Shoppers at a TJ Maxx store in New York.
Scott Mlyn | CNBC
Cash-strapped consumers may be cutting back on discretionary purchases at Target, but they are still splurging on high-quality brands and home goods at discount retailer TJX Cos..
On Wednesday, TJX Cos. raised its full-year outlook after reporting a strong quarter with a 7.7% year-over-year increase in sales and a 23% rise in profits. The company attributed its success to high customer traffic and the acquisition of premium merchandise from higher-end retailers looking to reduce their inventories.
Here’s how TJX Cos. performed in its fiscal second quarter compared to Wall Street expectations:
- Earnings per share: 85 cents vs. expected 77 cents
- Revenue: $12.76 billion vs. expected $12.45 billion
In the three-month period ending July 29, TJX Cos. reported a net income of $989 million, or 85 cents per share, compared to $810 million, or 69 cents per share, in the same period last year. Sales increased 7.7% to $12.76 billion from $11.84 billion.
TJX Cos. stock reached a new 52-week high, surging over 4% on Wednesday.
TJX Cos., which operates T.J. Maxx, Marshalls, HomeGoods, Sierra, and Homesense in the U.S., raised its full-year forecast for comparable store sales, pretax profit margin, and earnings per share based on its strong quarter.
The company now expects comparable store sales to increase by 3% to 4%. It projects a pretax profit margin of 10.7% to 10.8% and earnings per share between $3.66 and $3.72. Analysts had previously estimated earnings per share at $3.59, according to Refinitiv.
Neil Saunders, managing director and retail analyst at GlobalData, acknowledged that TJX Cos.’s strong quarter can be partly attributed to a favorable comparison with the previous year, which had experienced a decline in sales and comparable store sales. However, TJX Cos. is still gaining market share.
Despite inflation concerns and consumer debt, shoppers are cutting back on high-end and discretionary items, instead choosing to spend their money on services while seeking deals on accessories, clothing, and home goods at TJX’s off-price stores. Traffic increased across all divisions, contributing to the strong quarter.
TJX Cos. has been able to offer a wider range of premium merchandise due to its suppliers, typically full-price, high-end retailers, needing to offload excess inventory.
In a news release, TJX Cos. CEO Ernie Herrman stated, “The third quarter is off to a very strong start and we are seeing tremendous off-price buying opportunities in the marketplace. 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 faced pressure as consumers redirected their spending towards experiences and services after investing in home upgrades during the Covid pandemic. However, TJX’s HomeGoods saw a 4% increase in comparable sales as customers still sought out home decor.
Meanwhile, Target reported its fiscal second-quarter earnings on Wednesday and continues to experience a decline in spending on discretionary items like clothing and home decor. The company reduced its full-year forecast, citing pressure from high inflation in food, beverages, and household essentials.
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