Burlington Stores Inc. has a response to hedge fund Spruce Point Capital Management, which on Wednesday issued a “strong sell” report.
Spruce Point, a short seller, said Burlington’s sales record and earnings-per-share gains probably wouldn’t continue and indicated that there are financial and business issues that could signal a slowdown in sales. It also said that the selling of stock by certain company executives are an indication of instability. Short sellers operate by borrowing shares of a company, which they then sell. They hope to buy back the shares at a lower price.
The off-price retailer on Monday said, “The company stands by its financial statements and emphatically denies the claims made in the report. The report, which is filled with innuendo and baseless allegations, is based on flawed, inaccurate and misleading analysis.
“The company also notes that the short seller stated in the report that it ‘stands to realize significant gains in the event that the price of [Burlington’s] stock declines,’” the retailer said.
Burlington also said that its “financial statements are prepared in accordance with GAAP and any non-GAAP information is reconciled to its GAAP equivalent. Burlington’s annual financial statements are audited by Deloitte & Touche LLP.”
Burlington went public with an initial public offering in 2013. The company was formerly known as Burlington Coat Factory.
Shares of Burlington opened at $72.74 on Wednesday, but then fell to $69.55 later that day after the report was published. The stock closed at $69.24 on Friday. Shares of Burlington opened Monday’s trading session at $69.97, but rose 1.2 percent to $70.06 at 9:45 a.m. when the market opened for trading following the company’s issuance of its statement. Shares of Burlington ended the day’s trading session up 4.6 percent to close at $72.43.