Investors looking for stocks in the Retail - Discount Stores sector might want to consider either Dollar General (DG) or TJX (TJX) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revi ...

Group 1: Core Business Strategy - The TJX Companies, Inc. is focusing on global expansion as a key driver for long-term growth, with particular emphasis on international markets such as Europe, Canada, and Australia, and plans to enter Spain in 2026 under the TK Maxx brand [1][8] - Comparable sales in TJX International increased by 5% during the quarter, with Australia noted for outstanding performance and TJX Canada also achieving a solid 5% growth [2][8] - The company has a robust global sourcing network across more than 100 countries and a flexible merchandising model, positioning it well to replicate its U.S. success internationally [3] Group 2: Competitive Landscape - Competitors like Burlington Stores, Inc. and Costco Wholesale Corporation are pursuing different expansion strategies, with Burlington planning to open 100 new stores in fiscal 2025 and Costco expanding its international footprint with nine new warehouse openings [4][5][6] Group 3: Financial Performance and Estimates - TJX shares have appreciated by 9.6% over the past three months, outperforming the industry growth of 8.9% [7] - The Zacks Consensus Estimate indicates a year-over-year sales growth of 4.4% and earnings per share growth of 4.7% for the current fiscal year [9] - The company is trading at a forward price-to-earnings ratio of 27.77X, which is below the industry average of 33.53X [10] Group 4: Sales and Earnings Estimates - Current quarter sales are estimated at $14.08 billion, with a year-over-year growth estimate of 4.55% [12] - The earnings per share for the current quarter is estimated at 1.00, reflecting a year-over-year growth estimate of 4.17% [13]

Core Insights - The TJX Companies, Inc. (TJX) is experiencing consistent momentum with a 3% increase in comparable store sales in Q1 FY26, driven by customer traffic across all business segments [1][8] - The off-price retail model continues to attract a diverse consumer base, particularly in an uncertain economic environment, with both apparel and home categories showing comparable sales growth [2][8] - The company's inventory strategy, with a 7% year-over-year increase in inventory per store, supports a steady flow of fresh merchandise [3] Sales and Growth Projections - TJX projects a 2% to 3% growth in comparable sales for both Q2 and the full fiscal year, contingent on sustained customer traffic [3][8] - The Zacks Consensus Estimate indicates year-over-year earnings growth of 4.7% for fiscal 2026 and 10.2% for fiscal 2027, with estimates remaining unchanged recently [11] Competitive Landscape - Key competitors in the retail discount sector include Costco Wholesale Corporation and Dollar General Corporation, both of which are enhancing their inventory and operational strategies to attract price-sensitive consumers [4][5][6] - Costco reported a 5.2% increase in global store traffic and a 5.7% rise in comparable sales in Q3 FY25, while Dollar General saw a 2.4% rise in same-store sales in Q1 FY25 despite a slight decline in customer traffic [5][6] Valuation and Stock Performance - TJX shares have increased by 6.5% over the past three months, outperforming the industry growth of 4.4% [7] - The company trades at a forward price-to-earnings ratio of 27.73X, which is below the industry average of 34.39X [10]

Core Insights - The TJX Companies, Inc. (TJX) experienced a 5% drop in shares following the release of its first-quarter fiscal 2026 results, underperforming compared to the Zacks Retail - Discount Stores industry, which declined 1%, and the broader S&P 500, which increased by 0.2% [1][7]. Financial Performance - TJX reported net sales of $13,111 million for the first quarter, reflecting a 5% year-over-year increase, with consolidated comparable store sales rising by 3% [5][10]. - Earnings per share (EPS) for the quarter were 92 cents, a slight decrease from 93 cents in the same quarter last year [5][7]. - The company reaffirmed its fiscal year 2026 outlook, projecting comparable store sales growth of 2% to 3% and EPS between $4.34 and $4.43, indicating a 2% to 4% increase from the previous year's EPS of $4.26 [10][24]. Segment Performance - Comparable store sales growth was reported as follows: 2% at Marmaxx (U.S.), 4% at HomeGoods (U.S.), and 5% at both TJX Canada and TJX International (Europe and Australia) [8][10]. Strategic Outlook - Management expressed confidence in the company's ability to attract value-conscious shoppers despite macroeconomic challenges, emphasizing the strength of its off-price retail model and broad product assortments [9][11]. - TJX added 36 new stores in the first quarter, bringing the total to 5,121 locations, and is focusing on enhancing its e-commerce capabilities [13]. Valuation and Market Position - TJX is currently trading at a forward P/E ratio of 27.75X, which is lower than the industry average of 34.17X, making it attractive for value-focused investors [14]. - The stock is trading above its 50-day and 200-day moving averages, indicating growing market confidence in its growth potential [16]. Challenges and Risks - The company faces rising operating costs due to inflation and wage increases, which may pressure margins [17]. - Tariff-related pressures and foreign exchange fluctuations are anticipated to impact profitability, with management projecting a gross margin decline of 40 basis points year-over-year [18][19]. - Recent downward revisions in earnings estimates reflect cautious sentiment among investors, with the consensus estimate for EPS declining to $1.00 for the current quarter and $4.46 for the fiscal year [20][24].

Financial Performance - Net sales increased by 5% to $13.1 billion for the first quarter of fiscal 2026, compared to $12.5 billion in the same period last year[86]. - Consolidated comparable sales (comp sales) rose by 3% for the first quarter of fiscal 2026, consistent with the previous year's growth[88]. - Diluted earnings per share for the first quarter of fiscal 2026 were $0.92, a slight decrease from $0.93 in the first quarter of fiscal 2025[106]. - The pre-tax profit margin decreased to 10.3% in the first quarter of fiscal 2026, down from 11.1% in the same quarter last year[86]. - Cost of sales, including buying and occupancy costs, increased to 70.5% of net sales, up from 70.0% in the first quarter of fiscal 2025[101]. - Selling, general and administrative (SG&A) expenses as a percentage of net sales rose to 19.4%, compared to 19.2% in the prior year[102]. Inventory and Capital Management - Average per store inventories increased by 7% at the end of the first quarter of fiscal 2026 compared to the same period last year[86]. - The company returned $1 billion to shareholders through share repurchases and dividends during the first quarter of fiscal 2026[86]. - Capital expenditures for the first three months of fiscal 2026 are anticipated to be approximately $2.1 billion to $2.2 billion, focusing on store improvements and new store investments[134]. Segment Performance - Segment profit for the Marmaxx segment increased to $1.107 billion, with a segment profit margin of 13.7% for the first quarter of fiscal 2026[111]. - Marmaxx net sales for Q1 fiscal 2026 were $8.1 billion, a 4% increase from $7.8 billion in Q1 fiscal 2025, driven by a 2% increase in comp sales and a 2% increase in non-comp sales[112][113]. - HomeGoods net sales for Q1 fiscal 2026 were $2.3 billion, an 8% increase from $2.1 billion in Q1 fiscal 2025, with comp sales also increasing by 4%[117]. - TJX Canada net sales for Q1 fiscal 2026 were $1.1 billion, a 3% increase from the previous year, with comp sales up by 5%[120]. - TJX International net sales for Q1 fiscal 2026 were $1.7 billion, an 8% increase from $1.5 billion in Q1 fiscal 2025, with comp sales increasing by 5%[124]. Profit Margins by Segment - Segment profit margin for Marmaxx decreased to 13.7% in Q1 fiscal 2026 from 14.2% in the same period last year, primarily due to expense deleverage[114]. - HomeGoods segment profit margin increased to 10.2% in Q1 fiscal 2026 from 9.5% in the same period last year, driven by lower supply chain costs[118]. - TJX Canada segment profit margin decreased to 10.7% in Q1 fiscal 2026 from 12.3% in the same period last year, impacted by lower merchandise margin[121]. - TJX International segment profit margin increased to 4.3% in Q1 fiscal 2026 from 4.0% in the same period last year, due to lower administrative costs[126]. Corporate Expenses and Risk Management - General corporate expenses increased to $215 million in Q1 fiscal 2026 from $153 million in Q1 fiscal 2025, primarily due to unfavorable mark-to-market adjustments[127][128]. - There have been no material changes in the company's primary risk exposures or management of market risks from those disclosed in the Annual Report on Form 10-K for the fiscal year ended February 1, 2025[141].

Core Viewpoint - TJX Companies' stock price declined following its Q1 earnings report and guidance update, but this is seen as a natural market movement within a generally bullish trend [1][2] Financial Performance - The company reported a revenue growth of 5%, surpassing consensus estimates, with a 3% systemwide comparable sales increase driven entirely by transactions [8] - Margins remained firm despite some pressure, resulting in GAAP earnings contracting by only a penny compared to the previous year, offset by a penny's worth of outperformance [10] Guidance and Market Sentiment - TJX Companies is guiding for 2% to 3% top-line growth, which is considered sufficient to maintain capital return outlook, although it was anticipated by the market [2] - Analysts' responses to the results and guidance have been positive, with more analysts raising their price targets, contributing to a bullish sentiment [5][6] Share Buybacks and Capital Allocation - Share buybacks are a central part of the investment thesis, with plans to reach $2.5 billion in buybacks by 2025, reducing share count by 1.2% year over year [4] - The company maintains a robust capital allocation strategy, including dividends and distribution growth, supported by strong cash flow generation [3][10] Institutional Support - Institutional ownership stands at approximately 90%, with buying activity reaching multi-year highs in Q1 and remaining strong in Q2, providing solid support for the stock [13]

