03:42 PM EDT, 05/02/2024 (MT Newswires) -- Burlington Stores ( BURL ) is likely to generate better sales growth than previously expected while its earnings growth outlook has improved amid "increased conviction" that the off-price retailer and its peers will continue to gain market share from department stores, UBS Securities said Thursday.

The brokerage upgraded its rating on the Burlington Stores ( BURL ) stock to neutral from sell and boosted its price target to $212 from $126. The company's shares were up 4% in Thursday late-afternoon trade.

UBS expects store closures of US department stores to accelerate over the next 12 months, likely improving the prospects for off-price retailers such as Burlington Stores ( BURL ) to capture market share, analysts Jay Sole, Mauricio Serna and Tiffany Agard said.

The brokerage expects that consumers will switch spending to value channels amid a "lackluster" spending backdrop. These factors should help the company generate better sales growth, the trio wrote.

"Our view before was the macro environment would be so weak that it would hurt (Burlington Stores ( BURL ))," the trio wrote. There's now a reduced risk that Burlington Stores' ( BURL ) sales and margins are affected by high e-commerce competition in the medium term, as new data indicate that a "potential e-commerce disruption is not the existential threat we thought it was," the analysts said. The brokerage expects e-commerce's share of total retail sales to stabilize in the "relatively near future."

UBS said recent checks show soft trends at e-commerce companies such as Shein and Temu -- which have been considered as major threats to Burlington Stores ( BURL ).

The brokerage raised its earnings and revenue growth estimates for Burlington Stores ( BURL ) from 2024 through 2026, saying it's now more positive on the company's sales growth trajectory and "more bullish" on its margins, according to the note.

One of the two upside risks to the company's neutral rating is the possibility that department stores give up market share at a faster rate than projected by UBS. The downside risks are a reemergence of macro pressures, as well as increasing long-term supply chain, freight, and labor costs, the firm said.

UBS said it has a buy rating on rival TJX (TJX) and prefers it over Burlington Stores ( BURL ) as the former offers a better combination of growth potential, less operational risk, and stock valuation, according to the note.

Price: 184.99, Change: +6.97, Percent Change: +3.92