TJX Is Down but Not Out Following Its Results

TJX's latest results came up short, but is there hope for the rest of the year?

May 30, 2014 at 12:00PM


After it reported its results on May 20, 2014, shares of clothing and housewares retailer The TJX Companies (NYSE:TJX) plummeted by as much as 7.6%. Despite the drop, the company actually performed extremely well. While Wall Street analysts may not have liked what they saw, TJX put forth a solid performance. This fall in stock price might just be the opportunity that long term investors have awaited.

TJX continues to deliver
TJX's latest quarter ended May 3, 2014 showed a company in its prime. These results represent the company's first-quarter performance for the current fiscal year, which will conclude in January 2015. One of the quarter's highlights is the fact that total net sales increased by 5% over the same period last year to $6.5 billion, while same-store sales increased a respectable 1%.

Net income also grew by a decent amount for a company of its size to $454 million compared to $453 million in last year's first quarter. According to the company's press release, earnings-per-share growth would have been higher had it not been for foreign currency losses. While all divisions performed reasonably well, the company showed a particularly strong performance in its TJX Europe division, as its comparable-store sales jumped 8% over the same quarter last year.

TJX Companies appears unbeatable
Given the recent performance of TJX's main competitors, shareholders in TJX should be quite pleased with the company's growth. Kohl's (NYSE:KSS), for instance, which reported its latest quarterly results on May 15, 2014, not only saw its revenue fall to $4.07 billion from $4.199 billion in the year-ago period, but experienced a same-store sales decline of 3.4% as well. While the retailer is not going anywhere anytime soon, it also saw its net profit drop 15% to $125 million. This difference between the two companies is made even more obvious when looking at their sales results over the last several years.

Company Name

FY 2011

FY 2012

FY 2013

Kohl's 

$18.8 billion

$19.28 billion

$19.03 billion

TJX Companies

$23.19 billion

25.88 billion

$27.42 billion

As you can see from the chart above, TJX is increasing its revenue much faster year-over-year than Kohl's despite the fact that it is a much larger company. Kohl's would be wise to develop a new business strategy to ramp up its sales with the hope of pulling consumers away from competitors like TJX.

Offering more favorable promotions may just be the thing to drive sales growth higher from what it's been over the last few years. There's no question that consumers love the price to quality deal that they receive at TJX's stores. Sales are likely to continue to increase for TJX throughout the current fiscal year as consumers search out the best stores to get the most bang for their bucks.

Foolish takeaway
While shares of TJX reacted negatively to the company's results, this likely resulted from too much of a short-term focus. The company has been one of the great retail success stories in recent years, and has managed to thrive where companies like Sears Holdings and J.C. Penney have seen their customers leave in droves.

As investors can see from the results of competitors like Kohl's, shareholders in TJX have nothing to complain about. They own a strong company that is delivering growth while its competitors are suffering. If you don't already own shares of TJX, it is definitely worth a closer look by Foolish investors. 

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Natalie O'Reilly has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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