This Is Keeping TJX Bullish Amid The Broader Retail Meltdown – Investor's Business Daily

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TJX (TJX), the parent of T.J. Maxx, Marshalls and HomeGoods, disappointed investors with a first-quarter revenue and profit guidance miss early Tuesday, but shares started creeping back up during the call as management announced plans to bring Canadian home-decor chain HomeSense to American shoppers and expressed bullishness in the face of broader retail combustion.

“Home is a driver for TJX,” said CEO Ernie Herrman in response to an analyst query, adding that the company’s home businesses have been “a little stronger than apparel.” He also alluded to home goods being less susceptible to the impact of poor weather, which weighed on comparable sales during the quarter.

“We think nobody can replicate the fashion and the quality level we have at our home businesses,” he said on the call. “We think strategically this is not a short-term vision.”

Herrman was fairly mum about the details, but said that there would be an “extremely visible difference” between HomeSense and its American sister, HomeGoods, that would propel customers to shop at both stores.

The self-described “home fashions off-price” store can be found as stand-alone locations or as superstores, in which a HomeSense is teamed up with a Winners or Marshalls store, according to the HomeSense site. There are currently 106 stores across 10 Canadian provinces.

The concept is slated to debut in the U.S. toward the end of the summer, said Herrman.

While TJX’s Marshalls and T.J. Maxx locations in the U.S. logged flat comparable sales, HomeGoods comps grew 3% during the April-ended quarter, better than FactSet views for 2.4% growth.

Aware of the broader troubles of the retail sector, management brushed off the threat of e-commerce and Amazon (AMZN). People are still shopping for clothes at TJX-owned stores, was the message.

Herrman said Q2 is “off to a solid start,” with inventory in a good position, and later added that the company is “still gaining apparel market share in the U.S.”

Shares of TJX tumbled 4.1% to 73.76 on the stock market today after falling to a six-month low of 73.17 earlier. On May 10, TJX tried to break out of a consolidation resistance area. But shares have sold off since then in the wake of grim news from other retailers. Off-price rival Ross Stores (ROST), which reports earnings on Thursday, was down 1.4%.

In Q1, TJX’s profit rose 8% to 82 cents on 3% revenue growth to $7.78 billion, vs. consensus for 79 cents a share and $7.88 billion in sales. Same-store sales rose 1%, below some estimates.

Management sees Q2 EPS of 81-83 cents vs. 84 cents a year earlier. Analysts had expected 92 cents. TJX sees full-year profit of $3.71-$3.78, up 5%-7%, also below views. The company said currency effects and wage increases weighed on its guidance.

Off-pricers like TJX and Ross enjoyed a reputation for being untouchable by Amazon, thanks to the in-store treasure-hunt nature of bargain-rack shopping. But Tuesday’s weak sales and guidance raised concerns that status may be under threat as the rest of retail suffers a face-melting sell-off.

Macy’s (M), Kohl’s (KSS), J.C. Penney (JCP), Nordstrom (JWN) and Dillard’s (DDS) plunged last week amid grim results and a growing fear that department stores don’t know how to stop the bleeding. Macy’s and Dillard’s have hit their lowest levels in more than five years, while J.C. Penney is at record lows.

And Sears Holdings‘ (SHLD) CEO has resorted to blasting vendors in a blog post, in a bid to un-smear the long-ailing retailer’s name in the press. That’s sent Sears shares tumbling 12.3% on Monday.

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