T.J. Maxx owner raises full-year guidance, posts 5.6% sales gain for the most recent quarter (2024)

TJX Cos. raised its full-year guidance on Wednesday after posting another quarter of strong sales, but its outlook still fell just short of Wall Street's expectations.

The discounter behind Marshalls, HomeGoods and T.J. Maxx is now expecting full-year earnings to be between $4.09 and $4.13, compared with estimates of $4.14, according to LSEG.

For the current quarter, TJX is expecting earnings per share to be between $1.06 and $1.08, compared with estimates of $1.10.

So far this earnings season, retailers that disappoint with guidance haven't seen much negative impact to their shares, suggesting investors are prepared for uncertainty in the second half of the year ahead of the U.S. presidential election and a potential rate cut from the Federal Reserve. Shares of TJX rose nearly 6% in afternoon trading.

Here's how the discounter did for the fiscal second quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: 96 cents vs.92 cents expected
• Revenue: $13.47 billion vs. $13.31 billion expected

The company's reported net income for the three-month period that ended Aug. 3 was $1.1 billion, or 96 cents per share, compared with $989 million, or 85 cents per share, a year earlier.

Sales rose to $13.47 billion, up from $12.76 billion a year earlier.

Throughout TJX's fiscal 2024 year, which ended in February, the company posted strong sales gains and robust guidance, but investors have been keen to see how it will lap those numbers in the quarters ahead and if it can keep growing.

The company has looked abroad as a primary growth avenue and on Wednesday, it announced that it was taking a 35% ownership stake in the Dubai-based retailer Brands for Less for $360 million. The privately held brand is the region's only major off-price player and operates more than 100 stores, primarily in the United Arab Emirates and Saudi Arabia, along with an e-commerce business, TJX said in a news release.

"As TJX seeks to continue its global growth, this transaction gives the Company an opportunity to invest in an established, off-price retailer with significant growth potential," TJX said. "The Company's ownership in BFL is expected to be slightly accretive to earnings per share beginning in Fiscal 2026."

Europe has been more challenging for TJX, especially the U.K., according to CEO Ernie Herrman.

"We were a little disappointed in our Europe business," Herrman said in the earnings conference call. "A decent size of that is our own execution."

Nonetheless, Herrman said TJX is on the right path forward.

During the quarter, consolidated comparable store sales increased by 4% and were "entirely driven by an increase in customer transactions," indicating more shoppers are coming to its stores, TJX said. That jump is ahead of the 2.8% uptick that analysts had expected, according to StreetAccount.

The growth was primarily driven by TJX's Marmaxx division in the U.S., which includes TJ Maxx, Marshalls and Sierra stores. During the quarter, Marmaxx comparable sales were up 5%, compared with estimates of up 2.9%, according to StreetAccount. HomeGoods posted comparable sales up 2% — short of the 3% that analysts had been looking for, according to StreetAccount — as the overall home furnishings market remains stagnant.

TJX also benefited from operational improvements and lower freight costs, though those were partially offset by higher supply chain costs, according to CFO John Klinger.

As Marmaxx gains momentum, Klinger said the company has "opportunities to keep growing our largest division."

In the current quarter, performance is already "off to a strong start," said Herrman.

"We see excellent buying opportunities in the marketplace and are strongly positioned to ship fresh and compelling merchandise to our stores and online throughout the fall and holiday selling seasons. We marked a milestone for our Company in the second quarter by opening our 5,000^thstore," said Herrman. "Longer term, we are excited about our potential to capture additional market share in all of our geographies and to continue our global growth"

As of Tuesday's close, TJX's stock is up about about 21% year to date. The shares reached a new high in May after the company reported strong quarterly earnings.

The retailer has been taking market share from competitors like Target and Macy's and has become a haven for price-sensitive consumers who may be watching their dollars but still want to spring for new clothes.

"Consumers will keep seeking value," said Herrman.

In May, Herrman said the company is winning in part because it's "become a cooler place to shop" and has made inroads with younger Gen Z customers, who tend to be more concerned with snagging good, high-quality deals than shopping at high-end names.

In Wednesday's earnings call, Herrman said TJX is attracting an "outsized number" of younger customers.

Some analysts say the nature of TJX's business model means it does well in any economic environment. In good times, its core lower- to middle-income consumer has the extra cash to buy discretionary items like new clothes, shoes and home decor and in bad times, higher-income shoppers come to its stores looking for deals on the branded clothes they're accustomed to.

Even as consumers face rising prices at places like the grocery store, Herrman and Klinger said TJX's average selling prices have been "pretty consistent."

"If you look at our merchandise market, the story is becoming more about the buying better, and not just the retails," Herrman said.

However, a sharp downturn in consumer spending, which some analysts have warned may be ahead, could impact the company regardless of its value offering.