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Why Burlington Stores Inc. Stock Jumped Today

Image source: Burlington Coat Factory. 

What happened

Shares of Burlington Stores Inc. (NYSE: BURL) were surging today after the company posted another strong quarterly earnings report. As of 11:57 a.m. EST, the stock was up 13.8%.

So what

The clothing retailer said adjusted earnings per share (EPS) more than doubled, from $0.25 to $0.51, blowing past estimates at $0.33. The jump in profits was fueled by a comparable-sales increase of 3.7% and a gross margin improvement of 140 basis points, to 41.2%. Burlington's share buyback program also reduced shares outstanding by 5% over the past years, giving a boost to EPS.

Overall revenue rose 9.1%, to $1.34 billion, edging out the consensus at $1.32 billion. CEO Tom Kingsbury remarked: "We are very pleased with our third-quarter results, which exceeded our sales and earnings guidance. Our ability to execute our off-price model by delivering fresh product, compelling value, and sought-after brands continues to serve us well."

Now what

While much of the apparel retail industry has struggled lately, off-price brands like Burlington and TJX Companies have thrived: Burlington shares have nearly doubled this year. As e-commerce and fast-fashion brands chip away sales from traditional apparel retailers like department stores, off-price chains have found a valuable niche as their model is not easily replicated.

Following the momentum from the third quarter, Burlington raised its full-year guidance, now calling for adjusted EPS of $3.11-$3.15. It also sees top-line growth of 8.4%-8.7% and a comparable-sales increase of 3.9%-4.2%. For the fourth quarter, it expects comparable sales of 2.5%-3.5% and adjusted EPS at $1.63-$1.67. Analysts had been expecting $1.69 for the holiday quarter.

Shares may be getting pricey as they now trade at a P/E of 27 based on this year's earnings after today's surge, but after quarterly earnings doubled, it seems like the stock is worth the premium.

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