Bank of Hawaii (BOH) reported fourth quarter revenues declined 4% to $164.8 million with net income and EPS each down 27% to $42.3 million and $1.06, respectively. For the full year 2020, revenues were relatively flat at $680.7 million with net income down 32% to $153.8 million and EPS down 31% to $3.86.

Despite the many challenges faced during the year due to the COVID19 pandemic, loan balances grew 8.6% in 2020 and deposit balances reached another record high-- growing 15.4% aided by fiscal stimulus checks being deposited at the bank. Total assets expanded to a record high of $20.6 billion at the end of the year with overall asset quality remaining stable and capital and liquidity remaining strong. The bank’s efficiency ratio improved for the year to 54.9%. Due to low interest rates, the return on assets declined to 0.79%, the return on equity declined to 11.4% and the net interest margin declined to 2.73%.

In-person branch transactions have fallen sharply due to the pandemic with digital only transactions now representing 31% of total transactions compared to 22% a year ago. As a result, the bank plans to close 12 in-store format branches and sunset 50 ATM’s in 2021 which will result in a $6.1 million one-time cost but result in $5.1 million in annual savings. There were no share repurchases in the fourth quarter, but the Board declared a $.67 per share quarterly dividend to be payable on March 12, 2021, maintaining its unbroken record of dividend payments. The dividend currently yields a solid 3.1%. During the past quarter, Bank of Hawaii’s stock price did the hula by dancing 18% higher. With the stock now appearing fully valued, we decided to bank some profits by trimming our position. 

The TJX Companies (TJX) reported fourth quarter sales declined 10% to $10.9 billion with net income and EPS both down 67% to $325.5 million and $.27, respectively. The fourth quarter results reflected the negative impact of temporary store closures due to the pandemic primarily in Europe and Canada. This resulted in lost sales during the fourth quarter of about $1 billion. During the quarter, TJX saw sales trends improve each month with positive comp store sales in January. Fourth quarter earnings results were also negatively impacted by a higher tax rate and a debt extinguishment charge of $.18 per share as the company refinanced its debt to lower borrowing costs.

For the full year, revenues declined 23% to $32.1 billion with net income and EPS each down 97% to $90.5 million and $.07, respectively. The lower sales for the year reflected the adverse impact of temporary store closures for approximately 24% of the year due to the COVID-19 pandemic. During the year, TJX’s free cash flow increased 40% to $4 billion as the company curtailed store openings due to the pandemic. In fiscal 2022, the company plans to open 122 new stores with capital expenditures planned in the range of $1.2 to $1.4 billion. The company ended the year with $10.5 billion in cash and is resuming its quarterly dividend at a rate of $.26 per share or 13% higher than the last dividend paid in March 2020.

TJX currently has 690 stores that are temporarily closed due to COVID-19. Additional headwinds in fiscal 2022 include continued COVID-19-related costs and higher freight, wage and supply chain costs. Given these headwinds and the stock no longer appearing on the bargain rack, we have decided to trim our position. TJX’s stock has jumped a pretty 26- fold over the last 21 years.

Ross Stores (ROST) has a similar business model as The TJX Companies. Accordingly, we anticipate similar headwinds will impact their results this year. Ross Stores rose 7% during the past quarter as investors looked forward to the economy reopening. With the stock appearing fully valued, we decided to pocket some profits by trimming back our position. Ross Stores has provided a dressy 93% total return over the last four years.