Group 1 - TJX Companies reported fiscal 1Q'26 results that exceeded expectations across various metrics [1] - Despite strong financial performance, TJX's stock declined over 2% prior to the earnings call [1] Group 2 - Daniel Martins is the founder of DM Martins Research, focusing on creating efficient, replicable portfolios with balanced risk for growth [1] - The research firm has been featured in over 2,000 articles and cited by major media outlets including the New York Times and CNN [1] - Daniel Martins has a background in equity research and finance analysis, having worked with notable firms such as FBR Capital Markets and Bridgewater Associates [1]

Core Insights - The article emphasizes the investment philosophy focused on small cap companies, highlighting the importance of identifying mispriced securities through understanding financial drivers and utilizing DCF model valuation [1]. Group 1: Investment Philosophy - The investment approach is not confined to traditional categories such as value, dividend, or growth investing, but rather considers all prospects of a stock to assess risk-to-reward [1]. Group 2: Market Focus - The investment strategy encompasses markets in the US, Canada, and Europe, indicating a broad geographical focus for potential investment opportunities [1].

Group 1 - The U.S. stock market opened lower on May 21 due to weak demand in the 20-year Treasury bond auction, leading to a surge in bond yields and concerns over a new tax bill increasing the federal deficit [1][2] - The Dow Jones Industrial Average fell by 816.80 points, closing at 41,860.44, a decline of 1.91%. The S&P 500 dropped by 95.85 points to 5,844.61, down 1.61%, while the Nasdaq Composite decreased by 270.07 points to 18,872.64, a drop of 1.41% [1] - Among the S&P 500 sectors, ten out of eleven declined, with the real estate and healthcare sectors leading the losses at 2.63% and 2.37%, respectively, while the communication services sector rose by 0.67% [1] Group 2 - The 20-year Treasury bond auction had a final market yield of 5.047%, surpassing the previous average yield of 4.613% from the last six auctions, marking the first time since October 2023 that the yield exceeded 5% [2] - Concerns about the new tax and spending bill, which is expected to increase the federal deficit by approximately $3 trillion over the next decade, are influencing investor sentiment [2][3] - Major retailers reported disappointing earnings, contributing to stock market pressure, with Target lowering its full-year forecast, resulting in a 5.21% drop in its stock price [3]

Core Insights - TJX Companies reported fiscal Q1 2026 earnings with EPS of $0.92 and revenue of $13.1 billion, exceeding expectations [1] - Comparable store sales increased by 3%, aligning with the higher end of projections, while pretax margins reached 10.3% [1] - The company returned $1 billion to shareholders through share repurchases and dividends during the quarter [1] Company Performance - TJX has demonstrated consistent long-term stock performance, compounding at an annual rate of 16.7% over the last two decades [2] - The stock has significantly outperformed competitors in the discount retail sector [2] - Despite a slight decline in shares post-earnings, TJX maintains a Zacks Rank 2 (Buy) rating, indicating positive earnings estimate revisions [3] Financial Metrics - TJX's annual EPS has grown from $0.06 in 1996 to $4.26 today, showcasing steady earnings growth [5] - The company has reduced shares outstanding by 60% since 1998, reflecting a commitment to returning cash to shareholders [6] - TJX's median earnings multiple has increased from approximately 19x to 24.4x, with current trading at a premium valuation of 30.4x [6] Industry Comparison - TJX's earnings growth forecast is currently at 9.1% annually over the next three to five years, which is modest compared to competitors [7] - Costco has a similar growth forecast of 9.4% but trades at a higher valuation of 57.7x forward earnings [8] - Burlington Stores offers the highest projected earnings growth at 14.5% annually, trading at 29.2x forward earnings, presenting a compelling growth/value trade-off [9] Investment Considerations - For long-term investors, TJX remains a reliable retail name with a disciplined capital return strategy and effective business model [10] - Burlington Stores may be a more attractive option for those seeking stronger near-term earnings growth [11] - TJX is considered a textbook compounder, making it a worthy consideration for a diversified portfolio [11]