We recently compiled a list of the 10 Best Retail Stocks To Buy Now. In this article, we are going to take a look at where Burlington Stores, Inc. (NYSE:BURL) stands against the other retail stocks.
Tech is Disrupting Retail
The rise of tech and artificial intelligence (AI) in the past few years has had an impact not only on the tech sector but on the entire market. The retail sector is no stranger to this impact, with analysts now considering tech-enabled innovation as one of the core drivers in the growth of the retail sector. As a result, those retailers that are taking the tech expansion seriously and are making investments to incorporate new technology in their operations are finally beginning to catch the market’s attention.
On June 24, Simeon Gutman, analyst at Morgan Stanley, joined CNBC’s “The Exchange” to discuss the impact of tech and AI on retailers and how these companies are making use of tech to drive up profit margins. Here are some of his comments on the retail companies to keep an eye on in this respect:
“Walmart’s the one that comes to mind the first… with Walmart, you’re hitting the nail on the head with several of these aspects of tech diffusion, and on top of it, they’re gaining market share in terms of tech diffusion. AI is easily one of them, big scale, lot of data, lot of opportunity to go through their data and enhance both the frontend of their business, drive more sales to customers, make things easier, and improve the backend.”
According to Gutman, big-box retailers are the sector’s winners when it comes to incorporating innovative tech in their internal operations. Because of such innovation in retail, and its consequent impact resulting in increased profit margins for retailers, there may be room to argue that retail is fast making a comeback in the market.
Retail Sector Outlook 2024
According to the WTW Global Retail Survey for 2024, 52% of retailers this year generally expect higher profitability within two years. Additionally, more retailers today (48%) are looking to incorporate artificial intelligence in their operations to offer personalized shopping experiences to their customers. However, the rise of tech and AI in the sector has also resulted in some retailers (43%) voicing concerns about higher cybersecurity risks arising through a greater reliance on new technologies.
Despite the risks involved, most retailers today are heading towards AI incorporation to meet customers’ demands. According to the survey, AI is primarily favored by online-only and electronic retailers because of its potential for catalyzing growth. By helping retailers automate their processes and supply chain operations, AI and new technologies can enable retailers to deliver personalized experiences and recommendations to their customers. This is an exceptionally important feature in today’s market, with consumers becoming more reliant on new technologies and their benefits in everyday life.
Our Methodology
We sifted through ETFs and online rankings to compile a list of 25 retail stocks. We also used the Finviz stock screener to double check we didn’t miss any popular stocks. For this list, we have considered apparel retailers, discount stores, department stores, and home improvement retailers. We selected and ranked 10 stocks, from our initial pool of 25, that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds holding stakes in them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Women in fashionable clothing walking together down a busy city street.
Burlington Stores, Inc. (NYSE:BURL)
Number of Hedge Fund Holders: 40
Burlington Stores, Inc. (NYSE:BURL) is an apparel retail company based in Burlington, New Jersey. The company offers fashion-focused merchandise, such as ready-to-wear apparel, footwear, accessories, toys, gifts, and coats. It operates stores in Washington DC and Puerto Rico.
In the first quarter, Burlington Stores, Inc. (NYSE:BURL) reported revenue growth of 10.5% and its comparable-store sales rose by 2% from the year-ago quarter. The company has been benefiting from Bed Bath & Beyond’s bankruptcy, which has resulted in an increased demand for off-price retail products that it is able to provide. Burlington Stores, Inc. (NYSE:BURL) is also further expanding its operations with its new store in West El Paso, Texas.
As of May 31, Citigroup analysts hold a Buy rating on Burlington Stores, Inc. (NYSE:BURL). The consensus average price target on the stock is $265.5, with a high forecast of $284 as of June 28.
There were 40 hedge funds long Burlington Stores, Inc. (NYSE:BURL) in the first quarter, with a total stake value of $2 billion. At the end of the first quarter, Citadel Investment Group was the largest shareholder in Burlington Stores, Inc. (NYSE:BURL), holding 1.2 million shares in the company.
ClearBridge Investments mentioned Burlington Stores, Inc. (NYSE:BURL) in its fourth-quarter 2023 investor letter:
“Interest rate relief also had a strong impact on more cyclical companies and those with ties to general consumer spending. For example, consumer discretionary holdings and discount retailers Burlington Stores, Inc. (NYSE:BURL) and Five Below both rose during the quarter thanks to improving outlooks. Five Below, a specialty value retailer for products including apparel, accessories, novelty items, décor, cosmetics and accent furniture, rebounded from being one of the third quarter’s worst-performing stocks. We believe both Five Below and Burlington are particularly well-positioned for an economic environment where consumer budgets are being tightened but demand for discretionary goods remains stable.”
Overall BURL ranks 10th on our list of the best retail stocks to buy. You can visit 10 Best Retail Stocks To Buy Now to see the other retail stocks that are on hedge funds’ radar. While we acknowledge the potential for BURL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BURL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
