uploads///BURL valuation latest

Burlington Stores Trading at Lower Valuations than Off-Price Peers

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Jan. 20 2016, Updated 2:05 p.m. ET

Current valuations of Burlington and peers

As of January 8, 2016, Burlington Stores (BURL) was trading at a forward PE (price-to-earnings) multiple of 15.4x. The company’s valuation multiple is lower than off-price retailers TJX Companies (TJX) and Ross Stores (ROST). TJX Companies and Ross Stores are more established off-price retailers, have a larger presence than Burlington Stores, and currently enjoy higher operating margins. As of January 8, TJX Companies and Ross Stores were trading at forward PEs of 19.2x and 19.6x, respectively. Upscale department store Nordstrom (JWN), which operates the off-price Rack stores, was trading at a forward PE of 13.8x as of January 8.

Burlington Stores is also trading at a lower multiple than the S&P 500 Consumer Discretionary Index, which has a forward PE of 16.9x, and the S&P 500 Index, which has a forward PE of 15.4x.

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Burlington’s guidance for fiscal 2015

In fiscal 2015, ending January 30, 2016, Burlington Stores expects its net sales to increase in the 5.8% to 6.3% range and same-store sales to rise by about 2.0% to 2.5%. The company anticipates its adjusted EPS (earnings per share) for fiscal 2015 to come in the $2.28–$2.32 range, compared to $1.83 in fiscal 2014.

In 2015, Burlington Stores’ valuation multiple declined by 27.4%. Analysts expect the company’s fiscal 2015 adjusted EPS to come in at $2.31, which would reflect an increase of 26% on a year-over-year basis. Analysts currently expect the company’s fiscal 2016 adjusted EPS to increase by 18%.

Burlington Stores’ future valuation might benefit from the company’s efforts to expand its operating margins, and it plans to expand its store base. The company’s long-term plan is to open 1,000 stores. In the 3Q15 conference call, Thomas Kingsbury, Burlington’s President and Chief Executive Officer spoke about the company’s new stores pipeline for 2016 and stated that the company’s approved deals have an average square footage of 52,000 square feet.

Burlington’s ETF exposure

Burlington Stores constitutes 1.2% of the portfolio holdings of the SPDR S&P Retail ETF (XRT). The Vanguard Consumer Discretionary ETF (VCR) has 0.1% exposure to Burlington Stores. We’ll discuss the company’s strengths and weakness in the next part of this series.

In the next two parts of this series, we’ll do a SWOT (strengths, weaknesses, opportunities, and threats) analysis of Burlington Stores. Let’s begin with strengths and weaknesses.

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