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Burlington Stores Jumps 8.6% on Solid Q3 Beat

Despite the ongoing supply chain and price issues, off-price retailer Burlington Stores, Inc. (BURL) delivered solid third-quarter results beating both earnings and revenue.

Following the news, shares jumped 8.6% to close at $285.55 on November 23.

Solid Q3 Results

The retailer posted adjusted earnings of $1.36 per share, a whopping 369% growth against the prior-year quarter, and 11 cents higher than analysts’ estimates of $1.25 per share.

Furthermore, total revenue rose 37.7% year-over-year to $2.30 billion, exceeding the consensus estimate of $2.22 billion.

Encouraged by the performance of the new smaller prototype stores in the quarter, the company has increased its new store opening program. The company now expects to open 101 new stores and close 24 stores, aggregating to a net new store count of 77 for the current fiscal.

Management Comments

Michael O’Sullivan, CEO of BURL, said, “As predicted, freight and supply chain headwinds pressured margins in Q3. We fully expect these headwinds to moderate over time and, as they do, this should generate very attractive off-price buying opportunities as well as significantly lower expenses.”

He further added, “Our value differentiation vs. most other retailers has grown this year, as they have raised realized prices. If these higher realized prices are sustained then we believe that in the coming quarters we will have the opportunity to drive additional sales, to raise retails, or to do both.”

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Analysts’ View

Responding to Burlington Stores’ performance, Guggenheim analyst Robert Drbul said, “While we continue to hold a favorable outlook for the off-price sector and appreciate the operational opportunity at the company under CEO Michael O’Sullivan, we remain NEUTRAL on BURL largely due to the valuation premium of its shares.”

Drbul added, “Looking ahead of FY22E, despite many uncertainties in the current macroeconomic environment, we see 3 main factors that we believe will drive positive growth for the company in 2022. 1) increase in sales driven by stimulus checks and pent-up demand, 2) inflationary pricing – we see as a tremendous opportunity for BURL to drive up the top line, 3) supply chain constraints to potentially subside, driving lower freight and supply chain expenses.”

Overall, the stock has a Moderate Buy consensus rating based on 7 Buys and 4 Holds. At the time of writing, the average Burlington Stores price target was $350.73, which implies 22.8% upside potential to current levels. Shares have gained 26.4% over the past year.

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