Following the acquisition of Australian retailer Trade Secrets earlier this week, TJX Cos. Inc. maintained a “market perform” rating and a $73 price target by Telsey Advisory Group.
The analysts said in a research note that overall, “we view TJX as a best-in-class company; however, peak margins combined with incremental investment spending has led to flattish [earnings-per-share] growth in the coming year. We expect normalized growth to return in ensuing years.”
Shares of TJX are trading down 0.6 percent in the morning session to $69.03. The stock’s 52-week high is $71.03, and the low is $52.76.
The gross margin rate for TJX for the annual period ended January 31, 2015 was 28.55 percent, which compares to 28.51 in the prior year. In fiscal year 2013, the gross margin rate was 28.43. Over the past three years — as margins maintained these similar levels — revenues swelled 8.5 percent.
While Telsey Advisory group analysts said the acquisition wasn’t a “needle-mover” given the company’s $29.1 billion in total sales, “and cash and short-term investments on its balance sheet of around $2.5 billion, we like the moves TJX continues to make to grow its geographic footprint.”
The overseas expansion of TJX comes at a time when other retailers are either closing stores, laying off employees or launching new concepts to address changing market conditions.
Carol Meyrowitz, chairman and chief executive officer of TJX, said the acquisition is “similar to how we entered Canada with our acquisition of Winners in 1990 and grew that business into a leading Canadian retailer.”
On the first-quarter conference call May 19, Meyrowitz told investors that same-store sales for TJX Canada rose 11 percent “and adjusted segment profit margin, excluding foreign currency, was up 160 basis points. I want to point out that profit margin would have been even better without the significant negative impact that the year-over-year decline in the Canadian dollar continued to have on this division’s merchandise margins.”
The ceo said TJX Europe’s comps “were up 3 percent over a very strong 8 percent increase last year. Adjusted segment profit margin excluding foreign currency was down 120 basis points.”