TJX Beat Wall Street Estimates Yet Again

The TJX Companies (TJX 0.76%) is an American retailer specializing in apparel, accessories, and home furnishings. Founded in 1956 and headquartered in Framingham, Massachusetts, TJX purchases high-end brands in bulk from a variety of retailers to resell at discounted prices. Currently, TJX operates seven department store chains under the brand names T.J. Maxx, HomeGoods, Marshalls, Sierra Trading Post, HomeSense, Winners, and T.K. Maxx.

The continuous expansion of TJX throughout the United States, Canada, and Europe has been quite successful thanks to positive sales growth over the past several years. Its valuable selection of products and its dynamic pricing strategy are a winning combination, and it has been doing increasingly better despite difficult economic conditions. In its third quarter earnings report released Tuesday, Nov. 19, TJX once again exceeded market expectations and raised its guidance for fiscal year 2014.

Quarterly results
TJX' third-quarter fiscal results provided great excitement for investors while surprising analysts and surpassing their predictions. The company reported earnings of $623 million, or $0.86 per share. For the past ten quarters, in fact, the company has reported positive earnings-per-share growth. This proved, yet again, the company's ability to maintain strong growth despite economic and environmental factors. In addition, adjusted EPS was up 21% at $0.75 over the third quarter last year, surpassing Wall Street's estimates by $0.01.

As for net sales, TJX also surprised Wall Street by reporting that quarterly revenue increased by 9% to $7 billion; Wall Street expected net sales to only reach $6.91 billion. Most importantly, TJX' comparable same-store sales growth is doing extremely well, unlike that of other retailers. The company reported Tuesday that its comparable same-store sales, which include T.J. Maxx, Marshalls, and HomeGoods, rose by 5%. This was slightly worse, however, than its second quarter results when same-store sales increased by 7%.

HomeGoods had the best comparable sales growth for the quarter at 10%. TJX understands that money is tight right now for lots of people, and customers want great value on leading brands without the added costs. The company is confident that it has the best ability to deliver value to consumers going forward.

Looking forward to the fourth quarter
For the fourth quarter, TJX remains hopeful but realistic due to the holiday shopping season's shortened time-frame (by six days). As such, TJX only expects a 1% to 2% increase in comparable store sales. To combat a shortened holiday season, TJX has exciting promotions and marketing campaigns in the works to draw consumer traffic, as well as new shipments of holiday gifts not yet unleashed in stores that consumers will love.

Thus far, TJX has stayed within its projected fourth quarter EPS range of $0.77-$0.80. It earned $0.82 a share in the fourth Quarter last year. Analysts expect TJX to earn upwards of $0.85 per share despite fewer shopping days this year. Even though the holiday shopping season will be shorter, TJX increased its full year EPS estimate to $2.91-$2.94 whereas in October, the company predicted EPS between $2.89-$2.93. Both figures are much higher than the company's full year EPS last year of $2.55. The company believes its overall selection and bargain prices outweigh its competitors' offerings now and in the long-term future.

Doing it for the discounts
TJX' most direct competitor is none other than Ross Stores (ROST 1.17%), followed by Kohl's (KSS 1.49%). Like TJX, which places two of its brands, T.J. Maxx and HomeGoods, side-by-side within a large retail space, Ross Stores also pairs two of its stores together – Ross Dress For Less and dd's Discounts. Kohl's, though, takes the No. 1 place in terms of size. It is the largest department store chain in the United States as of February 2013 with 1,506 stores. As for "off-price" retailers, TJX is the largest with 3,050 stores worldwide, followed by Ross Stores in third place with a total of 1,227 stores as of February 2013. 

Given that we know what TJX reported on Nov. 19, let's take a look at how Ross Stores and Kohl's have been faring:

REVENUE

EARNINGS PER SHARE

TJX, given its large size, is performing well and its earnings growth compared to last year has been impressive. Ross Stores' expected growth on the top and bottom lines is also comparable to TJX. Kohl's, on the other hand, isn't performing as well with negative growth in both the revenue column and earnings per share; it could take a few pointers from its competitors.

My Foolish opinion 
TJX is performing extremely well, especially given the company's large size at over 3,000 stores. Investors should continue to expect the company to perform well, especially because consumers remain extremely focused on finding bargains in the current economy. It should be noted that Ross Stores has a lot of room to grow compared to its much bigger cousin. The company has no locations in New England, parts of the Midwest, Asia, and Europe. This combined with the fact that Ross is expected to grow at a decent rate this quarter compared to last quarter makes the company worthy of consideration by investors. Kohl's has been suffering as of late, and investors should hold off until it finds a way to improve its results.