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Why TJX Companies Stock Popped Today

By Jeremy Bowman - Feb 26, 2020 at 2:26PM

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Shares of the off-price retailer jumped on a strong earnings report.

What happened

Shares of TJX Companies (TJX 1.99%) were gaining today after the off-price retail giant posted better-than-expected numbers in its fourth-quarter earnings report. As a result, the stock was up 7.2% as of 1:20 p.m. EST on Wednesday.

So what

TJX, the parent of T.J. Maxx, Marshalls, and Home Goods, said that comparable-store sales surged 6% in the key holiday quarter, primarily driven by increased customer traffic, and well above its own guidance at 2% to 3%. It also came after a 6% comps gain in the quarter a year ago, significantly outpacing its apparel retail peers.  

A woman looking at clothes on a rack

Image source: Getty Images.

Overall revenue increased 10% to $12.2 billion, beating estimates of $11.8 billion, as the company also continues to open new stores. 

Gross margin rose 60 basis points to 28.4% as the company expanded its merchandise margin. That helped drive earnings per share up 19% from $0.68 to $0.81, which topped expectations at $0.77.

CEO Ernie Herrman summed up the quarter: "We saw strength across the Company, with each major division delivering comp sales growth of 4% or higher, all over strong increases last year and all primarily driven by customer traffic. Our exciting brands and gift-giving assortments at great values, supported by our marketing, attracted customers around the globe during the holiday season and beyond."

Now what

Management sees full-year EPS of $2.77 to $2.83 for fiscal 2021, an increase of 4% to 6% from the $2.67 it earned in 2020, though that's below the analyst consensus at $2.87. It also expects comps growth of 2% to 3%. The market may be shrugging off that guidance given the company's strong fourth-quarter numbers.

Off-price has been a rare winner in retail in recent years, and TJX has taken full advantage as the company also opened 223 stores globally last year to bring its grand total to 4,529. Other off-price peers, including Ross Stores and Burlington Stores, have also surged. 

Given the format's resilience to e-commerce, its price advantages, and the brand strength of names like T.J. Maxx, Marshalls, and Home Goods, TJX seems like a good bet for continued growth.

  

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Stocks Mentioned

The TJX Companies, Inc. Stock Quote
The TJX Companies, Inc.
TJX
$59.02 (1.99%) $1.15
Ross Stores, Inc. Stock Quote
Ross Stores, Inc.
ROST
$75.71 (5.34%) $3.84
Burlington Stores, Inc. Stock Quote
Burlington Stores, Inc.
BURL
$152.38 (1.11%) $1.67

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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