Cash-strapped consumers may be pulling back on discretionary purchases at Target, but they're spending big on name brands and home goods at off-price TJX Cos.
The discounter raised its full-year outlook on Wednesday after posting a 7.7% year-over-year sales jump and a 23% rise in profits. It cited high customer traffic and a windfall of premium merchandise that it secured from higher-end retailers eager to offload their bloated inventories.
Here's how TJX Cos. did during its fiscal second quarter, compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:
- Earnings per share: 85 cents vs. 77 cents expected
- Revenue: $12.76 billion vs. $12.45 billion billion expected
The company's reported net income for the three-month period that ended July 29 was $989 million, or 85 cents per share, compared with $810 million, or 69 cents per share, a year earlier.
Sales climbed to $12.76 billion, up 7.7% from $11.84 billion a year earlier.
Shares of TJX Cos. reached a new 52-week high on Wednesday, and closed more than 4% higher.
TJX Cos., which runs T.J. Maxx, Marshalls, HomeGoods, Sierra and Homesense in the U.S., raised its full-year outlook for comparable store sales, pretax profit margin and earnings per share following the strong quarter.
The company now expects comparable store sales to climb 3% to 4%. It anticipates pretax profit margin in the range of 10.7% to 10.8%, and earnings per share between $3.66 and $3.72. Analysts had been expecting earnings to be $3.59 per share, according to Refinitiv.
TJX may have had a stronger quarter, but the figures also compared with a prior year when sales had slid 1.9% and comparable store sales had fallen about 5%, Neil Saunders, managing director and retail analyst at GlobalData, noted. Still, the retailer is managing to win market share.
As inflation-weary and debt-laden consumers pull back on high-ticket and discretionary items and use their precious dollars on services, they are still seeking deals and are splurging on accessories, clothes and home goods at TJX's many off-price stores. Traffic increased in all of the company's divisions, driving the strong quarter, the retailer said.
TJX Cos. has been able to offer a wider assortment of premium merchandise because so many of its suppliers, which tend to be full-price, high-end retailers, have been dealing with bloated inventories and offloading more of their stock than usual.
"The third quarter is off to a very strong start and we are seeing tremendous off-price buying opportunities in the marketplace," TJX Cos. CEO Ernie Herrman said in a news release. "Going forward, we continue to see excellent opportunities to grow sales and customer traffic, capture market share, and drive the profitability of our Company."
The home goods sector has been under pressure recently after consumers shelled out to upgrade living spaces during the Covid pandemic and then switched their spending toward experiences and services. Even so, TJX's HomeGoods posted a 4% comparable sales increase as consumers still sought out home decor, throw pillows and other furnishings.
Meanwhile, Target reported fiscal second-quarter earnings on Wednesday and is continuing to see a pullback in spending on discretionary items like clothes and home decor. It slashed its full-year forecast and said consumers still face pressure from high inflation in food, beverages and household essentials.