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Can TJX Companies Continue Its Sales Growth Streak in Fiscal 4Q16?

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Consistent performance

TJX Companies (TJX) exceeded analysts’ sales estimates in each of the first three quarters of fiscal 2016. The off-price retailer has delivered consistent performance over the past several years. TJX Companies is scheduled to announce its fiscal 4Q16 results on February 24.

In 3Q16 ended October 31, 2015, the company delivered sales growth of 5.3% on a year-over-year basis. Off-price retailers Ross Stores (ROST) and Burlington Stores (BURL) reported sales growth of 7.1% and 6.2%, respectively, in the comparable third quarter. These off-price retailers delivered better performance than department stores like Macy’s (M), Kohl’s (KSS), and Dillard’s (DDS). In the third quarter ended October 31, 2015, Macy’s and Dillard’s reported a decline in sales of 5.2% and 1.8%, respectively. Kohl’s reported sales growth of 1.2% in the comparable third quarter.

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Growth drivers

TJX Companies’ sales in 3Q16 came in at $7.8 billion, ahead of the consensus Wall Street sales estimate of $7.7 billion. The company’s sales growth in 3Q16 was a result of higher store traffic. The company reported same-store sales growth of 5% in 3Q16, which marked the 27th consecutive quarter of same-store sales growth. This record reflects the strength of the company’s off-price business model. TJX Companies and other off-price retailers sell merchandise at 20% to 60% below the prices offered by department and specialty stores. These stores performed well during the recession and continue to attract consumers with their deals.

For more information on TJX Companies, read TJX Companies: A Tour of the Retail Powerhouse.

What does TJX expect?

Based on the guidance issued in November 2015, TJX Companies expects sales in 4Q16 ended January 30, 2016, to be in the range of $8.6 billion to $8.7 billion, assuming currency headwinds of 2%. The company expects same-store sales growth of 2% to 3% on both a consolidated basis and at its Marmaxx stores.

For full-year fiscal 2016, TJX Companies expects overall same-store sales growth of 4% to 5% and same-store sales growth of 3% at its Marmaxx stores. The iShares Russell 3000 ETF (IWV) has 0.2% exposure to TJX Companies.

Analysts’ estimates

Analysts expect TJX Companies’ sales in 4Q16 to increase by 5.1% to $8.7 billion. For fiscal 2016, analysts expect sales to come in at $30.7 billion, up 5.6% from fiscal 2015. The next part of this series discusses the factors that might impact TJX Companies’ 4Q16 margins.

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