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3 Reasons Why TJX Companies (TJX) Stock Appears Promising

Zacks Equity Research

The TJX Companies, Inc. TJX is on a strong footing, courtesy of solid store and e-commerce efforts, impressive marketing strategies, and a favorable inventory position. These factors have been aiding this Zacks Rank #2 (Buy) stock, which has gained 13.6% in the past three months, easily crushing the industry’s growth of 6.5%.

Let’s delve deeper.

Initiatives to Drive Store & E-commerce Business

TJX Companies regularly opens stores and is expanding fast across the United States, Europe and Canada. While many retailers are resorting to store closures, TJX Companies added 107 stores during the third quarter of fiscal 2020, taking the total count to 4,519 as of Nov 2. It intends to continue expanding the store base with plans to operate about 6,100 stores in the long term. Further, with an increasing number of consumers resorting to online shopping, TJX Companies has undertaken several initiatives to boost online sales and strengthen the e-commerce business. The company’s off-price model along with strategic store locations, impressive brands and fashion products has been driving its performance, both in stores and online.

Marketing Strategy & Loyalty Programs Aid Sales

The company is committed to driving comparable store sales (comps) 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. Its 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 improve customer engagement.

These factors have been helping TJX Companies draw traffic and boost comps. During the third quarter of fiscal 2020, its consolidated comps grew 4% year over year, fueled by increased customer traffic at all major segments. Notably, the quarter marked its 21st straight period of higher customer traffic. Most segments reported higher comps, courtesy of consumers’ favorable response to the company’s brands and impressive merchandise assortments at reasonable prices.

Favorable Inventory Position & Outlook

TJX Companies’ consolidated inventories, on a per-store basis (including distribution centers, and excluding e-commerce, inventory in transit and Sierra stores), increased 9% (also on a constant-currency basis) year over year during the third quarter. During its third-quarter conference call, management stated that given its impressive inventory position, the company is well poised to take advantage of solid market opportunities. In fact, the company stated that it began the fiscal fourth quarter on a strong note.

All these factors paint a bright picture of TJX Companies’ prospects.

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