TJX Earnings: Top-Line Growth Driven by Strong Gains in Transaction Volume; Shares Overvalued

Wide-moat TJX Companies capped off a strong fiscal 2024 as the firm’s unique value proposition that consists of selling excess branded merchandise at steep discounts to full price again attracted consumers to its portfolio of banners. The off-price retailer delivered 5% comparable sales growth during the fourth quarter (driven entirely by gains in transaction volume) and posted adjusted earnings per share of $1.12, landing closely in line with our expectations. We were also unsurprised by the firm’s prosaic fiscal 2025 guidance that consisted of 2%-3% comparable sales growth (we acknowledge further upside is plausible) and a steady pretax profit margin of 10.9%-11.0%. We reiterate our view that TJX’s more than 21,000 global vendor relationships and vast supply chain scale give it a procurement advantage over traditional retailers, allowing it to stock its stores with a dynamic assortment of cheap merchandise. We think the firm is well positioned to continue attracting value-conscious consumers to its banners even as a choppy demand environment has affected many apparel retailers. We plan to modestly raise our $71 fair value estimate, though we currently view shares, trading at a roughly 40% premium, as overvalued.