Skip to Content
Stock Analyst Update

TJX Posts Solid Rebound

The narrow-moat retailer generated decent sales growth last quarter by correcting merchandising issues and capitalizing on a strong consumer.

Mentioned:

Given narrow-moat  TJX’s (TJX) strong management team and flexible buying model, we were not surprised to see that the company righted merchandising issues from the third quarter and capitalized on a strong consumer with fourth-quarter comparable sales growth accelerating to 4% from flat in the third quarter.

Full-year fiscal 2018 sales growth of 8%, driven mostly by customer traffic (which we see implying market share gains), exceeded our 7% estimate and 5% U.S. retail sales growth, leading us to feel more confident in our five-year outlook for mid-single-digit top-line growth (comparable to fiscal 2018 when accounting for the 53rd week contributing over 1.5% to the top line). We see little change to our operating profit expectations, which call for adjusted operating margin to be range-bound at 11%-12% range due to mix, distribution channel costs, and wage increases, somewhat offset by leverage and cost efficiencies. Both of these estimates are roughly in line with fiscal 2019 guidance for 5% top-line growth (including the impact of 52 weeks versus 53 this year) and adjusted operating margin of 11% at the midpoint. Therefore, we see little change to our $87 fair value estimate outside of the time value of money and the impact of a lower-than-expected tax rate due to U.S. federal tax reform (25.9% guidance for fiscal 2019 versus our 26.4% estimate). Despite the high-single-digit uptick following results, the shares still trade slightly under our fair value estimate, and we view this as an attractive entry point for investment.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Bridget Weishaar does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.