Why Burlington Stores Stock Gained 15% in April

What happened

The stock of Burlington Stores (NYSE: BURL) outperformed a strong market last month by rising 15% compared to a 13% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

The rally only erased part of the previous month’s losses, though, and shares remain lower by more than 20% so far in 2020.

A shopper holding bags inside a mall.

Image source: Getty Images.

So what

Most of the clothing retailer’s stores were closed for the entire month due to the COVID-19 pandemic. Yet investors found a few reasons for optimism in Burlington’s operating updates. On April 13, CEO Michael O’Sullivan and his team announced salary cuts for executives along with furloughs and a range of other moves aimed at preserving cash while the store base remains closed .

Now what

It’s impossible to know the exact timing or scale of the eventual sales rebound that will follow the COVID-19 threat. But it seems likely that the pandemic will bring significant one-time costs and the potential for lingering sales and profit pressures that extend until at least late 2020.

Those risks help explain why investors are being cautious about Burlington’s stock today, especially since the retailer had been struggling with weak results even before the disruption hit its industry.

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Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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