BURL Trades 10% Below its 52-Week High: What's Next for Investors?

Shares of Burlington Stores, Inc. BURL are currently trading 10% below its 52-week high of $298.89 reached on Nov. 25, 2024, making investors contemplate their next moves. In the past month, BURL stock has gained 23.7%, outperforming the Zacks Retail-Discount Stores industry’s 7.5% growth. 

The company’s strategic initiatives and growth prospects have enabled it to outperform the broader Retail-Wholesale sector and the S&P 500 index’s respective increases of 14.5% and 15.3% in the same period.

BURL Stock Past-Month Performance

This leading retailer of branded apparel products closed Friday’s trading session at $268.99. The stock is trading above its 50 and 200-day simple moving averages of $237.69 and $260.39, respectively, highlighting a continued uptrend. This technical strength, along with sustained momentum, indicates positive market sentiment and investors’ confidence in BURL’s financial health and growth prospects.

BURL Trades Above 50 & 200-Day Moving Averages

Moreover, the company is trading at a notable low price-to-sales (P/S) multiple, below the averages of the industry and the sector. With a forward 12-month P/S of 1.44, BURL is priced lower than the industry and the sector’s average of 1.88 and 1.59, respectively. This undervaluation highlights its potential for investors seeking attractive entry points.

BURL Looks Attractive From a Valuation Standpoint

Burlington 2.0 Strategy Drives Enhanced Customer Experience

The company’s implementation of its Burlington 2.0 model has markedly improved both operational performance and the overall customer experience. By streamlining its product assortment to focus on a curated selection of well-known national brands alongside premium private labels, the company has sharpened the value proposition. The carefully crafted, multi-tiered pricing approach has not only strengthened customer loyalty but also elevated Burlington’s brand positioning within the market.

Burlington’s adaptable merchandising strategy has enhanced its responsiveness to changing market conditions. Whether leveraging the back-to-school shopping season or adjusting inventory in reaction to warmer-than-expected fall weather, Burlington has demonstrated agility, an increasingly vital capability in the dynamic off-price retail sector.

Alongside these operational improvements, Burlington’s expansion efforts are reinforcing its long-term growth prospects. In fiscal 2024, the company surpassed its store growth targets by opening a net total of 101 new locations, achieved through 147 gross openings, 31 store relocations and 15 closures of underperforming sites. Looking ahead, the pipeline remains strong, with plans to open at least 100 net new stores annually in fiscal 2025 and 2026.

New and relocated stores have delivered strong sales and improved productivity. Burlington has also capitalized on favorable real estate opportunities by securing prime retail spaces vacated by other retailers, such as Bed Bath & Beyond. This strategic expansion not only broadens Burlington’s national footprint but also positions it to capture a larger share of the growing off-price retail market.

BURL’s Positive Outlook for Fiscal 2025

During its latest earnings call, Burlington outlined a promising outlook for fiscal 2025, underpinned by ongoing store expansion and gradually improving consumer trends. The company forecasted total sales growth of 6% to 8%, fueled primarily by store openings and a projected flat to 2% increase in comparable store sales. Our estimates align closely, anticipating year-over-year comp sales growth of approximately 1.8%.

Burlington also guided for an adjusted EBIT margin ranging from flat to a 30-basis-point improvement over the prior year, with our expectations leaning toward the upper end of that band. Adjusted earnings per share are projected between $8.70 and $9.30, signaling growth from the $8.35 reported in fiscal 2024. The company expected net capital expenditures, after factoring in landlord contributions, to total approximately $950 million.

Rising Cost Challenges for Burlington

Despite this positive momentum, Burlington is facing increasing cost pressures. Adjusted selling, general, and administrative (SG&A) expenses rose 4% year over year in the fiscal fourth quarter, reaching $745.6 million. Although Burlington benefited from sales leverage in corporate general and administrative costs, these gains were offset by higher incentive compensation and increased advertising spending.

Product sourcing costs also increased, climbing to $217 million from $210 million in the previous year, caused by elevated incentive pay and rising asset protection expenses. These higher costs have impacted overall operational efficiency. We anticipate adjusted SG&A expenses to rise 7.6% year over year in fiscal 2025.

Final Thought on BURL

BURL stands out for its recent upward momentum, driven by strategic merchandising shifts and an agile response to seasonal demand fluctuations. The company’s focus on enhancing the customer experience through curated product offerings and targeted pricing has helped sustain shopper engagement. BURL’s ability to capitalize on real estate opportunities and expand footprint adds to its long-term positioning in the off-price segment. However, cost pressures from higher SG&A and sourcing expenses could weigh on the profitability. The company currently has a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks are Nordstrom Inc. JWN, Stitch Fix SFIX and Canada Goose GOOS.

Nordstrom is a leading fashion specialty retailer. It has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Nordstrom’s fiscal 2025 earnings and revenues indicates growth of 1.8% and 2.2%, respectively, from fiscal 2024 reported levels. JWN delivered a negative trailing four-quarter average earnings surprise of 26.1%.

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. SFIX 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 a decline of 1.4% and 4.9%, respectively, from the year-ago actuals. Canada Goose delivered a trailing four-quarter average earnings surprise of 71.3%.

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This article originally published on Zacks Investment Research (zacks.com).

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