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Burlington Stores (BURL) Gains From the Merchandising Strategy

Burlington Stores, Inc. BURL has successfully tailored its market approach by segmenting its customers into lower-income groups and those with moderately higher incomes who are seeking more affordable shopping options. This strategic segmentation allows Burlington to meet a diverse range of consumer demands, broadening its market appeal and reach.

The company's merchandising strategy plays a crucial role in its success. It focuses on a diverse selection of well-known brands in its clothing and accessories departments. This strategy not only draws in consumers looking for value but also drives the company's comparable sales growth.

Burlington Stores has demonstrated strong performance with its regular-priced items and effectively managed its clearance inventory, indicative of proficient inventory management. Quick inventory turnover and a strategic approach to clearance sales have helped maintain healthy profit margins and minimize inventory-related costs.

BURL has exhibited exceptional operational efficiency, which is evident in the notable increase in its operating margins. This improvement is largely due to better cost management, including higher merchandise margins and a more efficient supply chain.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Store Expansion Strategy Looks Promising

Burlington's aggressive store expansion strategy is set to significantly boost its market presence. In fiscal 2023, the company opened 104 new stores, relocated 13 and closed 11. Management sees substantial potential for increasing the number of stores. For fiscal 2024, Burlington plans to open 140 stores, aiming for a net increase of 100 stores after factoring in relocations and closures. This expansion reflects BURL's confidence in its business model and commitment to increasing its market share by entering new areas and enhancing its visibility to a wider customer base.

A critical element of this strategy is acquiring prime locations for new stores, particularly through opportunities arising from the Bed Bath & Beyond bankruptcy. This ensures that each new location is chosen based on strategic factors such as traffic flow, demographics and neighboring businesses, setting the stage for success and bolstering Burlington's competitive stance in the retail market.

Positive Outlook

Management has a positive outlook for the near future. For the first quarter of fiscal 2024, the company expects total sales to grow by 9-11% year over year. It also anticipates an increase in the adjusted EBIT margin of 20-60 basis points compared to the first quarter of fiscal 2023, with adjusted earnings per share ranging between 95 cents and $1.10. The projected margin improvements are primarily due to enhanced merchandise margins and supply-chain efficiencies.

For fiscal 2024, Burlington expects a 9-11% increase in net sales and an adjusted EBIT margin growth of 10-50 basis points. The adjusted earnings per share are forecasted to be between $7 and $7.60, marking an increase from the $6.06 reported in fiscal 2023.

Zacks Rank & Estimates

This Zacks Rank #1 (Strong Buy) company has exhibited a strong run in the past six months. The branded apparel retailer’s shares have surged 70.3% compared with the industry’s 27% growth over the said period, driven by its focus on key areas like marketing, merchandising and store layout to enhance customer value and operational efficiency.

The Zacks Consensus Estimate for earnings per share in the current and next fiscal years is pegged at $7.41 and $9.12, which suggests 22.3% and 23% year-over-year growth, respectively. The Zacks Consensus Estimate for sales in the current and next fiscal years is pegged at $10.72 billion and $11.85 billion, which implies 10.2% and 10.6% year-over-year growth, respectively.

3 Other Solid Picks

Some other top-ranked stocks are American Eagle Outfitters Inc. AEO, Abercrombie & Fitch Co. ANF and Deckers Outdoor Corporation DECK.

American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. The company sports a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings and sales indicates growth of 12.5% and 3.3% from the year-ago period’s reported figures. AEO has a trailing four-quarter average earnings surprise of 22.7%.

Abercrombie & Fitch is a specialty retailer of premium, high-quality casual apparel. The company currently sports a Zacks Rank #1. ANF has a trailing four-quarter average earnings surprise of 715.6%.

The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year earnings and sales indicates growth of 19.1% and 5.6% from the year-ago period’s reported figures.

Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. The company carries a Zacks Rank #2 (Buy) at present.

The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 38.7% and 15.8% from the year-ago period’s reported figures. DECK has a trailing four-quarter average earnings surprise of 32.1%.

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