TJX Companies (TJX:NYSE) $123.40

Market cap: $137.6 billion

A year-to-date share price pause for breath at TJX Companies (TJX:NYSE) presents investors with the chance to buy a world-leading discounter and high-quality compounder with years of market share gains, earnings growth and progressive dividends ahead of it.

Admittedly, concerns over the health of the important US consumer abound, but Shares believes TJX Companies occupies something of a sweet spot in retail, since its flexible business model relieves premium brands of excess stock and benefits value-focused shoppers by giving them access to aspirational labels at affordable prices.

As a result, TJX reaps the rewards of robust footfall and bumper takings at the tills, and the company also has decent ESG credentials too, since its model helps reduce waste.

TJX should benefit from the better-than-usual inventory availability management is currently seeing in the marketplace, and the shares look cheap relative to their own history.

EMBRACE THE TREASURE HUNT

For the uninitiated, TJX is the leading ‘off-price’ purveyor of apparel and home fashions in the US and worldwide and has also expanded into stocking premium beauty products.

By staying true to its mission to ‘deliver great value to our customers every day’, the $137.6 billion cap has continued to grow sales and profits through many retail and economic cycles, and gained market share across an array of geographies, establishing one of the widest demographic reaches in retail in the process.

Trading under banners including TJ Maxx, Marshalls and HomeGoods in the US, but better known for its TK Maxx and Homesense fascias in Europe, the company is predominantly a physical retailer with over 5,100 stores around the world, although the Massachusetts-headquartered firm has also successfully invested in its e-commerce capabilities.

While it already operates stores in nine countries on three continents, ambitious chief executive Ernie Herrman and his team see significant store growth opportunities both in the US and overseas.

TJX is geared into the global growth of ‘off-price’, a discount pricing format whereby a retailer purchases excess stock from known brands and sells it on to the end consumer at a lower price.

In Europe and the UK, local brand TK Maxx typically sells branded goods at a 60-65% discount, but it can go as low as 90%, encouraging consumers to indulge in a ‘treasure hunt’ format by scouring the store for bargains.

Bullish on the name, Jefferies believes TJX ‘should benefit from the secular migration toward the off-price sector, which, in our view, will likely lead to share gains from other, more traditional retailers’, and its analysts argue the expansion of the Home and International divisions ‘represent unique growth opportunities’ for the company.

TJX IS ON SALE

TJX Companies has delivered an impressively high ROCE (return on capital employed), a key gauge of profitability, of roughly 30% in the past two financial years, and continues to return capital to shareholders via earnings-accretive buybacks and progressive dividends.

The retailer showcased its resilience once again with its first-quarter results (21 May), which revealed better-than-expected revenue and EPS (earnings per share) of $13.11 billion and $0.92 respectively and a 3% rise in same-store sales driven by rising customer transactions.

‘Our teams across the company delivered consumers exciting value on great brands and fashions and a treasure-hunt shopping experience, every day,’ commented the chief executive.

‘All divisions, both in the US and internationally, drove increases in comp sales and customer transactions, which underscores the strength of our value proposition. This also gives us confidence in our ability to gain market share across all of our geographies.’

While TJX’s second-quarter outlook proved softer-than-expected, this reflected tariff- and currency-related headwinds for which strong mitigation efforts are in place.

According to Stockopedia, the analyst consensus points to EPS of $4.50 for the year to January 2026, with a dividend of $1.70, rising to $5.00 in full-year 2027 with the $1.80 of dividends.

Based on these estimates, TJX shares currently trade on 27.4 times January 2026 earnings falling to 24.8 times 2027 numbers, compared with a mean of around 40 times cyclically-adjusted earnings over the past 30 years.

Therefore, a reversion to the mean, say over the next 18 months, driven by additional market share gains and forecast upgrades, implies a stock price of $200 based on the January 2027 estimate of $5.00 of earnings per share - more than 60% above where the shares currently trade - while even Jefferies’ $155 price target implies near-term upside of around 25%.

‹ Previous2025-07-03Next ›