This Retailer Clamors for Its Part of Ecommerce Pie
Gerelyn is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
December 2012 was good to The TJX Companies (NYSE: TJX). The company's comparable store sales climbed 6% higher versus the year ago month, and it was on top of extremely strong comparisons. With its success being driven by its brick-and-mortar store locations coupled with the recent addition of an online retailer to its portfolio of companies, this stock has nowhere to go but higher.
Retail Information Systems News performed a breakdown of some of the top retail sales performers in December 2012 and TJX was ranked third. It was exceeded only by Costco and Nordstrom, whose sales rose 8% and 8.6% in the month, respectively.
Make It or Break It
TJX's holiday sales performance was so surprisingly strong, that the company decided to lift its profit guidance for the 4Q and full year. The company expects to earn between $0.77 and $0.78 per share in the 4Q, which represents about 25% growth over the year ago period. For the full year, TJX projects earnings of $2.50 and $2.51 per share, which similarly represents double-digit growth compared with the previous year.
January's comparable store sales are not expected to be quite as robust, as TJX has projected either flat sales or a slight 2% increase this month. This compares with a 7% jump in comparable store sales last January. We won't know the actual results until February 7th weeks before the company's 4Q and year-end earnings results are reported on February 27th.
TJX attributes customer traffic to its December sales results, which come on top of an 8% increase in the year ago period. The retailer has been able to foster loyalty among its customers at stores such as Home Goods and TJ Maxx and it has paid off.
With the most recent acquisition of Sierra Trading Post, the company is preparing for its belated launch into the online retail market. In the final days of 2012, TJX purchased online retailer Sierra Trading Post in a $200 million cash deal. The deal won't be accretive to TJX earnings until probably fiscal 2014.
Sierra Trading Post is a profitable company with 2012 revenues of $200 million-plus. The business provides TJX with the technology infrastructure, scale and new capabilities that can be used in the launch of its own e-commerce websites for TJX and Homegoods, for example.
The recent addition lends some shape to an e-commerce plan that was formerly abandoned by TJX. Last year, the company revealed its attentions to try e-commerce again, and the addition to Sierra Trading Post clearly fits into that strategy. In addition to its online capabilities, Sierra Trading Post's photography studios in Cheyenne, WY also become part of TJX , which introduces TJX to a market where JC Penney, Sears and Wal-Mart -- through its CPI Corp 'Picture Me' portrait studios -- already have a presence.
TJX performed a stock split last February. While its debut in e-commerce is kind of late the company has the fortitude to do it this time with a partner that has more than a decade of experience in online retail sales. Considering TJX's customer loyalty at its brick-and-mortar locations, online sales create an opportunity for the company that could reward investors over the next couple of years.
Separate Wheat from Chaff
While TJX is a stock that I would own, Ascena Retail (NASDAQ: ASNA) is one that I would avoid. Ascena, which owns stores such as Lane Bryant, Dress Barn and Catherines, was forced to lower its fiscal year 2013 earnings guidance amid weaker-than-expected holiday sales. Its November and December comparable and e-commerce sales combined increased 1% in the period while Lane Bryant sales fell 9% versus the year ago period.
Much of the sales momentum occurred in its online business. Of its brick-and-mortar locations, Justice, which is a pre-teen apparel brand and a bright spot for Ascena, saw its sales climb 5%.
The company has an array of brands in its portfolio, ranging from plus-size focused Lane Bryant to the tween brand Justice. While there may be a way to make the portfolio of companies work for Ascena the business has struggled to pull it off.
Meanwhile shares of Urban Outfitters, which like TJX and Ascena Retail has numerous speciality brands in its portfolio, have been setting new record-highs. The retailer, which owns the Anthropologie and Free People brands, among others, had record sales in the holiday season. Total company net sales were $666 million, which represents a 15% increase over the year-ago period. Urban Outfitters experienced strength across its portfolio of brands.
It's truly a mixed bag for retailers heading into 2013. Some, like TJX, are embarking on new opportunities while others are struggling to make their existing offering work. While retail sales throughout the entire year can't replicate what's earned at the end of the year, there is enough momentum in several stocks to ride the profit wave for at least a little while longer.
GerelynT has no position in any stocks mentioned. The Motley Fool recommends Ascena Retail Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!