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TJX Is In My Opinion the Best Storefront Retailer

July 1, 2017 / By /
Stock (Symbol)

TJX Companies (TJX)
Stock Price

$77
Sector
Retail & Travel
Data is as of
July 8, 2016
Expected to Report
Aug 16
Company Description
TJ_Maxx_LogoThe TJX Companies, Inc. (TJX) is an off-price apparel and home fashions. The Company operates through four segments: Marmaxx, HomeGoods, TJX Canada and TJX Europe. The Marmaxx and HomeGoods business offers family apparel, home fashions, accent furniture, lamps, rugs, wall decor, decorative accessories and giftware and other merchandise. The TJX Canada offers jewelry and home fashions. TJX Europe operates the T.K. Maxx and HomeSense chains in Europe. The Company operates approximately 3,461 stores in countries, including the United States, Canada, the United Kingdom, Ireland, Germany, Poland, Austria and Australia. Source: Thomson Financial
Sharek’s Take
David SharekIn my opinion TJX Companies (TJX) is the best storefront retailer in the world. TJX is a powerhouse, with 1000 buyers in 10 countries around the world buying from 17,000 vendors in over 100 countries. The company traces its roots back to 1956 when the Zayre discount department store was founded. It opened its first T.J. Maxx in 1976, and eventually sold the Zayre brand to Ames in 1988.  Then the company was renamed to The TJX Companies, Inc and focused on T.J. Maxx. It sees growth opportunity from the current 3500 stores to 5500 stores, and its U.S. brands now include:

  • T.J. Maxx
  • HomeGoods, a chain of home furnishing stores it launched in 1992
  • Marshalls, which doubled TJX’s size when it was acquired in 1995
  • Sierra Trading Post, a off-price outdoor recreation store it launched in 1998.

TJX is the only major international off-price retailer in the world, operating:

  • Since 1976 in the U.S.
  • In Canada since 1990, where its Winners division is the leading off-price family apparel and home fashions retailer.
  • Since 1994 in the UK and Ireland, where its stores are named as T.K. Maxx.
  • Germany in 2007, Poland in 2009 and are launching stores in Austria and the Netherlands.

TJX makes more than $3 billion a year in cash and spends more than half on stock buybacks. It’s increased its dividend every year since 1996 at an average rate of more than 20% a year. Store growth of 5% in addition to mid-single digit same store sales and a solid stock buyback program make it so TJX could grow profits around 10% a year long-term. Tack on the dividend and that’s an estimated 11% total annual return. The company has my top safety rating and an A+ credit rating from Standard & Poor’s. Profits are expected to grow in the mid-to-low single digits the next few qtrs, and I feel the stock is expensive at 22x earnings. I would like to buy TJX for conservative accounts if the stock were to fall into the $60s.
One Year Chart
TJX_2016_Q2Last qtr TJX had 10% profit growth on 10% sales growth and an impressive 7% gain in same store sales. The company guided future qtrs down a bit, but has been lowering estimates to then beat the street. Profit Estimates for the next 4 qtrs are 1%, 5%, 3%, and 9%. 
Fair Value
TJX_2016_Q2_PHI just can’t justify a 22 P/E right now when profits grew 5% last year and are expected to climb just 5% this year. Meanwhile when the company was growing profits in the double-digits earlier in the decade the stock carried a P/E in the teens. 
Bottom Line
TJX_2016_Q2_10yrTJX stock has been a fantastic investment. The stock hovered around $1 from 1985 through 1995, then went to $11 by the end of 2005 after it acquired Marshalls, and is $77 now. Management buys back stock, pays yield of 1.3% and has increased the dividend every year since 1996. This is a top quality stock, but the recent surge in safe assets has pushed this stock into overvalued territory. I want TJX for my conservative clients, and will look buy in the mid-$60s. 
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