Earnings and Prospects Speak Greatly About This Retailer

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The TJX Companies (NYSE: TJX) reported its third quarter earnings on Tuesday with an increase by 17% to $0.62 per share compared to the same quarter last year. Sales have improved and risen by 11% to $6.41 billion. In the sluggish U.S. economy the retail sector has done well, especially the discounters, who were market leaders for the budget conscious shoppers opting for the trendy stuff.

Figures

TJX Companies' consolidated comparable store sales have increased by 7.0% in the current quarter, due to same-store sales growth of 7% at Marmaxx, 6% at Home Goods, 11% at TJX Europe and 4% at TJX Canada. Strong performance in all the stores in the U.S., Canada, and Europe, and well-chosen clothing at the stores improved customer traffic during the period and a growth in same store sales. Company’s gross margin expanded mainly because of an increased merchandise margin.

The Bright Side

The consolidated inventories of TJX, including the warehouses, were down by 14% compared to an increase of 14% last year. The current inventory level places the company in an excellent position to ship fresh merchandise to stores throughout the holiday season and shows its excellent inventory management. The company is looking to tap into its efficient supply chain by reducing its inventory levels and by delivering the right goods at the right time.

The company has retired 22.5 million shares, buying back $950 million of stock year-to-date, which should improve its earnings per share. The company expects to have $1.6 billion to $1.7 billion cash at the end of the year, despite buybacks and dividend payments to shareholders.

The company has leveraged its global marketing abilities and plans to be more aggressive with their Gift Card business. The remodeled stores offer customers an upgraded shopping experience which is expected improve sales. TJX has a long-term growth prospects by increasing the number of stores under its current banner in their current geography. A good foothold in Europe gives them immense prospects for international growth.

Looking Around

Ross Stores, (NASDAQ: ROST) TJX companies’ off-beat competitor, should be a bit cautious about their sales growth predictions given the impact of Hurricane Sandy. The company had a healthy third quarter as shoppers were looking for bargains helping Ross Stores net income rise by 11%. The holiday season can make up to 40% of the company’s revenue depending upon the consumer’s behavior in the present economic conditions.

The marketing action of rivals is a source of concern for both Ross Stores and TJX. Both the companies have been affected by Nordstrom’s (NYSE: JWN) discounted Rack stores, which are enjoying higher earnings than both of its rivals. Nordstrom is aggressively investing in e-commerce to drive more growth. The company had a 15% increase in revenue and a 38% increase in internet sales in its third quarter. Nordstrom’s anniversary sale has given them an extra boost during this quarter. The company’s flexible return policy and the attentiveness of its employees differentiate it from its competitors.

Final Words

TJX companies’ have raised its fiscal 2013 adjusted earnings guidance to the range of $2.45 to $2.48 per share, a cent higher than the prior guidance range of $2.44 to $2.47. The company has also raised the estimates for consolidated comparable store sales growth to a range of 5% to 6% for fiscal 2013, up from the previous guidance of 4% to 5%.

TJX has again posted solid comparable store sales and its sales grew because of the higher customer foot-fall in the U.S., Canada, and Europe divisions. The company’s performance in Europe and North America have improved as consumers moved from high-priced branded products to the low-priced items offered by the discount stores. Thus, TJX companies are a promising buy at the moment.


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