Photo by Nicholas Cappello on Unsplash
 

The TJX Companies (TJX) is the leading off-price retailer of apparel and home fashions in the U.S. and worldwide. As of April 29, 2023, the company operated a total of 4,865 stores in the United States, Canada, the United Kingdom, Ireland, Germany, Poland, Austria, the Netherlands, and Australia. In addition, the company has five e-commerce sites. The stores include 1,304 T.J. Maxx, 1,189 Marshalls, 901 HomeGoods, 81 Sierra, and 49 Homesense stores in the United States. Stores in Canada include 298 Winners and stores in the United Kingdom include 632 T.K. Maxx stores.
 

Strong Brand Loyalty

TJX traces its roots back to 1976 when Ben Cammarata, general merchandising manager of Marshalls, was recruited to develop and lead the launch of a new off-price chain selling family apparel and home fashions. Under Ben’s leadership, T.J. Maxx was born, with its first two stores opening in Massachusetts in 1977. TJX has continued to grow steadily over the years, opening stores in new markets, countries, and continents. TJX is also launching new chains and acquiring other retailers to bring its popular off-price model to an even wider network of customers. In 1990, TJX acquired a five-store chain called Winners, which has grown into a winner by becoming Canada’s leading off-price retailer. In 1992, HomeGoods was introduced to expand TJX’s presence in the booming home fashion market. T.K. Maxx was launched in 1994 and introduced the off-price concept to the United Kingdom. In 1995, TJX acquired Marshalls, which doubled the company’s size. The company’s newest divisions include HomeSense and Sierra. In 2013, TJX launched its e-commerce site and now operates 4,865 stores in nine countries.

TJX delivers a rapidly changing assortment of quality brand name merchandise at prices 20%-60% less than department and specialty store regular prices. TJX can offer these savings because of its opportunistic buying strategies. As the largest off-price retailer, TJX has tremendous buying power and solid relationships with more than 21,000 merchandise vendors in 100 countries. This retail recipe engenders strong brand loyalty from consumers of all ages.
 

Dressy First Quarter

TJX reported first-quarter revenues rose 3% to $11.8 billion as overall comparable store sales increased 3%, at the high end of the company’s plan, driven by an increase in customer traffic. On a business division basis, Marmaxx, the company’s largest division, led the way with 5% comparable store sales growth, driven by very strong sales in apparel and accessories. HomeGoods’ comp sales were down following extraordinary growth during the pandemic. TJX Canada and TJX International both delivered comp sales growth and customer traffic increases.

Robust Cash Flows

The company’s strong free cash flow during the quarter jumped to $384 million as inventories declined 8% thanks to the company lapping last year’s elevated inventory due to supply chain delays. The company ended the quarter with $5.0 billion in cash after the company paid dividends of $343 million, which were increased 13% in the first quarter, and repurchased $492 million of its common stock at a cost of about $75.69 per share. The company continues to expect to repurchase about $2.0 billion to $2.5 billion of its stock for the full fiscal year from its abundant cash flows.
 

Fiscal Year Outlook

Given the strong start to the fiscal year, TJX expects revenues in the range of $52.7 billion to $53.2 billion for the full fiscal year and raised its pre-tax operating margin to a range of 10.3%-10.5% with EPS expected in the range of $3.49-$3.58.

Gaining Market Share

Management is very confident in gaining market share, driving customer traffic, improving its profitability, and reaching its strategic vision of becoming a $60 billion sales retailer.

Long-term investors shopping for a bargain should consider The TJX Companies, a well-managed high-quality business that is gaining market share with strong brand loyalty, robust cash flows, and substantial share repurchases. Buy.

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