BMO Says Brexit May Create Opportunity In TJX Companies Shares

Courtesy of Benzinga.

The Brexit may create opportunity in the shares of TJX Companies Inc (NYSE: TJX), BMO said while reaffirming its Outperform rating on the stock.

“We believe there is little immediate impact from Brexit outside of currency volatility. While there could be some modest incremental impact from FX volatility, there could be positive benefits for operating performance,” analyst John Morris wrote in a note.

TJ’s U.K. business is approximately 8-10 percent of sales mix and with Brexit coming late in the quarter and the pound declining an additional 8 percent since the first quarter conference call “we estimate an incremental 0.5% sales impact.”

“To the extent Brexit affects the U.K. consumer economy, we would see the downturn as a potential positive as more consumers seek value and discover TJX as well as favorable product costs and availability,” Morris noted.

Further, the analyst said the retailer is benefiting from strategic changes to product mix that is driving traffic, comparable store sales, and merchandise margin.

Further, the company is still taking advantage of very strong vendor pricing, and the buying teams believe this favorable environment will continue into the fall and likely beyond.

Commenting on the upcoming second quarter results, Morris said “despite some weather headwinds and a weak May for most of retail, we believe TJX should achieve another quarter of solid results in 2Q16 with an EPS estimate of $0.83 ahead of the consensus estimate of $0.81 based on a total company low-single-digit comparable same-store sales increase.”

At time of writing, shares of TJX rose 2.27 percent to $76.24. The analyst has a price target of $85 on the stock.

Posted-In: BMOAnalyst Color Price Target Reiteration Analyst Ratings