Analysts at a major Wall Street research firm see multi-year growth and share gains ahead for off-price retailers. As owners of TJX Companies (TJX), the company behind T.J. Maxx, Marshalls and HomeGoods, it’s a view we share — but with one major difference. In a note to clients this week, Bernstein arrived at its thesis from the current state of low-income consumers. While stimulus payments made to Americans during the pandemic have ended, Bernstein said the second half of 2023 and 2024 could be better for the less wealthy as macroeconomic pressures start to ease. Under this scenario, lower-income consumers will choose to spend their money at off-price retailers. The analysts like Ross Stores (ROST) best, and called Burlington Stores (BURL) high-risk, high-reward, with a multi-year turnaround story. Club holding TJX, on the other hand, “is the most defensive, least low-income exposed, and with the strongest track record, but much of that quality is embedded in the price, and we don’t see much re-rating opportunity this year.” While Bernstein’s prediction of a pickup in spending for lower-income shoppers would be welcome news, we have a different take. We agree that TJX is less-exposed to the least wealthy, but think the middle-and-higher income consumers that TJX targets is a better place to be. In an uncertain economy where the Federal Reserve is still battling sticky inflation with higher interest rates, it’s this group that will shop more at off-price retailers for the value of name brands at lower prices. That’s why we think TJX is best-in-show with a stock that has room to run. In TJX’s fiscal 2023 fourth-quarter results , which were out in February, the retailer delivered strong top-line growth, with total revenue advancing nearly 5% year over year to $14.52 billion and earnings-per-share (EPS) up 14% year over year to 89 cents. (TJX has an unusual fiscal calendar: It reports fiscal 2024 first quarter results on May 17). The Marmaxx division, which includes T.J. Maxx and Marshalls, delivered an impressive 7% same-store-sales growth in the U.S., its strongest quarter of fiscal 2023. Management expects that growth to continue. On the post-earnings call, management said the company plans to open more than 1,400 stores in the longer term. During its fourth quarter, TJX saw its store count go up 146 for a total of 4,835 stores. At the time, TJX provided fiscal first-quarter guidance of EPS between 68 cents and 71 cents, lower than the 74 cents expected. Sales guidance of between $11.7 billion and $11.8 billion was, at the midpoint, higher than the $11.72 billion expected. The consensus estimate for first-quarter EPS has since drifted down to 71 cents while the sales estimate has moved higher to $11.81 billion. TJX 1Y mountain TJX Companies 12-month performance It’s important to remember that TJX is able to protect and even build its business during tough times because it benefits from troubles at major department stores and specialty…
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