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TJX: What Do We Do With The Stock At Its Highs?


  • TJX reported earnings and shares are near their highs.
  • Comps continue to move up, but margin growth has been elusive.
  • The buyback is making up for the lack of margin growth, however, and I still think the stock is reasonably priced here.

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TJX (NYSE:TJX) has been a bit of a pioneer in the off-price treasure hunt retail experience. Its years of developing the concept have afforded it an advantage that few others have been able to cultivate; but in the recent past, TJX shares have just traded sideways. The company’s growth has slowed as it has become larger and more efficient, and investors have revalued the multiple they are willing to pay for the stock. After the company’s Q4 report, however, shares are very near their 52-week highs, and given the EPS growth TJX guided for, I still think they’re reasonably priced here.

Lots of sales growth, but margins were flat

Total sales for Q4 were up 16% as TJX enjoyed an extra week over last year’s Q4, but importantly, posted a 4% comp sales gain. Consensus was for more like 2%, and this quarter’s gain comes on top of last year’s Q4 gain of 3% as TJX has continued its 22-year streak of comp sales gains. The Canada business led the way with a 7% comp, but all segments were up at least 3% as TJX just continues to find ways to get people in the stores. The formula works, and nothing needs to change; TJX is doing a terrific job with comps.

Adjusted operating margins were down 10bps in Q4 as adjusted gross margins fell 40bps but adjusted SG&A costs partially offset that loss by leveraging down 30bps. TJX has a bunch of one-time adjustments to its margin profile in Q4, including charitable contributions, one-time bonuses, the extra week, a goodwill impairment and others. Excluding those, TJX saw operating margins at about flat, and while I’d obviously like to see some margin growth, that hasn’t been in the cards for TJX for some time. In addition, guidance for this year would suggest that margins will be flat again, but given

This article was written by

Josh Arnold profile picture

Josh Arnold has been covering financial markets for a decade, utilizing a combination of technical and fundamental analysis to identify potential winners early on in their growth cycles. Josh's focus is mainly on growth stocks. His goal is efficient and profitable use of capital, which overly rigid buy-and-hold strategies do not allow.

Josh is the leader of the investing group Timely Trader where he focuses on limiting risk and maximizing potential reward. Features of Timely Trader include: real-time alerts, a model portfolio, technical charts, sentiment indicators, and sector analysis to find the best trading opportunities. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (4)

Peter Jaworowski profile picture
Solid article and analysis. I think as a long term retail investment, TJX at current prices is hard to beat. People of all income levels seem to love visiting the stores and searching for a deal.
Josh Arnold profile picture
Thanks very much Peter and you're correct; everyone loves a deal.
Josh, I always enjoy your articles. Reasonable, but not cheap is OK for me. I bought TJX last week and sold WMT where I got tired of waiting for something positive to happen.
Josh Arnold profile picture
Thanks very much for the kind words!
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