When TJX Companies (TJX) reports quarterly results this week, we expect the off-price retailer to demonstrate continued momentum on both its top and bottom lines, helped by consumers looking for solid deals in an uncertain economic environment. TJX — which operates discount department stores T.J. Maxx, Marshalls and HomeGoods — is set to release results for the third quarter of its fiscal year 2024 on Wednesday before the opening bell. And we’re confident management can deliver a further expansion of gross margins as wary American consumers look for value at TJX’s popular off-price chains. For the three months ended Oct. 28, TJX’s total revenue is expected to climb 7.4% year-over-year, to $13.07 billion, according to analyst estimates compiled by LSEG. Earnings-per-share (EPS) should come in at 99 cents, LSEG data showed, up 15% on an annual basis. TJX’s results come as U.S. consumers face a higher interest-rate environment — making credit more expensive — and ongoing, if easing, inflation. But the company’s business model makes it uniquely positioned to weather those challenges and attract fresh customers — allowing it to opportunistically buy up designer wares from prior seasons and sell that merchandise at a discount. Increased consumer traffic Over the past year, TJX has been attracting more customers to its stores, as evidenced by higher ticket transactions — an important indicator of higher comparable-store sales growth. “Traffic remains the primary driver for comp in off-price,” Barclays said in a recent research note previewing earnings for TJX and peers Ross Stores (ROSS) and Burlington Stores (BURL). Barclays, which says the off-price sector is in a “golden moment,” expects TJX to have captured increased wallet share from existing customers last quarter, as well as new customers from a higher-income cohort. “Our data checks support evidence of trade-down from higher-income consumers into the off-price channel, with the most notable trade-down at TJX and ROST,” analysts at Barclays wrote. The firm predicts mid-to-high single-digit comparable-sales growth at the Marmaxx division — which includes both T.J. Maxx and Marshalls — and low-to-mid single-digit growth at HomeGoods. Merchandise opportunities TJX has been able to sell high-quality merchandise, as many cash-strapped mainstream retailers have been forced to sell excess brand-name and designer inventory. Indeed, traffic at TJX’s stores has been driven by a “very compelling” assortment of goods, Dana Telsey, CEO and chief research officer of Telsey Advisory Group, told CNBC. And in a recent research note, Telsey’s firm noted that TJX “continues to make progress on inventories supported by strong demand and a favorable off-price buying environment.” When TJX last reported in August, management said “the marketplace is loaded with outstanding buying opportunities” and that it’s confident it can “continue to offer a terrific mix of brands and an outstanding assortment of gifts to our shoppers during the fall and holiday selling seasons.” Higher profits In addition to delivering higher sales, TJX continues to show improved profitability — a trend we expect to accelerate when the company reports on Wednesday. Telsey expects TJX’s continued gross-margin benefit seen in the first half of the year to have been a tailwind through its fiscal third quarter. She sees at least 120 basis points of gross-margin leverage, but added that figure “could be higher, mainly driven by lower freight costs and the benefit and leverage they get from top line sales growth.” At the same time, according to Telsey, TJX faces headwinds from incremental store wage and payroll costs. But “given the increased traffic, they’re able to offset that,” she argued. (Jim Cramer’s Charitable Trust is long TJX. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Shoppers come and go the TJ Maxx store at the Mall at Prince George’s on August 17, 2022 in Hyattsville, Maryland.
Chip Somodevilla | Getty Images
When TJX Companies (TJX) reports quarterly results this week, we expect the off-price retailer to demonstrate continued momentum on both its top and bottom lines, helped by consumers looking for solid deals in an uncertain economic environment.
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