TJX Cos., quarterly performance was one of the few bright spots in the gloomy U.S. retail environment, proving that the company's off-price business model was luring shoppers even as competition from Amazon.com intensifies.
TJX, which reported better-than-expected quarterly profit and sales on Tuesday and also raised its earnings forecast, said higher customer traffic drove sales at its flagship Marshalls and T.J. Maxx stores.
As traditional retailers struggle in the face of changing consumer tastes and competition from Amazon, TJX has been posting strong sales for several quarters by selling coveted apparel brands such as Tommy Hilfiger and Marc Jacobs at prices 20 percent to 60 percent lower than those offered by others.
Analysts at brokerage Cowen & Co credited TJX's success in attracting customers to its off-price model, long-term relationships with its 18,000 vendors and a sharp focus on the in-store customer experience. "TJX's business model continues to resonate with customers," analyst Oliver Chen said on Tuesday.
TJX said its comparable-store sales rose 3 percent in the second quarter ended July 29. Analysts on average had expected 2.3 percent, according to research firm Consensus Metrix.
"Customer traffic was up and was the primary driver of our comp store sales growth at every division," TJX Chief Executive Ernie Herrman said in a statement.
While sales at TJX's Marmaxx unit that comprises Marshalls and T.J. Maxx rose 3.6 percent, sales at its much smaller HomeGoods business jumped 17 percent, reflecting demand from a robust housing market.
Earlier on Tuesday, home improvement chain Home Depot, which has been another bright spot in the retail sector, reported strong quarterly results and raised its annual forecasts.
TJX raised its forecast for adjusted earnings to $3.78 to $3.82 per share from $3.71 to $3.78 for the year ending January 2018.
TJX, which also operates in Canada and some European countries, said second-quarter revenue climbed 6 percent to $8.36 billion, beating analysts' expectations of $8.29 billion.
Net income slipped 1.6 percent to $553 million or 85 cents per share as expenses surged. Analysts on average had expected earnings of 84 cents per share.
Shares of TJX, which had fallen about 7 percent this year, were up 1 percent at $70.33 in afternoon trading.