Will TJX (TJX, $53.22) and Ross Stores (ROST, $97.14) be able to beat headwinds facing retail industry?
2018 was a strong year for major U.S retailers including off-price giants like TJX Companies and Ross Stores whose comparable-store sales grew 6% and 4% respectively during the year.
However, with the retail industry experiencing some strong headwinds over the last months owing to a volatile market and many retailers have already experienced sales slowdowns.
TJX and Ross Stores are scheduled to report their first-quarter results next week and the investors are worrying whether they too succumbed to the headwinds. However, there are good reasons to hope that it may not be the case and the companies have managed to carve out a decent quarter in terms of sales.
One of the primary reasons for the optimism about TJX and Ross’s quarterly results is their consistency. 2018 was the fourth consecutive year when Ross posted a 4% comp sales increase. TJX too averaged 4% comp-sales growth over the period gaining 6% in 2018, 2% in 2017, and 5% in 2016.
Another reason is that both the companies have a conservative approach towards forecasts and in most cases, they exceed those forecasts. So the investors can hope that they will meet their targets even when the market is volatile.
In keeping with this approach, Ross anticipates comp sales rise up to 2% in Q1, earnings per share would come in between $1.05 and $1.11 compared to $1.11 in 2018, and total sales to rise almost 6% to $3.79 billion with EPS of $1.12.
On the other hand, TJX expects a 2% to 3% comp sales gain but EPS may get hurt by 7% owing to higher freight costs, wage increases, and currency headwinds. Total sales are expected to rise 6% to $9.21 billion with an EPS of $0.55.
Furthermore, following the recent tariff raise on $200 billion Chinese imports which may further increase, the retail industry is in for some serious long term threats. But the exact nature of impact is still not clear and while TJX and Ross’s track records may inspire assurance, there’s still no guarantee in investing.
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Notable companies
The most notable companies in this group are TJX Companies (NYSE:TJX), lululemon athletica (NASDAQ:LULU), Gap (The) (NYSE:GPS), Abercrombie & Fitch Co (NYSE:ANF), Foot Locker (NYSE:FL), Guess (NYSE:GES), Stitch Fix (NASDAQ:SFIX).
Industry description
Companies in the apparel and/or footwear retail industry sell clothing, accessories and footwear, for different age groups and genders. The industry’s product categories could range from basics, such as underwear, to luxury items. Some retailers source items from wholesalers or an apparel brand to sell in their stores; some others are licensed to make and market their own retail goods under particular brands. Several companies outsource production of clothing to developing/emerging economies where labor costs are relatively inexpensive. Apparel retail is often influenced by fashion trends, and many companies feel the need to adapt to what’s “in vogue” to retain customers and attract new ones. A major disruption in this industry has been the burgeoning trend in digital shopping – to compete with rapidly growing e-commerce, even traditional retail players are upping the ante on their online platforms. Much of the products’ performance in apparel/footwear retail is cyclical, i.e., economic boom times encourage consumer spending, while recessions induce thriftiness among people. Some large-cap U.S. apparel/footwear retail companies include TJX Companies Inc., Ross Stores, Inc., Lululemon Athletica Inc. and Burlington Stores, Inc.
Market Cap
The average market capitalization across the Apparel/Footwear Retail Industry is 12.67B. The market cap for tickers in the group ranges from 256K to 119.4B. IDEXY holds the highest valuation in this group at 119.4B. The lowest valued company is DESTQ at 256K.
High and low price notable news
The average weekly price growth across all stocks in the Apparel/Footwear Retail Industry was 1%. For the same Industry, the average monthly price growth was 2%, and the average quarterly price growth was 5%. BZTAF experienced the highest price growth at 35%, while DBGI experienced the biggest fall at -19%.
Volume
The average weekly volume growth across all stocks in the Apparel/Footwear Retail Industry was -7%. For the same stocks of the Industry, the average monthly volume growth was 14% and the average quarterly volume growth was 53%
Fundamental Analysis Ratings
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
Valuation Rating: 53
P/E Growth Rating: 46
Price Growth Rating: 55
SMR Rating: 65
Profit Risk Rating: 73
Seasonality Score: 9 (-100 ... +100)