Three Impressive Retail Stocks
Shweta is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The holiday season is the most profitable time for all retailers. It's when they put forth their best efforts to grab the new customer's attention and also retain the old ones. Discounts, promotions, and campaigns are launched with full fervor to drive more and more traffic into the stores.
TJX (NYSE: TJX), an ‘off price’ retail leader, has had a rewarding holiday season so far as the total sales of the company for the month of November were $2.2 billion, up 7% when compared to November 2011. Sales grew as the company remained focused on providing its customers fresh merchandise, and due to its continuous efforts this growth is expected to continue in December as well.
The company maintains a leadership position when it comes to ‘off-price’ retailing, as it purchases goods in huge quantities from famous brands like Tommy Hilfiger, Calvin Klein, and Polo Ralph Lauren, and sells them at prices 20% to 50% below that of the department stores. TJX enjoys a huge geographical presence in the United States (984 T.J. Maxx, 86 Homesense and 884 Marshall Stores), the UK (332 T.K. Maxx, 24 Homesense stores) and Canada (6 Marshalls, 216 Winners and 86 Homesense stores).
While TJX gained its customers' confidence by providing them good value for their money, the two big box retailers Wal-Mart and Target have also been winning their customers' hearts. Let’s see what these companies did in order to increase customer traffic to their stores.
Wal-Mart (NYSE: WMT) decided to open its stores at 8:00 pm on Thanksgiving, which was 2 hours earlier than last year, with three events scheduled at 8:00 pm, 10:00 pm, and 5:00 am. The One Hour Guarantee program was extremely eye catching, as it provides products such as the Apple iPads, LG Blu Ray Players, and Emerson 32-inch HDTVs at lower prices to those consumers who are already either in the queue or inside the store between 10pm- 11 pm. Besides, its online shopping portal Walmart.com provided ease to the consumers who could do the shopping from their homes and also get free shipping on orders of $45 or more.
All these special initiatives gave good positive results to the company. Wal-Mart attended to more than 22 million customers on Thanksgiving and Black Friday, and its Three Events program sold a whopping 5,000 items per second. The company continues to increase its geographical footprint, as it has decided to make its biggest expansion in Canada with 73 new projects to be completed in 2013.
The partnership with Nieman Marcus was the best initiative Target (NYSE: TGT) undertook for the holiday season. Luxury brands at discounted prices are always in demand, and with this partnership Target provided customers with designer clothes produced by twenty four high profile designers. Target is known for capturing affluent customers, but this initiative brought Target in everybody's reach. The nation's second largest retailer has announced the online price match program, which will let customers match prices online with other retailers, giving them good bargaining power. Moreover, the company has its REDcard rewards program, which lets consumers purchase items at discounted prices. Also, Target has planned to open 125 to 135 stores in Canada in 2013.
These two big retailers also had a profitable holiday season, but TJX, with its strong consumer base, is expected to grow faster in the long term thanks to the following factors:
Increased Store Traffic: The off price retail company is expected to see increased traffic in its stores, with its best gift giving plans at discounted prices for Christmas. TJX has geared up its promotional strategies and its seasonal offerings to the maximum. The company, with its strong loyal customer base, targets the average age group of 18 to 35 years with high profile brands and style. The company is expanding its reach among its consumers with its e-commerce strategies as online shopping is gaining traction and providing ease to the shoppers. With this initiative the company's store presence will be enhanced, offering customers a broader range of clothing.
International Opportunities: Europe seems to be the bright spot for TJX in terms of revenue and store expansion. In 3Q12 this region reported 11% same store sales growth, compared to 5% last year. With 400 stores at present, the company has plans to increase the number to 850 in the 3Q 2012. In all, the sale in Europe is expected to grow 8% to 9% in 2012. This shows that the company has enough growth opportunities in Europe.
Summing up, TJX, Wal-Mart, and Target will be shining during the holidays and beyond, as they have enough room to grow and expand their presence in the online world. Their sales are increasing over the time and the holiday season is giving them stronger footholds in the growing retail market. Shares of TJX are currently trading at $44.05, up around 38% year to date; whereas Target is up by 21% ($62.30), and Wal-Mart 18% ($71.3), which is very impressive. Coming to P/E ratios, TJX is trading at a forward P/E of 15.73x, whereas Wal-Mart is trading at 13.26x and Target at 12.74x.
ShwetaDubey has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. 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!