Summary
The company is opening new stores and experiencing strong overall sales growth, in a retail environment that has seen closures and bankruptcies.
Comparable store sales have been positive for a while now, helping to drive shares 33% higher over a year versus 22.3% for the broader industry.
Operates a superior discount retailer business model with increasing sales per square foot.
The company has strategic store locations and impressive brands and is aggressively expanding its footprint in its covered markets.
TJX seems compelling but comes with some caveats.
Investment Summary
Overall the retail sector looks attractive, but when looking for quality stocks within the sector, finding the right company with a competitive business model is paramount. The TJX Companies, Inc. (TJX) operates retail stores in the US, Canada, and Europe, and is listed on the NYSE with a market cap of US$57,941 million. Brand name, designer apparel and home goods are offered at 20%-60% discounts to prices found in other department and specialty stores.
There is a continued shift in consumer buying habits in play, driving traffic towards off-price discounters like TJX. This shift coupled with a trend towards buying online - TJX has an internet platform - means we expect revenue at TJX to continue to grow, both in existing stores and new ones, and also online. TJX also demonstrates impressive performance when compared to the overall industry in converting top line revenue into bottom line earnings. TJX therefore seems compelling, and at ~19x, isn't particularly expensive. There are caveats to consider however, and these will be discussed in this report.
