Can TJX Companies See Strong Sales Growth in 1Q16?
Will TJX Companies Stay Ahead of Department Stores in 1Q16?
First quarter sales expectations
On May 19, leading off-price retailer TJX Companies (TJX) is set to announce its results for the first quarter of fiscal 2016 ending May 2, 2015. Based on the guidance issued in February 2015, the company expects its 1Q16 sales to be in the range of $6.7 billion–$6.8 billion.
For fiscal 2016, the company expects to see its consolidated sales in the $29.8 billion–$30.2 billion range, representing a 3.0%–4.0% increase compared with the previous fiscal year. Currency headwinds are expected to have a 2.0% adverse impact on its fiscal 2016 revenue.
Fiscal 2015 performance
TJX Companies’ net sales grew by 6.3% to $8.30 billion in the fourth quarter of fiscal 2015 ending January 31, 2015, from the comparable quarter of the previous year. The company exceeded analysts’ consensus sales estimates of $8.26 billion. For fiscal 2015, the company’s net sales increased by 6.0% to $29.1 billion.
Off-price retailing gaining traction
The fiscal year ending January 31, 2015, marked the first time that TJX Companies surpassed the sales notched by Macy’s, the largest department store in US. Sales by Ross Stores (ROST) and Burlington Stores (BURL) grew by 7.9% and 8.7%, respectively, in the fiscal year ending January 31, 2015. In the comparable fiscal year, Macy’s reported sales growth of 0.6%, and JCPenney (JCP) reported a 3.4% sales growth. Sales by Kohl’s Corporation remained almost unchanged.
Even after the recession, off-price retailers continue to perform better than department stores, as price-conscious consumers still search for better deals on similar merchandise available at off-price stores.
Upscale department stores like Nordstrom (JWN) and Neiman Marcus have expanded rapidly into off-price retailing. The latest to join the off-price race is Macy’s, which recently announced its decision to open four pilot off-price stores in New York City under the Macy’s Backstage brand.
TJX Companies has the advantages of scale, strong supplier relationships, and a lean business model. It will be interesting to see how long it can sustain its leading position in the off-price space, given the pace at which department stores are expanding in this category.
TJX Companies constitutes ~1.0% of the portfolio holdings of the SPDR S&P Retail ETF (XRT).
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