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Will TJX Companies (TJX) Continue to Ride on Sturdy Comps?

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The TJX Companies, Inc. (TJX - Free Report) has seen its shares rally almost 17% in the past three months, outpacing the industry’s growth of 12%. The company has been mainly gaining on sturdy comparable store sales (comps), which in turn has been backed by continued rise in traffic. Clearly, the company’s efforts to enhance store and e-commerce business are yielding.

Let’s delve deeper.



What’s Behind TJX Companies’ Solid Record?

TJX Companies has been reporting positive comps for a while now. During the fourth quarter of fiscal 2019, the company’s consolidated comps grew 6% year over year, fueled by increased customer traffic at all segments. The company’s apparel and home businesses remained strong in the quarter. Notably, the quarter marked the 18th straight period of higher customer traffic at Marmaxx as well as the entire company.  In fact, all segments reported higher comps, courtesy of consumers’ favorable response to the company’s brands and impressive merchandise assortments at reasonable prices.

Clearly, this leading off-price retailer is benefiting from efforts to drive traffic and sales. Well, major retailers like Walmart (WMT - Free Report) , Dollar Tree (DLTR - Free Report) and Kohl’s (KSS - Free Report) are also largely gaining from their respective comps record. Moreover, TJX Companies regularly opens stores and expands across the United States, Europe and Canada. While many retailers are resorting to store closures, the company added 236 stores during fiscal 2019, taking the total store count to 4,306 as of Feb 2, 2019. The company intends to continue expanding store base with plans to operate about 6,100 stores in the long term.

Further, with increasing number of consumers resorting to online shopping, TJX Companies has undertaken several initiatives to boost online sales and strengthen e-commerce business. The company’s off-price model along with its strategic store locations, impressive brands and fashion products has been driving performance both in stores and online. Also, the company is committed toward boosting comps growth through effective marketing initiatives and loyalty programs.

Incidentally, TJX Companies’ aggressive marketing and advertising campaigns through multiple mediums (TV, radio and social media) have been boosting traffic at its stores. The company’s 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) also help it improve customer engagement.

Will Momentum Stay?

Though wage and freight costs, and currency woes are expected to play spoilsports in fiscal 2020, consumers’ favorable response to TJX Companies’ impressive brand portfolio and consistent rise in customer traffic keep management encouraged. In fiscal 2020, the company’s consolidated comps are expected to grow 2-3% and comps at Marmaxx are also anticipated to grow in the same range. That said, we expect this Zacks Rank #3 (Hold) stock to sustain its impressive momentum.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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