Burlington's Superior Growth Profile Should Help The Stock Outperform

Daniel Hofkin of William Blair initiated coverage of Burlington Stores Inc BURL on Wednesday with an Outperform rating, given the off-price retailer's superior growth profile versus its peers such as TJX Companies Inc TJX.

Hofkin is bullish on the off-price retail segment's continuing growth and compelling value proposition, constantly changing assortment offering, strong access to branded products and the ongoing woes being felt by traditional full-priced department and specialty stores.

Burlington Versus Peers

Among the off-price group, Burlington boasts a better growth profile. The company is less penetrated in terms of its retail store base (592 versus TJX's 2,221) and has substantial opportunities to improve its sales productivity (retail sales/square foot of $126 versus TJX's $332) and operating margins which are already showing signs of improvement but are still below peer retailers.

Hofkin also argued Burlington holds an advantage over its peers in areas such as dress clothing (suits, separate slacks, jackets and dress shirts) as well as in the ladies' career category, children's dresses and suits, juvenile furniture and baby depot.

Burlington also faces substantial opportunity to increase its home decor business, where sales penetration is notably below its competitors, Hofkin said. 

Finally, the analyst is modeling Burlington to achieve annual earnings per share growth in the mid-teens, driven by 3 to 4 percent comp-store sales growth. The number puts Hofkin's estimates ahead of the company's own 2-to-3 percent longer-term guidance.

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