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Burlington’s Stock Underperformed Off-Price Peers in 2015

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Burlington’s performance in 2015

In 2015, the stock price of Burlington Stores (BURL) declined by 10.6%, ending the year at $42.9 on December 31, 2015. The company underperformed the Consumer Discretionary Select Sector SPDR Fund (XLY) and the Vanguard Consumer Discretionary ETF (VCR). In 2015, XLY and VCR appreciated by 9.1% and 5.7%, respectively. Burlington Stores constitutes 0.1% of VCR. The S&P 500 Index declined by 0.7% in 2015.

As of January 8, 2016, Burlington Stores was trading at a stock price of $41.59.

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Peer comparisons

Burlington Stores’ stock also underperformed TJX Companies (TJX) and Ross Stores (ROST) in 2015. The stock prices of off-price retailers TJX Companies and Ross Stores have appreciated by 4.3% and 14.8%, respectively, in 2015. The stock price of Nordstrom (JWN), which operates the off-price Rack stores, declined significantly by 36.4% in 2015.

Dividends and share buybacks

Burlington Stores is a growth stock and does not pay any dividends on its common stock. The company retains its earnings to fund its capital spending and growth plans.

In June 2015, the company announced a share buyback program of $200 million. As of October 31, 2015, the company has repurchased $123 million of shares under this buyback program. In November 2015, the company’s board authorized the repurchase of an additional $200 million of common stock. Share buybacks reduce the number of outstanding shares and thus boost the earnings per share.

Analysts recommendations and expectations

As of January 8, 2016, analysts had a 12-month target price expectation of $61.17 for Burlington Stores. This reflects a potential upside of 47.1% from the stock price of $41.59 on January 8, 2016. Of the 14 analysts covering Burlington Stores, 11 analysts have given a “buy” recommendation, and three analysts have given a “hold” recommendation.

We’ll discuss the company’s valuation in the next part of this series.

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