When Barron’s recently recommended
TJX Cos.
stock, we ticked off multiple reasons: low valuation, strong value reputation, a growing dividend. Now, we have another:
Bed Bath & Beyond’s
bankruptcy, which underscores a retail pecking order that increasingly favors the strongest operators.
Bed Bath’s filing was no surprise. Barron’s warned of a bankruptcy last summer. For now, Bed Bath stores will stay open as the company explores its options, including selling itself or closing. Rivals in the short term may feel pressure on sales as bargain hunters buy discounted merchandise, though few industry watchers expect a rescue.
One company’s demise is another’s opportunity. TJX could pick up lots of Bed Bath’s former sales, argues Bernstein analyst Aneesha Sherman, who notes that only a fifth of Bed Bath’s sales was purely online: the rest involve a store visit, even if just for curbside pickup. She believes that “share will remain offline as consumers maintain their existing shopping habits.” Some 80% of Bed Bath stores are within five miles of TJX’s T.J. Maxx or HomeGoods outlets. Like Bed Bath, these stores “attract a mainstream/value customer; offer a meaningful mix of home décor, furnishings, and small appliances; and are located in similar off-mall plaza/strip mall sites,” she writes. If Bed Bath liquidates, off-price retailers like TJX will scoop up cheap inventory.
Bed Bath’s market share has slipped, limiting TJX’s gains. Sherman estimates that capturing 10% to 15% of its roughly $5.5 billion in 2022 sales would boost TJX revenue by some $700 million. She rates TJX shares at Outperform with an $88 price target; TJX was trading on Friday at just over $78, up 0.31% for the week.
Write to Teresa Rivas at [email protected]
Next Week
Monday 5/1
Arista Networks,
MGM Resorts International,
NXP Semiconductors,
SBA Communications,
Stryker,
and
Vertex Pharmaceuticals
release earnings.
The Institute for Supply Management releases its Manufacturing Purchasing Managers’ Index for April. Consensus estimate is for a 46.7 reading, roughly even with the March data. The index has had five consecutive readings below 50, indicating contraction in the manufacturing sector.
Tuesday 5/2
Advanced Micro Devices,
Cummins,
DuPont,
Eaton,
Ecolab,
Ford Motor,
Marathon Petroleum,
Marriott International,
Pfizer,
Simon Property Group,
Starbucks,
and
Uber Technologies
report quarterly results
The Bureau of Labor Statistics releases the Job Openings and Labor Turnover Survey. Economists forecast 9.5 million job openings on the last business day of March, 431,300 fewer than in February.
Wednesday 5/3
The Federal Open Market Committee announces its monetary-policy decision. There is a 85% chance the FOMC raises the federal-funds rate by 25 basis points, to 5%-5.25%, per the CME FedWatch Tool.
Corteva,
CVS Health,
Emerson Electric,
Equinix,
Estée Lauder,
Kraft Heinz,
Phillips 66,
Public Storage,
Qualcomm,
and
Yum! Brands
release earnings.
ADP releases its National Employment Report for April. Expectations are for the economy to add 135,000 private-sector jobs, 10,000 fewer than in March.
The ISM releases its Services PMI for April. The consensus call is for a 51.8 reading, slightly higher than the March figure. The services sector continues to hold up better than the manufacturing sector with only one reading below the expansionary level of 50 since May of 2020.
Thursday 5/4
Anheuser-Busch InBev,
Apple,
Becton Dickinson,
Booking Holdings,
ConocoPhillips,
Expedia Group,
Fortinet,
Intercontinental Exchange,
Kellogg,
Moderna,
Regeneron Pharmaceuticals,
Sempra Energy,
Shopify,
and
Zoetis
hold conference calls to discuss quarterly results.
The European Central Bank announces its monetary-policy decision. The ECB is widely expected to raise its key interest rate by a quarter of a percentage point, to 3.25%. Traders are pricing in two more 25 basis-point-hikes after this meeting as the euro zone’s inflation has proved to be more stubborn than in the U.S.
Friday 5/5
Cboe Global Markets,
Cigna,
Dominion Energy,
Johnson Controls International,
and
Warner Bros. Discovery
release earnings.
The BLS releases the jobs report for April. Economists forecast an increase of 185,000 in nonfarm payrolls, following a 236,000 gain in March. The unemployment rate is expected to tick up from 3.5% to 3.6%.
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