Burlington Stores, Inc. (BURL) is a nationally recognized apparel retailer offering a wide range of fashion-focused merchandise, like women's, menswear, youth, footwear, accessories, toys, gifts, coats, and baby, home, and beauty products. Recently, the company posted solid financial results for the fiscal third quarter (ended November 2).

For the third quarter, the company reported total sales growth of 11% from the prior year’s quarter. Also, its comparable store sales growth grew 1% year-over-year. Burlington also maintained its company growth in the third quarter at 4%, consistent with the previous trends.

BURL is a Fortune 500 company operating through its 1,103 stores (as of the end of the third quarter of Fiscal 2024) in 46 states, Washington D.C., and Puerto Rico. These stores are spread out over 1,000 locations, and the company is continuously working to expand its reach through new stores. Also, its quick adaptability to changing environments helps it sustain and thrive.

Also, changing consumer preferences for shopping locally, coupled with rapid technological advancements and urbanization, are swiftly transforming the retail market. The global retail market is expected to grow strongly at a CAGR of 8.1% during the forecast period, resulting in a market volume of $42.76 trillion by 2028.

Looking forward, the company projects total sales growth in the range of 9% to 10% from the prior year, and its comparable store sales are expected to increase approximately 2% year-over-year for the full fiscal year 2024. By the end of 2024, the company now expects to open 101 new stores.

Shares of BURL have gained 44.9% over the last six months and an impressive 68% over the past year to close its last trading session at $288.36. The prominent performance reflects its ability to capitalize on the booming retail market trends, cementing its position as a market leader.

Let’s dive deeper into the factors that could shape BURL’s performance moving forward.

Solid Financials

For the third quarter that ended November 2, 2024, BURL’s total revenue increased 10.5% year-over-year to $2.53 billion. Its income before income tax expense grew 76.5% from the prior year’s quarter to $118.04 million. The company’s adjusted EBITDA of $228.79 million indicates growth of 30.3% year-over-year.

In addition, the company’s adjusted net income came in at $99.89 million, up 56.5% year-over-year, while its adjusted earnings per share rose 58.2% from the year-ago value to $1.55, respectively. Also, BURL’s cash and cash equivalents totaled $857.80 million as of November 2, 2024, versus $615.86 million as of October 28, 2023.

Sound Historical Growth

BURL’s revenue grew at a CAGR of 5.2% over the past three years, while its EBITDA improved at a CAGR of 0.8%. Its total assets increased at a CAGR of 5.1% over the same period, while the company's net income and EPS grew at respective CAGRs of 2% and 3.6% over the same time frame.

Further, the company’s tangible book value increased at a CAGR of 25.9% over the same timeframe.

Favorable Analyst Estimates

Analysts expect BURL’s revenue for the fourth quarter (ending January 2025) to come in at $3.29 billion, indicating an increase of 5.3% year-over-year. The consensus EPS estimate of $3.76 for the same period reflects a 2.9% year-over-year improvement. Further, the company has an impressive consensus surprise history, having topped the consensus EPS estimates in all four trailing quarters.

For the fiscal year (ending January 2025), the company’s revenue and EPS are anticipated to grow 9.5% and 30.6% year-over-year to $10.65 billion and $7.92, respectively. Moreover, Street expects its revenue and EPS for the fiscal year 2026 to grow 9.8% and 19.1% from the prior year to $11.69 billion and $9.42, respectively.

Mixed Profitability

BURL's trailing 12-month gross profit margin of 43.24% is 14% higher than the 37.94% industry average. Likewise, the stock's trailing 12-month net income margin of 4.49% is higher than the industry average of 4.34%. However, its trailing-12-month EBIT margin of 6.63% is 17.5% lower than the industry average of 8.04%.

Furthermore, the stock's trailing 12-month levered FCF margin of 0.81% is considerably lower than the 4.60% industry average.

Stretched Valuation

In terms of forward non-GAAP P/E, BURL is currently trading at 36.43x, 106.9% higher than the industry average of 17.61x. The stock’s forward EV/Sales and EV/EBITDA of 2.11x and 21x are considerably higher than the industry average of 1.34x and 10.78x, respectively.

In addition, the stock’s forward Price/Sales and Price/Book of 1.70x and 14.35x are 74.5% and 426.5% higher than the industry averages of 0.98x and 2.73x, respectively.

POWR Ratings Reflect Uncertainty

BURL’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, translating to a Neutral in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. BURL has a B grade for Momentum. The stock is trading above its 50-day and 200-day moving averages of $262.40 and $235.40, respectively, indicating an uptrend.

However, the stock has a C grade for Stability, justified by its 24-month beta of 1.15. Also, BURL has a D grade for Value, which is consistent with its elevated valuation.

BURL is ranked #38 among the 60 stocks in the B-rated Fashion & Luxury industry.

Beyond what I have stated above, we have also given BURL grades for Growth, Sentiment, and Quality. Get access to all the BURL ratings here.

Bottom Line

BURL posted solid financial results in the last reported quarter. Further, the company’s growth prospects appear robust, propelled by the continuous expansion of its store footprint, quick adaptability, and industry prospects. However, it grapples with slow comparable sales growth and uncertain profitability.

Given BURL’s elevated valuation and lower profitability, waiting for a better entry point in this stock seems prudent.

Stocks to Consider Instead of Burlington Stores Inc. (BURL)

Given its near-term uncertain prospects, the odds of BURL outperforming in the weeks and months ahead are compromised. However, there are many industry peers with much more impressive POWR Ratings. So, consider these A (Strong Buy) or B (Buy) stocks from the B-rated Fashion & Luxury industry instead:

Hugo Boss AG (BOSSY), Weyco Group, Inc. (WEYS), and H&M Hennes & Mauritz AB ADR (HNNMY).

For exploring more A and B-rated fashion & luxury stocks, click here.

What To Do Next?

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BURL shares were trading at $283.80 per share on Friday afternoon, down $4.56 (-1.58%). Year-to-date, BURL has gained 45.93%, versus a 28.09% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

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