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.)
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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.

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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.

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