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Category: Stock Market and TJX Companies
Date: 25 May 2020 Stock Price: $53.41 We take a look at the 1st quarter 2021 earnings report of TJX companies, off-price apparel and home fashions retailer, with quarterly net sales dropping by -52.4% to $4.4 billion over the last 12 months due to the Covid-19 pandemic
The Company’s first quarter results were negatively impacted by the temporary closure of its stores for approximately half of the quarter due to the COVID-19 pandemic." |
About TJX Companies
The TJX Companies, Inc. is the leading off-price apparel and home fashions retailer in the U.S. and worldwide. We believe that our retail business model is one of the most flexible in the world and that we have one of the widest demographic reaches in retail, both of which have enabled us to achieve successful, profitable growth, through many types of economic and retail cycles across different geographies. In our history as a Company, our annual comparable store sales have declined only once, and we have delivered solid earnings growth and strong financial returns. We are one of the few large U.S. retailers of apparel and home fashions to have expanded successfully internationally. We operate stores in nine countries across three continents, and we continue to believe we have exciting growth opportunities both in the U.S. and internationally. Our strong operations have consistently generated large amounts of cash annually, which has allowed us to invest in the growth of the business, while simultaneously returning value to shareholders
Overview of TJX's 1st quarter 2021 earnings report
The data refers to the latest quarter unless specified otherwise
- Net sales: $4.408 billion (down from $9.277 billion for the same quarter of the previous year)
- Total revenues decreased by -52.4% over the last 12 months
- Cost of sales: $4.414 billion (down from $6.637 billion for the same quarter of the previous year)
- Cost of sales decreased by -33.5% over the last 12 months
- Net loss: -$887.5 million (down from $700.2 million for the same quarter of the previous year)
- Diluted earnings per share: -$0.74 (up from $0.57 for the same quarter of the previous year)
- PE ratio of TJX Companies: A PE ratio cannot be calculated on a loss making firm
- Dividend declared: $0.23
- Dividend yield of TJX Companies: 1.55%
- Diluted shares in issue: 1.197 billion (down -2.9% from 1.233 million for the same quarter of the previous year)
- Cash and cash equivalents: $4.287 billion
- Cash and equivalents per share: $3.58
- Cash and equivalents makes up 6.7% of TJX Companies' market capital
- Cash and equivalents makes up 16.9% of TJX Companies' total assets
- Accounts receivable: $581.2 million
- Accounts receivable makes up 2.3% of TJX Companies' total assets
- Merchandise inventories: $4.95 billion
- Merchandise inventories makes up 19.5% of TJX Companies' total assets
- Stockholders in TJX Companies: $4.739 billion
- Stockholders equity per share: $3.95
- TJX Companies is trading at 13.5 times its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at
- To put this in perspective the average price to book value of firms in the S&P 500 is at 3.7. Read more about the S&P 500 here.
TJX Companies' management commentary on their 3rd quarter 2019 earnings
FRAMINGHAM, Mass.--(BUSINESS WIRE)--May 21, 2020-- The TJX Companies, Inc. (NYSE: TJX), the leading off-price apparel and home fashions retailer in the U.S. and worldwide, today announced sales and operating results for the first quarter ended May 2, 2020. Net sales for the first quarter of Fiscal 2021 were $4.4 billion. Net loss for the first quarter was ($887) million and loss per share was ($.74).
The Company’s first quarter results were negatively impacted by the temporary closure of its stores for approximately half of the quarter due to the COVID-19 pandemic. As a result, the Company reported a substantial pre-tax loss versus an original expectation of significant pre-tax income. The vast majority of the variance was a result of lost merchandise margin, corresponding to the lost sales from temporary store closures. The Company also had an inventory write-down charge (detailed below) and continued to incur payroll expenses while stores were closed. These costs were mostly offset by significant expense reductions which benefited the Company later in the quarter, as well as government credits related to COVID-19.
The Company’s first quarter results were negatively impacted by the temporary closure of its stores for approximately half of the quarter due to the COVID-19 pandemic. As a result, the Company reported a substantial pre-tax loss versus an original expectation of significant pre-tax income. The vast majority of the variance was a result of lost merchandise margin, corresponding to the lost sales from temporary store closures. The Company also had an inventory write-down charge (detailed below) and continued to incur payroll expenses while stores were closed. These costs were mostly offset by significant expense reductions which benefited the Company later in the quarter, as well as government credits related to COVID-19.
