The TJX Companies, Inc. (TJX) led discount apparel and home fashion stocks higher Wednesday after the off-price retailer reported better-than-expected quarterly results. The parent company of HomeGoods, TJ Maxx, and Marshalls swung to a second quarter (Q2) profit of 64 cents per share, recovering from a loss of 18 cents per share in the same quarter last year. Analysts had expected a profit of 58 cents per share. Meanwhile, net sales of $12.08 billion easily surpassed Wall Street's expectation of $11.2 billion and jumped 67% from the year-ago reported figure of $6.7 billion.

Key Takeaways

  • Off-price apparel and home fashion stocks rose Wednesday after TJX Companies surpassed analysts' top- and bottom-line expectations.
  • TJX shares rallied from the top trendline of a symmetrical triangle pattern on above-average volume, indicating buying interest from institutional investors.
  • The share price of Ross Stores, Inc. (ROST) rallied from a 10-month trendline and the 200-day simple moving average (SMA) on heavy volume, suggesting buyer conviction.

TJX's proprietary open-only comparable-store sales measure—which compared sales growth at stores open during the most recent quarter to sales of those stores on the same days in fiscal 2020—grew 20%. The HomeGoods segment led the way on this metric, improving 36% year over year (YoY) as many consumers continued studying and working from home during the pandemic.

Management estimated that temporary COVID-related store closures in Europe, Canada, and Australia during the quarter made a $300 million to $350 million dint in the top line and adversely affected earnings in a band of 5 cents to 7 cents. However, the company said that stores in the United States, Canada, and Europe are operational in the current quarter. As of Aug. 19, 2021, TJX stock has a market value of $88.07 billion and is trading 6.9% higher on the year. Investors also earn a 1.5% dividend yield.

TJX shares broke out from a symmetrical triangle earlier this month, subsequently retracing to the pattern's top trendline before surging higher from that level after the retailer's impressive earnings report. Moreover, above-average volume accompanied the move, indicating buying interest from institutional investors. Those looking to trade the momentum should consider placing an initial stop-loss order at the midway point of yesterday's wide-ranging day and trail the stop under the low of each higher bar until stopped out.

Chart depicting the share price of The TJX Companies, Inc. (TJX)

TradingView.com

A wide-ranging day describes the price range of a stock on a particularly volatile day of trading. Wide-ranging days occur when the high and low prices of a stock are much further apart than they are on a typical day.

Fellow off-price apparel retailer Ross Stores, Inc. (ROST) also added impressive gains Wednesday in the wake of its competitor's impressive quarter. Let's take a look at the company's upcoming earnings.

Ross Stores, Inc. (ROST)

Ross Stores, which operates the Ross Dress for Less and dd's DISCOUNTS brands, is expected to post Q2 earnings of 94 cents per share on revenues of $4.43 billion. This indicates a significant improvement from a reported loss of 18 cents per share on sales of $2.7 billion in the June 2020 quarter. Investors should also be looking for sequential revenue growth from the previous quarter, given the company said at its last earnings call that it expects pent-up consumer demand to provide favorable sales trends through the rest of the year. Trading at $124.05 through Wednesday's close, the stock has a market capitalization of $44.3 billion, offers a modest 0.92% dividend yield, and is trading just 1% higher year to date.

The Ross Stores share price rallied from a 10-month trendline and the 200-day simple moving average (SMA) on heavy volume Wednesday, suggesting buyer conviction. Active traders looking to jump in here should consider setting a profit target around key overhead resistance at $132 and protecting capital with a stop placed just under the blue uptrend line.

Chart depicting the share price of Ross Stores, Inc. (ROST)

TradingView.com

A profit target is a predetermined price point at which an investor will exit a trade for a positive gain. Profit targets are part of many trading strategies that investors and technical traders use to manage risk.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.