TJX - Why does TJX's stock keep soaring?
2024-06-07 11:48:29 ET
Shares of The TJX Companies, Inc. (NYSE:TJX), a leading off-price retailer of apparel and home fashions, have been experiencing a robust performance streak, recently reaching a new all-time high stock price of $108.58 on June 7, 2024. This surge is underpinned by several key developments and strong business fundamentals that have continually impressed both investors and analysts.
Expansion into Mexico
One of the significant recent developments for TJX is its strategic expansion into Mexico through a joint venture with Grupo Axo, S.A.P.I. de C.V., an off-price retailer with over 200 stores. This partnership, where TJX will hold a 49% stake, is expected to significantly enhance TJX’s market presence in Mexico.
The move aligns with TJX’s broader strategy to increase its footprint in international markets, further solidifying its position as a global retail powerhouse.
Financial performance
In terms of shareholder value, TJX declared a quarterly dividend of $0.375 per share on June 4, 2024, consistent with its previous dividend, offering a forward yield of 1.42%. Despite a slight pullback after its Q1 results in response to its FY25 sales guidance, which projected sales between $55.5 billion and $55.9 billion, slightly below the consensus estimate due to foreign exchange headwinds, the market responded positively overall.
The company’s expectation of comparable store sales growth of 2%-3% and a pre-tax profit margin of 11.3%-11.5% for the second half of the fiscal year suggests a stable outlook, buoyed by potential price increases and maintained competitive pricing strategies.
In its Q1 FY25 results, TJX reported earnings per share of $0.93, surpassing the consensus estimate of $0.88, with a 3% increase in comparable store sales. This performance was largely driven by higher customer transactions across all divisions, underscoring the strength of TJX’s value proposition in attracting price-sensitive consumers.
Notably, HomeGoods and TJX Canada led the charge with 4% growth in comparable sales. The company’s gross profit margin improved to 30.0%, benefiting from lower freight costs and better merchandise markups.
Analysts’ views
Analysts remain optimistic about TJX’s prospects, praising its ability to leverage its scale and purchasing power to reduce costs and improve margins. The company’s ability to attract and retain customers by offering strong value amid an inflationary environment has been a key driver of its success.
Valuation-wise, TJX’s strong financial performance and positive market sentiment have led to upward revisions in price targets. The company’s consistent outperformance and robust earnings growth have warranted a higher valuation multiple, reflecting confidence in its ability to sustain growth in a challenging economic environment.
Looking ahead, TJX’s expansion initiatives, strong cash flow generation, and strategic focus on value proposition are expected to drive continued market share gains and profitability. Now, let’s see what the charts have to say about the stock’s price trajectory. This technical analysis will delve into the key price levels, trends, and indicators that could influence TJX’s stock movement in the near term.
Strong momentum on both short-term and long-term charts
TJX is amongst the stocks that can be put into the ‘buy and forget’ category because of the consistent growth it has shown over the years. Since 2009 the stock has delivered a twentyfold return in price return alone to investors despite paying a healthy dividend. Despite the minor blip it faced amidst the COVID pandemic in 2020 the stock has continued on its upward trajectory.
TJX chart by TradingView
Investors who are looking to buy TJX’s stock on a retracement must remember that it is one of those stocks that keeps on marching forward, hence waiting for a retracement might prove futile. The stock is displaying strong upward momentum on both long-term and short-term charts and hence can be bought here while keeping a stop loss at $94.6.
Bearish traders should exercise caution. Given the strong bullish momentum, shorting the stock at current levels is not recommended. The stock is likely to remain in bullish territory as long as it trades above the recent swing low of $92.35. Only if it breaks below this level should short positions be considered.
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