Expect TJX’s Profit Growth To Pick Up Next Qtr


Stock (Symbol)

TJX Companies (TJX)

Stock Price


Retail & Travel
Data is as of
September 26, 2017
Expected to Report
Nov 13
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 (TJX), known for its TJ Maxx and Marshall’s discount clothing stores, is expected to see a big rise in profit growth starting next qtr. Profits are expected to climb from an average of 3% the last 4 qtrs to 15% the next 4 qtrsTJX 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 and has its dividend every year since 1996 at an average rate of more than 20% a year, yet the yield is still just 1%. Why so low? The stock’s soared from $0.10 in 1980 to $74 today. 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. F/X had been hurting sales, but that’s expected to end next qtr, and with profit growth set to accelerate TJX stock may already be back on track. This stock is a good one for conservative investors, with an Est. LTG of 10 a year plus the 1% yield.

One Year Chart
Last qtr TJX had 1% profit growth which beat estimates of 0% and 6% sales growth, including 3% same store sales growth. Profit growth was reduced by 8% last qtr due to F/X. Profit estimates ticked up this qtr, with 2017’s est rising 4 cents to $3.93. Qtrly profit Estimates are 10%, 23% and 15% and 13% for the next 4 qtrs. TO me it looks like the stock bottomed during the Summer and is now building a new upward pattern.
Fair Value
Although TJX has an Est. LTG of just 10% a year, the stock should have a P/E much higher because (1) its excellent management keeps the checkout lines long with good styles and great deals (2) buys back stock and (3) has grown profits every year for more than a decade. My Fair Value is 21x earnings, or $83 this year and $89 next year. The stock has solid upside potential here.
Bottom Line
TJX has been a wonderful stock until recently when the strong USD cut into sales and profits. Now it looks like slow-growth is behind us, and I feel the stock has some catching up to do. Last qtr I dropped TJX to 30th in the Conservative Portfolio Power Rankings and this qtr I’m boosting it to 15th as I feel this solid stock has already turned the corner and is moving higher.
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