NEW BULLISH Plays
Burlington Stores, Inc. - BURL - close: 40.56 change: +0.94
Stop Loss: 38.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on October -- at $---.--
Listed on October 27, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 663 thousand
New Positions: Yes, see below
Why We Like It:
Christmas is less than 60 days away. This year retail spending is expected to surge. The National Retail Federation is forecasting sales during the holiday shopping season to rise +4.1%. Analyst firm Deloitte LLP is expecting a +4.5% improvement. Last year we only saw +2.8% growth and the 10-year average is +2.9%.
If we take into account the positive impact low gasoline prices will have then the estimates above might be too low. Fuel prices are down nearly 20% from their early 2014 highs. That is a huge boost for consumer spending. Oil looks like it will continue to sink so the trend should continue.
The off-price retailers have been outperforming their regular price peers. BURL is part of the off-price group. According to their company website,
"Burlington is a national off price retailer offering style for less for the entire family and the home with up to 65 percent off department store prices every day. Departments include ladies' dresses, suits and sportswear, juniors, accessories, menswear, family footwear, children's clothing,
furniture and accessories for baby at Baby Depot, home dÃ©cor and gifts, along with the largest selection of coats in the nation for the entire family. Burlington has 520 stores in 44 States and Puerto Rico."
Credit Suisse recently noted that BURL has delivered three years in a row of strong same-store sales growth. They did it again when the company reported earnings in early September. BURL said their same-store sales grew +4.7% in their second quarter, compared to estimates for +2-3% growth. Management also noted that their gross margins improved by 50 basis points to 38.2%.
Wall Street was expecting a loss of 8 cents per share on revenues of $1.03 billion. BURL delivered a loss of only one cent and revenues were up +8.2% to $1.05 billion. It was a big improvement from a loss of 19 cents a year ago. More importantly management raised their 2015 guidance for both their earnings and revenue estimates.
The bears will argue that BURL is expensive. It's hard to argue with them since BURL currently sports a P/E near 58. However, investors continue to buy the stock and now shares are poised for another bullish breakout. New highs could spark some short covering. The most recent data listed short interest at 13% of the very small 29.3 million share float.
Tonight we are suggesting a trigger to open bullish positions at $41.05.
Trigger @ $41.05
- Suggested Positions -
Buy BURL stock @ (trigger)
- (or for more adventurous traders, try this option) -
Buy the DEC $40 call (BURL141220c40) current ask $2.95
Option Format: symbol-year-month-day-call-strike