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The TJX Companies (TJX) Benefits From Store & Online Strength

The TJX Companies, Inc. TJX is reaping benefits from its solid store and e-commerce growth efforts. The leading off-price retailer has been seeing strength in its Marmaxx and HomeGoods segments. However, the company is not immune to a rising cost environment.

Let’s delve deeper.

Growth Efforts on Track

The TJX Companies is benefiting from its solid store and e-commerce growth efforts. The company has been rapidly expanding its footprint in the United States, Europe, Canada and Australia. During the fiscal 2024, the company added 119 new stores, ending the quarter with 4,954 stores. Management expects to open nearly 141 net new stores in fiscal 2025 to reach 5,100 stores. The TJX Companies has been witnessing robust demand for an in-person shopping experience in the last few years. Its flexible buying supply chain and store formats aid the company in opening stores across a wide customer demographic.

With an increasing number of consumers resorting to online shopping, The TJX Companies has undertaken several initiatives to boost online sales and strengthen its e-commerce business. For the fiscal 2025, the company expects to incur capital expenditures of $2-$2.1 billion, which includes opening new stores, remodels and relocations and investments in the distribution network and infrastructure.

Zacks Investment Research
Zacks Investment Research


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Strength Across Core Segments

The TJX Companies has been seeing strength in the Marmaxx segment for a while. In the fourth quarter of fiscal 2024, net sales came in at $10,037 million, up 12% in the Marmaxx (U.S.) division. Comparable store sales rose 5% in Marmaxx (U.S.), buoyed by solid apparel and home categories. We believe that strength in Marmaxx is likely to continue aiding overall sales.

Also, the company has been witnessing solid momentum in its HomeGoods (U.S.) division, driven by a rise in customer traffic. In the HomeGoods (U.S.) division, the company’s net sales amounted to $2,805 million, up 16%. In the quarter, U.S. comparable store sales rose 7% in the HomeGoods category.

High Costs Hurt

Over time, The TJX Companies is dealing with the adverse impacts of the high cost of sales and operating expenses. In the fourth quarter of fiscal 2024, the company's cost of sales increased by 7.4% to $11,528 million. SG&A costs, as a percent of sales, were 18.9%, up 1.9 percentage points. The rise was caused by increased incentive compensation accruals, incremental store wages and payroll costs. Management expects first-quarter fiscal 2025 SG&A expenses to be nearly 19.5%, up 50 basis points, thanks to incremental store wage and payroll costs.

Wrapping Up

All being said, TJX is poised for steady growth, supported by improved merchandise margins and expense leverage. We believe that The TJX Companies’ off-price model, along with its strategic store locations, impressive brands and fashion products and efficient supply-chain management, are likely to aid its performance.

Shares of the Zacks Rank #3 (Hold) company have increased 23.9% in the past year compared with the industry’s 21.2% decline.

Top 3 Retail Bets

Burlington Stores BURL, a retailer of branded merchandise, currently flaunts a Zacks Rank #1 (Strong Buy). BURL has a trailing four-quarter earnings surprise of 10.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Burlington Stores’ current fiscal-year sales and earnings suggests growth of 10.2% and nearly 22.3%, respectively, from the year-ago reported numbers.

American Eagle AEO, a leading apparel retailer, currently sports a Zacks Rank of 1. AEO delivered an earnings surprise of 22% in the last reported quarter.

The Zacks Consensus Estimate for American Eagle’s current fiscal-year sales and earnings suggests growth of 3.3% and nearly 12.5%, respectively, from the year-ago reported numbers.

Target Corporation TGT operates as a general merchandise retailer in the United States. It currently has a Zacks Rank #2 (Buy). TGT has a trailing four-quarter earnings surprise of 27.1%, on average.

The Zacks Consensus Estimate for Target’s current financial-year earnings suggests growth of 5% from the year-ago reported figure.

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