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Burlington Stock Trades 3% Below Its 52-Week High: How to Play Ahead?
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Shares of Burlington Stores, Inc. (BURL - Free Report) are currently trading 3.3% below its 52-week high of $298.89 reached on Nov. 25, 2024, making investors contemplate their next moves. In the past year, the BURL stock has gained 49.1%, outperforming the Zacks Retail-Discount Stores industry’s 22.2% growth.
The company’s strategic initiatives, including enhancing merchandising capabilities and optimizing store operations, have supported it to outperform the broader Retail-Wholesale sector and the S&P 500 index’s respective growth of 30.1% and 24.4% in the same period.
BURL Stock Past-Year Performance
Image Source: Zacks Investment Research
This leading retailer of branded apparel products closed Friday’s trading session at $289.16. The stock is trading above its 50 and 200-day simple moving averages (SMAs) of $275.63 and $244.97, respectively, highlighting a continued uptrend. This technical strength, along with sustained momentum, indicates positive market sentiment and investors’ confidence in BURL’s financial health and growth prospects.
BURL Trades Above 50 & 200-Day Moving Averages
Image Source: Zacks Investment Research
Burlington 2.0 Initiatives Boost Efficiency & Value
The company’s Burlington 2.0 transformation is enhancing operational efficiency and customer value through advanced technologies like updated merchant tools and machine-learning algorithms. These innovations improve inventory allocation, reduce markdowns and align with the company’s focus on delivering value to budget-conscious shoppers.
This technological advancement reflects BURL's dedication to providing value to lower-income consumers whose discretionary spending is recovering and to higher-income shoppers seeking affordable alternatives. By enhancing customer satisfaction, these innovations solidify the company's position as a leader in the off-price retail market, which is well-positioned for sustained growth.
Burlington’s Store Expansion Strategy
BURL continues to deliver remarkable growth, achieving a 10.5% increase in total sales in the third quarter of fiscal 2024. A key factor in this success is the company’s strategic expansion plan, targeting 101 net new store openings by the end of fiscal 2024. These stores, featuring 25,000-square-foot prototypes, are strategically located in high-traffic areas to maximize customer engagement and operational efficiency.
Store relocations amplified sales 10% year over year, underscoring Burlington's ability to optimize its physical footprint. With an ambitious goal of opening 500 net new stores by 2028, the company is well-positioned to sustain its growth trajectory and solidify its leadership in the retail market.
Burlington’s focus on operational efficiency has significantly improved its financial performance. Adjusted EBITDA for the third quarter of fiscal 2024 rose 30.3% year over year to $228.8 million, whereas the adjusted EBITDA margin increased 140 basis points to 9.1%. The gross margin also improved by 70 basis points, bolstered by better merchandise margins and strategic buying practices. These measures enabled faster inventory turnover, reduced markdowns and enhanced profitability.
We anticipate the gross margin to expand 60 basis points year over year to 43.1% in fiscal 2024. We foresee a year-over-year adjusted EBIT margin expansion of 100 basis points in fiscal 2024.
Freight expenses as a percentage of sales declined 20 basis points, whereas supply-chain productivity improvements contributed to a 50-basis-point leverage in distribution costs. These efforts highlight Burlington’s disciplined approach to cost management, paving the way for continued margin expansion.
The planned 2-million-square-foot distribution center in Savannah, GA, set to open in fiscal 2026, will enhance the efficiency and scalability of the company. By owning its distribution centers, BURL gains the flexibility needed to support aggressive store expansion goals, ensuring long-term cost savings and margin growth.
Burlington’s Favorable Outlook for FY24
BURL revised its fiscal 2024 guidance on its last reported quarter’s earnings call with a more optimistic outlook. Total sales are projected to grow 9-10%. Comparable store sales are expected to rise 2-4%, an improvement from the previously mentioned 2-3%.
The adjusted EBIT margin is forecast to increase 60-70 basis points, slightly higher than the earlier mentioned 50-70 basis points. The estimate for adjusted earnings per share (EPS) was raised to $7.76-$7.96 from the earlier $7.66-$7.96.
For the fiscal fourth quarter, BURL expects total sales growth of 5-7%, supported by a 0-2% rise in comparable store sales from the prior-year quarter. The adjusted EBIT margin is anticipated to improve 50-80 basis points year over year. The adjusted EPS is projected at $3.55-$3.75, whereas it reported $3.69 in the prior year.
