Burlington Has 'Lean And Mean' Inventory, Growing Traffic

Burlington Stores Inc BURL reported strong Q2 results, attributing the beat to growth in traffic and UPT. BMO Capital’s John D. Morris reiterated an Outperform rating on the company, while raising the price target from $69 to $96.

“We believe the company still has room for improvement in under-penetrated categories (Home and Women's) as well as margin expansion, which could further drive EPS growth going forward,” Morris mentioned.

Q2 Beat

Burlington Stores reported its EPS for Q2 at $0.39, ahead of the estimate and the consensus. Comp came in at 5.4 percent, again ahead of the consensus forecast, driven by increases in traffic, conversion and UPT.

The company issued its Q3 EPS guidance at $0.30-0.32, driven by expectations of comp of 2.5-3.5 percent.

“Management is typically conservative, and we believe that 3Q and full-year guidance is no different,” Morris stated, while adding, “Although home, beauty, and women's apparel performed strongly this quarter, we believe these categories have room for improvement.”

“Lean And Mean” Inventory

Morris also pointed out that Burlington Stores “continues to run a lean inventory initiative and the company currently has a significant open-to-buy capability.”

Department stores usually have lean inventories heading into fall, which could lower the amount of products available to off-pricers.

“However, we view this as an incremental positive since this should allow the department store channel to pull back on promotions, widening the value differential between the two channels,” the analyst added.

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