5 Things TJX's Management Wants You to Know

TJX is generating impressive financial performance, and management believes the company has abundant room for growth. Let´s go through TJX`s latest earnings conference to find some interesting angles.

Aug 22, 2014 at 3:30PM

Tjx Image

Source: TJX

TJX Companies (NYSE:TJX) recently reported impressive financial performance for the second quarter of fiscal 2015, and management also raised its guidance for the rest of the year. The business seems to be firing on all cylinders, so let's go through TJX's earnings conference call and listen to some of the important things management had to say to investors.

Extraordinary long-term performance
The retail business is notoriously challenging and competitive, especially in categories such as home and apparel, which depend heavily on the economic health of the consumer and overall economic activity. TJX has demonstrated exceptional resiliency to continue growing through different economic scenarios over time. Said CEO Carol Meyrowitz in the conference call:

Over a 37-year history, we have sustained steady sales and earnings growth through many types of economic retail and consumer environments. This includes 22 consecutive quarters of consolidated comp store sales increases. 

 

The outlook is strong

Inventory levels are a crucial variable to watch in the business, as they convey important information regarding demand strength and management's ability to make the right decisions and execute efficiently in key areas such as merchandising. Low inventory levels in comparison to sales speak well about TJX and its management team, and they suggest a positive outlook for investors in the middle term.

At the end of the second quarter, consolidated inventories on a per store basis, including the warehouses and excluding in-transit and e-commerce inventories were flat on a constant currency basis. We begin the third quarter in an excellent inventory position and ready to take advantage of the plentiful buying opportunities in the marketplace.
-- Scott Goldenberg, CFO

Abundant opportunities for growth
TJX has considerable room to expand its store base, according to management estimations, both in the U.S. and abroad. Europe could be a major opportunity in the middle term; the company believes it can add over 450 new stores in European countries where it already has a presence, more than doubling its current store base of 408 units in Europe.

With over 3,200 stores today, we see the potential to grow to 5,150 stores long-term with our existing chains in our existing countries alone. The magnitude of our store growth opportunity, especially internationally is tremendous. Something we believe is often underappreciated externally. In North America alone, we see the potential to add over 1,400 new stores. Our new store performance continues to exceed our expectations, which gives us great confidence.

Internationally, we could not be more excited about our growth potential. In Europe, we believe we can add more than 450 stores, which is more than double our existing base in just our current countries, with our current chains alone. We are on track to open 40 stores in Europe this year, up 25% from last year and may further accelerate the pace of store openings in 2015. Our 2014 plans include more than doubling the number of stores in Germany versus the prior year. Our new store performance across Europe continues to be excellent. We are looking forward to expanding into our next European countries, with our first few stores opening slated for Austria in the first half of 2015.
-- Meyrowitz

Sourcing is a key competitive advantage for TJX
In order to sustain sales growth and keep customers coming back for more, TJX needs to buy the right merchandise from the best suppliers around the world. The company has built a remarkable sourcing network which represents a crucial competitive advantage.

The major way we are leveraging our business globally is our sourcing universe. We see ourselves as a global sourcing machine. We have built a world-class buying organization over nearly four decades, that is 900 people strong and we plan to keep growing it. We sourced merchandise from a universe of more than 16,000 vendors in over 75 countries. We keep opening new vendors all over the world and I believe we are very far from done. We are also leveraging our relationships to bring the newest fashion to all our chains. We truly believe that there are few other retailers that can offer the eclectic mix you will see in our stores or build new categories as quickly as we do.
-- Meyrowitz

Increasing marketing spending
Management seems quite encouraged by the return the company is getting from the money invested in marketing and advertising, so these investments will be on the rise over the coming quarters. This could have a negative impact on profit margins over the short term, since marketing spending is not necessarily compensated by an analogous increase in sales during short periods of time.

However, as long as management is making smart investments in strengthening the company's brands and competitive position, investors have no reason to be concerned about increased marketing expenses.

We are leveraging our global marketing abilities and I believe we become better every year. At Marmaxx, through the back half 2014, we are increasing our total marketing spend and TV impressions and our commercials will be on TV even more weeks than last year. You will also be seeing more of our successful dual and tri-branding marketing campaign.
-- Meyrowitz

Key takeaway
Balance sheets and income statements don´t tell the whole story when analyzing companies from a long term point of view. It's important to listen to management and what it has to say about the business and its fundamentals. Going through TJX´s latest conference call, it looks like there are strong reasons to expect solid performance from the company in the future.

Leaked: Apple's next smart device (warning, it may shock you)
Investing in well-run fashion companies such as TJX can be very profitable, and the wearable computing revolution can even change your financial future. Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Andrés Cardenal 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers