TJX Continues To Be Adored By Investors

Stock (Symbol)

TJX Companies (TJX)

Stock Price


Retail & Travel
Data is as of
January 8, 2017
Expected to Report
Feb 22
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 SharekTJX Companies is adored by its investors. 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. 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. The company has my top safety rating and an A+ credit rating from Standard & Poor’s. The stock also has a yield of 1% and increased its dividend every year since 1996 at an average rate of more than 20% a year. Profits are expected to climb just 5% for the second straight year as results are being hampered by raising labor costs and a strong dollar. At 20x earnings, TJX carries a premium valuation. I’d love to buy the stock, but am waiting for it to come down into the $60s.

One Year Chart
Last qtr TJX had 6% profit growth on 7% sales growth including a solid 5% same store sales growth. Analysts expected profit growth of just 1%. Afterwards, management guided estimates lower and now we are looking at 1% profit growth this qtr as well. It’s sad such a well oiled machine isn’t growing profits better than this. The strong dollar trims profits qtr after qtr. The Est. LTG of 11% is fine for such a quality stock, but that P/E of 20 is high when profits aren’t growing in the double-digits.
Fair Value
During the 2010-2012 period, the S&P 500 carried a median P/E of 13 each year as investors believed we had entered into a new era of lower valuations. The S&P has a P/E of 17 1/2 today, so TJX’s P/E should be higher too. I can see a P/E of 18-19 for this stock, but 20 seems high — especially with profit growth stuck in a rut. My Fair Value is 18x earnings or $68 a share.
Bottom Line
TJX has been a wonderful stock for investors. The stock hovered around $1 from 1985 through 1995, then went to $11 by the end of 2005 after it acquired Marshalls. Now more than 11 years later the stock is up another seven-fold. Management  is outstanding, as it buys back stock, pays dividend that’s increased every year since 1996, and manages more than 1000 buyers as well as 3500 stores. I would love to make TJX an investment in my Conservative Portfolio, but with the valuation high and profit growth low, I feel the stock could be around this level for the next year or two. I’ll keep TJX on my radar, and look to buy in the $60s.
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