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The TJX Companies' (TJX) HomeGoods Unit Solid Amid COVID-19

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The TJX Companies, Inc. (TJX - Free Report) is benefiting from strength in its HomeGoods segment. Also, the company is undertaking initiatives to enhance offline and online businesses. Moreover, its marketing strategies along with robust loyalty programs are noteworthy. That being said, The TJX Companies is witnessing coronavirus-induced hurdles like temporary store closures and increased costs.

Let’s delve deeper.

What’s Working Well for The TJX Companies?

The TJX Companies’ HomeGoods segment is seeing robust demand for a while now. During first-quarter fiscal 2022, open-only comp store sales surged 40% in the HomeGoods (U.S.) segment from fiscal 2020’s level. During its fiscal first-quarter earnings call, management highlighted that it witnessed impressive sales in HomeGoods and Homesense across all primary categories and regions on the back of favorable consumer response to its mix of global home fashion products.

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Moreover, the company expects to keep witnessing robust sales trend in HomeGoods business as consumers are increasingly spending on their houses amid health crisis. Apart from this, The TJX Companies is on track to roll out by the end of 2021. With this launch, the company expects to offer impressive home fashion products at great value on its digital platform.

Further, the company has been benefiting from its solid store and e-commerce growth efforts. It regularly opens stores and expands fast across the United States, Europe, Canada and Australia. Notably, The TJX Companies opened 67 new stores, taking the total count to 4,639 during fiscal first quarter. Moreover, the company expanded its square footage by 1% year over year during the quarter. With increasing number of consumers resorting to online shopping, The TJX Companies has undertaken several initiatives to boost online sales and strengthen its e-commerce business. Well, the company’s off-price model along with its strategic store locations, impressive brands and fashion products, are likely to drive performance in stores and online.

Additionally, the company is committed toward boosting growth, through effective marketing initiatives and loyalty programs. Incidentally, The TJX Companies’ aggressive marketing and advertising campaigns through multiple mediums (TV, radio and social media) have been adding growth. In its last earnings call, management highlighted that it has rolled out new campaigns across television, digital and social media platforms for several banners this year. Apart from this, The TJX Companies’ gift-giving initiatives, 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) have been helpful in improving customer engagement.

Roadblocks on Way

The TJX Companies’ performance in first-quarter fiscal 2022 was affected by temporary store closures thanks to the coronavirus outbreak. Although its stores in the United States were open, stores in Europe and Canada were shut for nearly 76% and 25% parts of the quarter, respectively. In its last earnings call, the company notified that presently almost 300 stores were temporarily shut thanks to government mandates amid the pandemic. Incidentally, management stated that it expects stores to be closed for nearly 3% of the fiscal second quarter, based on such restrictions.

Apart from this, The TJX Companies is battling coronavirus-induced expenses for a while. During fiscal first quarter, the company witnessed approximately $200 million in additional pandemic-led net costs. That being said, we believe that the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company stay afloat amid such hurdles.

Notably, the company’s stock has gained 33% in the past year compared with the industry’s growth of 40.9%.

Some Solid Retail Picks

Target Corporation (TGT - Free Report) which sports a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 13.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General Corporation (DG - Free Report) , which carries a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 11.3%.

Costco Wholesale Corporation (COST - Free Report) , which carries a Zacks Rank #2, has a long-term earnings growth rate of 9.1%.

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