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TJ Maxx Parent Company Misses Expectations, But Analysts are Confident in Long-Term Growth

Despite a predicted boon for off-price this year, TJX Companies missed expectations in its Q4 results on Wednesday.

The parent company to Marshalls, T.J. Maxx and Home Goods reported a net income of $940 million in Q4, with diluted earnings per share of $0.78. This missed the expectations of analysts surveyed by Yahoo news, who predicted earnings per share of $0.91. Revenue, at $13.9 billion, also missed expectations of sales at $14.22 billion.

Shares of TJX Companies were down over 1% by noon on Wednesday.

Q4 sales were impacted by surges in COVID-19 due to the Omicron variant, explained CEO and president Ernie Herrman. Heightened freight and wage cost pressures also impacted the company’s perfomance in Q4, though executives expect this to level out throughout 2022.

U.S. open-only comp store sales grew 13% over a 6% increase in Q4 of 2020.

“As COVID cases began to surge worldwide, we saw sales trends soften with the largest impact in January,” said CFO Scott Goldenberg in a call with investors. “The impact was greatest in our apparel businesses, which is consistent with what we have seen during previous COVID spikes.”

International government-mandated shopping restrictions also impacted sales, Goldenberg said.

Other off-price retailers like Burlington and Ross stores have also been dealt headwinds from supply chain slowdowns, which has caused inventory shortages in these channels that heavily rely on surpluses from other retailers.

Despite the issues, analysts remain confident in TJX Companies’ ability to emerge from supply chain challenges.

In a note to clients, Jane Hali & Associates (JHA), LLC said it believes TJX will be able to mitigate supply chain issues moving forward.

TJX retailers are also well positioned in the home category, which continues to drive momentum,” JHA analysts wrote in a note. “We believe the TJX stores are consumer centric and have a localized assortment in each region.”

Equity analyst at CFRA Research Zachary Warring also spoke strongly of TJX’s long-term potential, giving the retailer a “Strong Buy” rating.

“Although this was a disappointing quarter in our view, nothing has changed in our 12-month thesis, as we see TJX outperforming as the consumer weakens and becomes more aware of higher costs across all aspects of retail,” Warring wrote. “We see more and more consumers returning to off-price retailers over the next 12-months as stimulus fades, and we expect TJX to be the biggest beneficiary.”

Until 2022, discount and off-price stores had seen strong results throughout 2021. Port congestion, factory shutdowns and labor shortages prevented many retailers from receiving inventory in time for various shopping events. As a result, many of these companies cancelled their orders, leaving containers up for grabs for off-price chains that rely on overstocks and cancellations to make up the bulk of their inventory.

In order to succeed moving forward, it is crucial for TJX to maintain its relationships with its merchandise sources to be able to offer compelling product to consumers.

“The benchmark for the upcoming fiscal year is much tougher, so gains will be shallower,” wrote managing director of GlobalData Neil Saunders in a note. “However, off-price and TJX will remain winners and will continue to gain market share.”

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