BURL Navigates Higher Costs & Other Challenges
Burlington has faced increased expenses, with adjusted selling, general and administrative costs rising 9.2% year over year to $680 million in the fiscal third quarter due to higher investments in store payroll to enhance in-store service levels and maintain competitive wages in a tight labor market. Product sourcing costs grew to $210 million from $200 million, indicating higher supply-chain expenses despite improvements in distribution center productivity.
We anticipate adjusted SG&A expenses to rise 11.8% year over year in fiscal 2024. As a percentage of net sales, this metric is expected to increase 40 basis points year over year in fiscal 2024.
In the fiscal third quarter, warmer-than-average temperatures caused a substantial 300-basis-point reduction in comparable store sales (comps), reflecting the risks associated with unpredictable climate patterns.
Conclusion
Investors may consider Burlington due to its strong growth prospects, fueled by the Burlington 2.0 transformation and store expansions. The company has demonstrated impressive sales and margin growth, supported by its focus on operational efficiency. While challenges from rising expenses and seasonal risks exist, its ability to adapt to changing consumer demand and its commitment to scalability make BURL a solid long-term investment.
The above-mentioned factors suggest sustained growth and investor confidence in the stock’s potential. You should consider holding on to this Zacks Rank #3 (Hold) stock for now.
Stocks to Consider
We have highlighted three better-ranked stocks, namely The Gap, Inc. (GAP - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Deckers Outdoor Corporation (DECK - Free Report) .
Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It presently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Gap’s fiscal 2025 earnings and sales indicates growth of 41.5% and 0.8%, respectively, from the fiscal 2024 reported figures. GAP delivered a trailing four-quarter average earnings surprise of 101.2%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present.
The Zacks Consensus Estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 69.3% and 15%, respectively, from the fiscal 2024 reported levels. ANF delivered a trailing four-quarter average earnings surprise of 14.8%.
Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Deckers’ fiscal 2024 earnings and sales indicates growth of 13% and 13.6%, respectively, from the year-ago actuals. DECK delivered a trailing four-quarter average earnings surprise of 40.6%.
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Burlington Stock Trades 3% Below Its 52-Week High: How to Play Ahead?
Shares of Burlington Stores, Inc. (BURL - Free Report) are currently trading 3.3% below its 52-week high of $298.89 reached on Nov. 25, 2024, making investors contemplate their next moves. In the past year, the BURL stock has gained 49.1%, outperforming the Zacks Retail-Discount Stores industry’s 22.2% growth.
The company’s strategic initiatives, including enhancing merchandising capabilities and optimizing store operations, have supported it to outperform the broader Retail-Wholesale sector and the S&P 500 index’s respective growth of 30.1% and 24.4% in the same period.
BURL Stock Past-Year Performance
Image Source: Zacks Investment Research
This leading retailer of branded apparel products closed Friday’s trading session at $289.16. The stock is trading above its 50 and 200-day simple moving averages (SMAs) of $275.63 and $244.97, respectively, highlighting a continued uptrend. This technical strength, along with sustained momentum, indicates positive market sentiment and investors’ confidence in BURL’s financial health and growth prospects.
BURL Trades Above 50 & 200-Day Moving Averages
Image Source: Zacks Investment Research
Burlington 2.0 Initiatives Boost Efficiency & Value
The company’s Burlington 2.0 transformation is enhancing operational efficiency and customer value through advanced technologies like updated merchant tools and machine-learning algorithms. These innovations improve inventory allocation, reduce markdowns and align with the company’s focus on delivering value to budget-conscious shoppers.
This technological advancement reflects BURL's dedication to providing value to lower-income consumers whose discretionary spending is recovering and to higher-income shoppers seeking affordable alternatives. By enhancing customer satisfaction, these innovations solidify the company's position as a leader in the off-price retail market, which is well-positioned for sustained growth.
Burlington’s Store Expansion Strategy
BURL continues to deliver remarkable growth, achieving a 10.5% increase in total sales in the third quarter of fiscal 2024. A key factor in this success is the company’s strategic expansion plan, targeting 101 net new store openings by the end of fiscal 2024. These stores, featuring 25,000-square-foot prototypes, are strategically located in high-traffic areas to maximize customer engagement and operational efficiency.
