchase of 62 Bed Bath & Beyond leases but saw the move as a strategic investment towards future expansion and growth.

Telsey cautioned as it revised Burlington's estimates for the year. Telsey updated its projected sales figures, and its full-year 2023 EPS forecast is now pegged at $5.65, down from an earlier prediction of $6.

The Morgan Stanley Analyst: Alex Stratton reiterated an Overweight rating with a $233 price target.

Stratton said that, unlike its peers, Burlington hadn’t fully capitalized on the off-price tailwinds. Morgan Stanley believed market dynamics would soon swing in Burlington’s favor, particularly when considering potential advantages in 2024 such as the acquisition of Bed Bath & Beyond stores and freight benefits.

The William Blair Analyst: Dylan Carden set an Outperform rating on the stock and did not give a price target.

Carden, agreeing with Morgan Stanley, noted Burlington’s subdued performance compared to its off-price counterparts, especially Ross Stores Inc ROST. The analyst saw a brighter quarter ahead, supported by promising exit trends from the last quarter.

Currently, Burlington shares are trading at about 22 times William Blair’s revised 2024 EPS estimate. But they’ve also highlighted the potential risk of performance deceleration.

For additional perspective, Zack's Investment Research Senior Stock Analyst Tracey Ryniec’s insights on consumer behavior offer valuable context.

Ryniec said on Benzigna's PreMarket Prep on Friday that consumer behavior is becoming increasingly complex and varies across different demographic segments. Luxury retailers are seeing an upward trajectory, but mid-tier and low-end retail segments are beginning to feel strain. Consumers are getting selective, Ryniec said, prioritizing some spending sectors over others.

For instance, beauty continues to hold its ground, while apparel might face cutbacks soon. External factors, such as inflationary pressures and impending resumptions of student loan payments, are also influencing consumers’ discretionary spending.

Ryniec noted heavyweights like Walmart Inc WMT are maintaining momentum, while others such as Macy’s Inc M, are lagging.

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