Home Depot, TJX: Retail Isn't All Doomed
16 5월 2017 - 5:10AM
Dow Jones News
By Steven Russolillo
It isn't all bad news for the retail industry.
As department stores struggle and retail job losses accelerate,
Home Depot Inc. and TJX Cos. are among the few traditional
brick-and-mortar chains bucking the ugly trend. With business
models largely shielded from Amazon.com Inc.'s rise to dominance,
both should keep shining in their respective quarterly results, out
Tuesday.
Home Depot has been a big winner from rising home values and
booming construction. A gauge of home builder sentiment released
Monday surged to its highest level since 2005. Even young people
are finally getting onto the housing ladder after a decade on the
sidelines.
All this activity has prompted many to splurge on
home-improvement projects such as remodeling kitchens and
installing decks. Home Depot is a direct beneficiary of that, with
trends showing little sign of losing momentum. Analysts polled by
FactSet forecast Home Depot earned $1.61 a share in its fiscal
first quarter, up 12% from a year ago. Revenue for the period that
ended in April is expected to have increased 4.3% to $23.8
billion.
Home Depot has also used its 2,278 stores and the proliferation
of online shopping to its advantage. While many retailers are
closing locations, Home Depot has kept its store count fairly
steady. It recently noted that nearly half of its online orders
were fulfilled through in-store pickup. "Our stores have never been
more relevant," Craig Menear, Home Depot's chief executive, said in
February.
TJX., the parent of T.J. Maxx, Marshalls and HomeGoods, also has
benefited from its physical operations. It buys much of its
high-end merchandise through closeouts and sells it at discounted
prices in a format that is hard to replicate online. TJX's sales
per square foot has risen for six straight years, according to
FactSet. And while rivals are shuttering stores, TJX plans to
expand its store count to 5,600 in the coming years, up from 3,812
as of January.
In the near term, TJX's numbers also should be decent. Analysts
expect fiscal first-quarter earnings of 79 cents a share, up three
cents from a year ago. Revenue for the period that ended in April
is expected to have increased by 4.4% to $7.9 billion.
It is natural for prospective investors to wonder if they are
late to the party. Over the past two years, Home Depot and TJX have
outperformed the S&P Retail Select Industry Index by more than
50 and 30 percentage points, respectively, while also beating the
broad market.
Their valuations aren't pedestrian, but they haven't been for
quite a while. At 21 times projected earnings over the next 12
months, Home Depot's forward multiple remains below its recent
highs a few years ago. And TJX's multiple of 19 times forward
earnings is lower than its average over the past two years.
In troubled times, these two stocks continue to be retail's
saving grace.
Write to Steven Russolillo at steven.russolillo@wsj.com
(END) Dow Jones Newswires
May 15, 2017 15:55 ET (19:55 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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