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Time To Checkout For TJX?

Posted: Nov 19, 2009 11:33 AM by Glenn Curtis

Tickers in this Article: SHLD, WMT, TGT, TJX

Several years ago an embarrassingly large number of Americans spent their money with what seemed to be reckless abandon. However, due to the financial crisis, which continues to linger, the average person has and will probably continue to curtail their spending at least until the economy on Main Street firms up. Large discount stores such as Target (NYSE:TGT) and Wal-Mart (NYSE:WMT) are benefitting from this shift in consumer mindset, but they aren't the only ones.

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With that in mind let's take a look at TJX Companies (NYSE:TJX) in the wake of their third-quarter earnings.

Why Shop TJX?
The Massachusetts-based company known for high profile stores such as Marshalls and TJ Maxx recently released its third-quarter numbers and they were quite good. The company turned in a profit of 81 cents, which was a penny better than expectations. The beat really raised my eyebrows because it's the second straight quarter the company has exceeded expectations.

As far as the future is concerned, in the release TJX offered the following: "For the fourth quarter of Fiscal 2010, the company now expects earnings per share from continuing operations in the range of $0.65 to $0.71, based on estimated comparable store sales growth of approximately 5% to 7%."

Some may find fault with that because the estimate is for 71 cents. But I think management may just be playing it conservative and that when results are released they may come in north of that number. (For more on analyst expectations, be sure to read Analyst Forecasts Spell Disaster For Some Stocks.)

As things stand now, TJX is expected to earn $2.60 a share this year and $2.91 a share next year. That implies an expected rate of growth in EPS of 11.9%, which is impressive in this environment and even in a good environment. Interestingly the company also trades at a very reasonable 15 times this year's estimate and at just 13.5 times next year's estimate.

Another big thing that nobody seems to be talking about is how the estimates for this year and next year have risen. The estimate for this year has gone from $2.50 to $2.60 in the last 30 days, and the estimate for next year has gone from $2.76 to $2.91 in that same time. Pickups in estimates like that have the potential to draw a lot of retail and, for that matter, institutional focus.

TJX and other players like Kmart (Nasdaq:SHLD), Target, Wal-Mart and some of the dollar stores, which sell goods extremely cheap, have a very good chance of seeing a rise in traffic as shoppers look to conserve money. I also think that these players have the opportunity to reap big rewards during the holiday season.

The Bottom Line
TJX Companies is coming off a solid quarter that painted a decent picture for the fourth quarter. It also trades at a very reasonable multiple of expected earnings and it has the opportunity to see a gain in foot traffic over the next few months ahead thanks to the cautious and conservative consumer. (Read Analyzing Retail Stocks to learn about the most important metrics to look at when analyzing retail stocks.)

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By Glenn Curtis

Glenn Curtis started his career in the 1990s as an equity analyst for a regional firm in New Jersey. There, he covered companies in the technology, entertainment, and gaming industries. Curtis has since worked as a financial writer at a series of both web and print publications, including TheStreet.com and Registered Rep Magazine. He has held his series 6,7,24, and 63 securities licenses.

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