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Will Burlington Stores' Efforts Help Overcome Coronavirus Woes?

Zacks Equity Research
·3-min read

Burlington Stores, Inc. BURL has been hit hard by the coronavirus pandemic, as evident from the company’s performance during the first half of fiscal 2020. Disappointingly, it reported loss per share in the first and second quarter of the fiscal, while sales remained dismal for both the quarters. The volatility regarding the pace of recovery in consumer demand and COVID-19-induced uncertainties refrained management from providing sales and earnings view for fiscal 2020. Due to delay in the back-to-school trend and the ongoing crisis, management assumes comp sales to be down nearly 20% for fiscal third quarter.

Burlington Stores continues to grapple with a soft sales trend for quite some time. The company missed the Zacks Consensus Estimate for the fourth straight quarter when it reported second-quarter fiscal 2020. Also, total revenues fell 39.1% year over year in fiscal second quarter following a decline of nearly 51% in the preceding quarter. In the most recent reported quarter, net sales also plunged 39%, mainly owing to adverse impacts of COVID-19, while other revenues were down 57.9% year over year. Although sales were robust on pent-up demand and clearance markdowns as stores reopened, the sales trend declined significantly in the second half of June.

Further, sales in the re-opened stores fell 14% from the date of re-opening to the end of the reported quarter. Sales in re-opened stores consists of sales in stores which were opened before the end of fiscal second quarter. Significant sales decline on account of store closures and disruptions with respect to COVID-19 hurt the bottom line. We note that the company delivered second-quarter adjusted loss of 56 cents per share, which compared unfavorably with earnings of $1.36 recorded in the prior-year quarter.



Together, these factors have weighed on the apparel retailer’s price performance. So far this year, the Zacks Rank #4 (Sell) company’s shares have lost 9.3% against the industry’s rally of 9.1%.

Can Growth Plans Offer Respite?

Speaking of Burlington Stores’ strategies, the retailer has made multiple changes to its business model to adapt to the ongoing changes in the industry. Also, the company has made technological advancements, initiated a better marketing approach and focused on localized assortments. Additionally, the company has been optimizing markdowns, effectively managing inventory and controlling SG&A expenses. Also, it seems focused on its store-expansion strategy to drive top-line growth. During the second quarter of fiscal 2020, the company inaugurated three stores, and expects to open 37 outlets with seven closures or relocations in the upcoming quarter. For fiscal 2020, the company now anticipates opening 62 stores while relocating or shuttering 26, thus adding 36 net new outlets.

Certainly, the limitations revolving around Burlington Stores cannot be overlooked in the near term. However, the company’s strategic initiatives to bring itself back on the growth trajectory somewhat appear encouraging.

Key Picks in Retail

Target TGT has a long-term earnings-growth rate of 7.2% and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Tapestry TPR has a long-term earnings-growth rate of 10% and a Zacks Rank #2 (Buy).

Sprouts Farmers Market SFM, also a Zacks Rank #2 stock, has a long-term earnings-growth rate of 9.2%.

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Target Corporation (TGT) : Free Stock Analysis Report
 
Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report
 
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Tapestry, Inc. (TPR) : Free Stock Analysis Report
 
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Zacks Investment Research