TJX Companies Ups September Sales, Boosts Guidance

| About: TJX Companies (TJX)

The TJX Companies Inc. (TJX) reported same-store sales of 1% for the five-week period ended October 2, 2010. This indicates continued positive momentum of same-store sales so far in 2010. Sales in the concerned period upped 6% to $2.1 billion from $2.0 billion in the five-week period ended October 3, 2009, driven by an increase in store traffic.

Even though the company witnessed increased traffic, same-store sales in September were somewhat affected by warm and wet weather during the last week of the month, which had a detrimental effect on sales in the Northeast and Mid-Atlantic.

TJX September same-store sales results were in line with Target Corp.’s (TGT) September same store sales of 1.3%. However, TJX performance could not match the same store sales increases of 3% at Kohl's Corp. (KSS) and 6.9% at Macy's Inc. (M), which had one of the best back-to-school seasons in years.

On a 35-week period basis ending on October 2, 2010, TJX consolidated same-store sales increased 5%. For the period, TJX recorded sales of $13.8 billion, reflecting a 9% year-over-year increase. In August, TJX same-store sales increased 2% with sales increasing 6% year over year to $1.7 billion.

TJX fiscal second-quarter adjusted earnings per share came in at 73 cents, matching the Zacks Consensus Estimate, but were well ahead of 61 cents posted in the year-ago quarter.

During its second quarter earnings call, the company had guided third quarter earnings per share in the range of 86 cents to 91 cents. Following the declaration of September same store sales, TJX raised the lower end of its guidance to 89 cents, with sales results progressing as per its expectations and continued strength in merchandise margins.

The company’s third quarter earnings per share expectation currently stand in the 89–91 cent-range. The Zacks Consensus Estimate for the third quarter is currently pegged at 90 cents.

Buoyed by the quarterly results, TJX increased its adjusted earnings guidance for fiscal 2011 to a range of $3.27 to $3.37 per share from the earlier outlook of $3.24 to $3.33 at its earnings call. The Zacks Consensus Estimate for the third quarter currently stands at $3.36 per share, implying that analysts expect TJX to reach the upper end of its guidance.

TJX is set to enter the third quarter with leaner inventory, which will enable it to opt for other brands and improve its offerings. With wide geographical coverage, transformation of stores, product enhancement and increased awareness programs, TJX continues to attract new customers and retain old customers, thereby improving customer traffic.

However, intense competition across its various segments is a matter of concern. We have a Zacks #3 Rank (short-term Hold recommendation) on the stock. We also reiterate our long-term Neutral rating.

Framingham, Massachusetts-based TJX is a leading off-price retailer of apparel and home fashions in the U.S. and worldwide. The company aims to deliver a rapidly changing assortment of quality, brand name merchandise at prices that are 20–60% less than department and specialty store regular prices. The company operates 912 T.J. Maxx, 825 Marshalls, 329 HomeGoods, and 158 A.J. Wright stores in the United States.

Additionally, the company operates 211 Winners, 80 HomeSense and 3 STYLESENSE stores in Canada, and 295 T.K. Maxx and 24 HomeSense stores in Europe.