Burlington Stores (BURL, $200.12) shares initiated with an "outperform" at RBC Capital

Burlington Stores stock coverage was initiated by an RBC Capital analyst with an outperform rating.

RBC Capital analyst Kate Fitzsimmons expects the off-price department store retailer to continue to narrow its margin gap relative to peers, particularly under the leadership of a new CEO.

Michael O'Sullivan came in as chief executive of Burlington in September. He was previously with Ross Stores. O'Sullivan succeeded Thomas Kingsbury, who stepped down after 10 year as head of the Burlington, N.J., company. 

RBC’s outperform rating is based on the analyst’s expectation that Burlington can maintain a 2% to 3% comparative run rate as productivity improves, on the back of ongoing initiatives in merchandising (women's sportswear, home, footwear, and bath-and-body categories), selling and store experience (remodels, higher store wages), and marketing.

Over the next few years, RBC foresees Burlington margins to expand by 1 to 1 1/2 percentage points, to between 10% and 11%, on  moderate merchandise margin improvements bolstered by better buying, use of packaway, and lean in-store inventories (as indicated by RBC).

Fitzsimmons  wrote about Burlington shares being " expensive but rightly so, given BURL's productivity and margin runway." The analyst has set a price target at $230 for the shares.