Burlington Stores, Inc. BURL is currently trading at a low price-to-sales (P/S) multiple, which is below the average of the Zacks Retail-Discount Stores industry. With a forward 12-month P/S of 1.58, BURL is priced lower than the industry average of 1.79.
This makes BURL stock undervalued relative to its industry peers, presenting an attractive opportunity for investors seeking exposure to the sector. Furthermore, Burlington’s Value Score of A underscores its appeal as a potential investment.
BURL Stock Looks Undervalued
Image Source: Zacks Investment Research
Shares of the company are currently trading 3.5% below its 52-week high of $298.89, reached on Nov. 25, 2024, making investors contemplate their next move. In the past year, BURL stock has gained 70%, outperforming the industry’s 37.4% growth. The company’s 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 34.7% and 31.5% in the same period.
BURL Stock Past-Year Performance
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BURL closed Wednesday’s trading session at $288.36. The stock is trading above its 50 and 200-day SMA of $262.40 and $235.40, 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 Fuel Advancements
Burlington's ongoing transformation through its Burlington 2.0 initiative has significantly enhanced the company’s operational capabilities, helping it close the gap with competitors. Key innovations include advanced merchant tools and machine-learning algorithms for store-level inventory management, leading to better-localized assortments, reduced markdowns and improved sales trends.
This technological leap aligns with Burlington’s commitment to delivering value to lower-income consumers, whose discretionary spending is rebounding and higher-income shoppers who are trading down for affordable options. These advancements not only improve customer satisfaction but also position Burlington as a leader in the off-price retail sector, poised for sustained growth.
Burlington’s Strategic Store Expansion & Robust Growth
Burlington has achieved impressive sales growth, reporting a 10.5% increase in total sales in the third quarter of fiscal 2024. The company’s expansion strategy has been a key driver of this success with plans to add 101 new stores by the end of the fiscal year. The new stores, primarily 25,000-square-foot prototypes, are strategically placed in high-traffic locations, enhancing both customer experience and operational efficiency.
Store relocations have resulted in a 10% boost in sales, showcasing Burlington's ability to optimize its footprint. With a goal to open 500 new stores by 2028, the company is on track to drive further growth and strengthen its market presence.
Moreover, strategic buying practices have led to higher merchandise margins, while improved inventory turnover and reduced markdowns have bolstered profitability. Burlington's focus on supply-chain efficiency, including reduced freight costs and optimized distribution centers, further supports margin growth. With a clear path to continued operational improvements, Burlington is well-positioned for sustained financial gains in the coming quarters.
BURL’s Optimistic Outlook for FY24
BURL has updated its fiscal 2024 guidance and made this more optimistic. Total sales are expected to grow 9-10%. Comparable store sales are anticipated to increase 2-4%, improving from the earlier mentioned 2-3%.
The adjusted EBIT margin is expected to rise 60-70 basis points, higher than the previously mentioned 50-70 basis points. The forecast for adjusted earnings per share (EPS) has also been revised upward and is now expected to be in the range of $7.76-$7.96 compared with the earlier estimate of $7.66-$7.96.
For the fiscal fourth quarter, the company anticipates a 5-7% increase in total sales. This prediction is based on an expected 0-2% increase in comparable store sales from the year-ago quarter. Adjusted EBIT margin is expected to improve 50-80 basis points year over year in the fourth quarter. Moreover, it forecasts adjusted EPS to be in the range of $3.55-$3.75 compared with $3.69 in the year-ago period.
Higher Costs: A Burden of Burlington
Burlington has faced increased expenses, with adjusted selling, general and administrative costs rising 9.2% year over year to $680 million in the third quarter. This increase was primarily due to higher investments in store payroll, aimed at enhancing in-store service levels and maintaining competitive wages in a tight labor market. Furthermore, product sourcing costs grew to $210 million from $200 million, indicating higher supply-chain expenses, despite improvements in distribution center productivity.
Final Thoughts on BURL
Burlington Stores presents a compelling investment opportunity, trading below the industry average. The company’s strong performance, driven by successful operational improvements like the Burlington 2.0 initiative and strategic store expansion, has resulted in impressive sales growth and positive market momentum. Burlington's technological advancements, store relocations and efficient supply-chain practices position it as a strong player in the off-price retail sector. However, the company faces higher operational costs, particularly in payroll and supply-chain expenses. Despite these challenges, Burlington's optimistic guidance and strong market performance indicate a solid growth trajectory ahead. Investors should consider holding this Zacks Rank #3 (Hold) stock.
Stocks to Consider
We have highlighted three better-ranked stocks, namely Deckers Outdoor Corporation DECK, The Gap, Inc. GAP and Abercrombie & Fitch Co. ANF.
Deckers Outdoor Corporation is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Deckers’ fiscal 2025 earnings and sales indicates growth of 12.6% and 13.6%, respectively, from fiscal 2024 reported levels. DECK has a trailing four-quarter average earnings surprise of 41.1%.
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 2025 earnings and sales indicates growth of 40% and 0.8%, respectively, from fiscal 2024 reported figures. GAP has a trailing four-quarter average earnings surprise of 101.2%.
Abercrombie & Fitch operates as a specialty retailer of premium, high-quality casual apparel for men, women and kids. It currently flaunts a Zacks Rank #1.
The consensus estimate for Abercrombie & Fitch’s current fiscal-year earnings and sales indicates growth of 67% and 14.1%, respectively, from fiscal 2023 reported figures. ANF has a trailing four-quarter average earnings surprise of 14.8%.
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