To The Maxx
Ed Ponsi
A Retailer That’s About to Take Off
Online retail has exploded during the COVID-19 pandemic. In its just completed quarter, Best Buy (BBY) saw a 154% increase in online sales. Target (TGT) posted a 141% jump, and Wal-Mart (WMT) announced a 74% increase in e-commerce sales.
However, there's no substitute for the in-person shopping experience. That’s especially true when it comes to clothes. You really don’t know how you’ll look until you try it on.
I’m expecting a short-term shift to old fashioned brick and mortar sales. With the U.S. opening up for business, there is pent-up demand for the in-person shopping experience.
While all retailers have an online presence, there are those that focus on in-person sales. One such name is TJX Companies (TJX), parent company of the popular TJ Maxx store chain.
The TJX formula is quality at a reasonable price. The retailer does this by taking advantage of special situations, such as canceled orders. Because of this, shoppers never know exactly what they’ll find, and that’s part of the appeal. It’s like a treasure hunt.
With all the disruption currently occurring in the economy, many order cancellations are bound to occur. Entire chains, some in trouble before the appearance of the virus, might fail to emerge from the anticipated recession.
The coming wave of cancellations will allow TJX to acquire its products at even lower prices. I anticipate an accompanying boost in margins.
TJX’s chart hints that good news is coming. The stock has just broken out of an ascending triangle (black dotted lines). This bullish pattern projects a return for the stock to its 52-week high of $64.95, set in late February.
There is anecdotal evidence that the above scenario has already started to unfold. When the company released its earnings report last week, it stated the following:
“Initial sales overall have been above last year’s sales across all states and countries for the over 1100 stores that have reopened for at least a week.”
We’re buying TJX right here, as the stock’s technicals line up seamlessly with the company’s current bullish situation.
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