Sell-Side Roundup: Wall Street Mostly Positive On New Burlington Stores CEO

It's a new era for Burlington Stores Inc BURL after the retailer announced Wednesday that Thomas Kingsbury, its chairman and CEO for over a decade, will step down later this year.

Michael O’Sullivan, formerly president and COO of Ross Stores, Inc. ROST, will take over as CEO.

DA Davidson

The addition of O’Sullivan is a strong positive, as he brings with him a proven record of success in the off-price retail business, D.A. Davidson analyst John Morris said in a Wednesday note. 

O'Sullivan has been present and COO at Ross Stores since December 2009, and previously served as the retailer's executive vice president and chief administrative officer from February 2005 to December 2009, the analyst said.

"We believe Mr. O’Sullivan’s leadership during should prove vital for BURL’s management team in working alongside them to pursue long-term expansion initiatives as the company enters its next phase of growth,” Morris said.

DA Davidson maintains a Buy rating on Burlington Stores with a $193 price target.

Morgan Stanley 

Morgan Stanley analyst Kimberly Greenberger also views the succession plan as a positive, maintaining an Overweight rating on Burlington with a $168 price target.

The analyst said she expects O’Sullivan will help the company refine its off-price business model and narrow the EBIT gap margin against peers.

UBS 

UBS analyst Jay Sole took a different stance on Burlington, maintaining a Sell rating with a $131 price target, adding that the company's issue is not leadership.

“In our view, the issue is how the off-price channel can adapt to the changing retail environment,” the analyst said. “Barring some major change in strategy, which we think is unlikely, we think BURL will have a tough time evolving no matter who is CEO.”

Cowen 

Cowen analyst John Kernan maintained an Outperform rating with a $165 target and said Burlington’s long-term story remains in place.

Cowen slightly lowered its 2019 EPS estimates after the first-quarter guidance was updated, but said he still sees Burlington as a potential mid-teens EPS compounder.

Burlington Stores shares were up 1.08 percent at $178.57 at the time of publication Thursday. 

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Photo courtesy of Burlington Coat Factory.