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TJX – Market expectations are for Uniform ROA improvement, but management has concerns about the U.K. market, profitability, and HomeGoods

October 19, 2018

  • The TJX Companies, Inc. (TJX:USA)currently trades above historical averages relative to UAFRS-based (Uniform) Earnings, with a 24.4x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management is concerned about volatility in the U.K., their ability to maintain profitability, and headwinds facing HomeGoods
  • Specifically, management is confident that the retail market in the U.K. is volatile, and that they have difficulties when they have a change in management, particularly in apparel. Additionally, they may lack confidence in their ability to maintain strong EPS and profit margins, and to keep SG&A costs at current levels. Moreover, they may be concerned about headwinds facing their HomeGoods division in H2 2019, and about the sustainability of slight traffic increases in Marmaxx. Furthermore, they may lack confidence in their ability to maintain strong performance in their apparel segment in Canada and Europe, and sustain consistency among different geographies in the U.K. Finally, they may be concerned about their share buybacks, and about their current merchandise mix

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