Why These 3 Retailers Crushed the Markets on Tuesday

Shares of Dollar Tree (DLTR) , Barnes & Noble (BKS) and Burlington Stores (BURL)  soared Tuesday after the three companies reported quarterly results.

Major indices also rose Tuesday, but their gains were much more modest. The Dow Jones Industrial Average gained 67 points, or 0.4%, on Tuesday, while the S&P 500 rose 4.8 points, or 0.2%, and the Nasdaq added 17.49 points, or 0.3%. Trading volumes and economic news were light on Tuesday, but as we near the end of earnings season those few retailers reporting late have impressed investors.

Dollar Tree saw its shares rise 8.2% Tuesday after posting better-than-expected fiscal third-quarter profit. Analysts had been expecting adjusted earnings per share of 78 cents, but Dollar Tree posted adjusted EPS of 81 cents. That came on $5.00 billion in sales, just below estimates of $5.07 billion but still a 1.1% year-over-year increase. Same-store-sales rose 1.7%, better than the 1.4% expected. Dollar Tree is now the largest U.S. dollar-store chain after completing its acquisition of Family Dollar.

This has helped the company continue to put pressure on big-box discount retailers such as Walmart. Dollar Tree's smaller footprint and low prices starting at $1 continue to be a winning combination even though the economy is improving and more Americans are working. The fact that consumers haven't gone back up market to higher-priced stores is a sign Dollar Tree may be a recession-proof business that can still post strong figures in a healthy economy -- a very strong and sought-after combination.

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Another big winner on Tuesday was Barnes & Noble, shares of which soared 10.5%. The struggling book store company posted revenue of $858.5 million and lost 29 cents a share. Wall Street was looking for revenue of $859.78 million and a loss per share of 34 cents. The better-than-expected bottom line was only part of the slightly rosier news from Barnes & Nobles' earnings report. The company also posted a same-store-sales decline of just 3.2%, less than the 5% expected.

Management said full-year 2017 same-store-sales will be down in the mid-single digits. Shares of Barnes & Noble are up 49% year to date after Tuesday's move, but I wouldn't own shares of this company even if you gave them to me for free. Barnes & Noble is a dying company, and regardless of what the next quarter brings or how much the company bests analysts' expectations, the fact remains that this company is losing money each quarter, and there are no signs that this will change anytime soon. Barnes & Noble is headed for bankruptcy; it's just a matter of time.

Lastly, big-box clothing retailer Burlington Stores saw shares jump 16% Tuesday. Adjusted EPS came in at 51 cents, up from 21 cents a year earlier and much better than the 33 cents Wall Street was expecting. These great results were due to better-than-expected revenue of $1.34 billion (vs. the $1.32 billion Wall Street forecast). Revenue was up 9.1% from a year earlier. Management said it was happy with results and raised full-year guidance for adjusted EPS to a range of $3.11 to $3.15. The company also said it sees revenue growth of 8.4% to 8.7% and same-store-sales increases of 2.5% to 3.5%.

Burlington's and Dollar Tree's results indicate consumers no long feel the need to shop at name-brand stores for name-brand products, despite the economic conditions. This could be a trend that continues, and investors buying into this change now could really profit moving forward.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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