Burlington Stores, among this year's fastest-rising retailers like Walmart, is the IBD Stock Of The Day for Thursday. Shares have received a number of price-target hikes in the wake of Burlington's Q3 earnings report and Black Friday.
Burlington on Nov. 26 reported a 41% increase in Q3 earnings to $1.55 per share adjusted to meet FactSet expectations. Total revenue rose about 11% to $2.53 billion, short of estimates for $2.55 billion.
CEO Michael O'Sullivan noted that third-quarter comparable-sales trends started out "very strongly" for the company's winter outerwear stronghold. But warmer weather starting in mid-September slowed sales momentum. However, comparable sales were up 4% during the quarter if cold weather categories were excluded, which represented 15% of sales for Q3.
The comp growth is consistent with the trajectory Burlington has seen since March, O'Sullivan said, adding that the company is "very encouraged" by the underlying sales trend.
"The agility with which we operated during the quarter has left us in a strong inventory position, which has us well poised for the holiday season," O'Sullivan said. At the time, he added that November was off to a good start, and that he was optimistic about prospects for the fourth quarter.
Meanwhile, Black Friday on Nov. 29 flashed some strong signs for retailers, according to Mastercard.
Mastercard's SpendingPulse reported that Black Friday retail sales rose 3.4% compared with last year, not adjusted for inflation. Online retail sales increased 14.6% vs. last year, while in-store sales ticked up 0.7%, according to Mastercard. Data indicates that jewelry, electronics and apparel remain the top gift sectors for the holidays. Mastercard noted there was particular strength in e-commerce apparel shopping during Black Friday.
"Black Friday was a good indicator of how the holiday season is positively shaping up," Michelle Meyer, chief economist at the Mastercard Economics Institute, said in the release. "Consumers are comfortably in the gift-giving spirit as price reductions and deals occur across sectors, supporting budgets for holiday shopping."
Steve Sadove, senior advisor for Mastercard, added that "shoppers are making the most of seasonal deals and enjoying a balance of experiences spending and gifts for all loved ones. They're more strategic in their shopping though, prioritizing promotions that they believe hold the greatest value — opening their wallets, but with more intentional distribution."
Burlington Outlook
Still, the discount retailer provided cautious guidance for the fourth quarter, expecting comparable-sales growth to range from 0% to 2%.
Telsey Advisory in a Nov. 27 research note called the Q3 results a "bit of a mixed bag," The Fly reported. However, there was improvement in November as temperatures cooled and the firm expects underlying trends to remain solid. Telsey raised its price target on BURL stock by 10 to 320 and kept an outperform rating on shares.
Evercore ISI also said that it sees no change in Burlington's long-term story, and that the weather impact on comparable sales is not "a true indicator of the progress being made." Evercore lifted its price target on Burlington to 340 from 315 and maintained an outperform rating on the stock.
Elsewhere, Goldman Sachs on Dec. 2 added Burlington to its U.S. Conviction List as part of its monthly update. Goldman wrote that the retailer is ideally positioned for today's economy thanks to its value offering. Meanwhile, the retailer should benefit from sequentially strengthening low-income consumers, as well as high-end consumers trading down. The firm has a buy rating and 334 price target for Burlington stock.
BURL Stock
Burlington eased about 1.4% Thursday.
BURL stock is in a buy zone from a 279.51 buy point for a cup-with-handle base after breaking out on Nov. 22. Shares have edged higher for nearly three weeks. All of those weeks topped out just above 298, creating a shelf pattern with an entry at 298.88.
Burlington has rallied 67% from its 2024 low from April. The stock is up about 49% so far this year and trading at its highest level since December 2021.
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