The Burlington 2.0 "Full Potential" strategy propels BURL stock well above the industry's average just shy of 5% over the last three-month period and is on its way to achieving its five-year growth plan.
With a focus on fashion, Burlington Stores, Inc. merchandises branded apparel products in the United States. They offer items such as babies, homes, accessories, footwear, toys, and beauty products along with ready-to-wear apparel for women, men, and children. As of the end of the second quarter of Fiscal 2022, the Company operated 877 locations, mostly under the brand Burlington Stores, in 46 states and Puerto Rico. Subscribe to our artificial intelligence-based stock market forecasts to find out if BURL is still a buy.
Investors are pleased by fourth-quarter projections that suggest a minor improvement in the performance of the off-price retailer despite a dismal third-quarter earnings announcement from the company. Many retail stocks are rising, which may indicate that investors believe the industry is oversold. CEO Michael O’Sullivan stated that the company did not respond enough to the shift in consumers' frame of reference for value and took steps to improve the value and mix of its assortment.
“While we acknowledge that there are risks and uncertainties, we think the outlook for 2023 is very positive. We anticipate that the economic and competitive environment could set up very well for off-price. We also recognize that we will be lapping our own execution mistakes and under-performance from 2022. Based on these factors we believe that we can start to drive significant sales, margin, and earnings recovery next year.”
The market applauded BURL's successful inventory and cost management strategies in the fourth quarter, which are demonstrated by this earnings projection. Total sales decreased by 11% compared to the same period in 2021, and comparable store sales decreased by 17%. Net income was $17 million and diluted EPS was $0.26, inclusive of an $11 million impairment charge. On a non-GAAP basis, Adjusted EBIT was $55 million and Adjusted EPS was $0.43. The outlook for 2023 is positive with the potential for significant sales, margin, and earnings recovery. The gross margin rate decreased by 20 basis points, while SG&A increased by 140 basis points as a percentage of net sales. The effective tax rate was 26.4%, and the Adjusted Effective Tax Rate was 26.7%. Inventories increased by 36%.
Looking ahead to the fourth quarter, adjusted profits per share improved from $2.45 to $2.75, exceeding the $2.53 reported in the prior year. Additionally, the company recognizes that it will be lapping its own execution mistakes and underperformance from 2022. Therefore, they believe that they can start to drive significant sales, margin, and earnings recovery next year. On five considerations, management feels upbeat about the prospects for 2023. These variables include a stronger customer focus on value, reduced levels of promotional activity with a rebounding sales trend, abundant availability of exceptional off-price products, implementing the proper steps, a better expenditure environment in 2023, particularly for contractual transportation rates and that anticipated in-season products will be abundant in 2023. The CEO has stated that while there are risks and uncertainties, he thinks the outlook for this year is very positive. However, the company is maintaining its guidance for the fourth quarter, acknowledging the external risks.
The Burlington 2.0 "Full Potential" Strategy
The Burlington 2.0 "Full Potential" strategy aims to maximize the company's sales growth and increase its operating margins. The strategy consists of six key components, including chasing the sales trend, operating with leaner inventories, investing in buying and planning, creating more operational flexibility, implementing a smaller store prototype, and challenging expenses across all areas of the business. To chase the sales trend, Burlington intends to hold and control liquidity while fueling the trend through opportunistic buys. To operate with leaner inventories, the company will drive faster turns and lower markdowns, while flowing fresh receipts to support the sales trend.
The investment in buying and planning will involve increasing headcount in the merchant and planning departments and improving training, tools, and reporting. To increase operational flexibility, Burlington aims to have a faster and more responsive supply chain, as well as a more flexible store staffing model. The smaller store prototype is expected to result in more productive retail locations and lower occupancy and operating expenses. Finally, the strategy will challenge expenses in all areas of the business. The goal is to increase the company's operating margins through higher comparable store sales growth, higher merchandise margins, and lower occupancy and operating costs. Additionally, the smaller store prototype will enable the expansion of new store openings, leading to faster top-line sales growth.
