Which Discount Retail Chain Is the Best Bargain for Your Portfolio?

Discounts on name-brand clothing have never been more in style than they are now. Newcomer to the public scene Burlington Stores (NYSE: BURL  ) may not be the most exciting investment in history, but like its competitors Ross Stores (NASDAQ: ROST  ) and TJX  (NYSE: TJX  ) , it attracts the increasing number of budget-conscious consumers while helping to provide an oasis for investors.

Burlington Stores results
Burlington Stores reported its fiscal third-quarter results on Dec. 10. Total sales popped 10% to $1.065 billion, while same-store sales rose 3.9%. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped 28.3% to $62.5 million.

CEO Tom Kingsbury simply credited store and corporate teams for the growth. He said that the company is focused on growing its number of stores, growing the sales per store, and growing the profitability of the sales. For the fourth quarter, Burlington expects same-store sales to increase by between 2% and 3% with a full-year 0.3% to 0.4% improvement in profitability margins.

In the conference call, Kingsbury explained that Burlington's prices are 60% to 70% below those of traditional department stores as the current economic environment helps fill its pipeline of inventory while also sparking demand. Burlington's long-term goal is to build out a total of more than 1,000 stores, or roughly double the current store count of 521.

Based on recent experiences in opening new stores, Burlington expects each new outlet to bring in an average of $7 million to $8 million in annual sales and $1 million in EBITDA. Since the company only had $62.5 million in earnings at 500 stores, adding $1 million each in EBITDA would be enormous.

On top of this, Burlington believes that it has a huge opportunity to add brands within its stores. It currently has just 4,000 brands, while its two primary competitors have 8,000 and 16,000 brands each. This leaves a potential opportunity to expand brands by two to three times their current count. Kingsbury is "excited about our current performance and momentum as we head into the fourth quarter and 2014."

How does Burlington stack up against Ross Stores and TJX?
Ross Stores saw strong growth numbers last quarter, though it was a bit slower than at Burlington Stores. Ross Stores revenue gained 6% to $2.398 billion, while same-store sales inched up 2%. Earnings per share rose 11.1% to $0.80.

CEO Michael Balmuth of Ross Stores cautioned, "We are up against our own challenging multi-year comparisons and an upcoming holiday season that we believe will be the most intensely competitive and promotional selling period in recent years." In contrast, Burlington Stores said in its conference call that it believes the activity on the promotional front is similar to any other fourth quarter.

Meanwhile, TJX reported the best growth out of the bunch. For its third quarter, TJX saw sales leap 9%, same-store sales pop 5%, and adjusted earnings per share explode 21% to $0.75.

CEO Carol Meyrowitz stated that this beat the company's own expectations. She said that it is testament that TJX can "succeed in all types of economic and retail environments." Long-term, she sees continued "substantial top- and bottom-line growth."

Foolish final thoughts
While some department store retailers are struggling with the economy, discount chains such as Burlington Stores are embracing it. The company has a big opportunity to grow its stores, brands, and profitability in the quarters and years ahead. Burlington deserves a closer look by Fools seeking a retail company that is succeeding at growing now and operates in an industry that has the potential to grow in the future, regardless of whether times are good or bad.

Try this on for comfort
Social Security plays a key role in your financial security. In our special free report "Make Social Security Work Harder for You," our retirement experts give their insight on making the key decisions that will help ensure a more comfortable retirement for you and your family. Click here to get your copy today.


Read/Post Comments (1) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 05, 2014, at 7:01 PM, JAVKO wrote:

    Why does it not matter at all in this market to make any money whatsoever?

    Just the growth hype which never materializes into any actual rofit on any measure!

Add your comment.

DocumentId: 2769424, ~/Articles/ArticleHandler.aspx, 4/20/2014 11:59:05 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 2.54 0.14%
NASD 4,095.52 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

4/17/2014 4:01 PM
BURL $27.00 Down -0.07 -0.26%
BURLINGTON STORES… CAPS Rating: No stars
ROST $68.99 Down -0.40 -0.58%
Ross Stores, Inc. CAPS Rating: ****
TJX $58.70 Down -0.33 -0.56%
The TJX Companies,… CAPS Rating: *****

Advertisement