Examining the Redbook and the ICSC-Goldman Sachs Retail Indices

Part 6
Examining the Redbook and the ICSC-Goldman Sachs Retail Indices (Part 6 of 10)

Why the weekly distortions in the retail index did not impact TJX

Limited Brands and TJX

Last week’s results were mixed. However, year-on-year comparison showed a recovery in both the Redbook and ICSC-Goldman Sachs Indices. The U.S. apparel industry covered in the Redbook and ICSC-Goldman Sachs is being dominated by Limited Brands, Inc. (LB), with market capitalization of $16.2 billion and TJX Companies, Inc. (TJX), with a market capitalization of $41.4 billion. Essentially, the apparel company consists of manufacturers and retailers of fashionable clothing, footwear, and accessories. As we observe in the chart below, both TJX and LB share price appreciated on the date of the Redbook and ICSC-Goldman Sachs Indices announcement.

TJXEnlarge Graph

TJX is the leading off-price retailer of apparel and home fashions in the U.S. and worldwide. The company has recently reported its fiscal year ended February 1, 2014, report. The comparable sales for the 13-week fourth quarter 2014 has increased by 3%, marking a straight twentieth week of positive same-store sales in a row, which indicates consumers have been willing to spend on clothing. A significant portion of same-store sales growth came from Home Goods sections and TJX Europe, at 3% and 9% growth, respectively. Furthermore, the company launched tjmaxx.com, to accelerate the 24-hour e-shopping. Considering such a solid sales growth despite the unfavorable weather conditions, the company has also announced a 21% increase in quarterly dividend at $.175 per share, payable at June 5, 2014. This marks the 18th consecutive year that TJX has raised the dividend.

Another major stock that particularly did very well despite the higher unemployment rate and decline in the shopper-trak and a mere rise of 1.5% in the ICSC-Goldman Sachs Index was Limited Brands, Inc. (LTD). Limited Brands, Inc. is an apparel-based specialty retailer with additional focus on personal care and beauty categories. The company reported comparable store sales for the four weeks ended March 1, 2014, which increased by 2% compared to the four weeks ended March 2, 2013. The Victoria Secrets segment helped pulled up the company’s overall rate.

However, other major apparel retailers including the Abercrombie & Fitch (ANF) and The Buckle (BKE) posted a decline in the recent quarter same-store sales as direct sales metrics dried up with many consumers preferring the e-commerce platform for shopping, having become more price cautious. So, discounters such as Wal-Mart Stores, Inc. (WMT) may stand a chance here. Part 7 of the series discusses this in detail.

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