CEO and President Comments
Ernie Herrman, Chief Executive Officer and President of The TJX Companies, Inc., stated, “In these unprecedented times, our hearts are with everyone around the world who has been affected by the COVID-19 pandemic, including our Associates and their families, our customers, and the communities we serve. Throughout our 43-year history, we have navigated through many challenging economic and retail environments, and I am convinced that we will manage through this as well. While the pandemic has resulted in our making difficult decisions, TJX has always been and remains a fundamentally strong company. We have a senior management team with decades of TJX and off-price retail experience, who are fully dedicated to managing through this crisis while ensuring the long-term stability and strength of TJX and returning the Company to its path of long-term, successful growth. I want to thank our global Associates who are doing excellent work in the midst of this, and we are all looking forward to the day when our business is fully open again and we can welcome our Associates and customers back worldwide.”
Herrman continued, “As to our sales results, we saw strong trends prior to the impact of COVID-19. For the month of February, we delivered a 5% consolidated comp increase driven by customer traffic. All four major divisions had a February comp increase of 5% or better. As various states and countries reopen for business, health and safety remain at the forefront of our decision making. We have been pleased to reopen as many stores as we have in May, as well as our e-commerce websites. Although it’s still early and the retail environment remains uncertain, we have been encouraged with the very strong sales we have seen with our initial reopenings. We believe this very strong start speaks to our compelling value proposition and the appeal of our treasure-hunt shopping experience, as well as pent-up demand. It has been great to see, especially for the teams working so hard on the reopening preparations and our Associates welcoming back our customers. We are currently seeing plentiful off-price buying opportunities, which, as we look to the remainder of the year, gives us confidence in having excellent brands and quality merchandise available to us. With our flexible business model and ability to adapt quickly to changing market conditions and customer preferences, we will be pursuing these buying opportunities. Above all, we are convinced that our mission to deliver great value to consumers every day will continue to be our enduring retail formula today and in the future.”
Business Update
Beginning May 2, 2020 the Company started to reopen stores in select states and countries in accordance with local government guidelines. To date, the Company has reopened more than 1,600 of its stores worldwide. Initial sales overall have been above last year’s sales across all states and countries for the over 1,100 stores that have been reopened for at least a week. However, it is still early in the quarter and sales could fluctuate. In the U.S., the Company has fully or partially reopened in 25 states. Internationally, TJX Canada began reopening stores in some provinces this week, and stores in Germany, Austria, Poland, the Netherlands, and Australia are fully open. Stores in the U.K. and Ireland remain closed. The Company also reopened its four e-commerce websites in the U.S. and U.K.The Company expects to continue reopening stores around the world in a phased approach as more states and countries reopen for retail. The Company believes that it could be mostly reopened by the end of June based on current government guidance.
Q1 FY21 Inventory Charge
For the first quarter of Fiscal 2021, the Company wrote down inventory by approximately $500 million as a result of the Company’s store closures due to the COVID-19 pandemic. This inventory was primarily transitional or out of season merchandise and merchandise that was already in markdown that was expected to be reduced further. While the Company recognized these markdowns with respect to the first quarter, the inventory is expected to be sold in the second quarter upon reopening of its stores.
Q1 FY21 Inventory
Total inventories as of May 2, 2020, were $4.9 billion, compared with $5.1 billion at the end of the first quarter last year. Consolidated inventories on a per-store basis as of May 2, 2020, including the distribution centers, but excluding inventory in transit, the Company’s e-commerce sites, and Sierra stores, were down 7% on a reported basis and down 6% on a constant currency basis.
Fiscal 2021 Outlook
The Company continues to expect its results to be significantly impacted by the ongoing COVID-19 pandemic. Due to the high level of uncertainty around store reopenings, the current retail environment, and future consumer demand, it remains difficult to forecast a financial outlook for the remainder of the year. Therefore, the Company is not providing a Fiscal 2021 financial outlook at this time.
