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TJX Companies Hits 52-Week High on Solid Q2, Buyout Deal

Shares of The TJX Companies Inc. TJX hit a new 52-week high of $76.93 on Aug 18 on the back of impressive second-quarter fiscal 2016 results. The discount retailer also inked a deal to acquire Australian off-price retailer, Trade Secret. The company’s shares eventually closed at $76.78, recording a return of 11.96% year-to-date.

Shares of TJX have been on the rise over the past two years driven by consistently high comparable store sales (comps).

Growth Drivers

On Aug 18, TJX reported decent second-quarter earnings and revenues driven by solid comps growth.

The off-price apparel and home goods retailer reported 6% comps growth in the second quarter that beat management’s expectation and compared favorably with 3% rise in the year-ago period. Comps grew on the back of improvement in all the segments. In fact, the company has witnessed solid comps growth in consecutive months so far in fiscal 2016.

TJX Companies’ adjusted earnings of 80 cents went up 7% from the prior-year figure driven by solid top-line growth. Net sales increased 6% year over year to $7.4 billion supported by higher comps. Gross margin inflated year over year backed by higher merchandise margins and comps.

In addition, TJX has inked an agreement to take over Trade Secret for approximately $58.5 million as the company is geared to expand its presence internationally. Trade Secret sells branded apparel for women, men and children, as well as footwear, accessories and home fashions. The buyout, scheduled to close in 2015, will help TJX to enter Australia and explore strategic opportunities in the continent.

Stocks to Consider

TJX Companies currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the retail sector are Gordmans Stores Inc. GMAN, Dollar General Corp. DG and Ross Stores Inc. ROST. While Gordmans sports a Zacks Rank #1 (Strong Buy), Dollar General and Ross Stores have a Zacks Rank #2 (Buy).

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