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Why Is TJX (TJX) Down 3.8% Since Last Earnings Report?

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Zacks Equity Research
·5 min read
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A month has gone by since the last earnings report for TJX (TJX). Shares have lost about 3.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is TJX due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

The TJX Companies' Q4 Earnings Miss Estimates, Sales Down

The TJX Companies reported fourth-quarter fiscal 2021 numbers, with the top and the bottom missing the Zacks Consensus Estimate. Moreover, earnings and sales declined year over year.

For the first three weeks of first-quarter fiscal 2022, total open-only comp store sales trend were better compared with preceding quarter levels. However, the company expects overall sales, pretax margin and earnings per share to be adversely affected by the temporary store closures amid the pandemic during fiscal first-quarter. Owing to uncertainty surrounding the present environment management refrained from issuing any financial guidance.

Quarterly Details

The company reported fourth-quarter earnings of 27 cents per share. Excluding a debt extinguishment charge of 18 cents per share and a tax adjustment of 5 cents per share, earnings came in at 50 cents per share. The TJX Companies' bottom line came in at 81 cents in the year-ago quarter. Notably, the Zacks Consensus Estimate for the quarter under review was pegged at 61 cents per share.

Net sales came in at $10,943.2 million, lower than $12,206.5 million reported in the year-ago quarter. Net sales include adverse impact of temporary store closures amid COVID-19 of nearly 13%. Moreover, the metric missed the Zacks Consensus Estimate of $11,424.7 million.

Management stated that owing to temporary store closures amid the pandemic, the comp store sales definition was not applicable in the quarter under review. Thus, to offer a performance indicator for the stores as they reopen, The TJX Companies has come up with a temporary new sales measure — open-only comp store sales. This includes stores that were initially classified as comp stores (in the beginning of fiscal 2021), with sales reporting done for the number of days these stores were open in the quarter under review.

Markedly, open-only comp store sales for the company fell 3% year over year. The metric declined 7% and 4% at the Marmaxx (U.S.) and TJX Canada segments, respectively. Nevertheless, open-only comp store sales increased 12% and 2% at HomeGoods (U.S.) and TJX International (Europe & Australia) divisions, respectively.

Other Financial Updates

The company ended the quarter with cash and cash equivalents of $10,469.6 million, long-term debt of $5,332.9 million and shareholders’ equity of $5,832.7 million.

During fiscal 2021, the company generated operating cash flow of $4.6 billion. The company expects to declare a quarterly dividend in the first quarter of fiscal 2022 at the rate of 26 cents per share.

Total inventories as of Jan 30, 2021, were $4.3 billion, down from $4.9 billion in the year-ago period. Further, the company is optimistic about its capabilities to provide fresh assortment of products in its stores and online websites during the spring season.

Store & More Updates

During fiscal 2021, the company opened 43 new stores, taking the total count to 4,572. That said, the company’s reduced rate of store growth in fiscal 2021 can be attributed to lower capital spending amid the pandemic. Most of the company’s new store openings planned for fiscal 2021 was postponed to fiscal 2022.

Currently, the company has nearly 690 stores that are temporarily shut owing to government mandates amid the coronavirus pandemic. Most of these closed stores are situated in Europe. In fact, management estimates stores in the region to be shut for 67% of the fiscal first quarter. Overall, the company anticipates stores to be closed for nearly 11% of the fiscal first quarter based on the current restrictions. Nevertheless, its online business including tkmaxx.com in the U.K. is operational amid such closures.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -41.4% due to these changes.

VGM Scores

At this time, TJX has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise TJX has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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