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TJX Companies (TJX) Rides on Business Strength, Risks Persist

The TJX Companies, Inc. TJX has been benefiting from solid momentum in its Marmaxx (U.S.) segment. For instance, Marmaxx’s net sales increased 9% year-over-year to $8,107 million in third-quarter fiscal 2024. U.S. comparable store sales grew 7% in the segment, driven by solid apparel and home categories’ sales. Customer traffic remained the key driver behind comparable store sales growth. Strength in Marmaxx is expected to continue driving the company’s overall sales in the quarters ahead.

The company has also been witnessing improvement in its HomeGoods (U.S.) division, driven by solid growth in customer traffic. In the HomeGoods (U.S.) division, the company’s net sales amounted to $2,208 million in the fiscal third quarter, up 13% from the figure reported in the year-ago quarter. In the quarter, U.S. comparable store sales rose 9% in the HomeGoods category. In addition, the recovery of TJX Canada and TJX International segments has been a tailwind.

TJX raised its outlook for fiscal 2024, driven by strength across its businesses. For the fiscal year, it currently expects overall comparable store sales to grow by 4-5% compared with 3-4% guided earlier. Consolidated sales are now envisioned in the band of $53.7-$53.9 billion, suggesting 7.5-8% year-over-year growth. For the fiscal fourth quarter, comparable store sales are expected to rise by 3-4% and consolidated sales are expected to increase by approximately 10% to $15.9-$16.1 billion.

The TJX Companies has been benefiting from its solid store and e-commerce growth efforts. It has been rapidly expanding its footprint in the United States, Europe, Canada and Australia. It plans to add net new stores in the near term, taking its year-end total to roughly 5,000 stores.

TJX remains focused on rewarding shareholders through dividend payouts and share buybacks. In the fiscal third quarter, it repurchased shares worth $650 million and paid out dividends of $380 million. The company plans to repurchase shares worth $2.25-$2.5 billion in fiscal 2024.

Zacks Investment Research
Zacks Investment Research

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Shares of this Zacks Rank #3 (Hold) company increased by 15.7% in the past six months compared with the industry’s growth of 7.2%.

However, the company has been grappling with high costs and operating expenses. In the third quarter of fiscal 2024, the company's cost of sales increased by 6% and selling, general and administrative expenses rose by 18%. Also, in the first nine months of fiscal 2024, its cost of sales and selling, general and administrative expenses recorded year-over-year increases of 4% and 14.2%, respectively. The company expects incremental wage and payroll costs to remain hurdles in fiscal 2024.

Its high debt profile also remains a concern. Exiting third-quarter fiscal 2024, its long-term debt (including long-term operating lease liabilities) was nearly $10.8 billion. The metric reflects an increase from $10.6 billion at the end of fiscal 2023. An increase in debt levels can raise its financial obligations and hurt profitability.

Key Picks

Here, we have highlighted three better-ranked stocks, namely Target Corporation TGT, Abercrombie & Fitch Co. ANF and Ollie's Bargain Outlet OLLI.

Target currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The Zacks Consensus Estimate for Target’s current financial-year earnings suggests growth of 38.5% from the year-ago reported number. TGT has a trailing four-quarter earnings surprise of 30.8%, on average.

Abercrombie & Fitch carries a Zacks Rank #2. The Zacks Consensus Estimate for ANF’s current financial-year sales suggests an increase of 11.9% from the year-ago reported number. Abercrombie & Fitch has a trailing four-quarter earnings surprise of 713%, on average.

Ollie's Bargain presently carries a Zacks Rank #2. The Zacks Consensus Estimate for OLLI’s current financial-year earnings suggests growth of 67.9% from the year-ago reported number. Ollie's Bargain has a trailing four-quarter earnings surprise of 1.3%, on average.

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The TJX Companies, Inc. (TJX) : Free Stock Analysis Report

Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report

Ollie's Bargain Outlet Holdings, Inc. (OLLI) : Free Stock Analysis Report

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