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Why Burlington Dropped While Williams-Sonoma and Coty Stocks Popped Today

By Howard Smith – Aug 26, 2021 at 11:50AM

Key Points

  • Williams-Sonoma announced a huge dividend increase and stock buyback plan.
  • Burlington's CEO gave investors a strongly worded warning about the balance of the year.

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Financial results from the retailers impressed investors, but there was something else from Burlington Stores that spooked them.

What happened

Three retailers had equally strong quarterly earnings results, but one of the company's stocks went in a different direction. Shares of home retailer Williams-Sonoma (WSM -1.05%) and beauty and cosmetics company Coty (COTY -0.13%) soared on the news, but the stock of Burlington Stores (BURL 0.46%) sank on a warning from the CEO. As of 11:15 a.m. EDT, the stocks traded as follows:

  • Williams-Sonoma was up 10.4%.
  • Coty was up 13.4%.
  • Burlington Stores was down 10.2%.

So what

Each retailer provided impressive rebounds from the pandemic-impacted previous-year period. Burlington reported a 34% increase in total sales compared to the second quarter of 2020, and 19% growth in comparable store sales. Williams-Sonoma said revenue also grew over 30% and its e-commerce sales grew 58% versus the comparable pre-pandemic period in 2019.

Retail home and accessories shopper paying for product.

Image source: Getty Images.

Williams-Sonoma also hiked its quarterly dividend 20% and announced a new $1.25 billion stock repurchase program. Cosmetics retailer Coty is in the midst of a turnaround and saw adjusted revenue soar more than 80% over the prior-year period. 

Now what

Coty rode some tailwinds specifically in the sector as more people are socializing or returning to work in person. Its results were also mirrored by fellow beauty retailer Ulta Beauty, which had comparable sales jump 56.3%. 

But all wasn't good news for Burlington Stores. CEO Michael O'Sullivan praised the company's momentum and second-quarter sales results. But he also warned investors that looking ahead, margins will be dropping. O'Sullivan said that the retail environment remains unclear and that trends are hard to predict. But what most notably impacted investors was likely this statement: "We are seeing a huge imbalance between supply and demand in global logistics systems. This is driving up freight and supply chain expenses and it will put significant pressure on our margins for the balance of the year." 

In contrast, Williams-Sonoma raised its full-year outlook in addition to the confidence implied with the quarterly dividend increase and share buyback authorization. Investors are giving credit to the stocks of the retailers with optimistic outlooks, but are punishing Burlington today for what it predicts will be a difficult cost environment looking ahead. 

Howard Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Ulta Beauty. The Motley Fool recommends Williams-Sonoma. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Burlington Stores Stock Quote
Burlington Stores
BURL
$196.60 (0.46%) $0.90
Williams-Sonoma Stock Quote
Williams-Sonoma
WSM
$122.42 (-1.05%) $-1.30
Ulta Beauty Stock Quote
Ulta Beauty
ULTA
$448.35 (0.22%) $0.98
Coty (Class A) Stock Quote
Coty (Class A)
COTY
$7.58 (-0.13%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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