The TJX Companies, Inc. (TJX - Free Report) is surely worth giving a shot, as this off-price retailer rallied 52.9% in a year compared with the industry’s growth of 50.3%. In fact, this Zacks Rank #2 (Buy) company has gained 5.7% in nearly a week’s time alone, mainly attributable to its stellar second-quarter fiscal 2019 earnings results and raised outlook for fiscal 2019.
That said, let’s delve into the factors that make TJX Companies a lucrative bet, all the more after its strong quarterly show.
Sturdy Comps Run a Major Driver
TJX Companies has been reporting positive comparable store sales (comps) for a while now, buoyed by its robust initiatives to attract traffic. During the second quarter of fiscal 2019, TJX Companies’ consolidated comps grew 6% year over year, fueled by increased customer traffic at all segments. Management remains particularly impressed with the performance of the company’s largest division — Marmaxx. Notably, the second quarter marked the 16th straight period of higher customer traffic for both Marmaxx as well as the company as a whole. In fact, all segments reported higher comps, courtesy of consumers’ favorable response to the company’s brands and merchandise assortments at reasonable prices. These factors are expected to help the company maintain its solid comps trend. That said, management raised its fiscal 2019 consolidated comps growth guidance from 1-2% to 3-4%.
Expansion Efforts for Stores & E-commerce
TJX Companies has an aggressive store-opening strategy and it regularly opens stores and expands across the United States, Europe and Canada. While many retailers are resorting to store closures, TJX Companies added around 53 stores in the second quarter of fiscal 2019. Further, with increasing number of consumers resorting to online shopping, the company has undertaken several initiatives to boost online sales and strengthen its e-commerce business. TJX Companies’ off-price model along with its strategic store locations, impressive brands and fashion products has been driving its performance both in stores and online. Also, the company’s effective marketing initiatives and loyalty programs help it boost comps. Incidentally, the company’s aggressive marketing and advertising campaigns through multiple mediums (TV, radio and social media) have been boosting traffic at its stores. Its gift-giving initiatives also helps it improve customer engagement.
Q2 Retains Solid Past Record, Outlook Boosts Estimates
TJX Companies has been witnessing year-over-year growth in both top and bottom lines for more than a year now, courtesy of solid customer traffic. The trend continued in second-quarter fiscal 2019, wherein both earnings and revenues improved year over year and beat the Zacks Consensus Estimate for the third straight time. Splendid comps drove sales, which along with efficient inventory management and benefits from tax reforms aided earnings growth. Notably, consolidated inventories on a per-store basis increased 5% year over year. The company remains well placed to take advantage of solid opportunities in the market for branded merchandise, given its impressive inventory and liquidity position.
Management remains impressed with the company's exceptional performance, especially the apparel business. TJX Companies further stated that it commenced the third quarter on a strong note, which along with a stellar second-quarter show led to raised comps and full-year earnings guidance. For fiscal 2019, the company now projects adjusted earnings per share in the range of $4.10-$4.14, representing 6-8% increase from the year-ago period. Earlier, management expected the bottom line to be in the range of $4.04-$4.10, representing 5-6% increase from the year-ago period.
These factors have also made analysts more constructive on the stock’s ongoing performance. Evidently, the Zacks Consensus Estimate for fiscal 2019 has gone up by 4 cents to $4.89 in the past seven days. Clearly, there are enough reasons for investors to be upbeat about TJX Companies.
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