Marshalls owner TJX jumps after earnings — what investors love about the report

TJX Companies shares climbed to an all-time high Wednesday after reporting better-than-expected fiscal first-quarter results Wednesday. The report showcased the off-price retailer’s appeal to bargain-hunting shoppers and prompted us to boost our price target on the stock. Total revenue for the three months ended May 4 advanced 6% year over year, to $12.48 billion, exceeding analysts’ forecasts of $12.46 billion, according to estimates compiled by LSEG. Adjusted earnings per share climbed 22% on an annual basis to 93 cents, outpacing analysts’ estimates of 87 cents per share, LSEG data showed. Shares added more than 4% Wednesday, to nearly $102 each, putting the stock on pace for a record close; its previous high of $101.42 a share came on March 28. Wednesday’s move brings TJX’s year-to-date gain to nearly 10%. TJX Companies Why we own it: The owner of T.J. Maxx, Marshalls and HomeGoods is well-suited for the current economic environment, offering inflation-wary customers wide-ranging merchandise at compelling prices and a “treasure hunt” in-person shopping experience. The struggles and store closures of other retailers benefit TJX’s inventory and market share. The company also has been working to expand margins. Competitors: Ross Stores and Burlington Stores Last buy: May 2, 2024 Initiation: Aug. 24, 2022 Bottom line Our thesis is playing out as expected. Consumers are seeking out best-in-class value against the backdrop of sustained inflation, and that is leading them straight to TJX Companies locations. Results were a bit mixed under the hood, but strength at TJX Canada and its European and Australian segment was more than enough to offset minor misses at HomeGoods and Marmaxx, which consists of T.J. Maxx and Marshalls stores in the U.S. Crucially, same-store sales growth was positive across all divisions. That’s a closely followed metric in retail. Management continues to like the inventory landscape, indicating there are still healthy amounts of excess goods in the marketplace for TJX to acquire for its business. Executives also said they see further ability to grow because TJX is becoming an increasingly important channel for its vendors. As a result, those vendors — think product makers and other retailers — are figuring out ways to work with TJX in a more consistent manner than in the past. “It really encompasses all the reasons why we’re so bullish,” CEO Ernie Herrman said on the call. “I mean, we have the value leadership positioning right now,” he said, adding that its stores have become “a cooler place to shop.” Being a “cooler place to shop” has many benefits to the company and, by extension, its investors. On the call, management made it clear that its value proposition is resonating across income and age levels — not exactly a shock to us after reading The Wall Street Journal’s recent story about millionaires who shop at T.J. Maxx and Marshalls. Same-store sales in the Marmaxx division increased in demographic locations where the average household income is both above and below the $100,000 level, the company said. Executives also said the company continues to “attract new Gen Z and Millennial shoppers to our stores, which we believe bodes well for our future growth.” TJX YTD mountain TJX Companies’ year-to-date performance. On top of the strong reported results, management also upwardly revised its full-year outlook for pretax profit margin and earnings per share. That figures to be a driving force behind the stock’s advance on Wednesday. In the quarter, TJX returned a total of $886 million to shareholders in the quarter, with $609 million coming via buybacks and another $377 in dividend payments. That’s above the $841 million returned in the year-ago period . The company last month announced a 13% increase to its quarterly dividend payout. Our investment thesis is fully intact. TJX’s goal isn’t to just provide cheap goods. It’s about offering “good, better and best” products that appeal to a broad group of shoppers, as Herrman explained on the call. Given the strong results, and signs that the momentum has sustained into the current quarter, we reiterate our 1 rating and are taking our price target up to $115 a share from $110. Guidance There’s a lot of red on the guidance chart above, indicating TJX’s outlook for the metrics came up short versus Wall Street expectations. However, we’re not overly concerned due to management’s track record of under-promising and over-delivering later on. In fact, in the past nine quarters going back to April 2022 (including Wednesday’s report), management reported EPS above the high end of their guidance range seven times. In the remaining two instances, the team matched the high end. “The second quarter is off to a good start and we see numerous opportunities for our business for the balance of the year that we plan to pursue,” Herrman said in TJX’s earnings release. On a full-year basis, the company lifted its pretax profit margin to a range of 11% to 11.1%, up from 10.9% to 11% previously. Its outlook for earnings per share was raised to $4.03 to $4.09, compared with the old range between $3.94 to $4.02. Full year sales guidance was revised lower by about $150 million at the midpoint due to foreign exchange dynamics. Comparable same store sales guidance was left unchanged. Quarterly results Overall same-store sales were up 3%, matching the high end of management’s guidance range. However, that missed the 3.7% consensus estimate. Same-store-sales growth was reported across all divisions: Marmaxx , which includes Marshalls and T.J. Maxx, was up 2% year over year, a deceleration from the 5% growth seen in the company’s fourth quarter of fiscal 2024. HomeGoods advanced 4%, a deceleration from the prior quarter’s 7% rate. TJX Canada rose 4%, decelerating from the 6% rate seen in the prior quarter. TJX International gain 2%, below the last quarter’s 3% rate. Gross margin of 30% in the quarter matched the Wall Street estimate and was up from 28.9% in the year-ago period. CFO John Klinger said gross margins benefited from lower freight costs and “favorable mark-on,” which represents the difference between the selling price to consumers and cost of the good to the company. Pretax profit margin performance benefited from “lower freight costs, a reserve release, and higher net interest income,” Klinger said. Selling, general and administrative expense was higher due to store wage and payroll increases. (Jim Cramer’s Charitable Trust is long TJX. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Florida, Port St Lucie: TJMaxx, a cashier with a customer at check out.

Jeff Greenberg | Universal Images Group | Getty Images

TJX Companies shares climbed to an all-time high Wednesday after reporting better-than-expected fiscal first-quarter results Wednesday. The report showcased the off-price retailer’s appeal to bargain-hunting shoppers and prompted us to boost our price target on the stock.

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