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TJX Companies: Quality Discount Retailer, But Richly Valued

Jan. 02, 2022 1:46 AM ETThe TJX Companies, Inc. (TJX)ROST11 Comments
Jason Merriam profile picture
Jason Merriam


  • TJX has evolved into a global discount retail powerhouse.
  • Seasoned management team excels at providing a value proposition.
  • Company has navigated pandemic in good fashion.
  • Diversified sourcing will mitigate supply chain issues and concerns about access to designer brands.
  • Share price looks stretched; use pullbacks to buy or add.

T.J. Maxx Retail Store Location. T.J Maxx is a discount retail chain featuring stylish brand-name apparel, shoes and accessories

jetcityimage/iStock Editorial via Getty Images

The concept of discount or "off-price" retailing has been evolving for years. This model flourished in the 1930s during and after the Great Depression. It was integral to the post WW2 economy. The discount retail phenomena was warmly embraced during

This article was written by

Jason Merriam profile picture
Jason Merriam is former publisher and editor of the Merriam Report providing innovative financial analysis based on dual cash-flow, accruals and capital productivity methodologies. An active investor for 35 years, he is also founder and president of Merriam Investor Services since 1990. MIS offers portfolio analysis and investment research services to institutional and retail investor clients. Prior to MIS, Jason was managing partner for Beach and Sea Group, a San Diego based investment LP. Merriam studied corporate finance and accounting with Robert J. Westervelt, retired senior VP of Finance at Warner Lambert and Pfizer. As Mr. Westervelt's intern, Jason assisted and was responsible for financial statement analysis, evaluation of earnings-quality, credit/liquidity/dividend assessment, etc. This opportunity allowed Jason to advance his research of the novel dual cash-flow methodology (based on the pioneering work of Harry Ernst and Jeffrey Fotta in the 1990's). Jason has 22 years experience in active portfolio management and asset allocation. Media appearances include: CNBC, MarketWatch, New York Times and San Diego Union Tribune. Visit his blog: www.merriamreport.blogspot.com

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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.

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Comments (11)

Jason Merriam profile picture
TJX announced it would sell its 25% stake in Russian low-cost apparel chain Familia. Co. paid $225m in 2019. In Jan. it was worth $186m and with ruble falling further, liquidation value could be even less. Question is, does current share price of $58.50, price-in any potential impairment risk?
@Jason Merriam

I do not think the market has discounted TJX selling Russia assets
at a lose. Its a small asset but given the ''touchy market'' I feel TJX
will drop again as the market takes this news into account.
Jason Merriam profile picture
@jackmaster20 yes, comparatively speaking it's not a huge issue, but impairment is equity destructive. I can't help but think we'll see a lot of companies doing biz in Russia taking some sort of write downs simply on the plunge in the ruble.
@Jason Merriam

This may be flawed logic on my part.........

But one of the reasons I prefer ROST over TJX is that
Ross Stores is a USA only enterprise. Seems like there
have been many times in the past that TJX had to explain
about damped results due to EU or Russian economic
negative impacts.

When it comes to discounted retail soft-goods
''treasure hunting'' .......I think its best to KISS and stay
in the US.

Just my individual investor thought process.
Jason Merriam profile picture
I’ve taken a small long position in TJX this morning at $65.50
Thank you for a clear and concise review of 2 discount retailers.
I think your unique financial analysis using unique metrics is valuable.

Initial reaction is that ROST performs better than TJX...due to TJX's
international exposure...? Clearly the EU is not economically as
strong as the USA....at this time.

I think I will add to my ROST.
Better valuation & very similar financial performance metrics.
Jason Merriam profile picture
@jackmaster20 Thank you for reading. A good argument could be made to ROST's more compelling valuation, given that it underperformed both TJX and the broader S&P 500 during 2021. Time will tell, best of luck.
Thanks for the article. TJX and ROST barely moved from their pre-pandemic level. That does not make any sense to me. They are more reasonably priced than many other retailers, even with their superior quality. I'll add to these two positions, plus DLTR in January. All are defensive names with solid compounding potential.
@LongTermPortfolio DG is another one to consider. I think investors are buying the traditional retailers instead of the off-price ones because consumers seem to have a lot of money and there is pent-up demand. However, TJX, ROST, DLTR, and DG have business models which perform well throughout the business cycle, so I expect money to flow back to them. They have long histories of market-beating performance
Jason Merriam profile picture
@LongTermPortfolio Thanks for reading. It surprises me too that both TJX and ROST (more so) underperformed the broader market .
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