Discount retail operator TJX shows it can deliver profits in a slowing economy

Published Wed, May 17 20233:52 PM EDTUpdated Wed, May 17 20233:57 PM EDT

Club holding TJX Companies ' (TJX) weaker-than-expected sales for its fiscal 2024 first quarter were more than offset by strong expense management, resulting in a beat on profitability — further demonstrating the off-price retailer's ability to navigate gathering economic headwinds. Total revenue for the three months ended April 29 advanced 3.3% year-over-year, to $11.78 billion, missing analysts' forecasts for $11.82 billion, according to estimates compiled by Refinitiv. Reflected in the result is a $151 million foreign-exchange headwind. Excluding that, on a constant currency basis, sales were up 4.6% on an annual basis. Adjusted earnings-per-share (EPS) climbed 55% on an annual basis, to 79 cents, outpacing analysts' estimates of 71 cents per share, Refinitiv data showed. Bottom line Despite the top-line miss, this was a solid quarter for TJX — the company behind department stores T.J. Maxx, Marshalls and HomeGoods — with management demonstrating the ability to diligently control expenses, boosting overall profitability. A tailwind from lower-than-expected freight costs also bolstered the bottom line. Of course, as management noted Wednesday, they were also able to put the right items in the right stores at the right time. We saw the power of the TJX business model. Same-store-sales (SSS) growth came in at the high end of management's guidance range, driven by an overall increase in customer traffic and positive SSS growth in three of the four operating segments. That included 5% SSS growth at Marmaxx — comprised of the Marshalls and T.J. Maxx brands — which is the company's largest operating division. The strong first-quarter results — coupled with what management described as "a good start" to the current quarter and "phenomenal off-price buying opportunities in the marketplace" — allowed management to raise their pretax profit margin and earnings guidance for the full year. The operating environment undoubtedly remains uncertain for the retail industry, with consumers increasingly cost conscious amid a slowing economy. But we continue to believe that TJX Companies' focus on providing best-in-class value — along with the team's ability to flexibly source product and stock stores with a curated mix of better-and-best brands — puts the company in a position to gain retail market share. As a result, we reiterate our 1 rating on the stock and a price target of $88 a share. Guidance For the 53-week fiscal year ending Feb. 3, 2024, the company reiterated tha