TJX Companies (TJX): An Attractive Retail Choice for the Long Term


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The COVID-19 pandemic crushed several retailers last year as closures and restrictions impacted store operations and caused significant losses. With the reopening of physical stores following the easing of restrictions, retail sales have recovered well this year. That said, supply chain disruptions, inflationary pressures and a tight labor market have had an impact on the pace of recovery and profitability. TJX Companies (TJX) performed well in the first three quarters of fiscal 2022 (fiscal year ending January 29, 2022) despite difficult market conditions and exceeded Wall Street expectations. The company’s low-cost business model and efficient inventory management have helped it deal with supply chain issues better than many other players in retail.

TJX stock rose 11.2% in 2021 and generated a total return of 12.8% including dividends, lagging behind the 28.7% return of the S&P 500 Index. However, I am optimistic as to TJX’s long-term outlook based on its leading position in the non-price space, strong fundamentals and potential to further expand into national and international markets.

Strong recovery after a difficult year

Temporary store closures and restrictions amid the coronavirus pandemic caused TJX Companies’ sales to drop 23% for fiscal 2021 (ended Jan. 30, 2021) to $ 32.1 billion. The COVID-19 pandemic has shattered the company’s impressive 24-year streak of comparable sales growth, spanning several tough economic times. However, the company has rebounded strongly from the easing of restrictions and the vaccination campaign, with sales increasing 64% year-on-year in the first nine months of fiscal 2022.

The company’s sales in the third quarter of fiscal 2022 (ended October 30, 2021) increased 24% year-over-year to $ 12.5 billion. Open-only comparable store sales increased 14% from pre-pandemic levels (third quarter of fiscal 2020). The home category continued to outperform apparel sales in the third fiscal quarter. TJX’s third-quarter EPS increased 18.3% year-on-year to $ 0.84. Despite higher transportation costs, investments to expand distribution capacity and increased wages, the company’s profitability increased through strong sales and improved merchandise margin.

I believe in the current inflationary environment, customers will look for the discounted prices offered by TJX and other low cost retailers. For the fourth quarter of fiscal 2022, analysts expect TJX sales to rise 30% to $ 14.2 billion and adjusted EPS to rise to $ 0.91 from $ 0.45 in the comparable quarter of fiscal 2021. I think TJX’s home category will continue to outperform clothing as people continue to invest in their homes. While supply chain disruptions in the midst of the pandemic have taken a heavy toll on several retailers, TJX said it has plenty of inventory in its stores and online for the holiday season.

Additionally, to mitigate the impact of rising costs, the company began to selectively increase prices during the third fiscal quarter. On the third quarter conference call, the company revealed that comparable sales opened only in the fourth quarter started on a very strong note with growth in the mid-teens.

Source: In Search of the Alpha

As for expectations for fiscal 2022, analysts forecast revenue increase of about 52% to $ 48.8 billion and adjusted EPS of $ 2.97 from $ 0.26 for fiscal 2021 For fiscal 2023, analysts currently forecast revenue and adjusted EPS growth of 7%. and 14%, respectively. I believe continued sales growth and expense management will drive margin expansion. In addition, the company’s buybacks will also boost its EPS. The company plans to repurchase $ 1.75 billion to $ 2.0 billion of its shares during the current fiscal year.

A strong non-price model will support continued growth

TJX is a well-established non-price retailer, with 3,377 stores in the United States, 545 in Canada, 696 in Europe and 66 in Australia (as of October 30, 2021). The company’s US operations include the TJ Maxx, Marshalls, HomeGoods, HomeSense and Sierra banners as well as,, and e-commerce sites. Its TJX Canada segment operates the Winners, HomeSense and Marshalls chains, while TJX International includes TK Maxx, HomeSense and in Europe and TK Maxx in Australia.

TJX offers its customers clothing, household items and other merchandise at prices typically 20-60% lower than the prices at which full-price retailers, such as department stores and other retailers, sell comparable merchandise. . The company’s value offerings and its rapidly evolving merchandise mix provide customers with a scavenger-hunt-like experience and help increase traffic.

TJX has a global purchasing organization that sources products from an extensive supplier network of approximately 21,000 suppliers. The company is able to provide valuable offers to its customers through its purchasing strategy, which it describes as opportunistic buying. TJX takes advantage of opportunities such as manufacturer overruns, order cancellations and closings, to acquire merchandise at substantial discounts. The company’s purchasing strategy and inventory management have helped it cope with supply chain issues better than other retailers.

The growing strength of online retailers has forced many traditional retailers to close multiple stores. In contrast, TJX sees strong potential to expand its store footprint to 6,275 long-term stores in the countries where it currently operates.

TJX has mainly focused on its physical stores, although it has e-commerce sites unlike the Ross Stores, which do not have an online channel. TJX’s online sales represent a very small proportion of its overall sales (less than 3% in the first nine months of fiscal 2022, 2021 and 2020). However, given the growing relevance of e-commerce, especially since the pandemic, TJX is improving its online channels by adding new merchandise in all categories. He also launched in September 2021.

Overall, with its efforts to remodel its existing stores, improving online capabilities, and expanding the store footprint, I think TJX is on track to meet its long term goal. of $ 60 billion in sales.


  • The increase in COVID-19 cases and the new variants pose a great threat to TJX and other low-cost retailers, as any restrictions on store opening hours or temporary store closures to curb the spread of the disease. virus could significantly harm their business. Additionally, many retailers saw strong e-commerce sales amid last year’s lockdowns as demand shifted from stores to digital channels. Given the lack of strong online capabilities compared to other retailers, TJX may fail to meet online demand if lockdowns are re-imposed.
  • Higher wages, continued investments in expanding distribution capacity and increased transportation costs could put the company’s margins under pressure in the short term.


As of January 5, TJX stock was trading at a 12-month forward PE of 23.07, which was below its 3-year average of 24.56 (Source: Wall Street analysts’ price targets for the stock range from $ 65 to $ 98, with the average price target of $ 85.35 indicating a possible rise of about 14% from current levels.

I am optimistic about TJX’s long-term potential based on the success of its low-cost business model, inventory and expense management, and the ability to expand its in-store presence in the US and international markets. Also, in December 2020, the company announced the reinstatement of its quarterly dividend with a 13% increase. While its 1.38% term dividend yield may not sound appealing to some investors, I believe the company’s strong cash flow will support a continued increase in its dividend over the long term and improve returns for shareholders. .


Over the past few years, several retailers have succumbed to intense pressure from online retailers. However, TJX’s value offerings, low cost business model, strong financial position, and solid execution have helped it grow despite competition from e-commerce players. Overall, I think TJX is poised to grab additional market share from department stores as well as other retailers and strengthen its leadership in the low-cost space.


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