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TJX Companies' Efforts Drive Comps, Wage Costs a Concern
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While many retailers have been ailing under soft traffic stemming from intense competition and rising consumer preference for online shopping, The TJX Companies, Inc. (TJX - Free Report) has been defying such industry trends and witnessing growth in its store traffic. Well, the company’s impressive merchandising policies and other sales-driving efforts have been benefiting its comparable store sales (comps), thereby driving the top-line performance.
However, the company has been incurring high wage costs for quite some time now and also expects the same to hurt its bottom-line growth in fiscal 2019. It looks like these factors have kept investors somewhat cautious about the stock. Evidently, shares of this leading off-price retailer have gained only 4.1% in the past year, as against the industry’s growth of 16.5%.
Effective Merchandising and Marketing Efforts Boost Traffic
TJX Companies’ comps have been gaining from consumers’ favorable response to the company’s brands and impressive merchandise assortments at reasonable prices. Moreover, strong merchandise margins reflect the company’s disciplined inventory management and strength of its off-price business model. In fact, other off-price retailers, such as Ross Stores (ROST - Free Report) and Big Lots (BIG - Free Report) , have also been deriving much strength from efficient merchandising policies.
TJX Companies’ aggressive marketing and advertising campaigns have also been driving traffic at its stores. Its gift-giving initiatives, unique among off-price retailers and loyalty card program also help improve customer engagement.
Driven by such efforts, TJX Companies witnessed growth of 4% in comps, during the fourth quarter of fiscal 2018 compared with the 3% rise in the year-ago quarter. These factors, combined with favorable currency translations, helped net sales to advance nearly 15.8% year over year during the fiscal fourth quarter.
Further, management stated that it remains optimistic about comps growth in fiscal 2019 and will continue to focus on implementing sales-driving efforts to attract traffic. Management hopes that stores will benefit from solid merchandise assortment and brands. Accordingly, comps are expected to grow 1-2% in fiscal 2019, while an improvement of 1-2% is expected in the first quarter.
Store & E-commerce Expansion
In an effort to sustain the sturdy comps performance, TJX Companies also resorts to frequent store openings, and has been expanding at a rapid pace across the United States, Europe and Canada. It opened around 258 stores during fiscal 2018. Now, with almost 4070 stores across nine countries, TJX Companies intends to continue expanding its store base, with plans to open approximately 600 stores over the long term. The company is aimed at opening approximately 400 Homesense stores in the United States in the forthcoming period. In respect of TJX Canada, the company foresees opportunities to expand into rural areas. Management is impressed with the steady progress of its business across Europe, enabling it to continue as one of the major off-price retailers in the region. Like TJX Companies, Burlington Stores (BURL - Free Report) , a major discount-retailer, has also been undertaking store-expansion initiatives to bolster sales.
Additionally, with increasing number of consumers resorting to online shopping, TJX Companies has undertaken several initiatives to strengthen its e-commerce business. The company’s strategic prices, combined with effective offers and in-store return policies, have aided boosting its online business considerably.
Can Efforts Offset Wage Woes?
TJX Companies has been bearing the brunt of rising wage costs for a while. During the fiscal fourth quarter, wage rise dented TJX Companies’ earnings by approximately 1%. In fact, the company expects pre-tax margins to remain under pressure for the next few quarters due to an increase in employee payroll.
Though rising wage costs remain a concern, TJX Companies has nevertheless many reasons to cheer and remains positive on its journey ahead, courtesy of its effective strategies to drive store traffic and sales. Encouragingly, the company’s strong fundamentals have also led management to provide a positive outlook for fiscal 2019. That said, we expect the company’s strategic initiatives to continue aiding growth and also enhance investor sentiments, in the forthcoming periods.
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TJX Companies' Efforts Drive Comps, Wage Costs a Concern
While many retailers have been ailing under soft traffic stemming from intense competition and rising consumer preference for online shopping, The TJX Companies, Inc. (TJX - Free Report) has been defying such industry trends and witnessing growth in its store traffic. Well, the company’s impressive merchandising policies and other sales-driving efforts have been benefiting its comparable store sales (comps), thereby driving the top-line performance.
However, the company has been incurring high wage costs for quite some time now and also expects the same to hurt its bottom-line growth in fiscal 2019. It looks like these factors have kept investors somewhat cautious about the stock. Evidently, shares of this leading off-price retailer have gained only 4.1% in the past year, as against the industry’s growth of 16.5%.
So, let’s analyze both sides of the story and see if this Zacks Rank #3 (Hold) company’s endeavors can counter its ongoing hurdles. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Effective Merchandising and Marketing Efforts Boost Traffic
TJX Companies’ comps have been gaining from consumers’ favorable response to the company’s brands and impressive merchandise assortments at reasonable prices. Moreover, strong merchandise margins reflect the company’s disciplined inventory management and strength of its off-price business model. In fact, other off-price retailers, such as Ross Stores (ROST - Free Report) and Big Lots (BIG - Free Report) , have also been deriving much strength from efficient merchandising policies.
TJX Companies’ aggressive marketing and advertising campaigns have also been driving traffic at its stores. Its gift-giving initiatives, unique among off-price retailers and loyalty card program also help improve customer engagement.
Driven by such efforts, TJX Companies witnessed growth of 4% in comps, during the fourth quarter of fiscal 2018 compared with the 3% rise in the year-ago quarter. These factors, combined with favorable currency translations, helped net sales to advance nearly 15.8% year over year during the fiscal fourth quarter.
Further, management stated that it remains optimistic about comps growth in fiscal 2019 and will continue to focus on implementing sales-driving efforts to attract traffic. Management hopes that stores will benefit from solid merchandise assortment and brands. Accordingly, comps are expected to grow 1-2% in fiscal 2019, while an improvement of 1-2% is expected in the first quarter.
Store & E-commerce Expansion
In an effort to sustain the sturdy comps performance, TJX Companies also resorts to frequent store openings, and has been expanding at a rapid pace across the United States, Europe and Canada. It opened around 258 stores during fiscal 2018. Now, with almost 4070 stores across nine countries, TJX Companies intends to continue expanding its store base, with plans to open approximately 600 stores over the long term. The company is aimed at opening approximately 400 Homesense stores in the United States in the forthcoming period. In respect of TJX Canada, the company foresees opportunities to expand into rural areas. Management is impressed with the steady progress of its business across Europe, enabling it to continue as one of the major off-price retailers in the region. Like TJX Companies, Burlington Stores (BURL - Free Report) , a major discount-retailer, has also been undertaking store-expansion initiatives to bolster sales.
Additionally, with increasing number of consumers resorting to online shopping, TJX Companies has undertaken several initiatives to strengthen its e-commerce business. The company’s strategic prices, combined with effective offers and in-store return policies, have aided boosting its online business considerably.
Can Efforts Offset Wage Woes?
TJX Companies has been bearing the brunt of rising wage costs for a while. During the fiscal fourth quarter, wage rise dented TJX Companies’ earnings by approximately 1%. In fact, the company expects pre-tax margins to remain under pressure for the next few quarters due to an increase in employee payroll.
Though rising wage costs remain a concern, TJX Companies has nevertheless many reasons to cheer and remains positive on its journey ahead, courtesy of its effective strategies to drive store traffic and sales. Encouragingly, the company’s strong fundamentals have also led management to provide a positive outlook for fiscal 2019. That said, we expect the company’s strategic initiatives to continue aiding growth and also enhance investor sentiments, in the forthcoming periods.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>