As the Q1 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the discount retailer industry, including TJX (NYSE:TJX) and its peers.
Discount retailers understand that many shoppers love a good deal, and they focus on providing excellent value to shoppers by selling general merchandise at major discounts. They can do this because of unique purchasing, procurement, and pricing strategies that involve scouring the market for trendy goods or buying excess inventory from manufacturers and other retailers. They then turn around and sell these snacks, paper towels, toys, clothes, and myriad other products at highly enticing prices. Despite the unique draw and lure of discounts, these discount retailers must also contend with the secular headwinds of online shopping and challenged retail foot traffic in places like suburban strip malls.
The 6 discount retailer stocks we track reported a slower Q1. As a group, revenues missed analysts’ consensus estimates by 0.6% while next quarter’s revenue guidance was 5% below.
Stocks--especially those trading at higher multiples--had a strong end of 2023, but this year has seen periods of volatility. Mixed signals about inflation have led to uncertainty around rate cuts, and discount retailer stocks have had a rough stretch. On average, share prices are down 6.2% since the latest earnings results.
TJX (NYSE:TJX) Initially based on a strategy of buying excess inventory from manufacturers or other retailers, TJX (NYSE:TJX) is an off-price retailer that sells brand-name apparel and other goods at prices much lower than department stores.
TJX reported revenues of $12.48 billion, up 5.9% year on year. This print was in line with analysts’ expectations, but overall, it was a weaker quarter for the company with underwhelming earnings guidance for the full year.
Ernie Herrman, Chief Executive Officer and President of The TJX Companies (NYSE:TJX), Inc., stated, “I am very pleased with our first quarter performance. Overall comp store sales increased 3%, at the high-end of our plan, and both profitability and earnings per share were well above our expectations.”
Interestingly, the stock is up 11.7% since reporting and currently trades at $109.08.
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Best Q1: Ollie's (NASDAQ:OLLI) Often located in suburban or semi-rural shopping centers, Ollie’s Bargain Outlet (NASDAQ:OLLI) is a discount retailer that acquires excess inventory then sells at meaningful discounts.
Ollie's reported revenues of $508.8 million, up 10.8% year on year, in line with analysts’ expectations. It was a solid quarter for the company with a decent beat of analysts’ gross margin and earnings estimates.
Ollie's pulled off the highest full-year guidance raise among its peers. The market seems happy with the results as the stock is up 6.3% since reporting. It currently trades at $87.29.
Weakest Q1: Five Below (NASDAQ:FIVE) Often facilitating a treasure hunt shopping experience, Five Below (NASDAQ:FIVE) is an American discount retailer that sells a variety of products from mobile phone cases to candy to sports equipment for largely $5 or less.
Five Below reported revenues of $811.9 million, up 11.8% year on year, falling short of analysts’ expectations by 2.7%. It was a weak quarter for the company with underwhelming earnings guidance for the next quarter and revenue guidance for next quarter missing analysts’ expectations.
Five Below had the fastest revenue growth but had the weakest full-year guidance update in the group. As expected, the stock is down 48.1% since the results and currently trades at $68.78.
Ross Stores (NASDAQ:ROST) Selling excess inventory or overstocked items from other retailers, Ross Stores (NASDAQ:ROST) is an off-price concept that sells apparel and other goods at prices much lower than department stores.
Ross Stores reported revenues of $4.86 billion, up 8.1% year on year, in line with analysts’ expectations. Zooming out, it was a mixed quarter for the company with a decent beat of analysts’ gross margin estimates but underwhelming earnings guidance for the next quarter.
Ross Stores achieved the biggest analyst estimates beat among its peers. The stock is up 12% since reporting and currently trades at $147.79.
Burlington (NYSE:BURL) Founded in 1972 as a discount coat and outerwear retailer, Burlington Stores (NYSE:BURL) is now an off-price retailer that has broadened into general apparel, footwear, and home goods.
Burlington reported revenues of $2.36 billion, up 10.5% year on year, in line with analysts’ expectations. Zooming out, it was a decent quarter for the company with an impressive beat of analysts’ earnings estimates.
The stock is up 27.5% since reporting and currently trades at $255.45.
This content was originally published on Stock Story
