The owner of Marshalls, TJ Maxx and Home Goods, TJX Cos Inc TJX raised its full year profit on Tuesday as sales soared before the holidays! TJX attracts price-conscious shoppers of luxury brands like Calvin Klein, Ralph Lauren RL and many others sought after brands, offering them at discounts of up to 60%. The Framingham, Massachusetts-based company has been slowly expanding with new store openings and even remodelling of existing ones. As a result of its successful strategy, its shares rose 1.4% before the opening bell.
Third Quarter Earnings Report
With a 4% rise in comparable-store sales, the company already beat the 2.3% Refinitiv estimate and it didn't stop there. Net income rose from $762.3 million in last year's quarter to $828.3 million, respectively from 61 cents per share to 68 cents per share. On average, analyst's expected net sales of $10.32 billion resulting in profit of 66 cents per share whereas the company's net sales increased 6% and rose to $10.45 billion. Customer traffic was the primary driver of the increase and at all four major divisions.
New Investment
On Tuesday, TJX just completed a $225 million investment to acquire 25% ownership in Russian retailer, a privately held Familia. This is Russia's only major off-price apparel and home fashions retailer. This is also the first major M&A purchase in Russia by a western company since Moscow was sanctioned by both US and EU in 2014. The discounted retailer categorized this purchase as an investment opportunity with an established, off-price retailer with significant growth potential in Russia where Familia has more than 275 stores in 90 cities across the country.
Competition
Although TJX's business is definitely not struggling, the landscape is very competitive and the off-price retailer isn't seeing as impressive growth as for example Target Corporation TGT. Macy's Inc M and Nordstrom's JWN earnings are coming up this week as well. Amazon always seems to be around the corner putting an immense pressure with its heavy artillery on all its competitors and there's Walmart Inc's WMT desperate attempt to forge a good fight even in that sector. The company is having an impressive run, both in positive earnings surprises and stock performance as its stock is up nearly 28% this year.
On the other hand, Kohl's Corporation KSS attempt to lure in customers won Wall Street fans but not shoppers. Investors are losing their patience as sales grew at an anaemic rate of 0.4% during the latest quarter. As a result, shares tumbled and even brought Macy's and Nordstrom along. Kohl has even partnered with Amazon.com, Inc. AMZN to offer free returns for customers at stores but the company is losing market share and clearly showing signs that its makeover isn't doing the job intended.
Outlook
The company expects comparable store growth on a consolidated basis to be 3%, the upper range of its previous 2-3% estimate. The fourth quarter is off to a solid start and the holiday season has yet to begin! There are many initiatives underway to keep driving traffic and sales, both to the stores and online during the holiday season and beyond.
The discounted retailer is now expecting a higher full-year profit of $2.61 to $2.63 per share, with its previous forecast being $2.56 to $2.61. Considering the fact this is one of the rare companies that actually benefit from a weakening economy as it becomes a choice for more consumers as their purchasing power decreases, it seems that TJX has bright skies ahead!
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