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TJX Companies Up 23% in a Year, Rising Traffic a Key Catalyst

Zacks Equity Research

The TJX Companies, Inc. TJX is gaining from rising store traffic, which can be attributed to impressive merchandise assortments at reasonable prices as well as efficient marketing strategies. Such upsides have boosted investors’ optimism, evident from the stock‘s 23.4% rally in the past year compared with the industry’s rise of 9.1%. Let’s take a closer look at the factors working in favor of this Zacks Rank #2 (Buy) company.

Efforts to Boost Sales Bode Well

TJX Companies has been gaining from rising traffic across most segments. Management is particularly impressed with the performance of its largest division — Marmaxx. Notably, the third quarter of fiscal 2019 marked the 17th straight quarter of higher customer traffic for Marmaxx and the company as a whole. Also, the company has an aggressive store-opening strategy and regularly opens stores across the United States, Europe and Canada. While many retailers are resorting to store closures, TJX Companies added around 102 stores in the third quarter and plans to continue expanding its store base to about 6,100 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 e-commerce business. Also, the company is committed toward boosting sales through effective marketing initiatives and loyalty programs. Its gift-giving initiatives, which are unique to discount retailers, and loyalty card program help in improving customer engagement.

Backed by such robust strategies, TJX Companies has been reporting positive comparable store sales (comps) for a while. Moreover, management is optimistic about fiscal 2019 and has raised comps guidance. Consolidated comps are now expected to grow 5% in fiscal 2019, up from 3-4% growth projected earlier. Moreover, for the fourth quarter, the company expects consolidated comps growth of 2-3%.



Wrapping Up

The company’s off-price model along with strategic store locations, impressive brands and fashion products keep it well positioned to sustain business momentum in stores and online. The company also boasts an efficient inventory management system. Notably, consolidated inventories on a per-store basis increased 9% year over year during the third quarter of fiscal 2019.    

In fact, we expect that such upsides will help the company to overcome the negative impacts from higher freight and wage costs. That said, we hope that the company’s well-chalked strategies will enable it to meet financial targets and thereby continue to remain a preferred pick for investors.

Looking for More Retail Stocks? Check These

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Foot Locker, Inc FL delivered average positive earnings surprise of 6.8% in the trailing four quarters. It has a long-term earnings growth rate of 7.5% and a Zacks Rank #2 (Buy).

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