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Burlington Stores (BURL) Rides High on Strategies: Apt to Hold

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Burlington Stores, Inc. (BURL - Free Report) stock seems well poised for growth, thanks to the successful execution of its Burlington 2.0 strategy and strong prospects. The main objective of the 2.0 initiative is to significantly improve the execution of the off-price model. The company has also been progressing well in its store-expansion efforts for a while now.

Benefiting from such tailwinds, shares of this apparel retailer have surged a whopping 71.5%, surpassing the industry’s 4.4% growth over the past three months. A Value Score of B for this presently Zacks Rank #3 (Hold) stock further speaks volumes.

Moving forward, analysts seem optimistic about the stock. The Zacks Consensus Estimate for earnings per share (EPS) of $4.00 for fiscal 2022 and $6.36 for fiscal 2023 shows an increase of 0.5% and 1.9%, respectively, over the past 30 days.

In fact, the consensus mark for fiscal 2023’s EPS suggests year-over-year growth of 58.8%. The consensus estimate for the next fiscal year’s sales of $9.53 billion mirrors an11.5% rise from the last fiscal year.

Detailing Growth Efforts

Via the 2.0 initiative, Burlington Stores focuses on three aspects namely marketing, merchandising and store prototype. Under the marketing aspect, it looks to communicate a stronger and more direct off-price value message in a more cost-effective manner. This marketing program is expected to leverage the company’s wide reach.  With respect to merchandising, management expects investing in merchandising capabilities to better execute the off-price model and boost overall growth.

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Additionally, Burlington Stores has made multiple changes to its business model to adapt to the ongoing changes in the industry. The company’s off-price model is helping customers to get nationally branded, fashionable, high-quality as well as right-priced products. Management has increased vendor counts, made technological advancements, initiated a better marketing approach and focused on localized assortments.

 To drive top-line growth, Burlington Stores is focused on store expansion. The company’s store-related efforts including smaller store prototypes have been on track. Management had earlier raised the long-term store target to 2,000 stores from 1,000, by virtue of the smaller store format enabled by the Burlington 2.0 strategy. Over time, this smaller prototype is likely to represent the majority of the company’s new store openings. With this smaller prototype, the company aims to operate with leaner in-store inventory levels.

Management remains optimistic about the outlook for 2023 on five factors. These factors are a greater consumer focus on value, lower levels of promotional activity with a recovering sales trend, strong availability of great off-price merchandise, taking the right actions and a better expense environment in 2023, particularly for the contracted transportation rates. It expects the availability of great in-season merchandise to be pretty strong in the year.

Key Picks in Retail

We highlighted three top-ranked stocks, namely Tecnoglass (TGLS - Free Report) , Wingstop (WING - Free Report) and Capri Holdings (CPRI - Free Report) .

Tecnoglass manufactures and sells architectural glass and windows, and aluminum products for the residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Tecnoglass’ next financial-year sales and EPS suggests growth of 111.2% and 9%, respectively, from the year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 26.9%, on average.

Wingstop, which franchises and operates restaurants, currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 5.8%, on average.

The Zacks Consensus Estimate for Wingstop’s next financial-year sales and EPS suggests growth of 18.4% and 16.1%, respectively, from the year-ago reported numbers. WING has an expected EPS growth rate of 12% for three-five years.

Capri Holdings, a global fashion luxury group of iconic brands like Versace, Jimmy Choo and Michael Kors, carries a Zacks Rank of 2 at present.

The Zacks Consensus Estimate for Capri Holdings’ current financial-year sales and EPS suggests growth of 0.9% and 10.6%, respectively, from the corresponding year-ago tallies. CPRI has a trailing four-quarter earnings surprise of 21%, on average.

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