TJX Companies shares rose to an all-time high on Wednesday after reporting better-than-expected first-quarter results on Wednesday. The report showed the off-price retailer’s appeal to bargain hunters and prompted us to boost our price goal on the stock. Total revenue for the three months ended May 4 rose 6% 12 months over 12 months to $12.48 billion, beating analyst forecasts of $12.46 billion, in accordance with estimates compiled by LSEG. Adjusted earnings per share rose 22% 12 months over 12 months to 93 cents, beating analyst forecasts of 87 cents per share, LSEG data showed. Shares closed 3.5% higher at $101.12 per share on Wednesday after trading at record levels through the session. The all-time closing high of $101.42 per share was hit on March 28. Wednesday’s move brings TJX’s year-to-date gain to just about 8%. TJX Companies Why We Own It: The owner of TJ Maxx, Marshalls, and HomeGoods is well-positioned for the present economic environment, offering inflation-averse customers a big variety of merchandise at attractive prices and a personalised “treasure hunt” shopping experience. Other retailers’ struggles and store closures are benefiting TJX’s inventory and market share. The company has also worked to expand margins. Competitors: Ross Stores and Burlington Stores Last Purchase: May 2, 2024 Start: August 24, 2022 Bottom Line Our thesis is playing out as expected. Consumers are in search of the most effective value against a backdrop of persistent inflation, and that is leading them straight to TJX Companies locations. Results were a bit mixed behind the scenes, but strength in TJX Canada and its European and Australian segments was good enough to offset minor setbacks at HomeGoods and Marmaxx, which consists of TJ Maxx and Marshalls stores within the U.S. Crucially, same-store sales growth was positive across all business segments, a closely watched metric in retail. Management stays comfortable with the inventory landscape, which suggests there are still healthy amounts of excess merchandise available in the market for TJX to accumulate for its business. Executives also said they see further growth potential as TJX becomes an increasingly vital distribution channel for its suppliers. As a result, those suppliers — think product manufacturers and other retailers — are finding ways to work with TJX more consistently than up to now. “That really encompasses all the reasons why we’re so optimistic,” CEO Ernie Herrman said on the conference call. “I mean, we’re in the position of value leader right now,” he said, adding that its stores have change into “a cooler place to shop.” Being a “cooler place to shop” has many advantages for the corporate and, by extension, its investors. On the conference call, management made it clear that its value proposition resonates across all income and age levels — not an enormous surprise to us after reading the recent Wall Street Journal article about millionaires shopping at TJ Maxx and Marshalls. Sales within the Marmaxx department increased in demographics where the typical household income is each above and below the $100,000 mark, the corporate said. Executives also said the corporate continues to “attract new Gen Z and Millennial shoppers to our stores, which we think bodes well for our future growth.” TJX YTD Berg TJX Companies’ year-to-date performance. In addition to the strong reported results, management also upgraded its full-year pretax profit margin and earnings per share forecast, which is probably going a driving force behind the stock’s rise on Wednesday. During the quarter, TJX paid out a complete of $886 million to shareholders, including $609 million via buybacks and one other $377 million via dividend payments. That’s up from the $841 million paid out within the year-ago period. The company announced a 13% increase in its quarterly dividend payout last month. Our investment thesis is fully intact. TJX’s goal will not be to simply offer low-cost goods. It’s about offering “good, better and best” products that appeal to a broad range of shoppers, as Herrman explained on the conference call. Given the strong results and signs that momentum has continued into the present quarter, we’re reiterating our rating of 1 and raising our price goal to $115 per share from $110. Forecast There’s lots of red within the forecast table above, suggesting that TJX’s forecast for its metrics fell wanting Wall Street’s expectations. However, we’re not overly concerned, as management has a history of underpromising and later overdelivering. In fact, management has reported earnings per share above the high end of its forecast range seven times within the last nine quarters since April 2022 (including Wednesday’s report). In the remaining two cases, the team has hit the high end. “The second quarter started well, and we see numerous opportunities for our business for the remainder of the year that we intend to capitalize on,” Herrman said in TJX’s earnings release. On a full-year basis, the corporate increased its pretax profit range to a spread of 11% to 11.1%, up from the previous range of 10.9% to 11%. Earnings per share forecast was raised to $4.03 to $4.09, up from the old range of $3.94 to $4.02. Full-year revenue guidance was revised downward by roughly $150 million on the midpoint attributable to foreign exchange dynamics. Comparable same-store sales guidance remained unchanged. Quarterly Results Total same-store sales increased 3%, in keeping with the high end of management’s guidance range, but missed the consensus estimate of three.7%. All business segments reported same-store sales growth: Marmaxx, which incorporates Marshalls and TJ Maxx, grew 2% year-over-year, a slowdown from 5% growth in the corporate’s fourth quarter of fiscal 2024. HomeGoods gained 4%, a slowdown from the previous quarter’s rate of seven%. TJX Canada rose 4%, a slowdown from the previous quarter’s 6% growth. TJX International gained 2%, below the previous quarter’s 3% growth. Gross margin of 30% within the quarter was in keeping with Wall Street’s estimate and above the year-ago figure of 28.9%. CFO John Klinger said gross margins benefited from lower freight costs and a “favorable mark-on,” which is the difference between the selling price to consumers and the associated fee of the products to the corporate. Pretax profit margin development benefited from “lower freight costs, a provision release and higher net interest income,” Klinger said. Selling, general and administrative expenses were higher attributable to wage and salary increases at stores. (Jim Cramer’s Charitable Trust is long TJX. A full list of stocks will be found here.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. 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Florida, Port St. Lucie: TJMaxx, a cashier with a customer on the checkout.
Jeff Greenberg | Universal Images Group |
TJX Companies Shares rose to an all-time high on Wednesday after the corporate reported better-than-expected first-quarter results on Wednesday. The report showed how attractive the discount retailer is to bargain hunters and prompted us to boost our price goal on the stock.
