NYSE:TJX The TJX companies
Sector financial performance:
This company, who primarily buys and sells off-price apparels and home fashion mainly through their retail stores and web sites, has been grouped into casual clothing retailers (off-price) sector in clothing industry.
There was a clearly downward pressure on stores sales for companies in this sector in 2016 and 2017as indicated by our data that average comparable stores sales decreased by 0.5% and 2% in 2016 and 2017 respectively as compared with increase of 2% in 205. Some of companies in this sector presented stronger resistance to sales pressure than other full-price apparel retailers probably due to better performance of merchandises other than apparels such as home fashion and accessories.
As many companies in other sector, companies in this sector have also been seeing rebounding sales since 2018 driven by coming back traffic accompanies with less discounting. It seems that e-commerce has a very limited impact on this rebounding of sales in this sector.
It seems that, compared with full price apparels, the demand for off-price apparels seems to be more sensitive to economy elastic of price so that those companies’ sales have been supported by lowering price. As a result of price deflation (promotion/markdowns), companies’ gross margins decreased up to 500 basis points with an average decrease of 200 basis points in 2015/17. Plus the deleveraging of SG&A costs as a result of decreased sales, companies’ operating margins decreased by an average of 370 basis points during the same period. However, as sales jumped up with stronger demand in 2018, we have seen the improved gross margin driven less discounting and improved SG&A% driven leverage of expense.
The current average gross margin is 33% in this sector (distribution costs and occupancy costs included) with an average SG&A as percentage of sale of 28%. And this makes an average operating margin of 6%.
According our analysis, companies’ enterprise price/EBI ratios are 29 with interest/EBI ratios of 1%. Companies’ enterprise price/sales ratios is about 1.0.
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Company performance:
Our data did not indicate that there is a significant impact from unfavourable industry climate, which caused decline in comparable sales of many its peers. It seems that this company’s comparable sales growth slowed down for only 2017 to 2% and rebounded back to 5% comparable to the level of 2016.
First six months of fiscal 2019 compared with same period of 2018(ended 20180804)
The organic nets sales of this company increased 10% (12% for 2Q) primarily attributable to new stores opening and the comparable stores sales, which increased by 5% (6% for 2Q).
Fiscal 2018 compared with 2017(ended 20180203)
The organic nets sales of this company increased 6% primarily attributable to new stores opening and the comparable stores sales, which increased by 2% due to increased traffic. E-commerce accounts for 2% of total sales.
The organic nets sales of this company increased 5%in first 6 months of fiscal 2018 compared with sale period of 2017 primarily attributable to new stores opening and the comparable stores sales, which increased by 2%.
The organic net sales of this company increased by 7% in fiscal 2017 compared with 2016 primarily attributable to the increase of 5% in comparable stores sales and new stores opening.
The organic net sales of this company increased by 9% in fiscal 2016 compared with 2015 primarily attributable to the increase of 5% in comparable stores sales and new stores opening.
This company’ gross margins is currently about 29% (distribution included and stores rental costs included), presenting no changes in the past four years. It’s SG&A as percentage of sales increased to 18% as a result of increased operation costs and its operating margin went down by about 100 basis points to current 11%.
Stock price
This stock currently has an enterprise price/EBI ratio of 26 ($110). We think that its stock is being relatively overvalued since its high margin may be vulnerable to changes in sales.