By Teresa Rivas
When Burlington Stores first shed "coat factory" from its name, it adapted the slogan, "We're more than great coats." That's still true today -- and the stock looks like it's on sale.
In a market that can't seem to get enough of off-price retailers, Burlington has been left out in the cold. Industry leader and T.J. Maxx owner TJX Cos. is up some 130% in the past five years, while Ross Stores has jumped 55%. Then there's Burlington, which has gone almost nowhere. The stock has gained less than 10% over the past half-decade, underperforming the broader market and the State Street SPDR S&P Retail exchange-traded fund. As the smallest of treasure-hunt-style retailers, Burlington is often plagued with growing pains related to its store footprint and merchandising.
That could finally be changing. The company is closing underperforming stores while adding more-profitable locations, reworking its distribution centers, and improving margins.
"Ultimately, retail is about execution, and this has been choppy, and some investors have lost conviction," says Chris Miller, senior portfolio manager and head of the Select Equity team at Allspring Global Investments, which owns the shares. "That's understandable, but we like the strategy, the industry, and the valuation, and continue to see the risk/reward as favorable today."
Off-price retailers, Burlington among them, have been taking market share from other retailers for years as consumers trade down in search of bargains. While Burlington tends to cater to a lower-income consumer hit hardest by inflation, it has still delivered earnings-per-share growth of more than 30% in the past two years. That demonstrates the company has established its bona fides with some of the most value-conscious shoppers.
Consensus calls for EPS to jump nearly 20% in the current fiscal-2026 year, to $9.73 a share, and another 14% in the next. That's well ahead of both TJX and Ross, even though Burlington is trading at 24 times fiscal-2027 estimates, the cheapest of the group. For example, TJX trades at 30 times earnings, while Ross Stores trades at 25.5 times. In addition, Burlington's current price/earnings ratio is well below its average of 35 over the past five years.
But the most enticing thing about Burlington isn't where it's at, but where it's poised to go over the next few years.
"Long term, Burlington can deliver two times the earnings growth of Ross, yet trades four to five times lower," says Bernstein analyst Aneesha Sherman. The company is planning to open more than 100 new more productive locations a year in the next few years -- replacing its less efficient older format -- as part of its continuing expansion, but the "Burlington banner still has 700 fewer stores than Ross, its closest competitor, with plenty of room for expansion and share gains." Sherman says shares should trade to $335, 25% above Wednesday's close of $268.18.
Likewise, most strategists see tax changes related to the One Big Beautiful Bill Act, passed earlier this year, generating higher tax refunds for American consumers come spring. That's likely to be a catalyst for retailers that serve lower-income shoppers.
In addition, Burlington is investing heavily in its distribution centers, "to modernize and improve its supply chain," says Miller. This had been a major source of the company's underperformance vis-à-vis peers, but should lead "to future margin growth that is underappreciated in the current valuation."
That's on top of margin expansion that has already taken place; gross margins are now above their five-year average, at nearly 40% in the most recently completed fiscal year, and analysts see that figure expanding to over 43% in the next two years. Again, that has Burlington ahead of both TJX's and Ross' gross margins of 30.5% and 28%, respectively.
Burlington also has the balance sheet to support its plans, with some $1.5 billion in liquidity. Burlington is the only off-price retailer that doesn't pay a dividend, but it repurchased $61 million of its shares in the most recent quarter, with $444 million remaining in its authorization. In other words, its financial position "supports growth and shareholder returns," writes Jefferies analyst Corey Tarlowe. In a blue-sky scenario, he sees a path to $400 for Burlington shares.
Of course, there are potential clouds. Opening so many new stores every year is expensive and poses execution risk, particularly if Burlington's working-class shoppers fall on the wrong leg of the K-shaped economy. Hispanic shoppers, perhaps nervous about aggressive immigration tactics, turned from being an outperforming demographic earlier in the year to lagging in the third quarter, a trend that could continue. Then there's management's own forecast for the crucial fourth quarter, which calls for a modest 0% to 2% increase in comparable sales.
Nonetheless, it's relatively cheap to roll the dice in favor of Burlington continuing to improve. A strong Black Friday weekend suggests that investors are feeling more Santa than Scrooge, meaning Burlington and its off-price peers "are entering the holidays from a position of strength," observed data analytics firm Placer.ai in a recent report. In December 2024, Burlington was the best performer of the group in terms of traffic rising above its yearly average.
Combined with a strategy that emphasizes a growing footprint of smaller format, more profitable locations, and potentially conservative guidance, things could finally be looking up for Burlington. Investors can ride its coattails.
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December 18, 2025 08:00 ET (13:00 GMT)
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