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This under-the-radar retail chain will be a big beneficiary from Macy's store closures

A woman shops for coats at a Burlington Coat Factory store in White Plains, New York.
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A woman shops for coats at a Burlington Coat Factory store in White Plains, New York.

As Macy's closes up shop at more than 60 U.S. locations, one off-price chain stands to gain the most from its contraction.

New Jersey-based Burlington Stores could see a 15-cent boost to its earnings per share, as the chain's nearby locations pick up sales Macy's is leaving behind, BMO Capital Markets analyst John Morris said.

That's substantially more than the 1-cent per share opportunity for TJX, and the 7-cent increase he forecasts for Ross. Despite those chains' larger overlap with the Macy's locations slated to close, the stores account for a smaller percentage of their respective footprints.

Burlington has 47 stores within a five-mile radius of Macy's store closures. But because its store base is smaller than its peers', those locations account for roughly 8 percent of its domestic square footage.

By comparison, TJX has 100 overlapping stores, accounting for less than 5 percent of its U.S. footprint. Ross has 65 stores in a five-mile radius, equivalent to roughly 5 percent of its square footage in the U.S.

All in, Morris expects off-price chains will capture 40 percent of the $575 million in revenue that is up for grabs.

"The opportunity is most pronounced for Burlington, mainly based on the company's relative small size," Morris said. "But Burlington also benefits from its relatively large exposure to these particular malls."

Off-price stores, which sell name-brand goods at a discount, have excelled in the post-recession years, as consumers continue to seek unique merchandise at a value. Even more impressively, they've managed to do so with little to no e-commerce operations.

Their growth has come largely at the expense of department stores. A recent analysis by Credit Suisse estimates that off-price retailers increased their market share to 24 percent in 2015, from 17 percent in 2007. Meanwhile, department stores' share fell 10 percentage points over that time, to 35 percent.

Morris added that off-price chains could capture even more sales if Macy's closures trigger co-tenancy clauses that allow other retailers to break their leases. If that occurs, some malls could falter or even close.

BMO concluded that most of the malls impacted by Macy's closures were lower-tier properties. However, separate analysis by CoStar found that two-thirds of the stores set to close were in quality "A" or "B" malls.

The commercial real estate firm noted that 60 percent of the Macy's that will shutter are within 10 miles of another location. In those instances, the chain chose to keep the stores located in stronger malls.

According to Green Street's mall database, roughly 50 percent of the store closures are located at low-productivity malls where the mall could struggle to survive following an anchor closure.