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Burlington Erupts as Consumers Seek Discounts

consumer discretionary news Nov 22, 2023

As inflation takes hold, discount shops take control of the market


Burlington Stores experienced a double-digit gain in their stock price this morning as their earnings report demonstrated how hungry consumers are for discounts.  


The numbers are wild here. Burlington’s fiscal quarter ended on October 28th, and for that period their net income 3x’d to $48 million as their cost-cutting efforts finally began to gain momentum. Actual revenue at Burlington stores rose 12% to $2.29 billion. 


The really interesting thing here is that Burlington is rising despite limiting their Q4 guidance. Q4 projections are coming in a little lower than the market expects, but that’s not enough to keep investors away from the stock right now. What gives?

One of the chief concerns The Street has had for retail names has been the glut of inventory that has weighed on most stores since early 2022. Burlington was hit pretty hard by this, but has managed to reduce their inventory levels by 8% in the last quarter. This means Burlington had better margins for the quarter and should continue generating decent profits as this key cost continues to diminish.  


While this is great for Burlington stock, it adds to overall concerns about the health of U.S. consumer spending. Burlington is a notorious discount chop-shop. With their overall sales spiking, this suggests that more and more shoppers are feeling way more pressure from inflation and that spending could drop even more than anticipated. If the Fed has pushed too far and spending drops too much, that could push the economy from a slowdown into a full-bore recession. For now, this is just a trend we’re keeping an eye on before we make a call either way. We’ll take the good news as Burlington stock rose over 17% in the opening 15 minutes of trading.