Five-Year Growth Plan
Now that we have addressed the company's 3Q22 earnings, the short-term projections going forward and the company's 2.0 strategy, let's now discuss the longer-term vision. The Five Year Growth Plan aims to achieve significant growth and expansion over the next five years. The plan calls for the opening of 87 new stores in 2022, and a target of 100-120 new store openings per year from 2023 to 2026. Given the smaller shop format afforded by the Burlington 2.0 plan, management had already increased the long-term store objective to 2,000 from 1,000.
The company aims to achieve low double-digit average annual sales growth, which is driven by positive low single-digit average annual comparable sales growth. Based on these assumptions, the company believes it can achieve 200-300 basis points of potential operating margin expansion and mid-teens average annual adjusted earnings per share growth, excluding any potential share repurchases or debt paydowns. The company's strategy is to drive growth through new store openings and improve its operating margin, which is expected to result in substantial financial benefits for the company over the next five years.
AI Trading
Below is our stock prediction from our Top 10 quarterly stock forecast (90 days) publicly announcing BURL as a strong buy on November 9th, 2022 to our subscribers getting exclusive market insights based on artificial intelligence. Subscribers who bought BURL stock based on our AI forecast for the quarterly time horizon on this date generated a significant profit of 72.42%. Understand this, the key benefit of employing artificial intelligence for stock market analysis is that it can study more assets objectively and continually throughout the day. By merging big data analytics with our AI prediction system, we can improve decision-making, result modeling and forecasting, and market knowledge.
While this stock was available in our Top 10 package, we advise a larger forecast because it provides much more market coverage, makes it much easier to follow trends, and of course, you will certainly find A LOT more market opportunities. Click here to see the original forecast published on November 9th, 2022.
This stock prediction has been consistently accessible in numerous predictions during this month as well as in earlier AI forecasts for different time frames, including shorter-term time periods like the weekly or biweekly forecasts. You may spot greater possibilities as a subscriber when you review your daily forecasts by monitoring stock picks that keep appearing regularly in the AI stock predictions. Another indicator is stock picks that appear in multiple anticipated time periods, particularly throughout multiple predictions released each morning at 6:00 AM Eastern Standard Time.
Based on the historical accuracy of each prior financial asset forecast as well as current market variables important to stock price, the AI system calculates the Signal Confidence (SC), which is stated as a percentage out of 100%. In this stock prediction, the Signal Confidence (SC) is 78%. The AI stock prediction system analyzes empirical data on financial market irregularities linked to trader overreaction and underreaction to produce circadian forecasts in various frames. Every day, you will be updated with the best potential stock opportunities identified by AI that are offered from short-term to longer-term time frames.
As a general rule of thumb, longer-term predictions tend to be much more accurate and the profits generated tend to be more substantial making our AI trading signals ideal for value-based investors. When combined with machine learning, these incredibly intricate mathematical functions for statistical programming and modeling are capable of comparing their current coefficients and algorithms to newly added data and then adapting to improve the models' accuracy through a process of validation and reflection.
Stock Ticker | Open: Nov 9, 2022 | Close: Feb 07, 2023 | ROI% |
Burlington Stores, Inc (BURL) | $132.06 | $227.70 | 72.42% |
On November 9th, 2022, subscribers who purchased BURL stock based on our quarterly AI Forecast published every trading for the next 90 days would have made a substantial profit of 72.42%. As previously noted, this stock received several recommendations throughout a range of time intervals. Always exercise discretion when studying the market. Prior to putting any financial plans into action, you should always conduct your own due diligence and seek assistance from a licensed financial advisor.
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Sources: 1. Burlington Investor Relations, "Burlington Stores, Inc. Reports Third Quarter 2022 Earnings" (2022)
2. Burlington Investor Relations, "Burlington Stores Investor Presentation" (2022)
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