Ernie Herrman, Chief Executive Officer and President of The TJX Companies, Inc., stated, “In these unprecedented times, our hearts are with everyone around the world who has been affected by the COVID-19 pandemic, including our Associates and their families, our customers, and the communities we serve. Throughout our 43-year history, we have navigated through many challenging economic and retail environments, and I am convinced that we will manage through this as well. While the pandemic has resulted in our making difficult decisions, TJX has always been and remains a fundamentally strong company. We have a senior management team with decades of TJX and off-price retail experience, who are fully dedicated to managing through this crisis while ensuring the long-term stability and strength of TJX and returning the Company to its path of long-term, successful growth. I want to thank our global Associates who are doing excellent work in the midst of this, and we are all looking forward to the day when our business is fully open again and we can welcome our Associates and customers back worldwide.”
Herrman continued, “As to our sales results, we saw strong trends prior to the impact of COVID-19. For the month of February, we delivered a 5% consolidated comp increase driven by customer traffic. All four major divisions had a February comp increase of 5% or better. As various states and countries reopen for business, health and safety remain at the forefront of our decision making. We have been pleased to reopen as many stores as we have in May, as well as our e-commerce websites. Although it’s still early and the retail environment remains uncertain, we have been encouraged with the very strong sales we have seen with our initial reopenings. We believe this very strong start speaks to our compelling value proposition and the appeal of our treasure-hunt shopping experience, as well as pent-up demand. It has been great to see, especially for the teams working so hard on the reopening preparations and our Associates welcoming back our customers. We are currently seeing plentiful off-price buying opportunities, which, as we look to the remainder of the year, gives us confidence in having excellent brands and quality merchandise available to us. With our flexible business model and ability to adapt quickly to changing market conditions and customer preferences, we will be pursuing these buying opportunities. Above all, we are convinced that our mission to deliver great value to consumers every day will continue to be our enduring retail formula today and in the future.”
Business Update
Beginning May 2, 2020 the Company started to reopen stores in select states and countries in accordance with local government guidelines. To date, the Company has reopened more than 1,600 of its stores worldwide. Initial sales overall have been above last year’s sales across all states and countries for the over 1,100 stores that have been reopened for at least a week. However, it is still early in the quarter and sales could fluctuate. In the U.S., the Company has fully or partially reopened in 25 states. Internationally, TJX Canada began reopening stores in some provinces this week, and stores in Germany, Austria, Poland, the Netherlands, and Australia are fully open. Stores in the U.K. and Ireland remain closed. The Company also reopened its four e-commerce websites in the U.S. and U.K.The Company expects to continue reopening stores around the world in a phased approach as more states and countries reopen for retail. The Company believes that it could be mostly reopened by the end of June based on current government guidance.
Q1 FY21 Inventory Charge
For the first quarter of Fiscal 2021, the Company wrote down inventory by approximately $500 million as a result of the Company’s store closures due to the COVID-19 pandemic. This inventory was primarily transitional or out of season merchandise and merchandise that was already in markdown that was expected to be reduced further. While the Company recognized these markdowns with respect to the first quarter, the inventory is expected to be sold in the second quarter upon reopening of its stores.
Q1 FY21 Inventory
Total inventories as of May 2, 2020, were $4.9 billion, compared with $5.1 billion at the end of the first quarter last year. Consolidated inventories on a per-store basis as of May 2, 2020, including the distribution centers, but excluding inventory in transit, the Company’s e-commerce sites, and Sierra stores, were down 7% on a reported basis and down 6% on a constant currency basis.
Fiscal 2021 Outlook
The Company continues to expect its results to be significantly impacted by the ongoing COVID-19 pandemic. Due to the high level of uncertainty around store reopenings, the current retail environment, and future consumer demand, it remains difficult to forecast a financial outlook for the remainder of the year. Therefore, the Company is not providing a Fiscal 2021 financial outlook at this time.
TJX Companies (NYSE: TJX) stock price history
The image below, obtained from Google shows the stock price history of TJX companies (NYSE: TJX) for the last 5 years and it's been a very good time for TJX stockholders over the last 5 years. 5 years ago the stock was trading at around $32 and its currently trading at $53.41. That's a very strong return of 66.9% provided to TJX stockholders over the last 5 years.
