Burlington Stores Is A Retail Rarity: Growing Foot Traffic, Expanding Margins

Burlington Stores Inc BURL “could be a $10+ billion market cap in due time,” said Cowen analyst John Kernan. Cowen reiterated an Outperform rating and raised its price target from $103 to $110.

Gross Margin Is ‘On Fire’

Same-store sales increased 0.5 percent in the first quarter, below Kernan’s 2 percent estimate, a 2.4 percent consensus and a 1–2 percent guidance.

Despite the slowdown, store related costs accounting for about 2/3 of SG&A expenses deleveraged by only five basis points.

Year-over-year, comparable store inventories have declined 7 percent.

Kernan now estimated fiscal 2017 comps of 2.4 percent, adjusted EPS up from $3.87 to $4, and a 5.9 percent free cash flow yield.

3 Reasons Burlington Can Raise Guidance

The analyst sees the following as potential upsides to Burlington’s fiscal 2017 outlook:

• Increased cost savings from product sourcing as deleverage is factored into guidance.
• Merchandise margin expansion above the 50-basis-points guidance.
• Same-store sales above a low, single-digit rate will drive leverage on store related costs.

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