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Hype Asset of the Day | February, 27th, 2022


The TJX Companies, Inc. (NYSE: TJX)

TJX Companies, Inc., the leading off-price apparel and home fashion retailer in the U.S. and worldwide, was ranked 75 in the 2022 Fortune 500 company listings. At the end of fiscal 2022, the Company had nearly 4,700 stores across nine countries and three continents, and five distinctive branded e-commerce sites. Some of the better-known brands it operates are T.J. Maxx and Marshalls (combined, Marmaxx), HomeGoods, Sierra, and Homesense. Having recently released their fourth-quarter earnings report, the company has seen an increase in mentions by 325% over the last day, prompting investors to wonder what makes TJX Companies gain such hype. Currently, shares of TJX trade at $77.25 per share.


Positive Hype

There are lots of reasons that TJX has come to gain this much positive hype, here are some of them.



  • The discount store operator now expects full-year adjusted profit per share between $3.29 and $3.41, compared with analysts' estimates of $3.57, according to IBES data from Refinitiv.


  • The company's net sales rose 5% to $14.52 billion in the fourth quarter, beating analysts' estimates of $14.07 billion while profit per share came in line with expectations of 89 cents.


  • “We saw fourth-quarter U.S. comp store sales growth of 4%, well above our plan, and U.S. customer traffic increase. Marmaxx delivered a very strong 7% comp increase, its highest quarterly comp of the year, driven by excellent sales in its apparel and accessories categories,” said Ernie Herrman, chief executive officer and president of The TJX Companies.


  • The T.J. Maxx parent posted better-than-expected fourth-quarter revenue, benefiting from bargain-hungry but brand-conscious customers turning to off-price stores during the holiday season.


  • TJX also said it plans to increase dividends by 13% and buy back between $2B and $2.5B of its stock in the full fiscal year of 2024.


  • The company has a positive outlook for the near future, as Fiscal 2024 is off to a strong start, and they remain confident in improving profitability this year and reaching pre-tax profit margin targets of 10.6% by Fiscal 2025.


  • “We are energized for the year ahead and our plans to keep bringing customers around the globe ever-changing selections of great fashions and brands at excellent values. Longer term, I am confident that we are on track to becoming an increasingly profitable $60 billion-plus company,” Herrman added.


Negative Hype

Like any other company, TJX is not perfect. Here are a couple of reasons why it might not be the best time to buy any TJX shares.



  • Analysts were disappointed to hear that the gross profit margin contracted 100 points to 26.1% year-over-year, missing the 27.8% consensus.


  • For this quarter, the company sees EPS in the region of $0.68-0.71 while the full-year EPS forecast came at $3.35 (up or down 6 cents). Analysts were looking for EPS of $0.74 and $3.56 for the first fiscal quarter and full year, respectively.


  • The company has been battling higher freight and labor costs due to global supply chain disruptions, the Russia-Ukraine war and inflation, had selectively increased prices from fiscal 2022 on some products. However, these prices are still lower than other retail stores.


Conclusion

Analysts see TJX as one of the more well-positioned off-price retailers which is expected to gain market share in a weakening consumer discretionary environment. The company is likely to see strong growth in annual sales as inflation pushes bargain-hungry but brand-conscious customers to off-price retailers offering cheaper deals and promotions. However, whether they’ll be able to keep supply up to meet this demand still stands due to the challenges of supply chain disruptions.


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