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Burlington Stores Touches 52-Week High: Can it Surge Higher?

Burlington Stores, Inc. BURL looks promising on the back of its robust strategic initiatives, solid focus on store-expansion endeavors and impressive surprise history. Last year, the company has exhibited a bullish run on the index and has outperformed both the industry and the broader sector. Over the said period, the stock has rallied 45.2% while the industry gained 12.1%. Meanwhile, the Retail-Wholesale sector advanced 30% and is currently placed at the top 31% of the Zacks classified sectors.

Impressively, the company’s shares have hit a 52-week high of $123.92, although it closed a tad lower at $123.03. Additionally, a Growth Score of A with a long-term earnings growth rate of 17.5 % highlight the stock’s growth potential.

Let’s Delve Deep

Growth Catalysts

In a competitive retail scenario, Burlington Stores has made multiple changes to business model in order to adapt to the ongoing changes in the industry. In fact, its current open to buy off-price model is helping customers to get nationally branded, fashionable, high quality and fair priced products. Also, over the years, the company has increased vendor counts, made technological advancements, initiated better marketing approach and focused on localized assortments.

Additionally, the company has been focusing on store expansion in order to drive top-line growth. Management now intends to focus more on categories such as home, beauty and ladies apparel. It also believes that there is room to increase the store count to 1,000 over the long term.

Impressive Performance & Robust Outlook
Burlington Stores’ strategic efforts are quite well reflected in the company’s performance. The company’s earnings have surpassed the Zacks Consensus Estimate for 13 successive quarters now. Also, its top line beat the consensus mark in five of the trailing seven quarters. In the last reported quarter, earnings surged 37% year over year as well. Moreover, the bottom line has shown constant improvement in the past several quarters.

In both the second and first quarters of fiscal 2017, earnings have increased 85% year over year following an increase of 20%, 100%, 105% and 39% in the fourth, third, second and first quarters of fiscal 2016, respectively.

Management now envisions fiscal 2017 adjusted earnings in the range of $4.23-$4.27 per share compared with $3.24 reported in the prior year. For the fourth quarter, earnings are expected to come within the range of $2.02-$2.06 per share compared with $1.78 reported in the prior-year period. The Zacks Consensus Estimate is currently pegged higher at $4.28 and $2.08 for the fiscal year and the fourth quarter, respectively.

Amid a tough retail backdrop, Burlington Stores’ comparable-store sales (comps) have witnessed constant improvement over the past few years. Apparently, comps have increased 4.5%, 2.1%, 4.9%, 4.7% and 1.2% in fiscal 2016, 2015, 2014, 2013 and 2012, respectively. In fact, this momentum continued in fiscal 2017 as well, with first, second and third quarters witnessing a growth of 0.5%, 3.5% and 3.1%, correspondingly. Management now projects comps growth of 2-3% for the final quarter, resulting in comps increase of 2.3-2.6% for fiscal 2017.

Where retailers are struggling with dwindling margins owing to high promotional initiatives, Burlington Stores’ gross margin has shown constant improvement in the last few years. Improvement in gross margin can be attributed to its efforts toward managing inventory as well as effective cost management and merchandising margin. In the first, second and third quarters of fiscal 2017, gross margin expanded 80, 110 and 100 basis points to 40.9%, 40.7% and 42.2%, respectively.

Bottom Line

Effective changes in business model, robust store-expansion strategy, sturdy earnings surprise history and impressive comps growth and gross margin trend make this Zacks Rank #2 (Buy) stock a solid pick for your portfolio now.

Some other top-ranked stocks that have hit a 52-week high on Dec 29 are Deckers Outdoor Corporation DECK, Wolverine World Wide, Inc. WWW and Constellation Brands, Inc. STZ. All these stocks also carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Deckers with a long-term earnings growth rate of 10.7% has delivered an average positive earnings surprise of 88.3% in the trailing four quarters.

Wolverine with a long-term earnings growth rate of 12.5% has pulled off an average positive earnings surprise of 21.8% in the last four quarters.

Constellation Brands with a long-term earnings growth rate of 18.4% has come up with an average positive earnings surprise of 13.6% in the trailing four quarters.

Zacks Editor-in-Chief Goes "All In" on This Stock

Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.

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