Bear of the Day: The TJX Companies (TJX)

Based in Framingham, MA, The TJX Companies Inc. (TJX) is a leading off-price retailer of apparel and home goods, with more than 4,300 stores across the globe; the company has been able to distinguish itself from traditional retailers on the grounds of opportunistic buying strategies and a flexible business model. Here in the U.S., it operates under the banners T.J. Maxx, Marshall’s and HomeGoods.
Q4 Earnings Recap
The coronavirus pandemic was still a major obstacle for TJX in the fourth quarter. Some of the company’s stores were closed for 13% of the period, while closures in Europe and Canada resulted in about $950 million to $1 billion in lost sales.
Earnings were $0.27 per share for Q4, but would have been 18 to 21 cents higher if the stores hadn’t been closed.
As for revenue, the company’s comparable sales only declined 3% year-over-year compared to a 5% decline in the previous quarter, which is a promising trend. CEO Ernie Herman said that sales improved each month in the fourth quarter.
One bright spot is that TJX is continuing to see strong sales trends in its home and beauty departments, and HomeGoods once again posted a double-digit increase.
Bottom Line
TJX is now a Zacks Rank #5 (Strong Sell).
11 analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen 31 cents to $2.33 per share; earnings are expected to grow considerably year-over-year, but it looks like bottom-line growth will slow down next fiscal year.
Shares are up almost 20% in the past six-month period, falling just behind S&P 500’s gain of 21.1%.
Looking ahead, TJX still expects some stores to remain shuttered for 11% of the fiscal 2022 first quarter.
But there are two things are working in the retailer’s favor right now. First, TJX has been taking advantage of new inventory as other retailers were forced to close permanently or are scaling down their business. Second, it hopes to move into new target markets and relocate certain stores to more promising locations.
It also boasts $10 billion in cash at the moment, its highest level ever.
But, the pandemic will likely continue to hurt TJX’s sales for a while longer, and it may be best to wait on the sidelines until it passes.
Investors who are interested in adding a retail stock to their portfolio could also consider discount peer Big Lots (BIG). BIG is a #3 (Hold) on the Zacks Rank right now, and the fiscal 2022 consensus estimate has increased 20 cents over the past two months.
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