TJX Continues to Climb Higher Even as Profits Grow Slow

Stock (Symbol)

TJX Companies (TJX)

Stock Price


Retail & Travel
Data is as of
April 16, 2016
Expected to Report
May 17
Company Description
tjmaxx_bronxThe 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 SharekTJX Companies (TJX) traces its roots back to 1956 when the Zayre discount department store was founded. The company opened its first T.J. Maxx in 1976, and eventually the Zayre brand to Ames in 1988. With its focus now on T.J. Maxx, the company was renamed to The TJX Companies, Inc. TJX 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 is a powerhouse, with 1000 buyers in 10 countries around the world buying from 17,000 vendors in over 100 countries. It sees growth opportunity from the current 3500 stores to 5500 stores. TJX stock has been amazing investment. The stock hovered around $1 from 1985 through 1995, went to $11 by the end of 2005 after acquiring Marshalls, and is over $70 today. Management buys back stock and pays a dividend (yield 1.3%). The Estimated Long Term Growth Rate is 10% and the stock sells for a lofty 22x earnings.

One Year Chart
TJX_2016_Q1The history of TJX is amazing, but the company is having a slow patch of growth currently. Sales grew 8% last qtr which is good, but profit growth was just 6%. F/X is affecting profits by 4% and higher wages are taking another 4%. The company had excellent same store sales growth of 6% which was double expectations (and a healthy sign for a retailer). Estimates don’t look good with 3%, 2%, 7% and 6% profit growth expected the next 4 qtrs. These numbers have come down each of the last 3 qtrs, as has 2016’s profit estimate, which has dropped from $3.72 to $3.46.  But TJX has beaten the street the last 4 qtrs and management just low-balled same store sales growth to keep expectations down (probably so they can beat them).
Fair Value
TJX_2016_Q1_PHI just don’t understand why this stock is getting such a high P/E. Single digit profit growth and the stock’s P/E is maybe as high as its been all decade. My Fair Value is 18x earnings which I feel is fair looking back at TJX’s history. That gives me a Fair Value of $62, much lower than the current $77 price.
Bottom Line
TJX_2016_Q1_10yrTJX Companies is a worldwide retail juggernaut. It 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 — with great certainty and stability. The company has my top safety rating and an A+ credit rating from Standard & Poor’s. But 11% growth for 22x earnings is a little steep for me, and I’ll look to add TJX to conservative accounts if it corrects.


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