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Will Wage, Freight Costs Hit TJX Companies (TJX) Q4 Earnings?

The TJX Companies, Inc.TJX is slated to release fourth-quarter fiscal 2019 results on Feb 27. The company has been delivering positive earnings and sales surprise for the past four quarters, courtesy of its splendid comparable store sales (comps) record. Markedly, this off-price retailer's bottom line has topped the Zacks Consensus Estimate by average of 8.1% over the trailing four quarters. Let's see how things are shaping ahead of this quarter.

The TJX Companies, Inc. Price and EPS Surprise

The TJX Companies, Inc. Price and EPS Surprise | The TJX Companies, Inc. Quote

What to Expect?

The Zacks Consensus Estimate has gone down by a notch in the past 30 days to 68 cents, which reflects a slight decline from the year-ago quarter's 69 cents. Nevertheless, the consensus mark for revenues is $11,026 million, depicting a rise of 0.6% from the year-ago quarter figure.

Sturdy Comps Trend & Inventory Position

TJX Companies has been reporting positive comps for a while now, fueled by increased customer traffic. TJX Companies' off-price model along with its strategic store locations, impressive brands and fashion products has been driving the company's performance, both in stores and online. Management has been particularly impressed with the performance of its largest division, Marmaxx for the past few quarters. Notably, the third quarter of fiscal 2019 marked the 17th straight period of higher customer traffic for both Marmaxx and the company as a whole. In fact, all segments reported higher comps, courtesy of consumers' favorable response to the company's brands and impressive merchandise assortments at reasonable prices. For the quarter under review, the consensus mark for overall consolidated comps is pegged at 3%, whereas that for Marmaxx stands at 9%.

Management remained optimistic about fiscal 2019, wherein the company's stores were expected to benefit from solid merchandise assortments and brands. Further, the company's store-opening strategy and impressive e-commerce endeavors are likely to be top-line drivers. That said, management had raised its fiscal 2019 comps guidance, when i t report ed third-quarter results. Consolidated comps are now expected to grow 5% in fiscal 2019, up from 3-4% growth projected earlier. For fourth-quarter fiscal 2019, the company expects consolidated comps growth of 2-3%.

The company's consolidated inventories remained favorable in the third quarter. Also, during the third-quarter outcome, we noted that the company is well positioned to take advantage of solid opportunities in the market for branded merchandise, given its impressive inventory and liquidity position. Additionally, management stated that it commenced the fourth quarter on a strong note, and is focused on boosting traffic during the holiday season through its gifting and marketing initiatives. These factors make us hopeful about TJX Companies' top line in the impending quarter, though foreign currency headwinds are expected to hit net sales growth by 1% in the same time period.

Escalated Costs a Concern

However, we note that increased wage costs have long been a worry for TJX Companies. In the third quarter of fiscal 2019, the company witnessed escalated freight and supply-chain costs, which along with other factors dented the gross margin. Wage increases and higher freight costs are expected to negatively impac t earnings per share growth by 5% in both the fourth quarter and fiscal 2019. Moreover, the gross margin is expected to contract year over year in both the periods. These hurdles make us somewhat cautious about TJX Companies' upcoming performance.

What the Zacks Model Unveils

Our proven model doesn't show a beat for TJX Companiesthis earnings season. For this to happen, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Though TJX Companies carries a Zacks Rank #3, its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post earnings beat:

Zumiez ZUMZ has an Earnings ESP of +0.45% and a Zacks Rank of 1. You can see the complete list of today's Zacks #1 Rank stocks here .

Kroger KR , a Zacks #2 Ranked stock, has an Earnings ESP of +3.42%.

Costco Wholesale Corporation COST , a Zacks #3 Ranked company, has an Earnings ESP of +3.38%.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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