Will The TJX Companies (TJX) Collapse?

The TJX Companies (TJX) is one of the few department store operators to prosper in the Age of Amazon.

Notably, TJX’s bargain-basement operations have thrived as historic department store brands such as Sears and JC Penny struggle for survival, or die. To explain, TJX operates discount department, clothing, and home furnishings stores under several names in the US, Canada, Australia, and Europe.

For example, TJX (TJX) operates Marshalls, T.J. Maxx, Home Goods, HomeSense, Winners, and Sierra in the United States and Canada. It also operates TK Maxx in Europe and Australia.

The Department Store giant you never heard of

Interestingly, The TJX Companies (NYSE: TJX) is now one of the world’s largest department store operators. Yet many people are unfamiliar with TJX, even if they shop at its stores.

I calculate TJX operated 4,630 stores in the 2022 fiscal year. Statista estimates TJX operated 1,284 TJX Maxx stores, 1,148 US Marshalls stores, 850 US HomeGoods stores, 618 T.K. Maxx stores in Europe, 293 Winners stores in Canada, 147 Homesense stores in Canada, 106 Marshalls stores in Canada, 77 Homesense stores in Europe, 68 T.K. Maxx stores in Australia, and 39 HomeSense stores in the United States.

Thus, TJX operates the largest department store footprint in the United States. In contrast, Macy’s Inc. (NYSE: M) operated 783 stores in the US in 2022.

TJX is now larger than Macy’s. It reported quarterly revenues of $12.166 billion and total assets of $28.428 billion on 31 October 2022. In contrast, Macy’s reported total assets of $18.23 billion and quarterly revenues of $5.436 billion on 31 October 2022.

Will TJX Collapse?

Many people will wonder if TJX (TJX) could collapse because of the recent demise of Sears.

I think these fears have some validity because some of TJX’s financial numbers have fallen. For example, TJX’s quarterly revenues shrank from $12.531 billion on 31 October 2021 to $12.166 billion on 31 October 2022.

Similarly, the quarterly gross profit fell from $3.696 billion on 31 October 2021 to $3.544 billion on 31 October 2022. Finally, the quarterly operating income fell from $1.4 billion on 31 October 2021 to $1.359 billion on 31 October 2022.

TJX is suffering negative revenue growth. For example, Stockrow estimates TJX’s revenues shrank by -1.94% in the quarter ending on 31 July 2022 and -2.92% in the quarter ending on 31 October. In contrast, the revenues grew by 81.13% in the quarter ending on 31 July 2021 and 23.87% in the quarter ending on 31 October 2021.

Hence, whatever boost TJX got from the end of the COVID-19 pandemic is over. Instead, I think inflation, supply chain crises, and a possible economic downturn are hurting TJX’s sales. Thus, TJX could face a sales collapse.

How Much Cash is The TJX Companies generating?

Interestingly, TJX (TJX) is generating a little more cash. For example, the quarterly operating cash slow rose from $1 billion on 31 October 2021 to $1.053 billion on 31 October 2022.

However, TJX reported a negative ending cash flow of -$166.53 million on 31 October 2022. Yet TJX can generate enormous amounts of cash. It reported a quarterly ending cash flow of $4.295 billion on 30 April 2022.

TJX has far less cash. The cash and short-term investments fell from $6.792 billion on 31 October 2021 to $3.365 billion on 31 October 2022.

Yet, TJX has less debt. The total debts fell from $4.560 billion on 31 October 2021 to $3.358 billion on 31 October 2022. Notably, TJX’s quarterly financing cash flow was -$770.61 million on 31 October 2022. Hence, TJX is paying debts.

Could TJX collapse?

I wonder if The TJX Companies (TJX) could collapse because of its low cash flow. To explain, TJX could run out of money if its sales fall and could pay its debts. This is the retail death spiral.

I think the greatest threat to TJX is the supply chain crisis. To explain, TJX’s success comes from its low prices. TJX claims its prices are 20% to 30% lower than competitors.

TJX can offer those prices because it works with many suppliers in many countries. Plus, TJX buys overstock and cancellations (products other retailers cannot sell). The supply chain crisis threatens TJX’s business model because it could be harder and more expensive for shippers to reach all those suppliers.

Hence, TJX could have to cut stock or raise prices. Two moves that could drive customers away. After all, why shop at TJX’s messy stores if you cannot find those terrific bargains?

Could the Supply Chain Crisis destroy TJX?

The supply chain crisis has several causes. For example, there is a shortage of long-haul truck drivers, that limits the amount of merchandise retailers can move.

Other causes of the supply chain crisis include high energy costs in Europe where TJX sources many items, disruptions from the Ukraine War,and the COVID-19 lockdowns in China. Most of the world’s clothing and much of TJX’s merchandise comes from the People’s Republic. For example, there were lockdowns in China’s manufacturing hub of Guangzhou as late as 9 November 2022.

Furthermore, it is unclear whether recent unrest in China will end the lockdowns or lead to further disruptions. The Chinese government began easing COVID-19 restrictions in early December after a series of protests.

Unfortunately, it could take months or years for supply chains to recover. Hence, TJX shoppers could face empty shelves and higher prices for months or years to come.

What Value Does the TJX (TJX) Companies offer?

The TJX Companies (TJX) stock is cheap when compared to retailers such as Lowe’s (LOW). For example, Mr. Market paid $78.84 for TJX and $202.43 for Lowe’s on 21 December 2022.

TJX’s stock price has seen some growth. Mr. Market paid $78.84 for TJX on 21 December 2022. Thus, TJX is a cheap stock that could be capable of some price growth.

Moreover, TJX pays a dividend. They have scheduled nine 29.5₵ TJX dividends between 3 March 2023 and 3 March 2025. TJX offered a $1.18 forward dividend and a 1.5% forward dividend yield on 21 December 2022.

I think TJX is an interesting value investment that could experience some growth as inflation rises. However, TJX faces a difficult future because of the supply crisis and competition from the ultimate discounter, Amazon (AMZN). I expect to see little growth at TJX, but I consider it a cheap and reliable dividend stock that will not collapse.