TJX Could Be a Good Long-Term Investmenthttp://www.fool.com/investing/general/2014/02/13/tjx-could-be-a-good-long-term-investment.aspx Mukesh Baghel
February 13, 2014
The economic environment in the U.S. isn't conducive to discretionary spending, which is why the retail sector has witnessed muted spending by consumers for a large part of the last year. However, according to The NPD Group, total aggregate sales of the five largest off-price retailers in the U.S. increased by 11% during 2012 compared to a 4% increase in total national apparel sales during the same period. A similar report from The NPD Group also highlights that warehouse-club channels have also been gaining market share.
With these numbers and research data in mind, it is easier to understand the success of TJX (NYSE: TJX), Ross Stores (NASDAQ: ROST), and Costco Wholesale (NASDAQ: COST). But can they sustain their growth momentum in the future? Let's take a look.
TJX continues its march
Comps growth in the third quarter was fueled by a combination of increases in ticket and traffic. The fourth quarter is also off to a good start, and management is confident of sustaining the comps-growth momentum. TJX manages to attract and retain buyers because of its trendy designer names priced at a deeper discount to big department stores and other retailers.
On the back of comps growth and the better-than-expected performance of new stores, adjusted earnings per share increased 21%. This marked five consecutive years of double-digit EPS growth. This shows that the company is connecting well with its target customers, and its initiatives of store remodels and new store openings are panning out well, irrespective of the economic environment.
An optimistic future
Beyond the conventional brick-and-mortar business, TJX is also chasing the e-commerce channel in order to give consumers the ability and convenience to shop 24/7. After a long hiatus of eight years, it has launched an e-commerce website and customer response has been terrific.
Comparing to peers
As a result of positive comps, revenue increased 6% to $2.4 billion versus the year-ago quarter. On the heels of revenue growth, earnings per share increased 11% to $0.80, up from $0.72 in the year-ago quarter. Juniors and missy sportswear were the strongest businesses during the quarter, while Florida was the top-performing region.
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