TJX (TJX 0.19%) has been one of the best retail stocks to hold over the last few decades, and it continues to perform well for investors. The stock has increased by 154% over the past five years, when including reinvestment of dividends to purchase additional shares. TJX shares significantly outperformed the S&P 500's 102% return. TJX has outperformed the S&P 500 over the last three- and one-year period as well.
A $10,000 investment made in December 2005 would be worth roughly $357,670 today, assuming dividends were reinvested in additional shares. These returns reflect a resilient retail business that consistently delivers solid financial performance, regardless of the economic environment. Here's more behind TJX's unique business strategy and why it remains a solid long-term investment.
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An unstoppable business model
TJX has mastered the off-price retail model across its store brands, including TJ Maxx, Marshalls, Sierra, and HomeGoods. It sources unsold inventory from other manufacturers, as well as closeout sales from other brands, which it then resells to its customers at attractive discounts.
There has been weak sales growth across other apparel brands in the past few years, but not at TJX. Its quarterly revenue growth is still consistent with its historical trend. The last quarter saw its revenue increase by 7.5% year over year, with positive comparable sales growth across all three brands.
TJX is well-positioned to gain market share as other apparel stores struggle. It has been very opportunistic in its inventory acquisitions recently, which has driven higher availability of quality merchandise for its customers. Analysts expect full-year revenue to increase by approximately 6%, with earnings per share projected to rise by almost 10%.
NYSE: TJX
Key Data Points
What's next for TJX stock
The impressive returns investors could have realized over the last 20 years illustrate how patient investing can build tremendous wealth. TJX demonstrates that you can achieve this by investing in unexciting companies that excel in one area better than anyone else.
It's unclear whether the stock can replicate its past performance over the next 20 years. The stock is more expensive than it was a few years ago, trading at a forward price-to-earnings multiple of 32. This is relatively high for a business that analysts expect to grow earnings by around 9% annually over the next several years.
However, TJX is a uniquely strong business that is certainly deserving of a premium valuation. Plus, management continues to find new growth opportunities. It plans to enter Spain next year, indicating there is untapped international growth potential. Perhaps the stock is not expensive at all but fairly valued for the quality of TJX's business model.
