Analysis of TJX 2020

Company: TJX 

ISIN US8725401090 | WKN 854854 

Business: An American off-price apparel and home fashions retailer. They use several store names based on take overs and store concept and in the U.S. they have T.J. Maxx, Marshalls, HomeGoods, Sierra Trading Post and in Canada they have Winners, HomeSense, Marshalls and in Europe they got T.K. Maxx and HomeSense. 

Active: in the US, Canada, the Netherlands, Germany, the UK, Poland, Ireland, Austria and Australia.

P/E: 18.2

Here you can find the previous Analysis of TJX 2018. Since the previous analysis they have made a 1:2 share split.

The P/E of TJX is on the high side for me with 18.2 and the P/B is extremely high with 10 which gives a clear no go from Graham. The earnings to sales are ok with 8% and the ROE is excellent with 55% but due to debt leverage. The book to debt ratio is low with 0.3. Debt has significantly increased due to new lease standard which influences the balance sheet.

In the last five years they have shown an impressive yearly revenue growth rate of 6.2% which then also gives us a motivated P/E of 16 to 21 which means that TJX is today fairly valued by the market.

They pay a silly dividend in the size of 1.9% which corresponds to 34% of their earnings so it should be easy to maintain as well as increase in the future.

Future: Will people continue to want to buy fashion brands cheap even if it is a season later? I tend to think so. What did they fashion brands previously do with their out of season garments? Bin them? Now TJX is happy to take it and sell it cheap so sustainability is also good in my opinion.

Conclusion: Graham says no and I say yes. I like TJX. My latest garment shopping rounds have been to TK Maxx stores. I consider this to be a good moment to buy them at a fair price based on my overweight in retail if I would have had any money to invest with today then I would have bought Tessenderlo instead just to put it into perspective.