TJX Companies: Why This Stock Can Deliver Upside

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Jan 21, 2015

TJX Companies (TJX, Financial) announced a 7% increase in second-quarter fiscal 2015 revenue to $6.92 billion over $6.44 billion reported a year ago. These second-quarter results also exceeded the Thomson Reuters consensus estimate of $6.88 billion in revenue.

TJX reported second-quarter fiscal 2015 earnings of $517.6 million, or 73 cents per share compared to $479.6 million or 66 cents per share during the last year. However, analysts had expected earnings of 73 cents per share, according to FactSet. The company expects third-quarter earnings in 81 cents to 85 cents per share range.

Witnessing good growth

HomeGoods illustrated excellent quarter with comps increasing 5% for this year over 8% growth rate in previous year. The new store performance of HomeGoods in its fresh markets is exciting as it complements the ongoing growth of this segment. To enable the future growth of HomeGoods, the management plans to launch a fresh distribution center for it in the later half of this year.

Concerning the international business, TJX Canada posted significant improvements in the second quarter results. Comps expanded 3% this year compared to 2% previous year. TJX Europe had an excellent quarter with comps expanding 6% compared to 6% during the previous year. TJX is witnessing superior financial performance for all the European countries.

The ecommerce business segment of TJX for the U.S. and the U.K. continue to perform satisfactorily. The company introduced men’s sunglasses and luggage at tjmaxx.com in the second quarter. Moreover, TJX is keen on adding several other brands and introducing exclusive selection categories to increase the traffic. Most returns are seen to be coming to its stores, which gives it a great opportunity to attract online shoppers to its physical stores. Sierra Trading is performing excellently and TJX included Sierra into its TJX Rewards credit card program.

TJX is significantly utilizing its marketing abilities worldwide. At Marmaxx, TJX is enhancing its entire marketing spend, expanding the TC commercials and releasing its new and winning dual and tri-branding marketing campaign.

TJX is also attracting greater customers through its TJX rewards loyalty program. This increases their shopping frequency and enhancing greater shopping across its chains.

Making good moves

In the second quarter, TJX released its access loyalty card throughout the U.S. and thus offers customers an option of keeping a non-credit card and further gains like early shopping hours. This is believed to be an excellent technique for inviting additional shoppers to join its loyalty program coupled with engaging them closely and frequently.

TJX plans to remodel nearly 250 stores throughout its chains for this year coupled with growth of its innovative Marshalls prototype. There’s continued improvement of customer satisfaction scores for all its segments and strives to make them even better.

TJX has more than 3,200 stores now and sees huge potential to expand that number to 5,150 stores in a long term. The international store development opportunity of TJX is considerable. In North America itself, TJX eyes an opportunity to add more than 1,400 new stores.

Globally, there’s believed to be huge growth potential for TJX. In Europe, TJX has opportunity to open above 450 stores. TJX is working deliberately to introduce 40 stores in Europe for this year, an increase of 25% from the previous year and could further push the rate of opening stores in 2015. TJX’s 2014 plans comprise of further doubling the store numbers in Germany compared to last year. Our new store performance across Europe continues to be excellent. Going forward, TJX plans to further expand into other European countries, with its initial stores planned to be opened in Austria during the first half of 2015.

Conclusion

The major TJX investments comprise innovative fresh stores, ecommerce, store remodels, supply chain including its allocation systems and new planning, talent and teaching. The company is doing the right things, and this makes it a good investment.