The TJX Companies' Stock Rises 32% in a Year: To Hold or Fold?

Core Viewpoint - The TJX Companies, Inc. has experienced a significant stock price increase of 31.7% over the past year, prompting discussions on whether to take profits or anticipate further growth [1]. Company Performance - TJX has outperformed the Zacks Retail - Discount Stores industry, the broader Retail and Wholesale sector, and the S&P 500, which recorded gains of 16%, 13.2%, and 9.8% respectively [1]. - The company has also surpassed key competitors such as Burlington Stores, Costco, and Dollar General, with Burlington and Costco achieving gains of 26.3% and 31.6% respectively, while Dollar General saw a decline of 34.1% [4]. Stock Analysis - Closing at $128.94, TJX stock is currently 1.8% below its 52-week high of $131.30, indicating a slight pullback after a strong rally [5]. - The stock continues to trade above its 50 and 200-day moving averages, suggesting a bullish trend [5]. Growth Strategy - TJX's flexible off-price model allows for quick adjustments to trends, offering fresh, branded products at strong value, which keeps customers engaged and encourages repeat visits [8]. - The company has expanded its global presence, adding 131 stores in fiscal 2025, with plans to open approximately 130 net new stores in fiscal 2026, aiming for over 5,200 locations [10]. - The e-commerce strategy has been advanced, with growth in online sales through expanded assortments and an enhanced digital shopping experience [10]. Financial Outlook - For fiscal 2026, TJX projects consolidated sales between $58.1 billion and $58.6 billion, reflecting a 3% to 4% year-over-year increase, with earnings expected to rise from $4.26 to between $4.34 and $4.43 [12]. - Comparable store sales growth is anticipated to be between 2% and 3% for fiscal 2026, indicating continued customer demand [11]. Valuation - TJX is currently trading at a forward 12-month price-to-earnings (P/E) multiple of 28.39X, which is lower than the industry average of 32.41X, suggesting it is an attractive value opportunity [13]. Challenges - The company faces challenges such as rising operating costs due to inflation and wage increases, which may impact margins [16]. - Foreign exchange headwinds are expected to negatively affect profitability, with a projected impact of about 0.2 percentage points on the pretax profit margin and a 3% drag on earnings per share growth for fiscal 2026 [18]. - A slight decline in gross margin is forecasted for fiscal 2026, attributed to unfavorable foreign exchange and inventory hedge [19].