TJX Earnings Beat Expectations. Why Off-Price Retail Keeps Winning.

Comparable sales at TJX rose 5% from a year ago, ahead of forecasts. (Scott Olson/Getty Images)

Key Points

• TJX reported adjusted earnings of $1.28 a share, exceeding analysts’ projection of $1.23 for the fiscal third quarter.
• Revenue reached $15.1 billion, surpassing Wall Street’s estimate of $14.9 billion, with comparable sales up 5%.
• TJX raised its full-year comparable sales guidance to a 4% increase and earnings to $4.63 to $4.66 a share.

TJX posted a stronger-than-expected fiscal third quarter and raised full-year guidance, proving again the resilience of the off-price retail model.

TJX reported adjusted earnings of $1.28 a share for the quarter ended Nov. 1, topping analysts’ projections for $1.23 a share, according to FactSet.

Revenue of $15.1 billion was also better than the $14.9 billion Wall Street had penciled in. Total-company comparable sales rose 5% from a year ago, ahead of forecasts for a 3.7% increase.

“We believe this is a testament to our value proposition and treasure-hunt shopping experience, which continue to draw consumers to our retail banners worldwide,” said CEO Ernie Herrman.

The strong third-quarter results prompted TJX to raise its sales and earnings guidance for the full year. The company now sees comparable sales rising by 4% from a year ago. Prior guidance called for full-year comparable sales to be up 3%. Earnings per share will range from $4.63 to $4.66, above the previous forecast for a range of $4.52 to $4.57.

Herrman added that the company’s fourth quarter was off to a “strong start,” which investors take as a good sign that demand will stretech into the holiday season.

“Consumers are certainly looking for value with their discretionary dollars heading into the holidays,” said Brian Mulberry, senior client portfolio manager at Zacks Investment Management. “The fresh inventory at bargain prices continues to draw consumers in, and that trend is likely to continue as spending turns to gift giving items.”

TJX stock hovered between gains and losses in mid-morning trading Wednesday, reversing premarket gains. The reversal may stem from the fact that Wall Street has high expectations for the company, and wanted just a tad more from what was otherwise a very strong report.

Shares have gained 21% this year, and the stock trades at about 29 times next years’ earnings—its highest multiple in just under five years.

“While valuation presents some risk to further upside, TJX represents one of the most consistent comp and earnings growers in an otherwise volatile consumer discretionary backdrop,” wrote Dylan Carden, an analyst at William Blair.

Write to Sabrina Escobar at sabrina.escobar@barrons.com