Horseman Capital and TJX
Horseman increased its position in TJX Companies (TJX) during 4Q14. The stock accounts for 8.93% of the firm’s total portfolio, up from 6.22% of the fund’s 3Q14 portfolio.
TJX is a leading off-price apparel and home fashions retailer. The company operates 3,300 stores in the US and worldwide with over 2,900 stores in North America. At TJX, prices are generally 20% to 60% below department and specialty store regular prices on comparable merchandise. The company operates in four segments:
- TJX Canada
- TJX Europe
Comp growth beats management’s expectations in 3Q15
Net sales increased 6% year-over-year to $7.4 billion driven by comp sales. Comp sales increased 2% over last year’s 5% increase, which was at the high end of management’s guidance. The increase was mainly driven by an increase in units sold, while customer traffic was slightly up and ticket was essentially flat. Warm weather in the US and Europe affected comp sales.
Net income was $595 million or $0.85 per share on a diluted basis compared to $0.86 per share in 3Q14. Net income per share included a tax benefit of $0.11. Excluding this, diluted earnings per share (or EPS) increased 13% year-over-year (or YoY).
Value to shareholders
During the quarter, the company repurchased 7.5 million shares for $448 million. Year-to-date, the company repurchased 21.5 million shares for $1.2 billion. TJX expects to buy another $0.4 to $0.5 billion of stock in the fourth quarter.
On December 10, TJX declared a quarterly dividend of $.175 per share.
Focus on e-commerce
TJX launched its e-commerce business through tjmaxx.com one year ago. This business contributes over 1% of total sales. But the company is adding a number of categories to serve customers better. The company also began rolling out permanent signage board promoting tjmaxx.com in its stores.
Fourth quarter and full-year 2015 outlook
- For 4Q15, the company expects diluted EPS to be in the range of $0.86 to $0.90 with YoY increase of 6% to 11%.
- For the year 2015, the company expects diluted EPS to be in the range of $3.07 to $3.11 versus $2.94 in 2014.
- For 4Q15 and the year 2015, the company expects comp sales growth to be 1% to 2%.
Horseman’s key positions in 4Q14
Horseman Capital added a new position in Alibaba (BABA). The fund increased its stake in TJX Companies (TJX), Vipshop Holdings (VIPS), BNY Mellon (BK), Wells Fargo (WFC), and Goldman Sachs (GS). The fund sold its positions in Comerica (CMA), Barrick Gold (ABX), IAMGOLD (IAG), and Harmony Gold Mining (HMY). The fund reduced its stake in Newmont Mining (NEM).
In the next part of the series, we’ll discuss Horseman’s position change in Vipshop Holdings.