Off-price retailer TJX Companies (NYSE:TJX) missed profit expectations when it reported its fiscal first-quarter profits on Tuesday. The market sent its shares down as a result. Unfortunately, a better look at the company's books suggest the market still isn't giving the company enough credit for its consistent results throughout nearly any economic environment. Fortunately, this could mean good opportunities for potential investors. (For background reading on investing in this sector, see The 4 R's Of Retail Investing.)
TUTORIAL: Top Stock-Picking Strategies

TJX First-Quarter Results
In the first quarter of 2011, sales improved 4% to $5.2 billion as total store square footage grew 2%, despite the closure of 38 stores due to the winding down of certain underperforming stores under the A.J. Wright concept. The remaining Wright stores will either be closed down or converted to more successful concepts including T.J. Maxx, Marshalls, and HomeGoods. Same-store sales increased 2% on higher customer traffic, while strong trends in the U.S. offset comp weakness in Canada and Europe that collectively accounted for 22.7% of total sales. Management boasted that "value remains top-of-mind for consumers, regardless of the economic environment" and had the top-line results to back up its claim for the quarter.

Reported profit trends were weaker as operating income fell 19.8% to $438.6 million. Net income also fell 19.8% and declined to $266 million. Share buybacks helped temper the per-share drop as earnings fell 16.3% to 67 cents per diluted share. The results included 8 cents in charges related to winding down A.J. Wright and other store conversion costs. On a recurring basis, earnings were 78 cents per diluted share, falling just below analyst projections.

Outlook for TJX
For the full year, management currently expects to report earnings between $3.70 and $3.82 per share and between $3.81 and $3.93 excluding A.J. Wright store closures and other one-time costs. This represents year-over-year growth in the 9-13% range. Analysts project full-year sales growth just north of 5% and total sales of almost $23 billion.



MORE RELATED READING:



The Bottom Line
TJX has an impressive record of leveraging mid-single-digit sales growth into double-digit profit growth. It has accomplished this over the past three, five, and 10-year time frames and is on pace to do the same during fiscal 2011.

Myopic-minded investors sent the stock down more than 4% after the earnings miss, but TJX is still bumping up its highs over the past year, while trading at a reasonable forward P/E of about 13 (assuming it hits the high-end of its earnings guidance).

Based on the company's track record, it's clear that consumers do like shopping for bargains in any economic climate. Currently, spending trends are favoring higher-end retailers including Saks (NYSE:SKS), privately-held Neiman Marcus, Nordstrom (NYSE:JWN) and middle-market firm Macy's (NYSE:M). Nevertheless, TJX is doing just fine, as is rival Big Lots (NYSE:BIG) in the home goods space, and both have downside protection as they tend to pick up shoppers during economic downturns too.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  2. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  3. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  4. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  5. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  6. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  7. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  8. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
  9. Stock Analysis

    The Safest Stocks You Can Invest in Right Now

    These stocks are likely to hold up better than others in a bear market, but there's a twist.
  10. Investing Basics

    5 Reasons to Expect Lower Stock Returns

    Lower stock returns are likely here to stay for some time. Here are five reasons why.
RELATED TERMS
  1. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  2. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  3. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  4. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  5. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
  6. Impact investing

RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!