What Happened: Shares of off-price retail company Burlington Stores (NYSE:BURL) jumped 10% in the morning session after the company reported third quarter results with the all-important same-store sales metric in retail beating expectations, although revenue missed slightly. It was also good to see Burlington beat analysts' gross margin expectations this quarter. Lastly, on the positives, full year EPS guidance was raised, and management gave positive commentary on the current environment, saying that "November is off to a solid start, helped by cooler weather at the beginning of the month. We feel very good about how we are set up for Holiday." Overall, it was a strong quarter for BURL, and after off-price retail peer ROST reported strong earnings the week prior, the industry seems to be holding up well as of late.
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What is the market telling us: Burlington's shares are somewhat volatile and over the last year have had 8 moves greater than 5%. But moves this big are very rare even for Burlington and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 9.6% on the news that the company reported second quarter earnings in which it lowered its full-year revenue and EPS guidance. Management gave some reasons for the weak outlook, adding, "Looking at the spring season as a whole, it is clear that the lower-income shopper, our core customer, is still under significant economic pressure. Based on the underlying year-to-date comp trend we are narrowing our full-year comparable store sales guidance to a range of 3% to 4% versus 2022. It is possible that the trend will strengthen in the back half of the year, and if it does, then we are confident that we can chase it."
Despite these unfavorable macro trends, Burlington is playing offense. Over the past few months, it's used bankruptcies from other retail companies like Bed Bath & Beyond to acquire leases for new stores in great locations, expanding its store base and brand.
Furthermore, this quarter's EPS and adjusted EBITDA surpassed expectations while revenue was in line. We were also glad that next quarter's earnings guidance exceeded Wall Street's estimates. However, it seems investors are struggling to accept the company's weak full-year outlook.
Burlington is down 19.1% since the beginning of the year, and at $166.74 per share it is trading 28.8% below its 52-week high of $234.15 from January 2023. Investors who bought $1,000 worth of Burlington's shares 5 years ago would now be looking at an investment worth $1,122.