DJ TJX and Urban Outfitters Stock Have Double-Digit Upside. Here's Why. -- Barrons.com
By Teresa Rivas
Home is where the heart is -- and it's at the heart of consumer spending in 2020, given all the time that Americans are spending there amid the Covid-19 pandemic. That's one way that retailers can make up some of the shortfall in apparel sales, says Jefferies.
It's no secret that Americans are spending freely to improve their at-home experience, from DIY projects to furniture and décor. Bulls say this is likely to continue, given rising home sales (and the fact that cold-and-flu season might mean that many people will hunker down throughout the winter).
While there are obvious winners from this trend, like the home-improvement retailers, Jefferies analyst Janine Stichter argues that there are other specialty retailers that can benefit as well -- such as TJX (TJX) and Urban Outfitters (URBN), both rated at Buy with respective price targets of $67 and $27, implying upside of 24% and 29% from current stock prices.
"We see potential for growth in home décor to accelerate for the holidays as it becomes a key gift-giving item and tops many consumers' wish lists," she writes. "In what is likely to be a very unusual holiday season, many of the typical top gift categories (apparel, beauty, accessories) may be less in demand. Further, gifting apparel may be particularly problematic (with the exception of sweats/lounge), with many unwilling to visit a store to return an item in the case of fit issues."
Of course, home goods can't entirely make up for the loss in clothing sales, but for those that do have this extra category, it can bring a substantial lift, she argues.
TJX owns HomeGoods, which has a value bent as well as being focused on décor, and Marmaxx stores also sell home items. That means about a third of its business comes from the home category, Stichter notes. The stock is a top pick for her, given the ongoing shift to off-price retail as a whole, and was one of the analysts who told Barron's that it could be a beneficiary of a weird back-to-school season.
In addition, Urban Outfitters might also be more associated with apparel in consumers' minds, but it has long sold a home line. The shares have languished in 2020, and now sport a multiple near their five-year lows, even as its recent earnings report showed sales and gross-margin improvement. Moreover, while its higher-priced Anthropolgie brand has trailed this year, given its focus on dressier clothes, Stitcher thinks that banner's outsize home exposure could help it make significant strides in the fourth quarter.
Write to Teresa Rivas at teresa.rivas@barrons.com
(END) Dow Jones Newswires
September 22, 2020 10:50 ET (14:50 GMT)
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