TJX Companies Up 20% in 6 Months: Will the Rally Continue?

The TJX Companies, Inc. TJX appears to be a solid bet, given its efforts to remain on the growth trajectory. Notably, the company is gaining momentum on the back of strong merchandising and brand strategies combined with effective marketing efforts.

These factors continued to boost customer traffic and helped the company to retain its solid comparable store sales (comps) trend in first-quarter fiscal 2020. Also, the company’s off-price model, strategic store locations and impressive brands have been driving store and online performances.

Factors Narrating TJX Companies’ Growth Story

TJX Companies boasts an impressive comps trend. During the first quarter of fiscal 2020, the company’s consolidated comps grew 5% year over year, fueled by increased customer traffic in all segments. Its apparel and home businesses were the key contributors. Notably, the quarter marked the 19th straight period of higher customer traffic at both Marmaxx and the entire company. Most segments reported higher comps, courtesy of consumers’ favorable response to the company’s brands and impressive merchandise assortments at reasonable prices. In fiscal 2020, consolidated comps are expected to grow 2-3%, and comps at Marmaxx are expected to grow in the same range.

Moreover, the company regularly opens stores and expands across the United States, Europe and Canada. While many retailers are resorting to store closures, TJX Companies added 75 stores during the first quarter of fiscal 2020, taking the total store count to 4,381 as of May 4, 2019. TJX Companies intends to continue expanding store base with a plan to operate about 6,100 stores over the long term.

Apart from these, the company is undertaking several initiatives to boost online sales and strengthen e-commerce business. TJX Companies’ off-price model, along with strategic store locations, impressive brands and fashion products, has been driving its performance, both in stores and online. Additionally, it remains committed toward boosting comps growth, through effective marketing initiatives and loyalty programs.

Incidentally, TJX Companies’ aggressive marketing and advertising campaigns through multiple mediums (TV, radio and social media) have been boosting traffic at stores. Its gift-giving initiatives, which is unique among off-price retailers, and loyalty card program (which offers consumers a non-credit card choice and soft benefits such as early shopping hours) also help to improve customer engagement.

Raised View

TJX Companies is well positioned to take advantage of solid opportunities in the market for branded merchandise, given its impressive inventory position. Management remains impressed with its performance, driven by robust customer traffic and successful implementation of the company’s off-price fundamentals.

Consequently, management lifted its earnings guidance for fiscal 2020. The company now projects earnings per share of $2.56-$2.61, indicating year-over-year growth of 5-7% (including last year’s pension settlement charges) and 4-7% (excluding last year’s pension settlement charges). Earlier, the company projected earnings per share of $2.55-$2.60, implying year-over-year growth of 5-7%, including last year’s pension settlement charges, and 4-6%, excluding last year’s pension settlement charges.

Cumulatively, shares of this Framingham, MA-based company have increased almost 20% in the past six months compared with the industry’s rise of 28.2%.

We expect all aforementioned factors to continue bolstering this Zacks Rank #2 (Buy) company’s performance, and help it remain in investors’ good books.

Other Key Picks in the Retail Space

Target Corporation TGT has a long-term earnings growth rate of 7.1% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Walmart Inc. WMT has a long-term earnings growth rate of 4.7% and a Zacks Rank #2.

Zumiez Inc. ZUMZ has a long-term earnings growth rate of 13.5% and a Zacks Rank #2.

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