One of the best, most consistent retailers I can think of has been TJX Cos. (TJX). To start with, TJX had a fantastic fiscal 2012 (ended January). Revenue increased 6% to $23.2 billion on a comparable-store sales rise of 4%. Adjusted earnings per share grew 14% year over year to $1.99 -- and that climb came on top of 23% growth in fiscal 2011.
Fiscal 2013 got off to a great start: First-quarter revenue rose 11% to $5.6 billion on an 8% increase in comp store sales. More broadly, retail sales within the value-retail segment have continued the strong momentum into the new fiscal year. For example, comps were up 7% in April and 8% in May.
Although I believe it's unlikely TJX can continue to keep these numbers as high that May figure, the company should easily exceed guidance throughout the year. A 5% figure for June and July should complete another strong quarter. The consensus estimate for the second quarter is $5.8 billion in revenue and $0.51 in earnings per share. That works out to a 7% year-over-year increase in revenue and a 13% jump in EPS.
For fiscal 2013, analysts are expecting sales will rise 8.8%, that EPS will jump 21% and that net income will rise 17%. That puts year-end estimates around $2.42 per share. If you are willing to pay 16x to 17x forward estimates for shares of a retailer, that pretty much gets you to the current stock price of $42 to $43. For the shares to move beyond $43, you really have to jack up your expectations (or the company has to continue to blow the doors off the estimates.)
According to the TJX investor's presentation, management believes there is room for 2,300 to 2,400 T.J. Maxx/Marshall's stores. That works out to about 483 stores left to build. While that's a lot of stores, I wonder how many of those will actually get built.
Do you believe the company will build every single one of those stores? The other TJX brands, such as HomeGoods and HomeSense, have quite a few more stores to build -- but, in reality, those stores just aren't as exciting as the T.J. Maxx and Marshall's brands. Same goes for the overseas stores. I don't think building stores in Poland will really be enough to drive the shares much higher. So, unless the company can continue to find ways to increase same-store sales over the consensus, I don't believe TJX is going much higher. In fact, think TJX is maxxed out.