Off-price is not going off-trend anytime soon. That might not be clear based on recent trading in TJX Companies’ stock. Club holding TJX Companies and rival Ross Stores are well-positioned to keep stealing market share from other retailers, particularly department stores, UBS said in a recent note, keeping a years-long trend in the industry alive. And yet shares of TJX have not recently enjoyed the same kind of positive momentum the company’s underlying business seems to have — a stalling out that has the stock looking increasingly attractive. Year to date, TJX shares are up less than 1% while the S & P 500 has climbed more than 7%. Over the past month, in particular, the stock has trekked lower by nearly 3%; the broad U.S. stock index is down just 1% in that window. “TJX should continue to benefit from the struggles of department store chains,” said Jeff Marks, the Club’s portfolio director. He cited Macy’s plan to close 150 stores through 2026 as “a great opportunity” for TJX to garner quality merchandise at a bargain. The ongoing challenges for department stores, which extend back more than a decade, keep playing into the hands of off-price competitors, UBS said. The firm found that the three main publicly traded off-price players — TJX, Ross Stores and Burlington Stores — late last year saw an acceleration in their share of sales compared with four public department stores: Nordstrom , Dillard’s , Macy’s and Kohl’s . Over the past four reported quarters, the off-price retailers accounted for 57.6% of total sales, UBS said, up 3.3 percentage points from a year ago and 10.3 percentage points from five years ago. This analysis strongly supports our long-term investment thesis on the parent company of T.J. Maxx, Marshalls and Home Goods. Despite woes at other retailers, TJX stands out as a resilient company well-equipped to avoid many of the industry’s challenges. It excels when others fall on hard times and accumulate inventory gluts, giving TJX the chance to acquire quality merchandise across categories like apparel, personal care and home goods for cheap. For example, Bed Bath & Beyond’s bankruptcy last year was good news for TJX . The inventory set up across the industry remains favorable for TJX, CEO Ernie Herrman said on the company’s earnings call in late February. TJX is “in a terrific position to continue flowing a fresh assortment of goods to our stores and online this spring and throughout the year,” he said then. Even with management’s optimism, UBS has hold-equivalent ratings on TJX and Ross Stores, arguing “both companies will have a hard time exceeding the market’s growth expectations.” TJX 1Y mountain TJX’s stock performance over the past 12 months. One factor keeping a lid on TJX’s stock recently may be that it is trading close to its historical valuation, noted Chuck Grom, a consumer and retail analyst at Gordon Haskett. As of Friday, TJX shares are trading at 23 times forward earnings estimates, essentially in line…
Read More: Off-price retail keeps taking market share. Why is TJX’s stock stuck?
