TJX Misses Q4 Expectations; Shares Fall 4%

Shares of TJX Companies, Inc. (TJX) fell 4.2% to close at $62.50, after reporting its fourth-quarter fiscal 2022 results, which fell short of expectations. Despite delivering record U.S. open-only comparable sales growth, which surpassed pre-pandemic numbers by 13% in Q4 and 17% for FY22, the company’s numbers missed analysts’ estimates on both the earnings and revenue front.

TJX is one of America’s favorite off-price retailers of apparel and home furnishing hosting outlets including T.J. Maxx, Marshalls, HomeGoods, and Homesense across U.S. Canada, Europe and Australia. The company also intends to increase its quarterly common dividends by 13% to $0.295 per share, as well as raise its share buyback authorization in the range of $2.25 billion to$2.50 billion during FY23.

Disappointing Q4FY22 Results

Although TJX’s Q4 net sales of $13.85 billion grew 27% year-over-year, they failed to meet analysts’ estimates of $14.25 billion.

Similarly, the company’s quarterly EPS of $0.78 also jumped 189% compared to Q4FY21, but missed analysts’ estimates by 13 cents.

Full-year fiscal 2022 net sales leaped 51% to $48.55 billion and diluted EPS stood at $2.70 much higher compared to the FY21 number of $0.07.

Official Comments

Pleased with the company’s performance, CEO and President, Ernie Herrman, said, “Fourth quarter sales were trending higher before the surges in Omicron. During the holiday selling season and throughout the year, our shoppers responded to our amazing brands, excellent values, and inspiring treasure hunt shopping experience.”

“While freight and wage cost pressures remain elevated, we are pleased that our retail pricing strategy is working very well. This gives us confidence in improving our profitability when the macro environment normalizes while continuing to offer exceptional values to customers every day,” Herrman added.

Q1FY23 Guidance

Based on the strong quarterly performance and continued business momentum, TJX forecasts Q1FY23 diluted earnings to fall in the range of $0.58 per share to $0.61 per share while the consensus is pegged at $0.60 per share. Further, U.S. open-only comparable sales for the first quarter are expected to grow by 1% to 3% over the Q1FY22 figure.

Analysts’ Take

Responding to TJX’s results, Guggenheim analyst Robert Drbul lowered the price target on the stock to $80 (28% upside potential) from $85 while maintaining a Buy rating.

Commenting on his optimistic view on the stock, Drbul said, “We continue to view TJX as the strongest company and operator (management, financially, and from a buying organization standpoint) among our off-price coverage. In addition to the ongoing desire of consumers for the treasure hunt experience, we expect the company to continue to benefit from strong Home and its small but budding online initiatives.”

The analyst lists four tailwinds that affect off-price retailers, namely store closures, access to a wide range of quality merchandise, favorable real estate opportunities, and consumers’ desire for value and a treasure hunt environment.

With 11 unanimous Buys, TJX stock commands a Strong Buy consensus rating. The average TJX price target of $84.73 implies 35.6% upside potential to current levels. Its shares have lost almost 17% year-to-date.

Stock Investors

TipRanks’ Stock Investors tool shows that investor sentiment is currently Very Positive on TJX, with 8.8% of portfolios tracked by TipRanks increasing their exposure to TJX stock over the past 30 days.

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