This week’s Stock of the Week is a retailer that has found its own way to stand up to the competition.
The TJX Companies (TJX) is one of the few retail chains that has remained strong in the face of online competition. It is the parent company of T.J. Maxx, Marshalls, HomeGoods, Sierra Trading Post and international stores under the Winners, HomeSense and T.K. Maxx brands.
It operates a total of more than 3,800 stores in the US and eight other countries. And it is a rare breed among retailers, with more than 18,000 vendors worldwide and a proprietary inventory management system. This system lets it stock stores differently in different areas and quickly respond to changing local consumer tastes. This can make shopping something of an event, with consumers eager to see what new items a store has for them.
TJX does sell goods on its websites, but its real strength is in its bricks-and-mortar stores and very strong financial management. Since 2001, shares outstanding have dropped from 1.086 billion to the current 620 million—an ongoing boost to earnings per share. Return on shareholder equity since 2007 has never been lower than 41%. Free cash flow is very strong—about $5.10/share for 2017 and $5.55/share this year—so the dividend of $1.25/share, recently yielding 1.6%, appears secure.
Revenue was $33.2 billion in calendar 2016. It will likely be reported as $36 billion for calendar 2017 and will likely rise to $38 billion this year. Retailing is always competitive, but TJX has shown again and again that its strong financials and nimble approach—which includes very fast turnover of inventory—give it an edge.
Fiscal year: January. Earnings per share: 2018 est./$4.25…2017 est./$3.90…2016/$3.53.
Bill Staton, CFA, is senior director, Novare Capital Management, Charlotte, North Carolina, which manages $1.1 billion. NovareCapital.com
