Analysts Matthew Boss and Anne Samuel cited the following three key factors as support for their investment thesis:
- A number of growth levers remain, specifically incremental unit growth in Home Goods.
- Procured values are lower by 20–60 percent than Amazon.com, Inc. AMZN or D-Stores.
- 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."
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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