The TJX Companies, Inc.
by Todd BuntonMarch 23, 2012 | Comments : 0 Recommended this article: (0)
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The company delivered a stellar 9% increase in February same-store sales on the heels of a very solid fourth quarter report. And analysts once again raised their estimates going forward, sending the stock to a Zacks #2 Rank (Buy).
TJX is an off-price retailer that sells name-brand goods at significant discounts to their full-price peers. It does so by taking advantage of overstocking and canceled orders at the full-priced stores. TJX will buy this excess inventory at a steep discount and pass much of the savings on to its customers.
Its major stores include T.J. Maxx, Marshalls, and HomeGoods stores in the U.S.; Winners Apparel in Canada; and T.K. Maxx in Europe. The company was founded in 1956 and has a market cap of $29.4 billion.
Strong Same-Store Sales
TJX reported strong February sales growth. Net sales rose 12% over the same period last year, driven by a stellar 9% increase in same-store sales.
So far it doesn't look like the improving U.S. economy is causing consumers to leave off-price retailers like TJX and "trade up" to the full-priced stores.
Solid Fourth Quarter Results
TJX also delivered solid fourth quarter results for its fiscal 2012 on February 22. Net sales rose 6% to $6.71 billion, driven by a 7% increase in same-store sales.
Same-store sales were up across all brands and geographies, including a 10% increase at Home Goods, and a 10% increase at TJX in Europe.
Earnings per share came in at 62 cents, in-line with the Zacks Consensus Estimate. It was a 17% increase over the same quarter last year.
Management provided a positive outlook for its fiscal 2013. The company expects to earn between $2.21 and $2.31 per share on same-store sales growth of 2-4%.
This prompted analysts to revise their estimates higher, sending the stock to a Zacks #2 Rank (Buy).
The Zacks Consensus Estimate for 2013 is now $2.32, slightly above guidance, and representing 17% growth over 2012 EPS. The 2014 consensus estimate also moved higher and is currently at $2.56, corresponding with 10% EPS growth.
This year the company plans to invest in its supply chain and infrastructure, new stores, remodels, and building an e-commerce business to support long-term growth. The 5-year consensus EPS growth rate for TJX is a solid 14%.
Returning Value to Shareholders
With strong cash flow and a solid balance sheet, the company continues to return value to shareholders through stock buybacks and dividend increases.
In fiscal 2012, the company spent a whopping $1.4 billion repurchasing its stock. And it also announced plans to buyback approximately $1.2-$1.3 billion more for fiscal 2013.
The company also pays a dividend that yields a solid 2.0%. And management stated that it intends to increase its dividend by 21% pending approval by the board of directors.
This would mark the 16th straight year that the company has raised its dividend. And over that time, it has increased it at a compound annual rate of 23%.
Although shares have soared 50% since I last wrote about TJX back on September 9, valuation still looks reasonable. Shares trade at 16.5x 12-month forward earnings, a discount to the industry median of 17.9x.
It also sports a PEG ratio of 1.2.
The Bottom Line
With consumers still busting through the doors and estimates still rising, TJX still offers a lot of upside potential.
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T. Rowe Price Group, Inc. (TROW) benefits directly from a rising stock market. The company delivered strong fourth quarter results and has seen its earnings estimates rise over the last few weeks, thanks in part to the strongest start to a year for the S&P in 14 years. It is a Zacks #2 Rank (Buy). In addition to strong growth, the company offers a dividend that yields a solid 2.1%. Read the full article.
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