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TJX Companies Inc TJX

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Morningstar’s Analysis

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Recovery Still in the Cards for Narrow-Moat TJX Post-Pandemic, but Shares Seem Rich

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

The particulars of narrow-moat TJX’s fourth-quarter earnings matter less than signs that its customer appeal remains intact despite the pandemic, with comparable sales for stores that were open down only 3% for the full period and returning to growth in January. This aligns with our long-term view that TJX’s appeal will carry forth after conditions normalize (in mid-to-late 2021, assuming vaccines remain effective), and so neither our $53 per share valuation nor our long-term forecast (mid-single-digit top-line growth, low-double-digit operating margins) is likely to change much as a result of the news. We still suggest investors await a more attractive entry point as the current share price appears to assume a degree of execution perfection with which we are uncomfortable.

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Company Profile

Business Description

TJX is a leading off-price retailer of apparel, home fashions, and other merchandise. It sells a variety of branded goods, opportunistically buying inventory from a network of over 21,000 vendors worldwide. TJX targets undercutting conventional retailers' regular prices by 20%-60%, capitalizing on a flexible merchandising network, relatively low-frills stores, and a treasure-hunt shopping experience to drive margins and inventory turnover. TJX derived 79% of fiscal 2021 revenue from the United States, with 11% from Europe (mostly the United Kingdom and Germany), 9% from Canada, and the remainder from Australia. The company operated 4,572 stores at the end of fiscal 2021 under the T.J. Maxx, T.K. Maxx, Marshalls, HomeGoods, Winners, Homesense, Winners, and Sierra banners.

770 Cochituate Road
Framingham, MA, 01701
T +1 508 390-1000
Sector Consumer Cyclical
Industry Apparel Retail
Most Recent Earnings Jan 31, 2021
Fiscal Year End Jan 29, 2022
Stock Type Cyclical
Employees 320,000