TJX Posts a Solid First Quarter

Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Economic headwinds or no economic headwinds, discount retailers keep delivering value to shareholders. This was once again reaffirmed when The TJX Companies (NYSE: TJX) beat Mr. Market’s expectations in the first quarter and followed it up with an upgraded guidance. Investors greeted the company’s performance with joy, sending shares up by roughly 7%.

We will now take a look at TJX’s performance in the quarter and see how it can continue delivering value in future.

The quarter in brief

TJX saw more customers throng its stores in the just-concluded quarter. As a result, the company’s comparable store sales increased by 8% from last year and drove revenue 11% north to $5.8 billion in the quarter. Management attributed the increase in comp store sales to TJX’s wide range of offerings and merchandise mix, enabling it to strike a chord with greater number of customers in the quarter.

However, it was the comp stores performance in Europe that deserves a special mention. TJX’s same-store sales in the region grew 13% in the quarter, which is undoubtedly impressive considering the economic climate prevailing in the region. The company expects its positive streak in Europe to continue and is focused on attracting more customers to its stores.

Moving ahead

Management laid great stress on raising the bar during the conference call. The company is focused on giving consumers the correct product at correct prices. Moreover, younger customers have been walking into the company’s stores and this bodes well for the future since they would probably be forming the next generation of customers.

Also, TJX stands without any major competition in the European market where it is the only major off-price retailer. Thus, there is still a lot of market left to tap for the company. The company is also expanding globally and expects to increase its square foot area by some 4% to 5% every year for the next three years.

Final thoughts

TJX has upgraded its full year guidance and now expects to post a profit between $2.27 and $2.37. The company is trying to bring more customers to its stores and is looking to move further into the markets it hasn’t completely explored.

Off-price retailers usually do well even when the economy is in a soup, showing recession-proof characteristics. And TJX is certainly not alone in its moment of happiness as its peer, Target (NYSE: TGT), just released results that came in ahead of the Street’s expectations. In addition, like TJX, Target also raised its outlook, sending out a signal that discount retailers might continue with their impressive performance going forward.  

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