How Much Will Marmaxx Contribute To TJX’s Top Line Growth?

TJX Companies (NASDAQ: TJX) has seen its revenue grow consistently by more than $2 billion annually between FY 2016-2018 (fiscal year ends in February). TJX has opened new stores at a steady pace, increasing its store count from 3614 at the end of fiscal 2016 to 4070 at the end of fiscal 2018. The Marmaxx segment contributes nearly 64% of the company’s overall revenue and grew at under 6% annually between FY 2016-2018. The growth was largely due to an increase in the number of stores and comp sales.

Based on recent market trends and the near-term outlook provided by the company’s management, we forecast TJX to report 6-7% revenue growth in the next two years, from $35.8 billion in FY 2018 to about $40 billion in FY 2020. Of the estimated $4.2 billion added to net revenues, we estimate that the company’s Marmaxx segment will contribute around $1.6 billion, or over 38% of the incremental revenues. We arrive at this estimate from TJX’s key growth metrics such as square footage per store, number of stores, and revenue per square foot. We have summarized our expectations on our interactive dashboard platform. If you disagree with our forecasts, you can change the key drivers for TJX’s Marmaxx segment to gauge how changes will impact its expected revenue.

Estimates for Key Growth Drivers

The Marmaxx segment consists of T.J. Maxx, Marshalls, and Sierra Trading Post (STP) stores. The Marmaxx segment contributes nearly 64% of the company’s overall revenue and grew at under 6% annually between FY 2016-2018. This was largely driven by a modest increase in the number of stores, growing 3% annually and comp sales growing at roughly 3%, driven primarily by an increase in customer traffic. The Marmaxx segment holds modest growth potential for TJX, driven by increased customer traffic in strong and weak retail environments, enabling the company to capture additional market share as a result of the improved outlook for the retail sector and increased U.S. customer confidence. As a result, we forecast the net store adds to increase 2-3% annually to 2438 stores by 2020 from 2312 in 2018. On the other hand, we expect the revenue per square foot to grow steadily at about 2-3% annually to $443 by 2020, up from $424 in 2018. Further, management believes strategic marketing initiatives – coupled with the TJX rewards loyalty program – should provide long-term growth opportunities.

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