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Why Burlington Stores’ Stock Rose on Earnings and a New Outlook

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Stock up on earnings news

The stock price of off-price retailer Burlington Stores (BURL) rose  7.4% on May 26 as the company reported a 39% rise in its adjusted earnings per share for 1Q16, which ended on April 30, 2016. The company reported adjusted earnings per share of $0.57, significantly exceeding the consensus analyst estimate of $0.48. Burlington Stores reported its 1Q16 earnings before the markets opened on May 26.

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Earnings growth drivers

The strong growth in Burlington Stores’ adjusted earnings per share was driven by higher sales and improved margins. We’ll discuss the company’s sales performance and margin improvement in parts 2 and 3 of this series. Burlington Stores’ 1Q16 earnings per share also benefited from a reduction in diluted shares outstanding to 72.4 million from 76.5 million at the end of 1Q15. This reduction was mainly driven by the repurchase of 4.9 million shares since 1Q15.

Burlington Stores is one of the top ten holdings in the SPDR S&P Retail ETF (XRT). It constitutes 1.3% of the fund.

Comparison with peers

The company’s off-price peers TJX Companies (TJX) and Ross Stores (ROST) also reported strong earnings growth in the comparable first quarter. TJX Companies reported a 10.1% rise in its adjusted EPS for the quarter ended April 30, 2016, mainly due to higher sales. Ross Stores delivered a 6.6% rise in its 1Q16 adjusted EPS, driven by higher sales. However, upscale department store Nordstrom (JWN), which also operates off-price Rack stores, posted a 45.5% drop in its earnings in 1Q16.

Guidance revised

Following the strong results in 1Q16, Burlington Stores raised its full-year guidance for fiscal 2016. The company now expects its fiscal 2016 adjusted earnings per share in the $2.68–$2.78 range. This outlook compares to the company’s March 2016 guidance for fiscal 2016 adjusted earnings per share in the $2.62–$2.72 range. The company delivered adjusted earnings per share of $2.31 in fiscal 2015.

We’ll discuss the company’s growth in 1Q16 sales in the next part of this series.

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