Stifel's TJX Takeaways From Days With Management: Outlook Positive, Reiterate Buy

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Analysts at Stifel spent Monday and Tuesday with TJX Companies Inc's TJX CFO Scott Goldenberg and Europe Group President Michael MacMillan in Edinburgh, Scotland and London, England. They also made a tour of a TJ Maxx/HomeSense store and visited some of the company's clients.

According to a report issued Friday, the general tone was positive. The report highlighted the management's confidence in the company's business model and long-term outlook. With their positive view on the company and the stock reinforced, Stifel reiterated a Buy rating and a $78 price target for TJX.

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The analysts pointed out a few factors to take into account when investing in TJX:

1. Unique European Experience

The company's experience in Europe is difficult to replicate.

"The company is able to leverage its global presence as it grows while market specific merchandise and local talent enables the company to differentiate product by market as needed, fueling results. We view international as a considerable square footage and profit driver going forward," the analysts said.

They continue, "Despite the lack of scale, management believes that TJX Europe's long-term OM will exceed 10 percent, driving continued profit gains, in our opinion. Visibility for European growth is very good. Management expects that they can more than double their current store base in the company's existing chains and markets."

2. HomeGoods As Fashion

TJX operates its HomeGoods' business as a fashion business. This "fuels a virtuous cycle, driving high margin sales, evident in the continued improvement in results over the past several years. These consistently strong results supports management's belief that this brand has the long-term store growth potential of approximately 1,000 stores (more than double 2014's store count of 487) with operating margins above 13 percent."

3. Talent Pool

The company counts with a long-standing, deep talent pool.

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Posted In: Analyst ColorReiterationAnalyst RatingsEurope GroupMichael MacMillanScott GoldenbergStifel
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