Jefferies downgraded shares of The TJX Companies Inc. to Hold from Buy on Wednesday, citing concerns over a slowdown at its Marmaxx division and lowering the price target to $145 from $180.
The downgrade follows Marmaxx’s comparable sales growth decelerating to 1% from 6%, reflecting what Jefferies described as a more significant issue than a typical merchandising miss. The firm noted process changes at Marmaxx, implemented with direct CEO involvement, have contributed to the underperformance. Management has characterized the slowdown as "self-inflicted," according to Jefferies.
TJX’s stock was trading at $139.48 on Wednesday, near its 52-week low of $134.75, and down 8.4% year-to-date. The Marmaxx division accounts for over 60% of TJX’s total sales and nearly 70% of its earnings before interest and taxes (EBIT), making its performance a critical driver for the company’s overall results.
The downgrade contrasts with other analyst actions. UBS raised its price target for TJX to $198 from $197 while maintaining a Buy rating. Bernstein SocGen Group reiterated an Outperform rating with a $175 target. The mixed outlook comes as TJX reported stronger-than-expected second-quarter results, with adjusted earnings of $1.22 per share beating Wall Street’s $1.19 estimate, and revenue of $15.2 billion slightly exceeding forecasts.
Comparable sales for the quarter rose 4%, driven by higher average basket sizes and increased customer transactions. The company also reported an adjusted pre-tax profit margin of 11.9%, reflecting operational efficiency despite the challenges at Marmaxx. Competitor Ross Stores continues to outperform, posting industry-leading comparable sales growth and widening the execution gap with Marmaxx.
InvestingPro data shows eight analysts have revised earnings estimates downward for the upcoming period, while the stock’s Relative Strength Index (RSI) indicates it is in oversold territory. Despite this, the stock is trading above its Fair Value estimate according to the platform.
