TJX Companies Inc (NYSE:TJX) is an American off-price retail giant that took a long time to recover from the brick-and-mortar apocalypse of 2020. But it was one of the first struggling retailers to benefit from the November news of economic recovery.
You may shop for great deals at TJX stores, but is TJX stock a Buy?
There’s no doubt the accelerated transition to online shopping affected the company – it closed a lot of physical stores while leaning on new ecommerce initiatives to improve its supply chain. In fact, some 470 of its stores are still stuck closed due to local restrictions, although it’s a bigger problem in Europe than the United States.
If ever there were a company that embodies old-school brick-and-mortar retail, TJX is it. The company long eschewed online sales to keep customers coming in for the in-store treasure hunt. Everyone has a different idea of what makes a deal, but every savvy shopper knows it can be found at a certain niche of stores.
Does TJX stock represent a discount now or a high-price tag in disguise?
TJX Bargain Prices Are A Match For This Economy
TJX was originally created as a subsidiary of Zayre and became the legal successor when its parent company went defunct in the 20th century. The company operates a wide footprint of stores, including TJ Maxx (TK Maxx in Europe), Marshalls, HomeGoods, HomeSense, Sierra, and Winners.
It’s one of many off-price retailers, which provide high quality goods at cheap prices. They do so through bulk purchases of irregulars, closeouts, overruns, and merchandise returns from other retailers. If you ever wondered what happens to products you return, this is it.
Returned products are refurbished to look and feel like new. Sometimes the differences are indistinguishable to the average consumer. It may have inconsistent stitching or have other sizing issues, but the savings can be worth it for genuine, quality products.
Shoppers who love the hunt prefer off-price to discount retailers who may skimp on materials. It bridges the gap that could be exactly that the economy needs. Unemployment is at record highs, and people have less money than ever.
If TJX learns to fuse its retail and online presence in an innovative new way, it can compete with and even surpass major retailers in a recession. That has bulls thinking TJX shares could be worth buying.
Is TJX Stock A Buy?
TJX Companies started 2021 with a market capitalization of $80 billion and a P/E ratio well over 100.00. To put it in perspective, Target Corporation (NYSE:TGT) has a 25.00 P/E and Walmart Inc (NYSE:WMT) trades at 21.00 over earnings.
Share prices fell to a 52-week low of $32.72 at the start of the coronavirus crash. It was a bumpy ride to recovery through the rest of the year. By the time the November election finished, the stock returned to its $60.00 trading point and continued to climb through the holiday season.
The company has a rocky dividend history that steadily rose through the 2010s only to drop in 2018 before disappearing entirely in 2020. It finally came back in early 2021 with a $0.26 cash dividend. Investors who love dividends hope it’ll stay through what’s sure to be a turbulent 2020 economy.
Net sales of $10.1 billion in the quarter heading into the 2020 holiday season fell 3.2 percent from the same quarter in the prior year. And the company felt several supply-chain bottlenecks as the coronavirus shutdown global manufacturing.
The company focused on attracting younger customers through digital initiatives. It’s the only major in its category doing this – rivals Burlington Stores Inc (NYSE:BURL) and Ross Stores, Inc (NASDAQ:ROST) completely eschew online retail.
It’s cheaper to pay staff to set up a store than continuously list individual items online. It’s a logistical nightmare and the same reason you don’t see online pawn shops. The closest that exists are online P2P marketplaces, and that highlights the risk of investing in TJX.
TJX Stock Faces A Highly Competitive Online Market
TJX is only dipping its toes into ecommerce, and it may not realize how hard of a fight it’s in for. Walmart stands as one of few traditional retailers able to stand up to Amazon (AMZN), and together these titans have crushed many other retailers.
Best Buy (BBY) and Target (TGT), for example, sell through eBay to assist with their online traffic. And don’t forget how JCPenney got removed from Google, which is involved in an online marketing antitrust case.
Watching Home Goods migrate online is eye-popping. But the profitability of such endeavors can’t be understated.
By migrating online, TJX is competing with a growing volume of online marketplaces. From eBay (EBAY) and Facebook Marketplace to Craigslist, Zulily, Sara, and even Etsy (ETSY), there’s a lot of competition online.
And that has bears asking if TJX can beat its rivals.
TJX Operates In A Fierce Environment
What separates it is the ability to find a good deal. That makes it somewhat like Wish.com.
No matter which corner it turns, TJX finds another gang of rivals to compete against. Legacy brick and mortar and rising tech-enhanced startups are going to continue amping up the pressure on a shrinking consumer base.
Is TJX Stock A Buy? The Bottom Line
TJX Companies is a long-standing off-price retailer with a large footprint of brick-and-mortar stores. It’s also the first of its breed to dip a toe into e-commerce, where a whole other gang of tech-savvy retailers are bulking up through the pandemic.
This gambit may be exactly what it needs to continue its growth pattern. But it’s also trading a premium compared to retailers like Walmart and Target. Buyer beware.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.