TJX Companies (TJX) Immune to Virus

Despite the coronavirus's best efforts to take down the stock market with no prisoners in recent days, TJX Companies NYSE: TJX had just the remedy shareholders were looking for.  The off-price department store released red hot Q4 earnings on Wednesday that crushed analyst expectations and sent the stock to all-time highs. Both the top line and bottom-line numbers came in above the consensus with revenue, in particular, shining with 10% growth year on year. Comparable sales also dazzled and with 6% growth they came in about double what analysts were expecting. The cherry on top came from management who increased the dividend by 13%.

CEO Ernie Herrman commented with the release, “We are extremely pleased with our strong fourth-quarter results, as both sales and earnings per share significantly exceeded our expectations. Fourth-quarter consolidated comparable store sales increased a very strong 6%, over a 6% increase last year. We saw strength across the Company, with each major division delivering comp sales growth of 4% or higher, all over strong increases last year and all primarily driven by customer traffic. Our exciting brands and gift-giving assortments at great values, supported by our marketing, attracted customers around the globe during the holiday season and beyond. Fourth-quarter earnings per share of $.81 were also well above our guidance.”

Resilient Shares

Despite shares falling more than 7% in recent days as the virus took hold of markets and stocks, they traded higher by as much as 9% after the release as they printed fresh highs. That means that since the end of 2018 when the current rally began, shares have notched a run of over 50% and all internal signs point to this kind of performance continuing.

As we have remarked upon before, the more traditional department store names are struggling to remain competitive as we enter the second decade of the 21st century. The likes of Kohl’s NYSE: KSS have seen their shares fall 50% from 2018 levels. Macy’s NYSE: M are faring even worse and their stock is down over 80% from where it was trading in 2015. Even own-brand names like Ralph Lauren NYSE: RL can’t keep their head above water and their shares are down 50% from 2013, the irony being the off-price stores like TJX are cleaning up by selling heavily discounted Ralph Lauren merchandise.

The lack of exposure to China that TJX has makes them an attractive name to hold while we ride out the coronavirus selloff. With the S&P 500 down over 10% in the past week, there’s clearly a risk-off sentiment at play and a flight to safety underway. Aside from some outliers like Regeneron Pharmaceuticals NYSE: REGN and other biotech names, few stocks can say that they’re trading higher on Thursday than they were on Monday or Tuesday of this week.

Getting Involved

Investors looking to get involved must be conscious of just how much damage the coronavirus epidemic is doing to the market. Companies are struggling to accurately forecast just how much their guidance and numbers will be hurt, economists can’t agree on how affected the world’s economy will be and scientists still haven’t found a cure.

If or hopefully when the virus does start to retreat, there will be a rush back to equities and risk-on will be the name of the game again. TJX has repeatedly announced itself as a quality name for investors to hold with a proven sales model that’s running at close to optimum efficiency. Don’t wait too long to get involved.