NEW BULLISH Plays
Burlington Stores, Inc. - BURL - close: 55.46 change: +0.57
Stop Loss: 53.65
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on July -- at $---.--
Listed on July 15, 2015
Time Frame: Exit PRIOR to earnings in September
Average Daily Volume = 1.6 million
New Positions: Yes, see below
Investors seem to be in a forgiving mood with BURL. The company's most recent earnings report was a disappointment but the stock has recovered. Now it looks like the longer-term bullish trend is poised to resume.
BURL is in the services sector. According to the company,
"The Company, through its wholly-owned subsidiaries, operates a national chain of off-price retail stores offering ladiesâ€™, menâ€™s and childrenâ€™s apparel and accessories, home goods, baby products and coats, principally under the name Burlington Stores."
BURL's Q4 results were pretty good. The company announced these on March 17th. Earnings of $1.43 per share beat estimates and revenues were up +12% to $1.5 billion, also above estimates. Q4 comparable store sales surged +6.7% while gross margins improved 50 basis points. Management did warn that Q1 results would not be so hot but the stock didn't react to the negative guidance.
Shares did react when their chief merchandising officer resigned. This news hit on March 24th and shares of BURL peaked the next day. Shares fell more than 15% with a drop toward round-number support near $50 over the next few weeks. Then BURL reported its Q1 earnings on June 9th. Their bottom line results of $0.41 per share met estimates. Revenues were up +4.9% to $1.18 billion but that missed expectations.
The biggest miss was comps. BURL said their comparable store sales were only +0.8% versus the company's previous guidance of +2-3% and below analysts' estimates of +4%. Management issued mixed guidance for the second quarter and soft guidance for fiscal year 2016. They tried to soften the blow of bad news by announcing a $200 million stock buyback program to be completed over the next 24 months.
Wall Street was not happy over the terrible comps. Analysts are also concerned how a wage hike might impact margins. Wal-Mart, Target, the Gap, and TJX have all raised their minimum wage and other retailers are feeling pressure to raise theirs to retain employees. BURL announced they were raising their minimum wage to at least $9.00 an hour.
BURL's CEO Tom Kingsbury commented on their results, "We are pleased with our 64% increase in adjusted EPS which was driven by a robust gross margin expansion. While our comp sales were positive for the ninth consecutive quarter, we were negatively impacted by the timing of IRS tax refunds, lower markdown sales due to significantly less markdown inventory, increased store closures due to weather, and receipt flow issues in three key Easter businesses."
Naturally the market's reaction to bad news was to sell the stock. BURL plunged more than -8% posting its worst one-day loss since going public in 2013.
Fortunately for investors the sell-off was short-lived. BURL found support near $48.00 and its rising 200-dma. Now six weeks later the stock is above its pre-earnings highs and poised to breakout past potential resistance near $56.00. The long-term up trend looks poised to resume. Tonight we're suggesting a trigger to launch bullish positions at $56.05.
Trigger @ $56.05
- Suggested Positions -
Buy BURL stock @ $56.05
- (or for more adventurous traders, try this option) -
Buy the SEP $60 CALL (BURL150918C60) current ask $1.25
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike