Avoiding the earnings trap with the story behind the numbers at TJX Cos.
Elizabeth Holmes
Elizabeth Holmes of The Wall Street Journal chose expansion news as the focus of her TJX Cos. earnings story:
“Consumers may still be keeping a tight grip on their cash, but that’s prompting discount retailer TJX Cos. to pull out its wallet.
A major beneficiary of the bargain hunting forced by the deep recession, TJX is accelerating its plans to build and refurbish stores. The owner of T.J. Maxx, Marshalls and HomeGoods is also returning more cash to shareholders by boosting its dividend and buying back more of its stock. The moves come after TJX reported a 58% jump in profit for its fiscal fourth quarter amid rising sales.”
Today’s Tip: Beware the earnings-season trap.
Avoid auto-pilot during earnings season – reporting net income/revenue up/down – without considering what the story is behind the numbers.
Another tip is to put the numbers in a standardized table at the end of the story, which allows you to use fewer figures in the narrative. The Arizona Republic takes it a step further and puts routine earnings reports into a table with a sentence of elaboration. The columns in the table include: company name, quarterly revenue, net income, earnings per share, year-earlier revenue, year-earlier income and notable (for the commentary).
With TJX, a 58 percent rise in profit is definitely news, but so is retail expansion during the recession. By not getting stuck in the earnings trap, Elizabeth provided a broader story about the company.
