Thriving Through Turbulent Economies: TJX’s Execution Plan

TJX Companies, the parent organization of TJ Maxx, Marshalls, Sierra, HomeGoods and Homesense stores, is known for purchasing large amounts of inventory at discount prices from retailers who may have mismanaged their inventory. The company then sells these inventories to consumers at off-peak prices, excelling in an economy that appears to be entering a recession or near-recession.

In the first quarter of the year ended April 29th, TJX had GAAP EPS of $0.76 and revenue of $11,783 million. Sales beat Wall Street by a cent, but fell slightly short of expectations despite growing 3.2% year-over-year. TJX expects overall comp revenue to increase by 2% to 3% this quarter.

During the reported period, TJX generated operating cash flow of $745 million, up from -$634 million in the same period last year. The company ended the quarter with a cash position of $5.025 billion, inventory of $6.441 billion and liquid assets of $12.595 billion.

TJX’s stock price is slightly overpriced with a future expected profit of 22 times, but it’s not expensive compared to other retail groups. The sales performance is broadly in line with expectations, and margins are improving from solid. The stock is currently trading above all major moving averages and has a price target of around $91 in the short-term and $95 in the long-term.

As the economy is still struggling, TJX is seen as a better retailer in that environment. The author has owned TJX stock for a long time with a Panic Point of $72.

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