The TJX Companies, Inc. TJX is benefiting from its solid store and e-commerce growth efforts. The leading off-price retailer remains committed to boosting growth through effective marketing initiatives. That being said, The TJX Companies are not immune to the rising inflationary environment.
Let’s discuss this in detail.
Factors Working in The TJX Companies’ Favor
The TJX Companies is expanding its footprint fast in the United States, Europe, Canada and Australia. During third-quarter fiscal 2023, the company increased its store count by 57 stores to reach 4,793. It increased square footage by 1% quarter over quarter during this time. The TJX Companies have been witnessing solid demand for an in-person shopping experience in the last few years. Its flexible buying supply chain and store formats aid the company in opening stores across a wide customer demographic.
With more consumers resorting to online shopping, the company has undertaken several initiatives to boost online sales and strengthen its e-commerce business. We believe that The TJX Companies’ off-price model, strategic store locations, impressive brands and fashion products and efficient supply-chain management will likely aid its performance. In its recent earnings call management highlighted that it is committed to driving traffic and sales in the fiscal fourth quarter. In this regard, it is committed to providing products of great value throughout the store and online.
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The TJX Companies are committed to boosting growth through effective marketing initiatives and loyalty programs. The company’s aggressive marketing and advertising campaigns through multiple mediums (TV, radio and social media) are adding growth. To fuel growth, management is on track to attract new shoppers of every age, including many Gen Z and millennial shoppers. Also, its treasure hunting shopping experience is gaining traction among shoppers. The TJX Companies’ gift-giving initiatives, unique among off-price retailers and loyalty card programs (which offer consumers a non-credit card choice and soft benefits such as early shopping hours) have helped improve customer engagement.
Hurdles on the Way
The TJX Companies is grappling with increased freight costs. To some extent, the company’s merchandise margin was hurt by incremental freight pressure in the third quarter of fiscal 2023. The company also witnessed incremental wage costs, which weighed on the pretax profit margin. The TJX Companies saw additional wage costs of 80 basis points (bps). The company’s fiscal third-quarter gross profit margin was 29.1%, down 0.4 percentage points. In its last earnings call management highlighted that for modeling purposes, it is currently projecting nearly 130 bps of incremental freight expense and 70 bps of additional wage costs for fiscal 2023.
Nevertheless, we believe that the aforementioned upsides will likely help this Zacks Rank #3 (Hold) company stay afloat amid such hurdles. TJX’s stock has increased 39.8% in the past six months compared with the industry’s 8.7% growth.
Solid Retail Bets
Some better-ranked stocks are Walmart Inc. WMT, The Kroger Co. KR and Ross Stores Inc. ROST.
Walmart Inc. (WMT) is a renowned omnichannel retailer, carrying a Zacks Rank #2 (Buy). WMT has a trailing four-quarter earnings surprise of 3.8%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Walmart’s current-year sales suggests growth of 5.7%, from the year-ago period’s reported numbers. WMT has an expected EPS growth rate of 5.5% for three to five years.
The Kroger Co., a renowned departmental store retailer, presently carries a Zacks Rank #2. KR has a trailing four-quarter earnings surprise of 13.4%, on average.
The Zacks Consensus Estimate for The Kroger Co.’s current-year sales and earnings per share (EPS) suggests growth of 7.5% and 12.2%, respectively, from the year-ago period’s reported numbers.
Ross Stores, an off-price retailer of apparel and home accessories in the United States, currently holds a Zacks Rank #2. ROST has an expected EPS growth rate of 10.5% for three to five years.
The Zacks Consensus Estimate for Ross Stores’ current-year sales and EPS suggests declines of 1.6% and 11.7%, respectively, from the year-ago period’s reported figures. ROST has a trailing four-quarter earnings surprise of 10.5%, on average.
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The TJX Companies, Inc. (TJX) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
