TD Cowen analysts prefer TJX Cos. (NYSE:TJX) over peers Ross Stores (NASDAQ:ROST) and Burlington Stores (NYSE:BURL) in their off-price preview note on Friday.
The analysts, who raised the firm's price target on TJX to $89, reiterating an Outperform rating on the stock, explained that checks for off-price were mixed into mid-May, but data showed improving traffic trends in April, with TJX/Marmaxx looking the strongest.
"We see prospects for TJX to deliver a Q1 beat based on our intra-quarter checks and survey data, maintaining our above Consensus and guidance EPS estimate of $0.74," the analysts wrote. "We are raising our Q1 total comp estimate to +2.3% from +1.3% previously, including increasing our Marmaxx comp estimate to +5% from +4.5% vs Consensus +4.88%."
They also reiterated Market Perform ratings on ROST and BURL as they "see risk to Q2 guidance and higher macro headwinds. Burlington's price target was cut to $199, while ROST's was lowered to $102.
"There is a wide range of possible outcomes for BURL's fiscal Q1:23 owing to the company lapping significant supply chain and product sourcing related costs (e.g., freight and wages) in the year-ago period, which could form a tailwind of varying degrees of magnitude throughout FY23. The magnitude of the margin recovery could more than offset potential pressure on BURL's topline outlook with the uncertain consumer macro environment for discretionary spending," added the analysts. "We note that Burlington issued guidance on March 2 - and while our data for off-price traffic strengthened in April - the broad consumer spending trends slowed since that date."
For ROST, the analysts wrote: "With a "highly uncertain" macro and political environment, ROST management initiated a FY23 guidance range on 2/28/23, which we view as conservative at the low end but with modest upside at the high end. We believe upside prospects would need to come from an acceleration in ROST’s 2H:23, driven by comps sustaining a positive inflection and a significant recovery in its merch margin and distribution impacts to its Gross Margin."