After two good years for the industry, the off-price retailer could be set for a great one in 2025. By Teresa Rivas
TJX Cos. has seen its stock double in the past five years, and it could be poised to continue this run.
Off-price retailers have been gaining market share for years, boosted by inflation-weary consumers hunting for bargains. As the industry leader, TJX — which operates T.J. Maxx, HomeGoods, and Marshalls stores — buys excess inventory from other retailers and manufacturers, sells it at deep discounts, and commands some of the best merchandise along with well-heeled shoppers. That has pushed the stock’s valuation to close to its highest level since the pandemic.
Despite its recent strength, there are still plenty of catalysts that could lift the stock even higher. The retail industry looks a lot like it did in 2022, when strong demand led stores to overorder, only to be left with too much merchandise when shoppers pulled back, ultimately benefiting TJX’s stores. Similarly, worries about tariffs could lead retailers to try to stockpile at a time when consumers feel uneasy about prices going up. Retailers are also coming off a prolonged period of demand, so many are ordering even more as 2025 starts.
Jefferies analyst Corey Tarlowe notes that inventories have recently started rising for the first time in two years and appear on pace to outstrip sales. “[Therein] lies the risk,” he explains. “Retailers aren’t sophisticated….In times when there’s inventory excess, TJX is one of the — if not the most significant — beneficiaries.” He thinks TJX should trade up to $145, up 17.5% from Wednesday’s close.
You don’t have to believe that there is an inventory storm brewing to like TJX. The company has proved time and again that its treasure-hunt model appeals to consumers — and brings them back frequently to check out what’s new. Even millionaires and celebrities have raved about their finds on social media as shopping for bargains has become a badge of honor rather than something to hide.
It also means that TJX doesn’t have to worry — much — about its online presence, or lack thereof. The absence of easily searchable deals not only keeps shoppers frequently returning to its stores, but also makes them the destination of choice for designers that don’t want to be widely seen as offering brand-diluting discounts. That makes the company’s offline nature an advantage, not a hindrance.
TJX will report holiday-quarter results on Feb. 26, and investors may be feeling nervous after Walmart fell following soft guidance. Yet even if it follows suit, TJX is known for its conservative forecasts — which it often later exceeds — and has previously easily bounced back from postearnings declines.
Consider that TJX’s expected revenue growth this year and next is above that of largely offline dollar stores and other discounters; Five Below, for example, is seeing stronger sales growth, but its earnings per share are much more uneven. TJX is also ahead of omnichannel retailers like department stores and Target.
“This is a unique and defensible business you have to pay a premium for, ” says Joseph Ghio, an equity research analyst at Williams Jones Wealth Management.
That’s one reason he’s comfortable with TJX’s valuation, which at a recent 26.9 times forward earnings is above its own five-year average. It’s also in line with or cheaper than other retail winners, including Walmart, which trades for 37 times earnings, and Costco Wholesale, which fetches a whopping 56 times. TJX is also a steady performer, with consensus calling for EPS to climb 8.5% this fiscal year to $4.19 and 9.6% in the next, to $4.60, after growing 24% in 2024.
It’s also generous with shareholders even while spending to boost its growth, says Jared Bresnen, portfolio analyst at Bahl & Gaynor. Despite plans for a joint venture in Mexico and an investment in a Dubai-based off-price retailer last year, TJX continues to increase its payout while repurchasing shares. “TJX maintains a clear commitment to returning capital to shareholders,” Bresnen says. “The company has grown the dividend greater than 10% in each of the past few years.” The stock, at $123.42, now yields 1.2%.
All that said, investors may be questioning even steady outperformers in 2025, when uncertainty is the name of the game. Tariffs could drive up prices, forcing shoppers to pull back across the board. Delayed interest-rate cuts could also cause investors to reconsider whether monetary policy will shift from a tailwind to a headwind. January retail sales slowed — not surprising, given big holiday spending and rough weather, but not an ideal reading. A cooling job market is another risk; unemployment is often the biggest catalyst for people to rein in spending. Although economic data remain encouraging, any potential downturn or recession would inevitably curb shoppers’ appetites.
Yet it’s worth remembering that even during the financial crisis, TJX shares dropped just under 30% from September 2007 through the bottom in March 2009, outperforming both the S&P 500 index and the SPDR S&P Retail exchange-traded fund, which both declined more than 50%. “Long term, TJX wins in almost any economic environment,” says Joseph Ghio, an equity research analyst at Williams Jones Wealth Management. “It’s a great core holding you can own over the very long term without having to worry about any sort of market cycles.”
Ghio isn’t just a shareholder; he’s also a shopper — and one whose purchasing preferences have changed since frequenting T.J. Maxx. “I tell everyone about the deals I get,” he says. “I don’t think I can buy anything full price anymore.”
TJX stock might be the only worthy exception.