TJX Companies' Consistency, Quality Could Translate Into Top-Line Opportunity

Analysts Matthew Boss and Anne Samuel cited the following three key factors as support for their investment thesis:

1. A number of growth levers remain, specifically incremental unit growth in Home Goods.
2. Procured values are lower by 20–60 percent than Amazon.com, Inc. AMZN or D-Stores.
3. Diversified vendor and International buying organization establishes high entry barriers.

In a research note, the brokerage viewed, "Near-term, we are raising our 3Q consolidated comp to +5 percent (> Street at +2.9 percent) with our global field work pointing to TJX as a positive outlier QTD (OffPrice > Dept Stores in 3Q) noting sequential acceleration in domestic top line trends (Marmaxx + Homegoods) driven by improved merchandise assortments (see pics herein) partially offset by sequential softness in Europe."

Related Link: This Chart Shows A Year's Worth Of Comps Across Retail

The analysts pointed out that the company's strength lays in its balance sheet with cash and short-term investments of about $2.2 billion. The lead analyst thinks that TJX could generate free cash flow of $1.5 billion and pointed out management's priorities in store expansion, dividend payment and repurchase of shares.

Therefore, the brokerage expects the retailer to make $1.5–$1.6 billion worth of share repurchase per year in the next three years. In the last two years, the company spent about $1.75 billion average to buy back its shares.

The stock traded up by $1.39, or 1.89 percent, to $75.13 at time of writing.

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