Store relocations amplified sales 10% year over year, underscoring Burlington's ability to optimize its physical footprint. With an ambitious goal of opening 500 net new stores by 2028, the company is well-positioned to sustain its growth trajectory and solidify its leadership in the retail market.
BURL’s Operational Efficiency Drives Margin Growth
Burlington’s focus on operational efficiency has significantly improved its financial performance. Adjusted EBITDA for the third quarter of fiscal 2024 rose 30.3% year over year to $228.8 million, whereas the adjusted EBITDA margin increased 140 basis points to 9.1%. The gross margin also improved by 70 basis points, bolstered by better merchandise margins and strategic buying practices. These measures enabled faster inventory turnover, reduced markdowns and enhanced profitability.
We anticipate the gross margin to expand 60 basis points year over year to 43.1% in fiscal 2024. We foresee a year-over-year adjusted EBIT margin expansion of 100 basis points in fiscal 2024.
Freight expenses as a percentage of sales declined 20 basis points, whereas supply-chain productivity improvements contributed to a 50-basis-point leverage in distribution costs. These efforts highlight Burlington’s disciplined approach to cost management, paving the way for continued margin expansion.
The planned 2-million-square-foot distribution center in Savannah, GA, set to open in fiscal 2026, will enhance the efficiency and scalability of the company. By owning its distribution centers, BURL gains the flexibility needed to support aggressive store expansion goals, ensuring long-term cost savings and margin growth.
Burlington’s Favorable Outlook for FY24
BURL revised its fiscal 2024 guidance on its last reported quarter’s earnings call with a more optimistic outlook. Total sales are projected to grow 9-10%. Comparable store sales are expected to rise 2-4%, an improvement from the previously mentioned 2-3%.
The adjusted EBIT margin is forecast to increase 60-70 basis points, slightly higher than the earlier mentioned 50-70 basis points. The estimate for adjusted earnings per share (EPS) was raised to $7.76-$7.96 from the earlier $7.66-$7.96.
For the fiscal fourth quarter, BURL expects total sales growth of 5-7%, supported by a 0-2% rise in comparable store sales from the prior-year quarter. The adjusted EBIT margin is anticipated to improve 50-80 basis points year over year. The adjusted EPS is projected at $3.55-$3.75, whereas it reported $3.69 in the prior year.
BURL Navigates Higher Costs & Other Challenges
Burlington has faced increased expenses, with adjusted selling, general and administrative costs rising 9.2% year over year to $680 million in the fiscal third quarter due to higher investments in store payroll to enhance in-store service levels and maintain competitive wages in a tight labor market. Product sourcing costs grew to $210 million from $200 million, indicating higher supply-chain expenses despite improvements in distribution center productivity.
We anticipate adjusted SG&A expenses to rise 11.8% year over year in fiscal 2024. As a percentage of net sales, this metric is expected to increase 40 basis points year over year in fiscal 2024.
In the fiscal third quarter, warmer-than-average temperatures caused a substantial 300-basis-point reduction in comparable store sales (comps), reflecting the risks associated with unpredictable climate patterns.
Conclusion
Investors may consider Burlington due to its strong growth prospects, fueled by the Burlington 2.0 transformation and store expansions. The company has demonstrated impressive sales and margin growth, supported by its focus on operational efficiency. While challenges from rising expenses and seasonal risks exist, its ability to adapt to changing consumer demand and its commitment to scalability make BURL a solid long-term investment.
The above-mentioned factors suggest sustained growth and investor confidence in the stock’s potential. You should consider holding on to this Zacks Rank #3 (Hold) stock for now.
Stocks to Consider
We have highlighted three better-ranked stocks, namely The Gap, Inc. (GAP - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Deckers Outdoor Corporation (DECK - Free Report) .
Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It presently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Gap’s fiscal 2025 earnings and sales indicates growth of 41.5% and 0.8%, respectively, from the fiscal 2024 reported figures. GAP delivered a trailing four-quarter average earnings surprise of 101.2%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present.
The Zacks Consensus Estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 69.3% and 15%, respectively, from the fiscal 2024 reported levels. ANF delivered a trailing four-quarter average earnings surprise of 14.8%.
Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Deckers’ fiscal 2024 earnings and sales indicates growth of 13% and 13.6%, respectively, from the year-ago actuals. DECK delivered a trailing four-quarter average earnings surprise of 40.6%.