As the craze of earnings season draws to a close, here’s a look back at some of the most exciting (and some less so) results from Q1. Today, we are looking at discount retailer stocks, starting with TJX (NYSE: TJX).
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 5 discount retailer stocks we track reported a mixed Q1. As a group, revenues beat analysts’ consensus estimates by 0.7% while next quarter’s revenue guidance was 1.5% below.
While some discount retailer stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 3.6% 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 $13.11 billion, up 5.1% year on year. This print exceeded analysts’ expectations by 0.7%. Despite the top-line beat, it was still a slower quarter for the company with EPS guidance for next quarter missing analysts’ expectations and full-year EPS guidance missing analysts’ expectations.
Ernie Herrman, Chief Executive Officer and President of The TJX Companies, Inc., stated, “I am very pleased with our first quarter performance. Overall comp sales increased 3%, at the high end of our plan, and both profitability and earnings per share were above our expectations. Our teams across the Company delivered consumers exciting values on great brands and fashions and a treasure-hunt shopping experience, every day. All divisions, both in the U.S. and internationally, drove increases in comp sales and customer transactions, which underscores the strength of our value proposition. This also gives us confidence in our ability to gain market share across all of our geographies. The second quarter is off to a strong start and we are laser focused on executing all the key fundamentals of our off-price retail model. I am convinced that our broad assortments of great brands and fashions, at compelling prices, will continue to be a tremendous draw for shoppers seeking value. Further, I am confident that the strength, flexibility, and resiliency of our off-price business model will serve us well in today’s macro environment, as it has throughout our long, successful history. I am as confident as ever that we will bring our value proposition to even more customers around the world and keep growing our sales and profitability over the long term.”
Unsurprisingly, the stock is down 8.9% since reporting and currently trades at $123.05.
Is now the time to buy TJX? Access our full analysis of the earnings results here, it’s free.
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 $576.8 million, up 13.4% year on year, outperforming analysts’ expectations by 1.9%. The business had a strong quarter with an impressive beat of analysts’ EBITDA estimates and a decent beat of analysts’ gross margin estimates.
Ollie's achieved the biggest analyst estimates beat and highest full-year guidance raise among its peers. The market seems happy with the results as the stock is up 8.3% since reporting. It currently trades at $121.25.
Is now the time to buy Ollie's? Access our full analysis of the earnings results here, it’s free.
Weakest Q1: 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 $2.50 billion, up 6% year on year, falling short of analysts’ expectations by 0.9%. It was a slower quarter as it posted full-year EPS guidance missing analysts’ expectations.
Burlington delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 4.5% since the results and currently trades at $228.17.
Read our full analysis of Burlington’s results here.
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 $4.98 billion, up 2.6% year on year. This result topped analysts’ expectations by 0.5%. Taking a step back, it was a slower quarter as it logged EPS and revenue guidance for next quarter missing analysts’ expectations.
Ross Stores had the slowest revenue growth among its peers. The stock is down 15.5% since reporting and currently trades at $128.66.
Read our full, actionable report on Ross Stores here, it’s free.
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 $970.5 million, up 19.5% year on year. This print surpassed analysts’ expectations by 1.3%. Taking a step back, it was a mixed quarter as it also produced an impressive beat of analysts’ EBITDA estimates but full-year EPS guidance missing analysts’ expectations significantly.
Five Below achieved the fastest revenue growth but had the weakest full-year guidance update among its peers. The stock is up 2.3% since reporting and currently trades at $123.86.
Read our full, actionable report on Five Below here, it’s free.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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