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Bear of the Day: The TJX Companies, Inc. (TJX)

Benjamin Rains
·3 min read

The TJX Companies, Inc. (TJX) was one of the many victims of non-essential status during the early days of the coronavirus. The off-price retail powerhouse’s near-term outlook appears rough and its stock price has lagged the broader retail space in 2020.

The Positives

TJX is an off-price apparel and home décor retailer that runs roughly 4,500 stores in nine countries, including the U.S., Canada, the UK, and Germany. The company operates under T.J. Maxx, Marshalls, and HomeGoods, as well as the much smaller Sierra and Homesense brands. The company had found success in both in-store retail and through the expansion of its digital and e-commerce offerings.

TJX has carved out a strong niche within a rapidly evolving traditional retail landscape that has seen the likes of Kohl's (KSS), Macy’s (M), and Nordstrom (JWN) all struggle and be largely discarded by Wall Street over the last five years or so. In fact, TJX shares had outclimbed its industry and outshined its rivals over the last three years. But the coronavirus put a major dent in its near-term success.











Covid-19 Impact

TJX’s stores were temporarily closed for “approximately half of the quarter” due to the coronavirus pandemic. This saw it post an adjusted loss of -$0.74 per share, which came in far worse than our estimates. Meanwhile, its quarterly sales plummeted 52%.

TJX didn’t provide full-year guidance last quarter, like many other firms throughout various sectors. And in an effort to conserve cash, the company said in its May 21 earnings release that it “decided not to declare a dividend for the first quarter of Fiscal 2021, and at this time, does not expect to declare a dividend in the second quarter of Fiscal 2021.”

Executives said they expected to return to making regular dividend payments soon. But the continued spread of the coronavirus makes the situation unclear and increasingly more difficult for management and investors.












Bottom Line

Moving on, our current Zacks estimates call for TJX’s second quarter fiscal 2021 revenue to fall 30.3%, with its adjusted earnings expected to tumble from +$0.62 a share in the year-ago period to a loss of -$0.09 per share. Luckily, the company is expected to see things start to turn around in the second half of 2020 as the economy slowly begins to return to something close to normal.

TJX is currently a Zacks Rank #5 (Strong Sell) that holds a “D” grade for Value and an “F” for Growth in our Style Scores system. The stock is also part of the Retail - Discount Stores space that sits in the bottom 30% of our more than 250 Zacks industries.

The stock also rests roughly 20% off its 52-week highs, as it has fallen behind the broader retail industry since the market’s March 23 comeback. That said, long-term investors might want to keep TJX stock on their watchlists because it has been able to succeed at its own game during the e-commerce era that’s seen Amazon (AMZN) push its weight around and disrupt many other retailers.

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