Counter to recent developments in the retail environment, Framingham, Massachusetts based off-price retailer TJX (TJX) saw a huge spike in its fourth quarter profits. The company, which operates such retail brands as TJ Maxx and Marshalls, says improvements in inventory management, cost controls, and marketing helped lead to the strong showing.
The surprisingly strong report gave the company’s stock help and inspired stock trading that moved the shares forward nearly 5% following the announcement. The company’s earnings results barely beat estimates on Wall Street, but given the uncertain economic landscape, and several weak retail earnings reports already announced, the market responded strongly to the positive results.
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Net income for the company during the fourth quarter was 66 cents per share, for a total net income over $301 million. During the fourth quarter of 2006, the company had a profit of 43 cents per share, or $205.4 million. Last year’s earnings were impacted significantly by a $38 million reduction based on 34 A.J. Wright stores being closed.
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Sales were narrowly up 8% on the quarter, beating analyst estimates by trim margin. The company credits much of its success to cost controls that helped improve profit margins. Investors have been fairly safe with their investment strategy related to the company’s stock. While performing stock research, investors seem to believe TJX is a reasonable addition to one’s long term stock picks. The company’s stock price has maintained a modest 52-week price range, between $25.49-$32.53, with a decent 1.2% dividend yield.
Some investors may look to covered calls to increase their short-term gains on the promising stock. Covered calls allow buyers with a long position in a stock to take advantage of a short-term neutral view of a stock’s growth potential. Essentially, long investors can take advantage of short-term movement while maintaining their long positions.
Current analyst estimates pit the stock at a one year price target of $34.60. Given its current trading position just above $31.00, and its dividend, the stock seems like a good fit for a long-term stock trading strategy.
TJX forecast a 40-41 cent first quarter income, but analysts expect a bit better from the company, with a 42 cent prediction. Good stock trading involves finding stocks undervalued with great growth potential. With the economy and the retail environment facing uncertain near-term situations, there may be a chance for those savvy at stock investing to find a great short-term dip to get into the market for the long-term.
Part of the benefit to the company from a marketing perspective is its ability to leverage its brand name products at discount prices, during a season of cautious buying from consumers. Consumer confidence has been a bit uncertain as of late, so the opportunity to find brand name items, even out of season at time, is appealing to consumers looking to moderate their spending. This might be part of the reason the company has thrived in spite of a flatter trend in the broader retail sector.
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