TJX to the Maxx

TJX (NYSE: TJX  ) shareholders should be very pleased. While other retailers struggle with softening results, TJX continues to thrive and just announced yesterday that it will post a third straight month of better-than-expected same-store sales.

As a result, management said the company will also beat its already upwardly revised earnings guidance. Earnings, excluding charges set aside for computer intrusion(s), were set at $0.38 a share, which itself beat out the $0.34-$0.36 in earnings that TJX expected just last month.

Management also increased its outlook for the year to $1.84-$1.88 a share, from $1.80-$1.85. That assumes only a 3%-4% comps increase for the year, and it seems a bit conservative, considering that same-store sales grew 4% in the first half of the fiscal year and 5% in the second quarter.

All of the company's divisions did well. The "Marmaxx" core, consisting of Marshalls and T.J. Maxx, posted a decent 3% rise in same-store sales and accounted for more than 65% of total sales. Overall gross margins for the company improved 60 basis points, to 24%, a result of "improved merchandise margins as well as buying and occupancy expense leverage." The company sold its goods for a higher profit, and increased sales led to higher margins, since the fixed costs were spread over higher sales.

Putting the computer intrusion(s) issue to rest, TJX used some of its cash flow to repurchase stock. The company spent $345 million to buy back 12.2 million shares, and there could be more buybacks on the way, as long as the stock price stays at these levels.

Amidst all of this good news, Wal-Mart (NYSE: WMT  ) just warned about softening results at its stores. The company cited the housing slump and high fuel prices for a weaker outlook for this quarter and the rest of the year. Yet here's TJX knocking down its own expectations. Sure, most of the company's chains target middle- and upper-middle-income consumers, who are more immune to the economic factors than the typical Wal-Mart shopper is, but that's not the whole story. TJX's secret to success is simple: It offers a combination of quality and value. That's a concept that will always be in style.

A proper business model and execution trump everything else at the end of the day. TJX knows that, and that's how it's been able to serve up a pleasant surprise this quarter. You may want to invest now and get in on an early Christmas present.

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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.


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