Why Burlington Stores' (BURL) Turnaround Is Working

This story has been updated from 10:58 am EST with additional information and analyst comments, stock price update.

NEW YORK (TheStreet) -- Shares of Burlington Stores (BURL) rose 3.1% to $37.18 after the discount retailer posted better-than-expected fiscal second quarter results and raised its outlook with adjusted earnings of $1.52 to $1.58 per share for the fiscal year, compared with its previous $1.25 to $1.35 per share.

The company also raised its sales growth outlook for the full year to a range of 6.5% to 7.2%, from its previous 5.8% to 6.8%.

For its fiscal second quarter, Burlington Stores posted an adjusted net loss of one cent per share, or a loss of $6.5 million, compared with a loss of 19 cents per share, or a loss of $25 million in the same quarter of last year. Revenue rose 8.2% to $1.05 billion for the quarter. Comparable sales growth of 4.7% beat analysts' expectations of a 3.7% rise, according to Consensus Metrix.

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BURL Chart BURL data by YCharts

Here's what analysts are saying about Burlington Stores.

Paul Lejuez, Wells Fargo Securities (Outperform; $38-$42 valuation range)

Q2 was a strong quarter all around, with comps better than the company had previously announced (+4.7% vs. recent guidance of +3-4% and original guidance of +2-3%) and 50bps of GM expansion. In an environment that remains difficult, BURL is demonstrating that it can execute and drive top- and bottom-line results. And unlike its off-price competition, BURL has easy comparisons. We believe BURL's initiatives are beginning to drive better productivity, they are outcomping their competitors and the company has continued opportunity to improve both the top-line and margins longer term.

BURL "checks all the boxes" of a great retail story, in our view. We believe it is in an attractive industry, it has multiple drivers of top-line growth (including sq ft opportunity and comp momentum), and it has several other drivers of EPS growth. The company has performed well in a very challenging environment and the company has been able to "comp the comp" despite the market view that they had difficult comparisons (though we believe that productivity levels are depressed so comparisons are not difficult). We believe by executing the off-price model better, the company can significantly increase margins in the coming years.

Ike Boruchow, Sterne Agee (Neutral; $39 PT)

BURL put up another solid quarter, with top and bottom-line results exceeding expectations, inventory levels significantly lower, and achievable guidance for 2H. The company's recently-completed debt refinancing also provides significant bottom-line benefits for the next 12 months. While BURL's multiple turnaround initiatives and debt-reduction capabilities are quite compelling, we believe that they are adequately reflected in shares, and we are remaining sidelined for now.



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