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Bull Of The Day: TJX Companies

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TJX Companies TJX is a retail star that I have been waiting for the right moment to pick up. It looks like that entry opportunity has finally come as the broader equity market sells off while TJX’s fundamental growth narrative remains unchanged.

Consumers are rushing to Main Street with the new normal ushering in a slew of digitally inclined product offerings. TJX is one of the rare (and maybe only) retailers that didn’t need digital sales to survive the pandemic. Nevertheless, it has been developing digital omnichannel platforms, positioning the company for accelerated growth through the Roaring 20s.

TJX is now over 15% off its August highs and poised for a buy as the stock comes down to robust technical support that should encourage bullish capital to flood into this Millennial favored “off-price” retailer.

Analysts are getting increasingly bullish on TJX as retail foot traffic swells in this economic resurgence. Consumers are looking to refresh their fall & winter wardrobes and evolving consumption patterns of younger generations with a penchant for value, providing a long-term tailwind for TJX and its niche quality at a discount product offering.

TJX analysts have been continuously raising price targets, and EPS estimates alike as the company’s future growth gets progressively priced in, pushing this stock up to a Zacks Rank #1 (Strong Buy).

The Business

TJX Companies, comprised of TJ Maxx, Marshalls, HomeGoods, & more, has become a beacon of hope amid the ‘retail apocalypse.’ Many brick-and-mortar storefronts closed their doors for the last time during the pandemic lockdowns in 2020, with more than 10,000 store closures 30 major retailers being forced to file bankruptcy last year. Meanwhile, TJX grew its global store count by 136 since the pandemic began.

TJX Companies has gained tremendous popularity from Millennials, now the largest consuming generation, because of the value hunting possibilities it offers customers. TJX’s diverse portfolio of global companies provides a wide array of growth opportunities.

Direct e-commerce sales were not a part of TJX’s original “value-hunting” framework because of the nature of these types of operations (constantly changing inventories). However, the enterprise has adapted digital sales options on their websites, and it has proven to be a potent driver for new customer acquisitions in recent quarters.

TJ Maxx, Marshall, and TK Maxx (the international TJ Maxx) established transactional online sites over the past decade or so, and HomeGoods just recently launched its own e-commerce platform. As I mentioned above, TJX didn’t need digital sales to survive the pandemic’s brick-and-mortar shutdown, with a mere 3% of revenue coming from its online platforms. Still, the pandemic did help to develop a new digital consumer base that will continue to expand in the post-pandemic world.

TJX experienced significant pandemic headwinds, exhibiting two-quarters of losses, which was the first time in recent history (last 25 years) that the company could not turn a quarterly profit. Nevertheless, this discount retailer bounced back fast, with its latest July quarter illustrating record Q2 results. This past quarter painted a picture of resilience and core growth. Its topline increased by 20% year-over-year on an open-only comp basis and saw over 81% annual sales expansion on a nominal basis.

This legacy retailer’s revived growth narrative is just beginning as its online presence grows with its bread-and-butter physical storefronts.

TJX was so resilient to the retail apocalypse because of the satisfying in-person experience it provides the growing number of bargain shoppers. There is a peculiar dopamine-powered bliss in finding that item you were looking for at a considerable discount to what you would typically pay, like finding a needle in a haystack.

The Charts

TJX bounced off a critical Fib-derived support level around noon yesterday, which you can see below. If you want to draw this Fibonacci extension (price targets to the downside) yourself, you would start with the September 13th lows and pull it up to the highs we reached on September 17th (Monday to Friday).

TradingView
TradingView

Image Source: TradingView

TJX closed yesterday’s session just about 30 cents above its pre-pandemic record, which it notched at the end of February 2020.

Final Thoughts

The stock is currently trading below its most pessimistic price target with a 27% upside to its average price target. TJX is a buy from both a technical and a fundamental standpoint.

A new wave of consumers is being ushered into this flourishing economy with a penchant for value and convenience. TJX’s new omnichannel platform equips the company with both of these profit-driving qualities.

This company’s savvy management team has managed to gain brick-and-mortar market share as storefronts close down at a record pace. TJX seems to be doing everything right, and I want to be a part of its growth narrative.


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