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The TJX Companies (TJX) Hurt by Store Closures Amid COVID-19
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Increased social distancing, stay-at-home trends and other government restrictions amid the coronavirus outbreak have been marring businesses of a number of retailers like The TJX Companies, Inc. (TJX - Free Report) . Incidentally, pandemic-induced costs and temporary store closures are posing a threat to the company’s performance. Nevertheless, The TJX Companies’ impressive digital business provides a breather.
Let’s delve deeper.
Factors Hurting The TJX Companies’ Performance
The TJX Companies has been witnessing coronavirus-induced hurdles like temporary store closures. Notably, temporary store closures in Europe and Canada during the fourth quarter of fiscal 2021 adversely impacted sales by nearly $950 million to $1.05 billion. This resulted in major loss of profit dollars as well as nearly 18-21 cents loss of earnings per share in the quarter. During the quarter, open-only comp store sales for the company fell 3% year over year. The metric declined 7% and 4% at the Marmaxx (U.S.) and TJX Canada segments, respectively.
In its fiscal fourth-quarter earnings call, management highlighted that nearly 690 stores are temporarily shut due to government mandates amid the coronavirus pandemic. Most of these closed stores are situated in Europe. In fact, management estimates stores in the region to be shut for 67% of the first quarter of fiscal 2022. Overall, the company anticipates stores to be closed for nearly 11% of the fiscal first quarter based on the current restrictions. All said, management expects overall sales, pretax margin and earnings per share to be adversely affected by temporary store closures amid the pandemic during fiscal first quarter. Notably, temporary store closures are likely to affect first-quarter sales by $750 million to $850 million.
Moreover, The TJX Companies saw nearly $300 million in additional net costs related to COVID-19 in the quarter under review, which included additional payroll to clean stores and monitor occupancy levels, expenses of PP&E and appreciation bonus for certain associates, among others. In fact, management continues to anticipate incurring higher net costs related to the pandemic in the fiscal first quarter. Moreover, the company saw supply-chain costs stemming from reduced average ticket and processing higher units, costs linked to increased distribution capacity as well as increase in wages at distribution facilities during the fourth quarter. Apart from this, The TJX Companies is exposed to unfavorable foreign currency translations, owing to the company’s significant exposure to international markets.
Wrapping Up
The company has been benefiting from its solid store and e-commerce growth efforts. Markedly, with an increasing number of consumers resorting to online shopping amid the pandemic, The TJX Companies has undertaken several initiatives to strengthen its e-commerce business. Apart from these, the company’s HomeGoods segment has been seeing robust demand for a while now.
That being said, let’s see if these upsides can help this Zacks Rank #4 (Sell) company counter the aforementioned hurdles. Shares of The TJX Companies have lost 1.4% year to date compared with the industry’s decline of 4.5%.
Hibbett Sports, Inc. (HIBB - Free Report) , which sports a Zacks Rank #1, has a long-term earnings growth rate of 17.2%.
Dillard’s, Inc. (DDS - Free Report) , with a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of almost 11%, on average.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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The TJX Companies (TJX) Hurt by Store Closures Amid COVID-19
Increased social distancing, stay-at-home trends and other government restrictions amid the coronavirus outbreak have been marring businesses of a number of retailers like The TJX Companies, Inc. (TJX - Free Report) . Incidentally, pandemic-induced costs and temporary store closures are posing a threat to the company’s performance. Nevertheless, The TJX Companies’ impressive digital business provides a breather.
Let’s delve deeper.
Factors Hurting The TJX Companies’ Performance
The TJX Companies has been witnessing coronavirus-induced hurdles like temporary store closures. Notably, temporary store closures in Europe and Canada during the fourth quarter of fiscal 2021 adversely impacted sales by nearly $950 million to $1.05 billion. This resulted in major loss of profit dollars as well as nearly 18-21 cents loss of earnings per share in the quarter. During the quarter, open-only comp store sales for the company fell 3% year over year. The metric declined 7% and 4% at the Marmaxx (U.S.) and TJX Canada segments, respectively.
In its fiscal fourth-quarter earnings call, management highlighted that nearly 690 stores are temporarily shut due to government mandates amid the coronavirus pandemic. Most of these closed stores are situated in Europe. In fact, management estimates stores in the region to be shut for 67% of the first quarter of fiscal 2022. Overall, the company anticipates stores to be closed for nearly 11% of the fiscal first quarter based on the current restrictions. All said, management expects overall sales, pretax margin and earnings per share to be adversely affected by temporary store closures amid the pandemic during fiscal first quarter. Notably, temporary store closures are likely to affect first-quarter sales by $750 million to $850 million.
Moreover, The TJX Companies saw nearly $300 million in additional net costs related to COVID-19 in the quarter under review, which included additional payroll to clean stores and monitor occupancy levels, expenses of PP&E and appreciation bonus for certain associates, among others. In fact, management continues to anticipate incurring higher net costs related to the pandemic in the fiscal first quarter. Moreover, the company saw supply-chain costs stemming from reduced average ticket and processing higher units, costs linked to increased distribution capacity as well as increase in wages at distribution facilities during the fourth quarter. Apart from this, The TJX Companies is exposed to unfavorable foreign currency translations, owing to the company’s significant exposure to international markets.
Wrapping Up
The company has been benefiting from its solid store and e-commerce growth efforts. Markedly, with an increasing number of consumers resorting to online shopping amid the pandemic, The TJX Companies has undertaken several initiatives to strengthen its e-commerce business. Apart from these, the company’s HomeGoods segment has been seeing robust demand for a while now.
That being said, let’s see if these upsides can help this Zacks Rank #4 (Sell) company counter the aforementioned hurdles. Shares of The TJX Companies have lost 1.4% year to date compared with the industry’s decline of 4.5%.
Some Solid Retail Picks
Abercrombie & Fitch Co. (ANF - Free Report) , which sports a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 18%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hibbett Sports, Inc. (HIBB - Free Report) , which sports a Zacks Rank #1, has a long-term earnings growth rate of 17.2%.
Dillard’s, Inc. (DDS - Free Report) , with a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of almost 11%, on average.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2021 today >>