National off-price retailer Burlington Stores, Inc. (BURL) delivered outstanding second-quarter results driven by continued momentum in sales and margin expansion. However, the company did warn of supply-chain disruptions elevating margin pressures in the future. Consequently, shares plunged 9.2%, closing at $318.01 on August 26.
The company reported adjusted earnings of $1.94 per share, much higher than the Street’s estimate of $1.38 per share. BURL posted an adjusted loss of $0.56 per share in the year-ago period.
Moreover, total revenue climbed 118.8% to $2.21 billion and also surpassed analysts’ estimates of $2.05 billion. (See Burlington Stores stock charts on TipRanks)
Michael O’Sullivan, CEO of the company, said, “The environment remains uncertain, and the trend is difficult to predict. We will continue to manage our business flexibly so we can chase the trend or pull back if necessary. In addition, we are seeing a huge imbalance between supply and demand in global logistics systems. This is driving up freight and supply chain expenses and it will put significant pressure on our margins for the balance of the year.”
Due to the uncertainty surrounding the COVID-19 situation, the company refrained from providing revenue and earnings guidance for the remainder of 2021.
In response to Burlington’s results, Guggenheim analyst Robert Drbul maintained a Hold rating on the stock and 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.”
Markedly, Drbul lists numerous tailwinds for the off-price sector, including pent-up demand, department & specialty retail store closures, access to a wide range of quality merchandise, favorable real estate opportunities, and consumers’ desire for value and a treasure hunt environment.
Overall, the stock commands a Strong Buy consensus rating based on 11 Buys and 3 Holds. The average Burlington Stores price target of $372.86 implies 17.3% upside potential to current levels. Shares have gained 57.5% over the past year.
Furthermore, Burlington Stores scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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