The stock of TJX is trading at closer to its 52 week high of $64.95 than it is to its 52 week low of $32.72 which to us is a clear indication that the short term sentiment and momentum of TJX stock is positive at this point in time.
The stock of TJX is trading at closer to its 52 week high of $64.95 than it is to its 52 week low of $32.72 which to us is a clear indication that the short term sentiment and momentum of TJX stock is positive at this point in time.
Recent Google search trends for TJX stock price
The graphic below shows the Google search trends for TJX stock price over the last 12 months in the United States. As it shows there has been relatively consistent interest in TJX stock price over the last 12 months but a clear surge in searches in the middle of March 2020, which coincides with a sharp decline in their stock price due to global market sell offs due to the coronavirus.
TJX companies (NYSE: TJX) stock vs Stitch Fix (NASDAQ:SFIX) stock
The image below shows the stock price performance of TJX companies (NYSE: TJX) and Stitch Fix (NASDAQ: SFIX) over the last 2 years. While the stock of TJX is far more stable than that of Stitch Fix over the course of the last 2 years. However since early 2020 the trends of these two stocks are very similar. Over the two year period the stock of TJX companies increased by 14.93% while the stock of Stitch Fix increased by 28.1%
Recent coverage of TJX Companies
The extract below covers the latest regarding TJX Companies as obtained from Fool.com on 21 May 2020
What happened
Shares of off-price retailer The TJX Companies (NYSE:TJX) were trading higher on Thursday. The company reported a wider loss than expected, but said that it's already reopening its stores, and that it expects to bounce back well, later in 2020. As of 2 p.m. EDT today, TJX's shares were up about 6.6% from Wednesday's closing price.
So what
TJX's results from the quarter that ended on May 2 weren't good. The company lost $887 million in the quarter, or $0.74 per share, as revenue declined 52% from the year-ago period to $4.4 billion. It's not a surprise that TJX swung to a loss in the period, given that it closed both its physical stores and its online storefront in mid-March amid the COVID-19 pandemic. But its results were worse than Wall Street had expected: Analysts had forecast a loss of $0.15 per share on revenue of $5.17 billion.
Read the full article here
What happened
Shares of off-price retailer The TJX Companies (NYSE:TJX) were trading higher on Thursday. The company reported a wider loss than expected, but said that it's already reopening its stores, and that it expects to bounce back well, later in 2020. As of 2 p.m. EDT today, TJX's shares were up about 6.6% from Wednesday's closing price.
So what
TJX's results from the quarter that ended on May 2 weren't good. The company lost $887 million in the quarter, or $0.74 per share, as revenue declined 52% from the year-ago period to $4.4 billion. It's not a surprise that TJX swung to a loss in the period, given that it closed both its physical stores and its online storefront in mid-March amid the COVID-19 pandemic. But its results were worse than Wall Street had expected: Analysts had forecast a loss of $0.15 per share on revenue of $5.17 billion.
Read the full article here
TJX Companies (NYSE: TJX) latest stock valuation
So what is TJX Companies stock worth based on their 1st quarter 2020 earnings report and the fact that the group is currently loss making? Based on their earnings report and the fact that they are currently loss making and no fiscal guidance was provided for 2021 our valuation model provides a target price (full value price) for TJX Companies at $41.70 a stock (down from our last valuation of TJX Companies). We therefore believe the stock of TJX Companies is overvalued
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $41.70, thus a good entry point into TJX Companies would be at $37.50 or below.
We expect the stock of TJX Companies to pull back strongly from current levels in coming weeks and months to levels closer to our target price (full value price). Since the stock of TJX Companies is trading at well above our suggested entry point and target (full value) price we rate the stock of TJX Companies as a sell
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $41.70, thus a good entry point into TJX Companies would be at $37.50 or below.
We expect the stock of TJX Companies to pull back strongly from current levels in coming weeks and months to levels closer to our target price (full value price). Since the stock of TJX Companies is trading at well above our suggested entry point and target (full value) price we rate the stock of TJX Companies as a sell
Next earnings release for TJX Companies
It is expected that TJX Companies will release their 2nd quarter and full fiscal 2021 earnings report in late August 2020