As the holiday shopping season approaches, it’s natural to turn toward would-be retail winners as good investments for the typical end-of-year rally. In fact, the 2017 holiday season is setting up to be the biggest ever for retailers.
However, not every brick-and-mortar store represents a good opportunity right now. And one in particular that I’m staying away from is TJX Companies Inc (NYSE:TJX). Let me explain why.
TJX has a solid track record of beating earnings, but in its latest report that came out earlier this week, the numbers were completely underwhelming. The shares fell 4% after the company reported its worst quarterly same-stores sales performance since 2009, and the big headline was that revenue missed Wall Street’s expectations. Management appeared to push the weakness off on one-time events.
On the plus side, TJX reiterated its full-year profit guidance and even indicated that the final results could come in at the high end of the $3.91-$3.93-per-share range.
Red Flags on the TJX Stock Chart
Then there is the chart. After topping out in mid-2016, the discount retailer has been struggling to build up any sort of sustainable momentum.
A few rally attempts in the first half of this year failed at resistance around $80, and the most recent test of that level was met with heavy selling.
We’ve seen several more rally attempts since then. The first, which began after TJX hit a near-term bottom in July, failed to break through the 200-day moving average (the red line). And the latest came to a halt when earnings sent the shares down to their lowest level in nearly two years.
The chart alone indicates that the worst is not yet over for TJX, but add in the latest earnings report and underlying fundamentals and it’s a sure sign to stay away from this stock.
The company’s business model of offering discounted clothing can easily be duplicated by its peers, including online retail giant Amazon.com, Inc. (NASDAQ:AMZN). With very little online presence, TJX is simply not a company I consider next generation.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt just launched two new investment advisories focused around the “next” generation investing theme. His trademark three-prong investing approach targets the mega-trends old Wall Street is missing out on. Click here for more information on the “NexGen” Experience.