Bright Future for The TJX Companies (TJX): Ross Stores, Inc. (ROST), Stein Mart, Inc. (SMRT)

Page 1 of 2

During a Wednesday earnings call, The TJX Companies, Inc. (NYSE:TJX) President/Chief Executive Officer Carol Meyrowitz said she’s repeatedly asked one question that I find myself positing quite a bit where the company is concerned: how can its positive operational momentum continue? When it sports a 21% five-year CAGR in EPS and steady annual gains in both sales (8.48% three-year CAGR) and operating income (16.25% three-year CAGR)—and given pundits’ ongoing worries about consumer discretionary spending in light of the Federal payroll tax increase, delayed income tax refunds, and nasty weather—the question’s popularity comes as little surprise.

Funny thing, though. Even as The TJX Companies, Inc. (NYSE:TJX) missed consensus estimates for fiscal 2014 EPS ($2.66-$2.78/share vs. $2.84) and sales ($26.8-$27.1 billion vs. $27.32)—equating to YOY growth of 7.7%-12.6% in the former metric based on a 52-week comparison and a rise of 3.5%-4.6% in the latter—shares appreciated. Following are a few likely reasons that TJX’s adherents aren’t fleeing despite the company’s slowing growth:

The TJX Companies, Inc. (NYSE:TJX)

TJX sits in a retail sweet spot along with Ross Stores, Inc. (NASDAQ:ROST) and Stein Mart, Inc. (NASDAQ:SMRT) by offering sought-after clothing and home furnishing brands at discount prices. This operational thrust worked exceedingly well (at least for The TJX Companies, Inc. (NYSE:TJX) and Ross) during the economic volatility of the past five years and should continue in earnest as many consumers remain cash strapped and the housing market continues its recovery, meaning value-based home goods are at a premium. Indeed, I’ve long marveled at Ross Stores’ operational prowess that includes continuous annual growth in key metrics such as sales and gross and operating margins.  Through December 31 Ross Stores, Inc. (NASDAQ:ROST) delivered a 10.2% five-year CAGR in sales– sales were $9.72 billion in 2012 and $5.98 billion in 2007–and gross and operating margins have expanded every year over the same period. Stein Mart, Inc. (NASDAQ:SMRT) recently emerged from a lackluster early 2012 by announcing January overall and same-store sales growth of 31.3% and 4.6%, respectively, and comparative 4Q gains of 11.3% and 6%. Plus, the company’s February comps came in at +0.6%, ahead of consensus estimates of flat growth. In all, Stein Mart has now achieved eight consecutive quarters of same-store sales growth. Beware, however, that Stein Mart must regain compliance with NASDAQ listing standards requiring timely filings of periodic reports with the Securities and Exchange Commission. No doubt it’s impossible to like the triumvirate equally–in my eyes Stein Mart, Inc. (NASDAQ:SMRT) isn’t quite in the same league as TJX or Ross Stores, Inc. (NASDAQ:ROST)–but it’s easy to like the consumer value proposition they each offer.

Meyrowitz said during the Wednesday call that the company plans conservatively and aims to beat future estimates. Last year, for example, The TJX Companies, Inc. (NYSE:TJX) forecasted 0-2% growth in same-store sales and came in at +7%. I’m not saying such a positive surprise will repeat itself this year, but I’ve always been a big fan of a company’s goal and ability to under promise and over deliver.

TJX said February same-store sales will likely be flat compared to +8% a year ago, certainly a disappointing admission. Yet the month ended up 1% after the company said sales picked up as March approached. Also important: Meyrowitz allayed, at least for the time being, any concerns over weakness in consumer discretionary spending by asserting that the comparative February underperformance was “absolutely a weather story for us,” adding that comps have been negative in the snow-covered northeast but positive in the sun-soaked southeast. Translation: Mother Nature can be fickle, to be sure, but the company hasn’t witnessed any meaningful hit to consumer health.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Top Reasons For Getting Fired

The 3 Best States to Start an LLC

10 Jobs That Allow You to Travel

7 High-Paying Jobs You Can Do From Home

12 Best Cities to Shop in USA

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!