New TJX Target Price as Economy Weakens
The off-brand retailer enjoyed a strong quarter and is in a strong position moving forward.
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On Wednesday morning, off-brand retailer (TJX) went to the tape with the firm's fiscal third quarter financial results.
For the three-month period ended November 1, the parent company of such retail chains as TJ Maxx, Marshalls, HomeGoods, Sierra and HomeSense posted a GAAP EPS of $1.28 on revenue of $15.117 billion. These top- and bottom-line numbers both exceeded Wall Street's expectations while the revenue print was good for year-over-year growth of 7.5%. Comp sales increased 5%, up from 3% growth for the same period last year and well ahead of the firm's target.
Operations
As sales were growing 7.5% to $15.117 billion, the cost of sales increased 5.9% to $10.19 billion. Administrative expenses were up 10.6% to $3.039 billion. After factoring in interest, non-operating income and expenses and taxes, GAAP net income hit the tape at $1.442 billion (+11.2%). This works out to $1.28 per fully diluted share, up from the year-ago comp of $1.14.
Segment Performance
- Marmaxx generated revenue of $9.037 billion (+7%), producing a segment profit of $1.35 billion (+11.9%). Segment margin improved from 14.3% to 14.9%.
- HomeGoods generated revenue of $2.539 billion (+8%), producing a segment profit of $344 million (+18.6%). Segment margin improved from 12.3% to 13.6%.
- TJX Canada generated revenue of $1.492 billion (+8%), producing a segment profit of $22 million (+6.2%). Segment margin dropped from 15.1% to 14.9%.
- TJX Europe and Australia generated revenue of $2.049 billion (+9%), producing a segment profit of $188M (+37.2%). Segment margin improved from 7.3% to 9.2%.
Guidance
For the current quarter, TJX sees comp sales growth of 2% to 3%. At the midpoint, this is considerably lighter than the 3.1% that Wall Street was looking for. Pre-tax profit margin is projected at 11.7% to 11.8%, as the firm expects a GAAP EPS of $1.33 to $1.36. That is a hair lighter than the $1.37 that Wall Street had in mind.
For the full fiscal year, TJX is expecting comp sales growth of 4%, up from prior guidance of 3% and well above the 3.4% growth that had been the consensus view. The full year pre-tax profit margin is seen at 11.6%, up from prior guidance of 11.4% to 11.5%. Lastly, full year GAAP EPS is projected at $4.63 to $4.66. That is up from prior guidance of $4.52 to $4.57 and also above the $4.60 that Wall Street was looking for.
Fundamentals
For the first nine months of the fiscal year, TJX generated operating cash flow of $3.717 billion. Out of that number, the firm spent $1.489 billion on capital expenditures. That leaves free cash flow of $2.228 billion. "Out of this number," TJX repurchased $1.738 billion worth of common stock for the corporate treasury and dished out $1.371 billion in cash dividends to shareholders.
Moving to the balance sheet, TJX ended the period with a cash position of $4.64 billion and inventories of $9.353 billion. That puts current assets at $15.314 billion. Current liabilities add up to $14.001 billion, including $999 million in shorter-term debt. That leaves the firm with a current ratio of 1.09. We do not harp on quick ratio levels with large retailers due to the inventory-centric nature of the business.
Total assets amount to $35.188 billion. There is almost nothing intangible on this balance sheet, which is something we appreciate. Total liabilities less equity comes to $25.829 billion. This includes $1.87 billion in long-term debt. The firm has more cash than debt on the books. Therefore, this balance sheet is in far better shape than what we see from many large retailers in 2025.
My Thoughts
TJX is executing at a high level. The balance sheet is OK. Cash flows are strong. Sales growth is better than expected. Full-year guidance is better than we had thought as well. Additionally, as the economy potentially weakens, TJX delivers for consumers some value at a time when budget consciousness will matter more. I am long TJX and expect to remain long.
Readers will see that TJX has rallied sharply on Wednesday morning and then given back much of those gains. The stock is trying to break out from an ascending triangle of trend continuance. The stock tested pivot support on Tuesday and that support level held. This is encouraging.
As far as my favorite indicators are concerned, relative strength is better than neutral and gaining upside momentum without being close to entering into an overbought state. The daily MACD is in good shape as well with the histogram of the nine-day EMA positive and the 12-day EMA running above the 26-day EMA with both of those lines in positive territory.
Target Price: $168
Pivot: $146
Add: Down to the 50-day SMA (currently $143)
Panic: Loss of 200-day SMA (currently $131)
At the time of publication, Guilfoyle was long TJX equity.
