TJX Companies (TJX 1.09%) has had a rough 2020. Stores were open for about two-thirds of the fiscal second quarter, which led to a significant drop in sales. Still, this is the type of environment that could play to its advantage in the long run.

Here are five reasons why the leading off-price retailer is a buy. 

1. Stellar long-term record of comparable sales growth

TJX has built an enviable position in retail with its treasure-hunt style shopping experience. Last year, TJX generated $41 billion in total sales, for an increase of 7% year over year. 

Although sales dropped by a third in the most recent quarter, TJX's value proposition will continue to pay dividends both in the short and long run. Customers love shopping its stores, such as T.J. Maxx and Marshalls, for the deep discounts on brand merchandise -- typically 20% to 60% off department stores and other full-price retailers. During the fiscal second quarter, pent-up demand drove a strong customer response for compelling values.

A young woman holding several shopping bags in her hand.

Image source: Getty Images.

TJX has mastered the off-price model. Between fiscal 1982 and fiscal 2019, TJX only had one year of negative comparable sales growth. Even though 2020 will mark the second year of negative growth, that is a fantastic record.

2. Flexible merchandise strategy

TJX delivers value to customers through a network of 21,000 vendors and a team of 1,100 associates whose job it is to seek out and acquire quality merchandise on the cheap. TJX is basically a value investor operating in the retail industry.

This opportunistic buying strategy allows TJX to turn inventory fast and remain very flexible with its merchandise assortment. Flexibility is an important asset in the era of fast fashion and e-commerce, which only made up 2% of the business last year. Despite its lack of a digital presence, TJX still managed to deliver consistent comp sales growth before the pandemic.

3. HomeGoods sales are booming in 2020

Among stores that were open last quarter, TJX reported a comp sales decline of 6% for its Marmaxx U.S. segment and an 18% decline for TJX Canada. However, TJX was able to hedge those losses with double-digit growth in its HomeGoods segment. 

With HomeGoods, TJX operates the largest off-price retailer of home fashions in the U.S. Consumers shifted spending toward their homes in recent months, and TJX is benefiting tremendously. For stores that were open during the most recent quarter, HomeGoods saw comparable sales increase by 20%. That strong performance brought total comp sales for opened stores across all segments to a tolerable decline of just 3%.

During the quarterly conference call in August, CEO Ernie Herrman said: "We believe there is a long runway ahead of our home and other hot categories, and we are positioning ourselves to take advantage of these opportunities."  

4. Opportunities to gain market share

Management reported that it is seeing plenty of opportunities to acquire new products, as new vendors reach out to TJX. This is a huge advantage for TJX, where it can acquire new inventory across all categories to be ready for any pent-up demand when customers return to stores. Once stores are fully reopened and business is back to normal, TJX should be in a great position to gain market share.

TJX is also looking to lay the foundation for future growth by capitalizing on opportunities to score prime real estate locations for new store openings, which should lead to further gains in share of consumer spending

5. TJX is a long-term winner

The stock's price-to-earnings (P/E) ratio is inflated right now due to the store closures and lack of profitability. But looking at it another way, the stock's current price-to-sales (P/S) multiple based on fiscal 2019 sales is 1.63. That is consistent with TJX's P/S valuation over the last five years.  

TJX stock has significantly outperformed the broader market over time. The steps management is taking to capitalize on real estate opportunities and shift its assortment to hot merchandise categories like home goods should lead to a return to growth, although TJX expects comp sales for opened stores to be down in the near term. 

Overall, TJX is a best-of-breed retailer trading at a fair price and should remain a good investment at these price levels.