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 and Retail-Wholesale sector. With a forward 12-month P/S of 1.22, BURL is priced lower than the industry average of 1.79 and the sector average of 1.50.
This suggests that BURL stock is undervalued compared with its industry peers, offering a compelling opportunity for investors looking to gain exposure to the sector. Furthermore, Burlington’s Value Score of A underscores its appeal as a potential investment.
BURL Looks Attractive From a Valuation Standpoint
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Shares of the company are currently trading 23.8% below its 52-week high of $298.89 reached on Nov. 25, 2024, making investors contemplate their next move. In the past year, the BURL stock has gained 27.9%, outperforming the industry’s 18.8% growth. The company’s strategic initiatives and growth prospects have supported it to outperform the broader sector and the S&P 500 index’s respective growth of 15.1% and 10.3% in the same period.
BURL’s adoption of its Burlington 2.0 model has significantly enhanced its operational performance and overall customer experience. By narrowing its product range to focus on a curated mix of well-known national brands and premium private labels, the company has sharpened its value proposition. This "eliminate to elevate" approach has resonated well with cost-conscious consumers, driving strong growth in comparable store sales in the fiscal fourth quarter. The carefully selected, multi-tiered pricing strategy has not only bolstered customer loyalty but also improved Burlington’s brand positioning in the market.
Burlington’s flexible merchandising strategy has bolstered its ability to respond swiftly to market shifts. Whether capitalizing on the back-to-school shopping season or adjusting inventory in response to warmer-than-expected fall temperatures, BURL has demonstrated its agility, which is an increasingly critical trait in the fast-moving off-price retail sector.
In addition to its operational enhancements, the company’s expansion strategy is supporting its long-term growth trajectory. In fiscal 2024, BURL exceeded its store growth targets by adding 101 net new locations through 147 gross openings, 31 relocations and 15 closures of underperforming stores. The pipeline for fiscal 2025 and 2026 is also robust, aiming for at least 100 net new stores each year.
The performance of new and relocated Burlington stores has been strong, with improved sales and productivity. Burlington has also leveraged favorable real estate trends, securing prime retail spaces left vacant by other companies such as Bed Bath & Beyond. This calculated expansion not only strengthens Burlington’s national presence but also positions it to capture a greater share of the growing off-price retail market.
BURL’s Positive FY25 Outlook
In its latest earnings call, BURL laid out an encouraging forecast for fiscal 2025, supported by a solid foundation in store expansion and improving consumer trends. The company projected total sales growth of 6-8%, driven by store openings and an expected flat to 2% increase in comparable store sales. Our estimate placed year-over-year comp sales growth at 1.8%.
BURL also expects its adjusted EBIT margin between flat and a 30-basis-point improvement from the prior year, with our projection aligning with the high end of the range. Adjusted earnings per share are anticipated between $8.70 and $9.30, suggesting a rise from the $8.35 reported in fiscal 2024.
Net capital expenditure, after accounting for landlord contributions, is projected to reach $950 million. For the first quarter of fiscal 2025, the company anticipates year-over-year sales growth of 5-7%.
Burlington Faces Rising Cost Challenges
Despite its positive outlook, BURL is facing rising cost pressures. Adjusted SG&A expenses increased 4% year over year in the fiscal fourth quarter to $745.6 million. While Burlington benefited from sales leverage on corporate G&A costs, these gains were offset by higher incentive compensation and increased advertising expenditure.
Product sourcing expenses also rose to $217 million from $210 million in the previous year, driven by elevated incentive pay and higher asset protection costs. These rising costs have impacted overall efficiency. For fiscal 2025, we anticipate a 7.6% year-over-year increase in adjusted SG&A expenses.
Burlington’s guidance for the first quarter of fiscal 2025 reflects these challenges, with management projecting a 50-90-basis-point decline in the adjusted EBIT margin, a significant contrast to the 170-basis-point increase reported in the prior year. Higher inventory costs, more frequent promotions and fixed cost deleverage due to soft sales are expected to weigh on performance. Adjusted EPS for the first quarter is forecast between $1.30 and $1.45, whereas it reported $1.42 in the same period last year.
Final Thought on BURL
Burlington’s strong performance, bolstered by its Burlington 2.0 strategy and expansion efforts, offers solid long-term growth potential. The company’s focus on curated merchandise and market agility has resonated well with consumers, driving positive sales trends. However, rising costs, including higher SG&A and product sourcing expenses, present near-term challenges that may pressure margins.
While BURL remains undervalued compared with industry peers, the stock’s performance could be impacted by these ongoing pressures. Investors may consider holding on to the stock to benefit from its strategic growth while monitoring how Burlington navigates these challenges in the coming quarters. The company currently has a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks are The Gap, Inc. GAP, Stitch Fix SFIX and Canada Goose GOOS.
The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. 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 The Gap’s fiscal 2025 earnings and revenues indicates growth of 7.7% and 1.5%, respectively, from the fiscal 2024 reported levels. GAP delivered a trailing four-quarter average earnings surprise of 77.5%.
Stitch Fix delivers customized shipments of apparel, shoes and accessories for women, men and kids. It currently has a Zacks Rank of 2.
The Zacks Consensus Estimate for SFIX’s fiscal 2025 earnings implies growth of 64.7% from the year-ago actual. Stitch Fix delivered a trailing four-quarter average earnings surprise of 48.9%.
Canada Goose is a global outerwear brand. GOOS is a designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. It carries a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for Canada Goose’s current fiscal year’s earnings and revenues implies declines of 1.4% and 4.9%, respectively, from the year-ago actuals. GOOS delivered a trailing four-quarter average earnings surprise of 71.3%.
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