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What TJX Companies Wants You to Know

Demitrios Kalogeropoulos, The Motley Fool

The retailing industry keeps changing, but TJX Companies (NYSE: TJX) isn't struggling to grow despite those shifts in the wider selling environment. Instead, the off-price leader this past week posted its 18th consecutive quarter of customer traffic gains as part of a surprisingly strong holiday-quarter outing.

CEO Ernie Herrman and his team outlined the key factors behind that performance in a conference call with analysts while explaining why they believe the chain has plenty of room for additional market-share gains in the coming years. Here are a few highlights from that presentation.

Two women shop for clothes.

Image source: Getty Images.

Broad-based wins

I am most pleased with the consistency of the performance across our major divisions.
-- Herrman

One aspect of this business that attracts investors is its diversity. Besides the core Marshalls and TJ Maxx franchises in the U.S., the company manages the popular HomeGoods brand, in addition to substantial operations in Canada, Europe, and Australia.

Each of these divisions contributed to the fourth-quarter growth, with rising customer traffic leading to accelerating gains in every market except for Canada. Specifically, the Marshalls and TJ Maxx brands grew sales by 7% compared to 3% a year ago. HomeGoods and the Europe and Australia segments each sped up to a 5% pace from 3%. In Canada, sales gains slowed from 7% to 4%. "We operate four powerful divisions," Herrman explained, "each with exciting growth potential."

Growing through the online challenge

We are convinced that the ability to touch and feel merchandise will continue to resonate with consumers, despite the growth of online retail overall.
-- Herrman

TJX's online business is tiny today, especially in comparison with rivals like Walmart and Target, both of which counted on e-commerce to deliver a big proportion of sales growth in 2018. The off-price specialist isn't ignoring this sales channel, though, and in fact is planning to significantly expand its digital selling assortment this year while introducing in-store pickup to more of its locations.

Executives don't see the urgent need to pivot to a multichannel retailing posture. Instead, they believe the chain's flexible inventory setup and appeal with treasure-hunting shoppers should support many more years of aggressive growth in store selling space. The retailer added 236 stores in 2018, and it plans to add about the same number this year. Over the long term, TJX is aiming for as many as 6,100 locations around the world, up from 4,300 today.

Staying flexible

Even with our significant shareholder distributions, we still plan to end fiscal 2020 with approximately $2.5 billion in cash and short-term investments.
-- CFO Scott Goldenberg

The company this week announced an 18% increase to its annual dividend payment on top of last year's 25% hike. TJX also aims to return about $2 billion of cash to shareholders through stock repurchases this year. Together, these cash return channels should match the $3.4 billion that the company provided investors in 2018.

TJX is still aiming to invest heavily in the business by adding stores in each of its retailing divisions this year. Wages and supply chain costs are likely to rise, too. But its high returns make it likely that the chain will easily protect its strong financial standing. That success puts its merchandise buyers in a good position to take advantage of inventory opportunities through the year. It also means the retailer is highly likely to keep raising its dividends, with just two more annual raises necessary to set a 25-year streak.

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Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends The TJX Companies. The Motley Fool has a disclosure policy.