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TJX Companies Keeps Spending on Brick-and-Mortar Expansion

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Investment in growth

TJX Companies (TJX) continues to see growth potential in traditional brick-and-mortar expansion. The company raised estimates for its long-term store potential to 5,475 stores, which was 325 more stores than its prior target issued in October 2013.

TJX Companies makes up 1.0% and 0.3% of the SPDR S&P Retail ETF (XRT) and the SPDR S&P 500 ETF (SPY), respectively.

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Fiscal 2015 capital expenditure

In fiscal 2015, TJX Companies spent ~$912 million or 3.1% of sales on offices and distribution centers. This included buying and merchandising systems, store renovations, and new stores.

TJX Companies’ capital expenditure has come down both in dollars as well as percentage of sales. In fiscal 2015, the company brought down its expenditure on store renovations and improvements as well as on its office and distribution centers. However, capital spending on new stores increased by 8.7% to $202 million in fiscal 2015.

How are peers spending their money?

High-end department store Nordstrom (JWN) invested $861 million in its most recent fiscal year ending January 31, 2015. It spent the money on various growth initiatives, including expansion of its off-price Rack stores and growth into the Canadian market.

Macy’s (M) spent $770 million mainly on new stores, store remodels, and technology enhancements. Ross Stores (ROST) invested ~$647 million on growth initiatives, including the opening of 95 new stores.

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Planned capital expenditure

TJX Companies’ planned expenditure of $975 million for fiscal 2016 will be primarily directed at investments in new stores, store remodeling, and supply chain and infrastructure enhancement. The company plans to remodel 225 existing stores.

Store expansion

TJX Companies plans to add 181 stores this year, including 110 stores in the United States. In the long term, the company sees prospects to add more than 1,400 stores in the United States alone.

The company sees potential to grow its US Marmaxx store base by 40.0% to ~3,000 over the long term in both rural and urban locations.

The company has also raised its long-term estimates for the HomeGoods store count to ~1,000, which is double the current store count.

TJX Companies will also invest in improvement of its online or e-commerce platform and the expansion of its geographical reach. We’ll cover these investments in the next two parts of this series.

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