Why Investors Are Selling Burlington Shares After Earnings Beat

Shares for Burlington Stores Inc. dropped nearly 3% in Thursday premarket trading after the retailer issued a cautious outlook.

During the fourth quarter, the Burlington, N.J.-based company logged adjusted earnings per share of $3.25, beating analysts’ bets of $3.23, on profits that climbed 12% to $206 million. Revenues rose 10.5% to match the $2.2 billion expected by Wall Street, and same-store sales improved 3.9%.

“We are pleased with our fourth-quarter results,” CEO Michael O’Sullivan added in a statement. “In addition, our inventory management made further progress during the fourth quarter…putting us in a very opportunistic inventory position as we enter fiscal 2020.”

However, Burlington’s guidance for the next quarter fell below forecasts: It anticipates a sales gain of 8% to 9% and for earnings between $1.29 and $1.34, compared with predictions of earnings per share of $1.42.

Looking ahead, the company expects full-year revenues to grow 8% to 9% and adjusted EPS in the range of $7.97 to $8.12.

In recent years, Burlington has made a number of progressive business steps, including ditching massive promotions, enhancing its stores’ treasure hunt experience and expanding its merchandise assortment. It dropped the name “Coat Factory” in 2009 as part of former CEO Thomas Kingsbury’s turnaround strategy, which helped grow its share price from around $30 in 2014 to a high of $180 in late 2018.

Rival off-pricer Ross Stores Inc., on the other hand, recently posted better-than-expected earnings but warned of potential supply chain disruptions as the novel coronavirus has cast uncertainty over many retailers that do business in China.

Over the past few years, discount retailers have consistently bucked industry-wide trends amid retail turbulence spurred by digital disruption, among other factors. Experts believe a significant factor in the success and agility of such chains has been their ability to offer both cheap prices and a treasure hunt experience that engages shoppers with key brand-name finds.

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