TJX Earnings: Marmaxx Drives Strong Sales as Value Orientation Draws Shoppers; Shares Rich

We do not plan to alter our $71 per share valuation of narrow-moat TJX TJX significantly after it announced solid (April-ended) first-quarter fiscal 2024 earnings that indicate its value proposition is particularly resonant amid economic uncertainty. So, our long-term targets remain intact (mid-single-digit percentage sales growth and low-double-digit operating margins, on average). We suggest investors await a more attractive entry point.

In the U.S., Marmaxx paced sales, posting 5% comparable growth. While HomeGoods saw comparable sales decline by 7%, we believe the division remains healthy, with quarterly revenue up by an 11% compounded annual growth rate against the opening period of fiscal 2020 (before the pandemic). TJX’s international units saw low- to mid-single-digit comparable expansion, suggesting that off-price’s global appeal remains strong. The overall sales performance led to a 9.9% operating margin, above the 9.5% mark TJX posted in the same period a year ago and our 9.4% estimate. The solid profitability (driven in large part by normalizing freight costs) led management to lift its expectations for the year, now targeting $3.49 to $3.58 in diluted EPS (previously $3.39 to $3.51). Our $3.54 estimate should rise toward the high end of the new range considering first-quarter results.

The results reinforce our view that management should be able to meet its 10.6% pretax margin target for fiscal 2025, despite economic uncertainty and pressure on discretionary spending. The company has executed particularly well, capitalizing on its broad list of brands in apparel and home décor and its global footprint to maximize its importance to vendors. Despite manufacturers’ vows to clean up inventory management practices, we believe availability will remain strong long term, as customer tastes remain mutable and as TJX enjoys considerable flexibility to draw opportunistically from its roster of more than 20,000 vendors.