Timeless Style at TJX

TJX (NYSE: TJX  ) runs a simple but effective business: It targets middle- and upper-middle-income consumers at most of its chains, including T.J. Maxx, Marshalls, and A.J. Wright, and it offers them high-quality, name-brand merchandise at a discount. And offering quality and value will never go out of style. Nor will good financial news, like a 5% increase in July same-store sales -- a performance that knocked the socks off Wall Street's 3.5% expectations.

Comps at TJX beat expectations for at least the third straight month, and management now expects earnings to come in above the high end of the latest estimate. The company's latest earnings report comes out tomorrow.

Last month, management boosted its earnings expectation by $0.02, to $0.34-$0.36 a share -- not including charges related to the notorious "computer intrusion(s)" of recent months -- in response to a better-than-expected June comps increase of 5%. This good performance and the continued optimism further illustrate that a solid business model combined with good execution gets sales, even in a challenging retail environment.

By way of comparison, Kohl's (NYSE: KSS  ) same-store-sales were flat, for a second consecutive quarter of disappointing comps. There are specific issues this company faces, such as sales items being out of stock. Macy's (NYSE: M  ) , meanwhile, suffered a 1.4% comps decline of its own. And speaking of specific issues, this company sometimes has to compete against itself as a result of the May-Federated merger -- there are often different stores on different ends of the same mall, particularly in the densely populated Northeast and in California. These troubles can only benefit TJX. Simplicity sometimes really is the best.

TJX appears to have put the "computer intrusion(s)" behind it. (What's up with the "s" in parentheses, TJX?) The computer system that was breached is responsible for processing and storing information related to credit and debit cards, checks, and merchandise returns. Even though customer information was stolen, shoppers appear to have continued patronizing the store without fear of identity theft.

The only surprise shareholders will get with tomorrow's earnings report is going to be positive. At a trailing price-to-earnings ratio of 18, the price looks like a bargain. But as long as it continues performing well, the sale won't last for long.

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Fool contributor Larry Rothman is happy to receive feedback, and he promises to read it when he's not being wrestled by his three children. Feel free to email him at rothmanviews@comcast.net. He doesn't have any positions in the companies mentioned. The Fool has a disclosure policy.


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