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Burlington’s Small but Significant Presence in US Off-Price Retail

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Jan. 11 2016, Updated 3:45 p.m. ET

US off-price retailing

In 2016, the US off-price retail market segment is getting interesting, with more and more major department stores branching into this lucrative space. Off-price stores sell their merchandise at significant discounts compared to department and specialty store regular prices.

The US off-price space is currently dominated by the following three retailers:

Of these three, Burlington Stores is comparatively smaller, with a store count of 566 stores in 45 states in the US and Puerto Rico, inclusive of an internet store as of October 31, 2015.

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Tracing Burlington’s history

Burlington Stores operates through its indirect subsidiary Burlington Coat Factory Warehouse Corporation. The roots of Burlington Coat Factory, founded by the Milstein family, can be traced back to 1972, when its first outlet store was opened in Burlington, New Jersey, with coats as the primary offering. The merchandise offering was later expanded to men’s and women’s suits, sportswear, shoes, accessories, and baby clothing and products.

Burlington went public in 1983. In 2006, Bain Capital acquired Burlington Coat Factory. The company again went public in October 2013. Bain Capital ceased to own a majority of the company’s outstanding common stock in October 2014. Burlington Stores constitutes 1.2% of the portfolio holdings of the SPDR S&P Retail ETF (XRT).

Charting a competitive landscape

As of October 31, 2015, TJX Companies had 3,594 stores across the US, Canada, Europe, and Australia, while Ross Stores operated 1,448 stores. In fiscal 2014, Burlington Stores generated revenues of $4.8 billion. TJX Companies and Ross Stores delivered revenues of $29.1 billion and $11 billion, respectively, in the comparable fiscal year.

Aside from TJX Companies and Ross Stores, Burlington Stores also competes with department stores, specialty stores, discount stores, wholesale clubs, and outlet stores. Upscale department store Nordstrom (JWN) competes in the off-price space through its Rack stores. Macy’s (M) entered off-price retailing through Macy’s Backstage stores in 2015.

In this series on Burlington Stores, we’ll discuss the company’s business model, merchandise assortment, strategic priorities, and other operational and financial parameters. Continue reading for a crucial analysis of Burlington’s business model.

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