Jefferies cuts TJX to Hold as Marmaxx stumbles and Ross pulls ahead

Investing.com -- On Wednesday, Jefferies downgraded TJX Companies (NYSE: TJX) to Hold from Buy with a $145 price target, arguing the slowdown at its Marmaxx division looks more serious than a routine merchandising miss.

"TJX's Marmaxx slowdown looks more significant to us than a typical merchandising miss," analyst Corey Tarlowe wrote.

He noted that comparable sales at the division, which accounts for more than 60% of sales and nearly 70% of EBIT, slowed to 1% from 6%, the weakest showing since fiscal 2018, excluding the pandemic.

What is said to stand out most to Jefferies is the level of attention being directed at the problem, with buying, planning, senior merchandising leadership and the chief executive involved directly in remediation.

"In a business that has historically operated with remarkable consistency and predictability, we find this degree of intervention unusual," the firm said.

Jefferies expects a recovery but not a quick one, noting the fiscal 2018 issues took three quarters to resolve. It models comps of 1% to 2% over the next three quarters against consensus of 2% to 3%, with tougher comparisons in the second half.

Complicating matters, the firm said Ross Stores (NASDAQ: ROST) is firing on all cylinders, with its data showing Ross outpacing Marshalls and T.J. Maxx by double digits and raising concern that share is shifting.

Jefferies still credits TJX's diversification, margins and international and HomeGoods strength

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