Everyone knows that traditional chain retail clothing stores in the U.S. are dead, right? Well, in this case, everyone would be wrong. There is one international retailer that is attracting more customers, ringing up greater sales, and is being rewarded with an all-time high stock price, even as the overall markets are plunging.
The company was founded in 1956 as Zayre Corp. However, in 1989, the company sold the Zayre name and was left with its remaining brand name, T.J. Maxx. In 1995, the company acquired one of its main competitors, Marshalls, which doubled its size and the company was branded as TJX Companies. Today the company has annualized revenue of over $40 billion, almost 4,000 store locations, and it operates in nine countries.
TJX is known as an off-price retailer where the company sells name brand and fashion clothing at discount prices. Customers enjoy the “treasure hunting” aspect of shopping where there are always new and different products in the stores.
Last week the company posted earnings that beat expectations of betterthan expected holiday sales. In addition, TJX reported that same store sales increased by 4 percent in the quarter. This is even more impressive given the current retail environment where most retailers are experiencing negative sales trends.
TJX pointed to a few factors that contributed to its success. First, the company stated that the improving economy enabled people to spend more of their income on clothing. Second, it said it was well positioned for the cold weather in much of the country by stocking up on cold weather clothing. And finally, its message to consumers of offering high fashion clothing at low prices was connecting.
Going forward, TJX is optimistic regarding its prospects. It believes that the one-time bonuses paid to employees after the federal tax cuts will boost its revenues in 2018. In addition, higher minimum wages and pay raises for lower- to middle-income families will also be a strong tailwind this year.
Management demonstrated its optimism by first boosting TJX’s dividend by 25 percent. It also committed to buying back between $2.5 billion and $3 billion of its stock during this fiscal year. And even after posting new stock highs, the company is not overly pricey.
It has a P/E of around 22, which is lower than other retail stores like Walmart with a P/E of 28.
I think there is still room to run for this stock. If there is one retail stock that is so far immune to Amazon and online shopping, it appears this is the one. ¦
— Eric Bretan, the co- owner of Rick’s Estate & Jewelry Buyers in Punta Gorda, was a senior derivatives marketer and investment banker for more than 15 years at several global banks.