We’re raising our price target on TJX after it delivered for bargain-hunters and investors

TJX Companies on Wednesday held up its end of the bargain for consumers and investors — delivering a great quarter and strong guidance. It’s no wonder shares of the off-price retailer — already up 21% for the year before the release — were jumping another roughly 6% in afternoon trading and heading for record high close. Sales during TJX’s fiscal second quarter ended Aug. 3 rose 5.6% year-over-year to $13.47 billion, beating the LSEG-compiled consensus estimate of $13.31 billion. Adjusted earnings per share advanced 12.9% on an annual basis to 96 cents, exceeding the EPS estimate of 92 cents. TJX Companies Why we own it: The owner of T.J. Maxx, Marshalls and HomeGoods is well-suited for the current economic environment, offering inflation-wary customers wide-ranging merchandise at compelling prices and a “treasure hunt” in-person shopping experience. The struggles and store closures of other retailers benefit TJX’s inventory and market share. The company also has been working to expand margins. Competitors: Ross Stores and Burlington Stores Last buy: May 2, 2024 Initiation: Aug. 24, 2022 Bottom Line TJX Companies certainly met the moment. The company’s ever-increasing ability to attract deal-hungry shoppers was on display, with a 4% increase in quarterly comparable store sales entirely driven by more purchases rather than higher prices. TJX is pairing that flourishing customer appeal with its well-oiled corporate operations, enabling the company to deliver the financial results that investors have come to expect. With Wednesday’s results in hand, the off-price retailer has now delivered top- and bottom-line beats in four straight quarters. Gross margin of 30.4% in the second quarter exceeded estimates and was up from 30% in the first quarter. TJX’s largest and most important segment by far — T.J. Maxx and Marshalls stores in the U.S., referred to as Marmaxx — easily beat revenue estimates. The monthly pace of sales, known as cadence, was encouraging, as well. TJX upped its full-year outlook on pretax profit margin and earnings per share. While still a bit shy of Wall Street estimates, we’re not concerned. Not only is executives’ conservatism with guidance well-documented, but on Wednesday’s earnings call, they were upbeat about the trends in the current fiscal third quarter so far and the chunk of the holiday shopping season contained in the fourth quarter. TJX YTD mountain TJX Companies’ year-to-date stock performance. Inventory is the lifeblood of TJX’s business. Is it able to acquire the clothes, shoes and home decor people want to buy and spend time in the stores hunting for? Executives said Wednesday the answer to that question, as it has been for a few years now, is a resounding yes. CEO Ernie Herrman said the availability of branded merchandise is “outstanding,” adding that he’s confident the company will have an “exciting” selection of merchandise for the fall and holidays. TJX has “access to more goods than we could ever buy,” Herrman said — echoing commentary from the prior call about tighter relationships with vendors, which increasingly see off-price retail as an important part of their own businesses. The company has also seen traction in its expanding consumables selection — such as food and drinks sold along its checkout lines — and the increased perception of its stores as year-round gift-buying destinations. It’s abundantly clear that TJX remains one of the best-positioned retailers for the current economic environment. Concerns about the health of the U.S. consumer, worn down by years of elevated inflation, have not disappeared, which plays into the hands of companies with reputations for providing good deals, such as TJX and fellow Club holding Costco , for that matter. On top of that, the enduring struggles of department store chains like Macy’s — which on Wednesday cut its full-year guidance and has been shuttering stores — create a void in the retail landscape that TJX and other off-price players can continue filling. In fact, TJX opened its 5,000th store in the second quarter — and executives on the call reiterated that they see an opportunity to open another 1,300 locations under the company’s current nameplates in existing markets. Put it all together, TJX is thriving and taking share. We’re increasing our price target to $130 per share from $115. We don’t like to chase hot stocks. So, we’re keeping our 2 rating , meaning we would want to see a pullback in shares before considering further buys. Guidance TJX’s fiscal third-quarter guidance came in a bit short of expectations, but that has tended to be the case with this management team. They have regularly under-promised, only to over-deliver later. In the past 10 quarters going back to April 2022, including Wednesday’s report, TJX has reported EPS above the high end of its guidance range eight times. In the remaining two instances, it matched the high end. On a full-year basis, the company lifted its pretax profit margin forecast to 11.2%, up from a range 11% to 11.1% previously. The EPS outlook was raised to a range of $4.09 to $4.13, compared with the old range between $4.03 to $4.09. TJX now expects comparable store sales to increase by 3%. Previous guidance called for growth between 2% and 3%. Quarterly commentary Across the company, comparable-store sales were up 4%, above the high end of management’s guidance range 2% to 3%, and well ahead of the 2.8% consensus estimate. Growth was reported across all divisions: Marmaxx , which includes Marshalls and T.J. Maxx, was up 5% year over year, an acceleration from the 2% growth seen in the company’s first quarter of fiscal 2025. HomeGoods advanced 2%, a deceleration from the prior quarter’s 4% rate. TJX Canada rose 2%, decelerating from the 4% rate seen in the prior quarter. TJX International gained 1%, below the last quarter’s 2% rate. As seen in the chart above, overall sales for HomeGoods, TJX Canada, and TJX International fell short of analysts’ projections. But the misses were relatively small and easily offset by the strength in Marmaxx. Cost of sales and selling, general and administrative expenses also were slight misses, but didn’t get in the way of a bottom-line beat. TJX returned $982 million to shareholders in the quarter, nearly $100 million more than in the first three months of its fiscal year. The company bought back $559 million worth of stock and paid out $423 million in dividends. (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.

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