Burlington Stock Up 28% in 3 Months: How to Play Ahead?

Burlington Stores, Inc. BURL has exhibited a decent run on the bourses in the past three months, owing to its Burlington 2.0 initiative, which focuses on an off-price model with enhanced marketing, better merchandising and efficient inventory management. The company is opening smaller, cost-effective stores and acquiring Bed Bath & Beyond leases for expansion. In the said period, the BURL stock has risen 27.6%, outpacing the S&P 500's growth of 7.4%.

On Jul 11, 2024, Burlington's stock reached a 52-week high of $252.73 before closing at $252.65, reflecting strong investor confidence and market optimism about the retailer's prospects. Additionally, trading above its 50-day and 200-day moving averages indicates robust upward momentum.

From a valuation perspective, the stock presents an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-earnings ratio of 30.18, below the five-year high of 34.31 and the industry's average of 31.36, the stock offers compelling value for investors seeking exposure to the sector. Additionally, the stock currently has a Value Score of B, validating its appeal.

Analyzing Growth Endeavors

BURL is undergoing a significant transformation through its Burlington 2.0 initiative, which emphasizes an off-price model. This strategy includes enhanced marketing efforts to convey a compelling off-price message more effectively. Investments in merchandising capabilities are aimed at optimizing operations and driving growth. The strategic acquisition of Bed Bath & Beyond leases, although initially impacting earnings, presents opportunities for store expansion and potential revenue growth.

In the first quarter of fiscal 2024, Burlington experienced a notable 10.5% increase in total sales from the prior year. This growth reflects the effectiveness of the company's market strategies and its expanding customer base. Comparable store sales rose 2%, meeting the higher end of the company's guidance.

Moreover, effective inventory management and improved supply-chain efficiency have led to significant margin expansion, with the company's EBIT margin increasing 170 basis points and the gross margin reaching 43.5% in the first quarter.

Burlington has set ambitious long-term growth targets, aiming to grow its sales to $16 billion and operating income to $1.6 billion within the next five years. These targets would nearly triple its fiscal 2023 operating profit, highlighting the company's strategic vision and confidence in executing its growth plans. For the current fiscal year, BURL expects total sales to increase 9.3% year over year and the adjusted EPS to grow 25%. This demonstrates the company's commitment to robust financial performance.

The company is also focusing on strategic expansion with store openings, having added 14 stores in the first quarter of fiscal 2024, bringing the total to 1,021 stores. Burlington plans to open 100 stores in fiscal 2024, reflecting its focus on expanding its physical footprint. This expansion is expected to drive sales growth and enhance market penetration.

Wrapping Up

BURL's robust growth, coupled with strong financial and technical indicators, positions it well for sustained market leadership and success. Over the past 30 days, the Zacks Consensus Estimate for earnings for the current and next fiscal years has increased 5 cents and 3 cents to $7.60 and $9.33 per share, respectively. Currently, Burlington flaunts a Zacks Rank #1 (Strong Buy).

Other Stocks to Consider

Some other top-ranked stocks in the retail space are The Gap, Inc. GPS, Abercrombie & Fitch Co. ANF and Canada Goose GOOS.

Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It currently sports a Zacks Rank #1.

The Zacks Consensus Estimate for Gap's fiscal 2024 earnings and sales indicates growth of 21.7% and 0.2%, respectively, from the fiscal 2023 reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.

Abercrombie is a specialty retailer of premium, high-quality casual apparel. It flaunts a Zacks Rank of 1 at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.

The consensus estimate for Abercrombie's fiscal 2024 earnings and sales indicates growth of 47.3% and 10.4%, respectively, from the fiscal 2023 reported levels. ANF has a trailing four-quarter average earnings surprise of 210.3%.

Canada Goose is a global outerwear brand. It currently sports a Zacks Rank of 1.

The Zacks Consensus Estimate for Canada Goose's fiscal 2025 earnings indicates growth of 13.7% from the year-ago actual. GOOS has a trailing four-quarter average earnings surprise of 70.9%.

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