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The TJX Companies' (TJX) HomeGoods Unit Strong, Costs High
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Strength in the HomeGoods segment has been aiding The TJX Companies, Inc. (TJX - Free Report) . The leading off-price retailer is undertaking initiatives to enhance offline and online businesses. That being said,The TJX Companies is battling escalated freight costs for a while now.
Let’s delve deeper.
Image Source: Zacks Investment Research
What’s Favoring The TJX Companies?
The TJX Companies’ HomeGoods segment has been seeing robust demand for quite some time now. Owing to store closures amid the pandemic, management had come up with a temporary new sales measure — open-only comp store sales — to offer a better view. During fourth-quarter fiscal 2022, open-only comp-store sales surged 22% in the HomeGoods (U.S.) segment from fiscal 2020 levels. Management highlighted that it witnessed consistent strength in every key category and geographic region for HomeGoods and HomeSense through fiscal 2022. The TJX Companies launched homegoods.com in the third quarter of fiscal 2022. The company expects to offer impressive home fashion products at great value on its digital platform with this launch. We believe that the continuation of a strong trend in the segment is likely to keep aiding the company’s performance in the future.
The Zacks Rank #3 (Hold) company is benefiting from its solid store and e-commerce growth efforts. Management has been expanding its footprint fast in the United States, Europe, Canada and Australia. During fiscal 2022, the company increased its store count by 117 stores to reach 4,689 stores. Management expects to incur capital expenditure in the range of $1.7-$1.9 billion for fiscal 2023. This will be spent on opening new stores, remodels, relocations and investments in distribution, network as well as infrastructure.
With an 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. In its last earnings call, management highlighted that it is impressed with the sales growth of e-commerce businesses in 2021. The TJX Companies is optimistic about its capabilities to provide fresh spring merchandise to its stores and online.
Will Hurdles be Countered?
During the fourth quarter of fiscal 2022, The TJX Companies’ consolidated pretax profit margin came in at 9%, down 1.9 percentage points from the fourth-quarter fiscal 2020 levels. Management highlighted that additional investment to expand distribution capacity and wage hikes hurt margins. In addition, net pandemic-induced expenses hurt the pretax margin by 0.5 percentage points. Merchandise margin in the quarter was affected by rising freight expenses.
In its last earnings call, management highlighted that for fiscal 2023 it expects persistent escalated expense headwinds compared with the fiscal 2022 level. It anticipates first-quarter fiscal 2023 to be most pressured with incremental freight expenses. The company also expects escalated wage costs to significantly affect the fiscal first-quarter pretax margin.
All said, it is yet to be seen if the aforementioned upsides can help The TJX Companies stay afloat amid such hurdles. The company’s stock has declined 6% in the past three months against the industry’s 7.8% growth.
The Zacks Consensus Estimate for Costco’s current financial year sales and earnings per share (EPS) suggests growth of 12.3% and almost 17%, respectively, from the year-ago period’s corresponding readings. COST has an expected EPS growth rate of 8.9% for three-five years.
Target, a general merchandise retailer, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 21.3%, on average.
The Zacks Consensus Estimate for Target’s current financial year sales and EPS suggests growth of 3.5% and 6.7%, respectively, from the year-ago period. TGT has an expected EPS growth rate of 16.5% for three-five years.
Dillard's, a retail department stores operator, currently has a Zacks Rank #2. Dillard's has a trailing four-quarter earnings surprise of 294.5%, on average.
The Zacks Consensus Estimate for Dillard's current financialyear sales suggests growth of 4.7% from the year-ago period’s reported figure. DDS has an expected EPS growth rate of 14.6% for three-five years.
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The TJX Companies' (TJX) HomeGoods Unit Strong, Costs High
Strength in the HomeGoods segment has been aiding The TJX Companies, Inc. (TJX - Free Report) . The leading off-price retailer is undertaking initiatives to enhance offline and online businesses. That being said,The TJX Companies is battling escalated freight costs for a while now.
Let’s delve deeper.
Image Source: Zacks Investment Research
What’s Favoring The TJX Companies?
The TJX Companies’ HomeGoods segment has been seeing robust demand for quite some time now. Owing to store closures amid the pandemic, management had come up with a temporary new sales measure — open-only comp store sales — to offer a better view. During fourth-quarter fiscal 2022, open-only comp-store sales surged 22% in the HomeGoods (U.S.) segment from fiscal 2020 levels. Management highlighted that it witnessed consistent strength in every key category and geographic region for HomeGoods and HomeSense through fiscal 2022. The TJX Companies launched homegoods.com in the third quarter of fiscal 2022. The company expects to offer impressive home fashion products at great value on its digital platform with this launch. We believe that the continuation of a strong trend in the segment is likely to keep aiding the company’s performance in the future.
The Zacks Rank #3 (Hold) company is benefiting from its solid store and e-commerce growth efforts. Management has been expanding its footprint fast in the United States, Europe, Canada and Australia. During fiscal 2022, the company increased its store count by 117 stores to reach 4,689 stores. Management expects to incur capital expenditure in the range of $1.7-$1.9 billion for fiscal 2023. This will be spent on opening new stores, remodels, relocations and investments in distribution, network as well as infrastructure.
With an 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. In its last earnings call, management highlighted that it is impressed with the sales growth of e-commerce businesses in 2021. The TJX Companies is optimistic about its capabilities to provide fresh spring merchandise to its stores and online.
Will Hurdles be Countered?
During the fourth quarter of fiscal 2022, The TJX Companies’ consolidated pretax profit margin came in at 9%, down 1.9 percentage points from the fourth-quarter fiscal 2020 levels. Management highlighted that additional investment to expand distribution capacity and wage hikes hurt margins. In addition, net pandemic-induced expenses hurt the pretax margin by 0.5 percentage points. Merchandise margin in the quarter was affected by rising freight expenses.
In its last earnings call, management highlighted that for fiscal 2023 it expects persistent escalated expense headwinds compared with the fiscal 2022 level. It anticipates first-quarter fiscal 2023 to be most pressured with incremental freight expenses. The company also expects escalated wage costs to significantly affect the fiscal first-quarter pretax margin.
All said, it is yet to be seen if the aforementioned upsides can help The TJX Companies stay afloat amid such hurdles. The company’s stock has declined 6% in the past three months against the industry’s 7.8% growth.
3 Retail Stocks to Bet on
Here are some better-ranked stocks — Costco Wholesale Corporation (COST - Free Report) , Target Corporation (TGT - Free Report) and Dillard's, Inc. (DDS - Free Report) .
Costco, which operates membership warehouses, currently carries a Zacks Rank of 2 (Buy). COST has a trailing four-quarter earnings surprise of 13.3%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Costco’s current financial year sales and earnings per share (EPS) suggests growth of 12.3% and almost 17%, respectively, from the year-ago period’s corresponding readings. COST has an expected EPS growth rate of 8.9% for three-five years.
Target, a general merchandise retailer, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 21.3%, on average.
The Zacks Consensus Estimate for Target’s current financial year sales and EPS suggests growth of 3.5% and 6.7%, respectively, from the year-ago period. TGT has an expected EPS growth rate of 16.5% for three-five years.
Dillard's, a retail department stores operator, currently has a Zacks Rank #2. Dillard's has a trailing four-quarter earnings surprise of 294.5%, on average.
The Zacks Consensus Estimate for Dillard's current financialyear sales suggests growth of 4.7% from the year-ago period’s reported figure. DDS has an expected EPS growth rate of 14.6% for three-five years.