Off-price Opportunities. Burlington and Beyond
Burlington Stores is making a unique appeal to investors by embracing its current standing as the smallest and least productive among its peers, an approach that's surprisingly resonating in the stock market. Since late September, Burlington's shares have surged nearly 90%, driven by optimism about its growth potential and the broader buoyancy of the off-price retail sector.
According to the article in The Street, Burlington expects its same-store sales to grow by 3% to 5% this year, a stark contrast to other retailers facing flat or negative trends. Michael O’Sullivan, CEO of Burlington, has highlighted the company’s underperformance relative to competitors like Ross Stores and TJX but sees this as an opportunity for significant improvement and growth. In fiscal 2021, Burlington's sales per square foot and operating profit margins significantly lagged behind those of its main competitors, signaling ample room for efficiency gains and profitability enhancements.
The broader context for Burlington's optimism is the current state of the retail industry, particularly the off-price segment which thrives on purchasing excess inventory from other retailers at a discount and selling it at reduced prices to cost-conscious consumers. With many retailers adjusting their inventories in response to a post-pandemic dip in sales, companies like Burlington are well-positioned to capitalize on the increased availability of discounted merchandise.
Carol Spieckerman, a retail analyst and president of Spieckerman Retail, supports this optimistic view, suggesting that other retailers' challenges with excess inventory create a favorable environment for Burlington. She notes that while other retailers are grappling with the need to slash prices and manage unsold stock, Burlington can leverage this situation to enhance its merchandise assortment and attract bargain-hunting shoppers.
The article also highlights that the off-price retail model remains robust despite economic downturns, as consumers continue to enjoy the thrill of finding high-value items at lower prices. Data from Placer.ai underscores this resilience, showing significant foot traffic increases at Burlington and its competitors, which indicates strong consumer engagement and potential for continued growth in this retail sector.
