Burlington Stores Stock Still Has Room to Run Despite 25% Rally

Burlington Stores has been a top performer in retail, and analysts believe its strong run could continue. The stock is up about 25% since late last year, beating the S&P 500 and most retail ETFs. For investors worried the rally is overdone, the numbers tell a different story. Here’s what’s fueling the momentum and what risks to watch.

In the most recent quarter, Burlington reported its fourteenth straight quarter of double-digit earnings growth, showing that its progress is steady and not just a short-term trend. Same-store sales went up 6%, marking the first time in nearly three years that Burlington has had two quarters in a row with mid-single-digit sales growth. The company also beat expectations and raised its forecast for the year.

Burlington’s stock trades at 29 times next year’s earnings, which is lower than its five-year average and a bit cheaper than TJX Companies and Ross Stores. Earnings per share are expected to grow 20% this year and almost 17% next year, so the current price looks more reasonable given that growth.

The off-price retail model is in a good spot right now. With inflation at 4.2% in May, many households are feeling the pinch and looking for value, which benefits stores like Burlington. The company has also been updating its store layouts and improving its merchandise, changes that shoppers like and that help Burlington catch up to TJX and Ross.

There are still real risks. Burlington’s customers tend to have lower incomes than those at TJX, so the company is more vulnerable if lower-income shoppers cut back in a split economy where wealthier Americans keep spending but others are more cautious. Investors who have already seen a 25% gain might want to look elsewhere while questions about consumer health remain.