Off-Price Retailers Ross Stores and TJX Co Have Been Off
Ross Stores, Inc., together with its subsidiaries, operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd's DISCOUNTS brands in the United States. It primarily offers apparel, accessories, footwear, and home fashions.
The TJX Companies, Inc. operates as an off-price apparel and home fashions retailer. It operates through four segments: Marmaxx, HomeGoods, TJX Canada, and TJX International. The company sells family apparel, including footwear and accessories; home fashions, such as home basics, accent furniture, lamps, rugs, wall décor, decorative accessories, giftware, lighting, soft home, tabletop, and cookware, as well as expanded pet, kids, and gourmet food departments; jewelry; and other merchandise.
Both companies reported their earnings this week and both companies sold off. I thought the discount retailers were safe heavens, regardless of the economic conditions, but especially when times get tough. If big department stores like Target and Kohl’s are having issues, shouldn’t that benefit TJX and Ross due to department stores offloading plenty merchandise not selling / sold to the likes of TJX and Ross at a discount.
NOTE: as least I benefited from Ross when I picked up some jeans and shoes just in time before attending a destination wedding last month.
Ross reported earnings per share of $0.91 on revenue of $3.55B. Both numbers beat estimates and improved year over year. However, their operating profit margin continued to be impacted by higher freight costs and wage-related investments. The increase in freight cost had to deal with shortage of drivers and once upon a time…higher oil prices.
TJX Companies’ third-quarter sales grew by an impressive 12.1% to $9.83 billion, again outpacing the top-line growth of major department stores. Analysts forecasted sales of $9.49 billion. The company’s same-store sales grew 7.0% driven by strong consumer traffic across all its divisions. In particular, the company’s largest division, Marmaxx, which consists of T.J. Maxx and Marshalls stores, generated same-store sales growth of 9.0%. TJX Companies’ rival Ross Stores (ROST) reported a 6.6% rise in its net sales and same-store sales growth of 3.0% in the third quarter.
MKM Partners’ Roxanne Meyer reiterate a Buy rating and $98 price target on the stock, although she writes that comparable sales and earnings upside were “not enough to please.” She also notes that inventory rose, and that “with freight costs an ongoing pressure point and incremental paid-leave costs beginning in the second half, it will take outsized comp gains to drive meaningful upside to EPS and could continue to be an overhang for the stock near-term.”
CFRA’s Jim Corridore reiterated a Hold rating on the shares and cut his price target to $90 from $102, writing that the 1% to 2% expected same-store sales gain is a “negative,” and that with the company facing “a tough holiday environment and with operating margins under pressure, we see little catalyst for the shares to outperform the market over the next year.”
So with both companies having to defend their margins, lets go to the charts to see where price is heading next?
Ross - on the weekly chart, price broke the weekly up trendline. The chart suggests price continue to down to target 1 at $71.50, with a final target at $61.
TJX - on the weekly chart, price broke the weekly up trendline. The chart suggests price continue to down to target 1 at $41.50, with a final target at $38.50
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
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by rollandthomas
