TJX Experiencing Slower Sales and Profit Growth

Stock (Symbol)

TJX Companies (TJX)

Stock Price


Retail & Travel
Data is as of
July 1, 2017
Expected to Report
Aug 14
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 in slow growth mode for the time being. Sales and profits rose just 3% last qtr, on 1% same store sales growth as management blamed the weather on poor results. Blaming the weather is what all the retailers have been doing. The company also lowered next qtr’s profit growth estimates, and now analysts expect 0% growth for the qtr.  Although things aren’t great right now, TJX has been a solid stock for decades, and may now be ready for another run higher. 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.

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 for 21 consecutive years (since 1996) at an average rate of more than 20% a year. 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 — but it’s not doing that now! I feel this will be one of the last men standing once the retail carnage is over. First we have to get these mall-based retailers out of the way — then people will either buy online or at discounters like TJ Maxx. My Fair Value on TJX is 21x earnings or $82 a share this year and $89 next year. This is a tremendous stock to buy-and-hold with an Estimated Long Term Growth Rate of 11% per year in addition to the 1% yield.

One Year Chart
This isn’t good. Both the stock chart and the profit growth slowing. Also, TJX isn’t really on a discount as the P/E is 20. At least annual estimates didn’t fall much this qtr: from $3.91 to $3.89. Profits are expected to climb 0%, 10%, 20% and 14% the next 4 qtrs so maybe there’s light at the end of the tunnel. But TJX just lowered next qtr’s estimate from 10% to 0% so we’ll have to see. 
Fair Value
TJX has sold for around 20x earnings since 2013, and had a median P/E of 21 during 2015 and 2016. TJX has a high P/E for the growth it’s delivering.
Bottom Line
TJX has been a wonderful stock during the last decade, but with retail tougher now the long-term trend stock might turn down. If TJX loses its luster it would lose its nice P/E ratio — which is well above the Est. LTG. I will stick with this quality stock in my Conservative Portfolio, but will drop it from 10th to 30th in the Power Rankings.
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