This is my first attempt at DD and any constructive criticism would be greatly appreciated.
Burlington Coat Factory (BURL) is the third largest discount retailer, after TJX and ROST. They report their Q3 earnings tomorrow, 11/23. Looking back, they’ve beaten estimates for the past four quarters.
Since discount retailers have had unique supply chain issues, this DD will focus on how TJX & ROST’s earnings have gone, rather than the retail space as a whole. Despite both TJX & ROST beating estimates this quarter, TJX jumped 10.4% on earnings while ROST dropped 3.4%.
The primary differences I can see are: ROST provided negative guidance, calling out supply chain uncertainty. In contract, TJX declined to give any guidance. Additionally, and more importantly, TJX increased their share repurchase program by $500M (while ROST left theirs unchanged).
Comparing to BURL, the company has not given guidance in the past three quarters and I wouldn’t expect them to do so tomorrow. Further, until last quarter, their share repurchase program had been suspended due to the pandemic. I wouldn’t expect an increase to the program this quarter.
Ultimately, the play here was likely to ride the IV increase into earnings. Holding through earnings is a complete gamble and likely hinges on sentiment during the call and any guidance that is given (if any). Considering the other plays this week, I believe there are better uses for your capital.
I currently have no positions in BURL and do not plan to open any.
TJX also reaffirmed several times over that they had no supplies issues. My read on it is that the market is really concerned with supply at the moment and any companies that are indicating supply chain problems will likely tank like ROST (or alternatively run like TJX).
I’m not sure on how we can get a read on Burlington’s supply other than legitimately going to stores and looking, but if we could manage to get a read on it, I feel as though this could be an opportunity.
" Our Suppliers:
Our network of approximately 5,100 brands is an essential part of our business. We strive to partner with companies who treat their workers with dignity and respect, adhere to applicable laws and regulations and maintain high standards of business conduct. Burlington considers a range of risks, including environmental and social, before entering into these business relationships.
All of Burlington’s suppliers are expected to comply with our Code of Conduct and we reserve the right to refuse to do business with those who do not uphold, in action as well as words, these established principles. We also have an Open Door Policy and we strongly encourage our associates to voice concerns about product safety and compliance. If we suspect or discover non-compliance, we make every effort to work with the supplier to correct the problem through implementing a corrective action plan and a subsequent audit. For more information, please see our Legal & Social Compliance Manual."
seems like they have a wide range of suppliers, I wouldn’t worry too much about the supply if that’s the only hurdle.
edit
nvm, it looks like they could have trouble after all.
Yeah, it all comes down to guidance. Interestingly enough though, the Marshall’s / Home Goods stores near me have not been stocked well since re-opening.
