On Thursday, JPMorgan raised the price target for Burlington Stores (NYSE: NYSE:BURL) to $354 from $346, while maintaining an Overweight rating on the stock. The adjustment follows Burlington's second-quarter earnings report, which outperformed market expectations.
The retailer posted an adjusted earnings per share (EPS) of $1.24, excluding expenses related to Bed Bath & Beyond (BBBY) leases. This figure surpassed the average analyst estimate of $0.96 by approximately 30%.
Burlington's performance was bolstered by a 5% increase in same-store sales, exceeding both the company's forecast of 4% and the consensus estimate of 2.4%. Gross margin also saw a year-over-year improvement, expanding by 110 basis points to 42.8%, which was above the Street's prediction of 42.5%.
Additionally, the company achieved adjusted selling, general, and administrative (SG&A) expense leverage of 60 basis points year-over-year, resulting in a 34.8% rate that was lower than the expected 35.4%. These factors contributed to an adjusted EBIT margin expansion of 160 basis points to 4.7%, outpacing the Street's anticipation of 3.9%.
Burlington's positive momentum was highlighted in comparison to other off-price retailers, with a 300 basis point sequential acceleration on a two-year stacked basis from the first quarter. This follows similar trends observed at Ross Stores (NASDAQ:ROST) and TJX Companies (NYSE:TJX), which experienced sequential accelerations in two-year stacked comparable store sales. In contrast, department stores such as Macy's (NYSE:M), Kohl's (NYSE:KSS), and Dillard's (NYSE:DDS) reported a moderation in comparable sales.
Looking forward, Burlington's management has revised its full-year 2024 adjusted EPS guidance upwards to $7.66-$7.96, excluding BBBY lease expenses. This forecast is higher than the previous range of $7.35-$7.75, based on anticipated same-store sales growth of 2-3% and total sales growth of 9-10%.
The company also expects adjusted EBIT margin expansion to range between 50-70 basis points, reflecting ongoing supply chain productivity and merchandise margin benefits.
For the third quarter, management anticipates an adjusted EPS between $1.45-$1.55, which is above analysts' expectations of $1.37. This guidance is based on flat to 2% growth in same-store sales and an adjusted EBIT margin expansion of 60-80 basis points to 5.5% at the midpoint.
The company has also hinted at the potential for continued outperformance, with management stating their readiness to "chase if the underlying sales trend is stronger," suggesting further beat and raise opportunities.
Finally, the report projects fourth-quarter EPS to be between $3.55-$3.75, which is below the Street's estimate of $4.02. However, with same-store sales growth expected to be flat to 2% and more favorable year-over-year comparisons, there appears to be a 5% upside opportunity for comparable sales in the fourth quarter.
In other recent news, Burlington Stores has announced a 13% growth in total sales for the second quarter, primarily driven by new store openings and a 5% increase in comparable store sales. The company has also expanded its operating margin by 160 basis points, largely due to higher gross margins and supply chain efficiency.
In light of these positive results, Burlington Stores has increased its full-year guidance and plans to open 100 net new stores this fiscal year, alongside relocating around 30 existing stores.
The company's full-year 2024 guidance includes a 2% to 3% increase in comparable store sales and a 9% to 10% increase in total sales. Adjusted EBIT margin is expected to increase by 50 to 70 basis points, with an adjusted earnings per share range of $7.66 to $7.96. However, the company anticipates some challenges due to increased ocean freight costs, which may negatively impact merchandise margin.
CEO Michael O'Sullivan has emphasized the company's focus on expanding within the US market, while CFO Kristin Wolfe has noted that wage rate increases have been absorbed, and competitive wages are maintained in distribution centers. Despite potential headwinds, Burlington Stores remains committed to modernizing its distribution network and maintaining a focus on domestic growth.
InvestingPro Insights
Alongside the positive outlook provided by JPMorgan, Burlington Stores (NYSE: BURL) showcases a blend of intriguing financial metrics and analyst sentiment. InvestingPro data indicates a robust market capitalization of $16.93 billion, reflecting the company's substantial market presence. Despite a relatively high P/E ratio of 44.7, the adjusted P/E ratio for the last twelve months as of Q1 2025 is more favorable at 40.55, suggesting a potential alignment with near-term earnings growth. This is further supported by a PEG ratio of 0.77, which may indicate an attractive investment when considering the company's earnings growth rate.
The company's revenue growth remains strong, with an 11.74% increase over the last twelve months as of Q1 2025, and a solid gross profit margin of 42.84%, aligning closely with the reported gross margin in the article. Notably, Burlington Stores has delivered a high return over the last year, with a 73.56% total price return, highlighting the stock's impressive performance.
InvestingPro Tips for Burlington Stores underscore the positive revisions by analysts, with eight analysts having revised their earnings upwards for the upcoming period. This aligns with the article's mention of Burlington's management revising full-year guidance upwards. Additionally, the retailer is praised for trading at a low P/E ratio relative to near-term earnings growth, an aspect that may interest value-oriented investors.
For readers seeking more detailed analysis, there are additional InvestingPro Tips available on https://www.investing.com/pro/BURL. These tips delve deeper into the company's financial health and market performance, offering insights that could be pivotal for investment decisions.
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