The TJX Companies, Inc. (TJX)

NetscribeRetail (< 20) Submitted: 5/24/07 8:47 AM : Start Price: $27.70 TJX Score: -21.38

With more than three-times the sales of its closest competitor, the leading retailer of off-price apparel and home fashions finds itself well positioned to take advantage of the off-price selling strategy. While margins have taken the toll of it, company has cut other expenses to nullify the effect and diversified in newer concepts, including Home Goods and A.J. Wright stores.





For quarter ended April 2007, revenues rose by mere 6% to staggering $4.11 billion supported by higher sales from Marmaxx segment, increased Winners & HomeSense division income and rise in HomeGoods segment sales. Comparable store sale rise of meager 2% was owing to better results from the like T.K. Maxx, Winners/HomeSense, and HomeGoods which are fewer in comparison to the Marmaxx astores. Net income from continuing operations fell by 1% to $162.1 million offset by an increase in selling, general & administrative expenses explains the falling margins story. During Q1, it added total 25 stores mostly consisting Marshalls & T.J., which are the company’s highest revenue generating divisions.





Company spent $6 million in repurchases and continues to expect repurchases up to $900 million during fiscal 2008 significantly above the $557 million of buyback during fiscal 2007, thereby giving a notion that it’s not left with any significant expansion plans. For Q2, it expects EPS in the range of $0.29 to $0.32, which is negative growth in comparison to Q1, while for fiscal, 2008, TJX expect EPS in the range of $1.80 to $1.85. Comparable store sales growth of about 3% is also not a very significant improvement.





The company is looking for diversification, as growth in the core T.J. Maxx and Marshalls concepts has been slowing. Moreover as it’s more mature concepts reach the maximum number of stores, TJX will have to increasingly rely on its newer chains to grow, and so far results have been disappointing. Also The Bob's Stores chain does not fit into TJX's off-price retailing business model and could become a distraction for management. All in all the company is trying hard to grow but the future remains dicey.

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