We were happy to see the company address e-commerce, which currently contributes little, if anything, to the top line. We’ve mentioned several times that we think The TJX Companies, Inc. (NYSE:TJX)’s business model is somewhat immune to the same online pressures faced by other retailers since it sells an experience, but we appreciated CEO Carol Meyrowitz’s comments:
“We see e-commerce as another platform to reach and introduce our great values to the approximately 75% of U.S. shoppers who do not shop T.J. Maxx and Marshalls today. Whether brick-and-mortar, e-commerce or mobile, our goal is to reach an extremely wide customer demographic with our values. While we have e-commerce expenses reflected in our plans, we have only a little top line benefit assumed in the near- and long-term expectations at this time.”
Again, valuation is our main issue with the company. While we think its business model is superb, The TJX Companies, Inc. (NYSE:TJX) trades at the high end of our fair value range. Therefore, the risk/reward simply isn’t compelling enough to warrant a position in the portfolio of Valuentum’s Best Ideas Newsletter.
Nordstrom, Inc. (NYSE:JWN)
On a higher end than both The TJX Companies, Inc. (NYSE:TJX) and Urban Outfitters, Inc. (NASDAQ:URBN), department store Nordstrom, Inc. (NYSE:JWN) reported relatively weak first quarter results. Though revenue was 5% higher than a year ago at $2.7 billion and earnings per share were 4% higher at $0.73, both numbers fell short of consensus estimates.
Same-store sales for the company were decent, registering 3.1% for the quarter. However, performance at its brick-and-mortar locations weren’t so strong. Full-line same-store sales were flat and sales at the usually steady Nordstrom, Inc. (NYSE:JWN) Rack were up just 0.8%.
Naturally, weather was a component of the problem, but we think one of the other issues is industry promotional behavior. With competitors like J. Crew, Madewell, and even Macy’s constantly running promotions, we think the company might be having a hard time attracting customers at its higher price points. As for the Rack, we think the business will recover in the coming quarters.
Looking ahead, the firm slightly reduced its full-year sales growth outlook range to 4%-6% from 4.5%-6.5%, but kept its full-year earnings guidance of $3.65-$3.80. Although we like the long-term trajectory of the Rack business, we think Nordstrom, Inc. (NYSE:JWN)’s aspirational price level could experience a slump after performing exceptionally well for the past few years. Thus, we’ll remain on the sidelines for now.
The article Mixed Results From Retail’s Best originally appeared on Fool.com and is written by RJ Towner.
RJ Towner has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. RJ is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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