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Why Shares of Burlington Stores Inc. Jumped on Tuesday

By Timothy Green - Jan 12, 2016 at 1:14PM

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Despite weak sales of winter coats hurting retailers, Burlington managed to stick to its previous guidance, a feat that send the stock soaring.

What: Shares of Burlington Stores (BURL 1.23%) rose on Tuesday after the company reaffirmed its guidance for the fourth quarter and the full year at the lower end of previously stated ranges. At 1 p.m. ET Tuesday, the stock was up about 11%.

So what: A company reaffirming its guidance, particularly at the low end, may not seem like the kind of news that drives a stock higher. However, an unseasonably warm winter has hurt sales of cold-weather clothing over the past few months. Shares of Burlington had slumped by 14% over the past three months prior to Tuesday's gains, with investors likely expecting a guidance cut.

Instead, Burlington expects net sales to increase by 3.7% during the fourth quarter, in line with the low end of the company's previous guidance. Comparable-stores sales are expected to be approximately flat, again in line with the low end of Burlington's previous guidance, with comps excluding cold-weather categories expected to increase by about 4%.

Burlington pointed to strong sales in other categories, including fragrances, bath & body, and home, which offset weak sales of coats and outerwear. The company expects to report adjusted net income per share between $1.44 and $1.46 for the fourth quarter, only slightly lower than the previous guidance range of $1.44 to $1.48. Notably, inventory aged 91 days and older is expected to be below last year's levels at the end of the fourth quarter, suggesting that Burlington has done a good job managing its inventory despite a rough market for winter products.

Now what: Weak sales of coats and outerwear represents a temporary problem for retailers, and Burlington's ability to execute despite these issues is an impressive feat. Investors were likely expecting much worse, given the big jump in the stock price on Tuesday.

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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