TJX Proves the Consumer Is Alive and Spending

 | May 14, 2013 | 9:00 AM EDT  | Comments
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On Monday, the Commerce Department said retail sales grew 0.1% for the month of April after a 0.5% drop in March. Core sales, which correspond better to consumer spending, climbed 0.5%. February and March sales were upwardly revised, as well. The report was good news for retailers, since most investors had assumed consumer spending would decline amid tax hikes and lackluster job growth. One company that has proven the consumer is still alive and spending is TJX (TJX).

Just last week, TJX said April same-store sales jumped 8% vs. the 6.8% consensus estimate. The company also hiked guidance, as the first quarter has come in better than expected and much stronger than last year. Management also said May sales were off to a solid start. The stock responded, and is now just $0.57 off its 52-week high.

For all of fiscal 2013 (ends January 2014), the consensus Street estimate is for a 6.3% sales increase to $6.163 billion, and earnings of $0.62 per share. For fiscal 2014, Wall Street expects $27.29 billion in revenue and $2.82 earnings.

TJX has really dialed into the consumer. Looking back at the past eight years, the company never noticed the economy had slowed. It didn't even acknowledge the last three recessions. In fact, during those eight years, the stock has gained more than 320%. TJX's profit margin is up 520 basis points to 11.9%, and management believes it can lift that figure again this year.

When TJX reports the first quarter, scheduled for May 21, I think management will have to boost guidance. The year-end revenue estimate seems too low. Also, the Street is targeting revenue growth of just 5.4% for the year. I think analysts will have to scramble to increase their estimates toward $29 billion in sales and to above $3 a share.

Moreover, it seems to me TJX has guided same-store sales in the 2% range, which is far too low. TJX will probably produce a high-single-digit comp for the first quarter, and it sounds like the second quarter is another strong one in the works.

Add it all up, and I'd say TJX shares are going higher. Specifically, I think the stock can get to the mid-$60s over the course of the next few months. When the analyst community reviews its fiscal 2015 models in June, it will collectively have to increase those numbers as well. In order to get the maximum value for your dollar, shop in the stores -- but to get the maximum appreciation, buy the stock.

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