Tjx company analysis
TJX is the largest international apparel and home fashions off-price department store chain in the United States with 26 million in revenues in 2012. It was founded in 1956 as Zayre and is headquartered in Framingham, Massachusetts. Globally it is one of the top 50 retailers in the world, specializing in cheap apparel and footwear. With over 3,000 stores today, we see the potential to expand our store base by over 50%, up to almost 4,800 stores, with our current chains in our current markets alone. Their target customers are female, middle to upper-middle income, between the ages f 25-54 years that are fashion and value conscious.
Beyond our successful brick- and-mortar business, we see expanding our e-commerce presence over time as a great opportunity for TJX and another platform to reach more customers with our great values. According to Forbes it is also #95 on the S&P 500. TJX comprises T. J. Maxx, Marshalls, HomeGoods, Winners, and T.
K. Maxx. TJX’s stock price is currently selling at $63. 52 significantly hire than the prices we calculated using the Price Earnings Model, Dividend Discount Model, and Discount Cash Flow Model which verage out to about $33. 39.
What makes TJX different from most retailers is that they operate with leaner, faster turning inventories. This allows them to be more nimble in the marketplace and be smarter in our purchasing, which, in turn, gives us the ability to drive higher merchandise margins. These high returns are due to the company’s low-cost structure and solid revenue growth. As a result, TJX has generated significant free cash, which management has used to reinvest in new store growth and to provide value to shareholders through share repurchases (11% 10- ear CAGR) and dividends (21% 10-year CAGR on a per share basis).
TJX also has one of the strongest balance sheets in the industry positioning it to gain share and generate strong profitability in challenging economic environments, such as the current one. At TJX, being a low-cost operator allows great values to customers while maintaining strong profitability.
This is shown by their excellent financial results and their rapid growth even during the financial crisis. To this day, TJX still beats expectations though Value Line believes that growth will be lower for 2013 and 2014, round 10 to 13%.
TJX is one of many retailers in the industry; a retailer basically purchases goods or products in large quantities from manufacturers directly or through a wholesale, and then sells smaller quantities to the consumer for a profit. Other common known retailers include Wal-Mart and Kroger but unlike them, TJX concentrate more on clothing and footwear, making companies like The Gap a more appropriate comparison. Macroeconomic Environment TJX operates as an off price apparel and homes fashion retailer in the US and overseas.
Its four divisions are Marmaxx, Home Goods, TJX Canada, and TJX Europe. Being an off price apparel company their prices are usually 20% to 60% below department and specialty retail stores, providing customers with both quality and value. Their key competitive advantages include a very highly skilled Merchant organization of over 700 employees who purchase inventory at discounts from initial wholesale prices from over 14,000 vendors. They also have extensive relationship with many vendors and are able to bargain and buy at very low prices.
With housands ot stores TJX has huge buying power, and witn about $1858.
8 million cash on hand they are able to offer suppliers money right away which usually leads to them getting the best deal possible. TJX Merchants purchase is “close to need” and this allows them to buy into current market trends. This allows TJX to have greater flexibility in adjusting prices to meet market demand. TJX is able to turn inventory more quickly versus traditional retailers, which order goods far in advance of the time the merchandise is actually placed on store racks.
TJX has shown to be successful during all economic times, even recessions (seen in figure below).
During recessions they have been able to attract new customers who are looking to save while still being fashionable. In the last 35 years The company generated solid same store sales growth in each of the prior four recessions, with only one year of negative same store sales which occurred in 1996 TJX generated positive comparable store sales during the Great Recession with growth in both 2009 (+1 and 2010 (+6%) driven by higher customer traffic.