Morgan Stanley makes a buy call on tumbling retail giant stock

Anyone who shops at TJ Maxx or Marshalls knows the routine. You walk in without a list, dig through the racks, and leave with something you did not plan to buy.

That treasure-hunt habit has powered The TJX Companies (TJX) for decades.

So when the company’s flagship Marmaxx division posted its softest sales growth in years, shoppers and shareholders both noticed.

The stock has slid, down about 16% over the past month as of Sept. 3.

Yet one major bank is telling clients to look past the dip.

Why Morgan Stanley still rates TJX stock a buy

In a Morgan Stanley research note shared with me, analyst Alex Straton reiterated an Overweight rating and a $178 price target on TJX.

Straton, who leads Morgan Stanley’s softlines and off-price retail coverage and rates rivals Ross Stores (ROST) and Burlington (BURL), frames TJX as a “consumer compounder.”

It refers to a business that keeps growing profits steadily through good times and bad.

Overweight is Morgan Stanley’s version of a buy call. It means the bank expects the stock to outperform its retail peers over the next 12 to 18 months.

The $178 target sits roughly 35% above where TJX traded in early September, near $131.

TJX beat overall expectations, even as its Marmaxx division posted its weakest comparable sales in years.

SOPA Images / Getty Images

What actually went wrong inside Marmaxx stores

Marmaxx is TJX’s largest segment, combining TJ Maxx, Marshalls, and the smaller Sierra chain, whose sales are folded into Marmaxx’s results.

Comparable sales there rose just 1% in the second quarter, according to TJX‘s earnings report, well below the 6% to 7% growth logged at HomeGoods, TJX Canada, and TJX International.

Morgan Stanley points to three fixable problems rather than a broken business.

1. Empty racks despite full backrooms

Understaffed teams and messy storage rooms meant inventory sat hidden in the back instead of moving onto the sales floor. That left shoppers staring at gaps on the shelves, even when the product existed in the building.

2. Missed calls on basics and back-to-school

Rivals leaned harder into everyday apparel basics and moved earlier on back-to-school goods, so Marmaxx was caught with the wrong mix at the wrong time.

3. Beauty complaints and pricing pressure

According to Reddit discussions tracked by the bank, shoppers noticed damaged packaging in the beauty aisle, threatening what is normally a highly profitable section.

Straton also questions whether Marmaxx’s reputation for low prices is shrinking as other retailers cut prices more aggressively.

CEO Ernie Herrman was blunt on the earnings call, calling the shortfall “self-inflicted and within our control,” Investing.com reported.

How the rest of TJX covered the shortfall

Even with its biggest division stalling, TJX still beat expectations across the board.

Overall comparable sales rose 4%, adjusted earnings per share climbed 11% to $1.22, ahead of the $1.19 analysts expected, and the company’s management raised its full-year profit outlook.

HomeGoods did the heavy lifting, with comparable sales up 7% and net sales jumping 10% to $2.5 billion.

Three signs the wider portfolio held up:

HomeGoods, Canada, and International each grew comparable sales 6% to 7%.
Adjusted pre-tax margin widened to 11.9%, up 50 basis points from a year earlier.
Management lifted its long-term store target by 500 locations, to 7,500 stores.

That variety of brands is the whole argument. When one engine slows, the others keep the profits growing.

What Morgan Stanley’s price target really assumes

The $178 target is not a single guess. It sits at the midpoint of two scenarios the bank models.

Bull case, $197: TJX fixes Marmaxx quickly and holds mid-single-digit comparable sales across every banner.
Base case, $158: Execution problems drag on, and medium-term comparable sales fall below the roughly 4% the bank expects.

Even Morgan Stanley’s more cautious $158 outcome would still put TJX above its early-September price, and its optimistic case implies a much larger gain.

TJX stock vs. the broader market

Here is how TJX has traded against the S&P 500.


Period	TJX	S&P 500
Past 5 days	Down about 3%	Roughly flat
Past month	Down about 16%	Modest gain
Year to date	Down about 14%	Up about 13%

The company still generates steady free cash flow and pays a dividend yielding about 1.4%, with a quarterly payout of $0.48 a share.

What still needs to happen before the recovery sticks

Management says Marmaxx improved in August and expects comparable sales there to climb back toward 2% to 3% by the fourth quarter.

Getting there is not free. The company will likely spend more on store labor, marketing, and sharper pricing to win shoppers back.

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There are also near-term costs to watch.

TJX flagged higher fuel and freight expenses in the back half, and inventory grew 7% heading into the holidays, so that merchandise needs to sell.

That matters because American shoppers are working with tight budgets. Discount chains usually see more business when money is tight, and competitors are experiencing this directly.

What TJX investors should watch next

Morgan Stanley’s message is that one weak quarter at Marmaxx does not undo the case for TJX.

The company beat expectations, widened margins, and raised guidance even while its largest division stumbled, which is exactly what the bank wants a diversified retailer to do under pressure.

The risk is real. If Marmaxx’s sales remain slow through the holiday season and higher operating costs reduce profits, the base case target of $158 becomes the most likely result.

If that happens, long-term investors may have to wait longer to see a return.

For now, the buy call rests on one question. Can TJX get the right products back on the floor before the crowds arrive?

The company’s management says the solution is already underway, and Morgan Stanley is betting it works.