Market Overview

Wells Fargo Calls A Peak In Discount Retail, Downgrades TJ Maxx's Parent Co.

Share:
Wells Fargo Calls A Peak In Discount Retail, Downgrades TJ Maxx's Parent Co.

The case for owning off-price retail stocks like TJX Companies Inc (NYSE: TJX) two years ago no longer applies today for one key reason, at least according to Wells Fargo. 

The Analyst

Wells Fargo's Ike Boruchow downgraded TJX Companies' stock from Outperform to Market Perform with a price target lowered from $76 to $72.

The Thesis

The case two years ago for owning off-price retail stocks like TJX Companies was threefold, Boruchow said in a note. (See the analyst's track record here.) 

The catalysts for off-price retail were, according to Boruchow:

  • An increase in wallet share from closing department stores.
  • Retailers and department stores eager to sell their excess inventory to off-price retailers.
  • A shifting customer demographic toward off-price options.

Among the three factors, the most supportive factor for owning off-price retailers was the high levels of inventories at department stores and retailers, the analyst said. Today, the inventory situation in the U.S. wholesale channel is "clean," especially on the apparel side, Boruchow said. 

Brands are now less likely to rely on the off-price channel compared to recent years, and the company now has less closeout buys to take advantage of— something that served as a high-margin opportunity for TJX Companies, the analyst said.

The company is by far and large the largest off-price retailer, so any pullback from a notable brand is "almost assuredly" going to impact TJX's brands, while it "may or may not" impact its smaller rivals, Boruchow said. 

"It's essentially the law of large numbers." 

Price Action

Shares of TJX Companies were trading lower by nearly 2 percent Wednesday morning at $75.30.

Related Links:

Retail Watcher: Department Stores Aren't Dead Yet, But Face 'Assault' From Many Angles

TJX, Ross And Burlington Will Open The Same Number Of Stores Macy's, Sears And JC Penney Are Closing

Photo by Anthony92931/Wikimedia.

Latest Ratings for TJX

DateFirmActionFromTo
Sep 2019UpgradesSellNeutral
Aug 2019UpgradesHoldBuy
Jun 2019MaintainsBuy

View More Analyst Ratings for TJX
View the Latest Analyst Ratings

Posted-In: Apparel Department Stores Ike Boruchow Off Price RetailersAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga

 

Related Articles (TJX)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
IINDoughertyAssumes34.0
PNRJefferiesInitiates Coverage On
YYUBSUpgrades
ROKUOppenheimerMaintains155.0
IPHIBank of AmericaMaintains80.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Wall Street Reacts To Spark Therapeutics' $850K Genetic Blindness Treatment

Ulta Beauty Investors Failing To Reward Stock For Tax Tailwinds, Says Wells Fargo