TJX Companies (NYSE:TJX) announced second-quarter results this week that demonstrated the ability of its value-based business model to generate steady growth in a weak retailing industry.

Here's how the latest headline numbers compared to the prior-year period:

 Metric

Q2 2017

Q2 2016

Year-Over-Year Change

Revenue

$8.36 billion

$7.88 billion

6%

Net Income

$553 million

$562 million

(2%)

EPS

$0.85

$0.84

1%

Data source: TJX financial filings.

What happened this quarter?

TJX's broad results were strong as sales growth sped up and the company enjoyed rising customer traffic and increased merchandise margins.

Two women shopping for clothes.

Image source: Getty Images.

Here are the highlights of the quarter:

  • Comparable-store sales growth accelerated to a 3% pace from 1% in the prior quarter. TJX posted increased comps in each of its four divisions, led by a 7% spike in the HomeGoods brand.
  • Gross profit margin fell by nearly a full percentage point, but the core merchandising margin increased.
  • Rising labor costs boosted expenses, which contributed to a 0.9 percentage-point dip in net profitability.
  • Net income slipped slightly, but increased on a per-share basis due to a falling share count.
  • Stock repurchase spending sped up to $550 million from $350 million in the prior quarter.
  • TJX added 51 stores to its base, equating to a 5% boost in selling square footage.

What management had to say

Management said the results illustrated fundamental strength in the business. "Customer traffic was up and was the primary driver of our comp store sales growth at every division," CEO Ernie Herrman said in a press release. "Overall merchandise margin was up," he continued, while pointing out that executives are "confident that we are gaining market share at each of our four major divisions."

Executives say the company is ideally positioned to capitalize on the growth struggles of other retailers as they look to reduce their inventory levels. "We see exciting opportunities for our business in the second half of the year," Herrman said. The retailer has plenty of resources available to make aggressive moves, too, thanks to its lean inventory position and ample liquidity. "We believe we are set up extremely well to take advantage of the abundant buying opportunities in the marketplace."

Looking forward

Those attractive inventory opportunities helped convince the executive team to boost their profit outlook for the second time this year. TJX is now calling for earnings to rise to between $3.89 per share and $3.93 per share, up from the prior target range of $3.82 per share to $3.89 per share. That would translate into a 13% profit improvement at the midpoint of guidance.

Meanwhile, investors can expect to see a steadily declining share count as Herrman and his team raised their stock repurchase spending target to between $1.5 billion and $1.8 billion in fiscal year 2018.

TJX doesn't issue detailed sales growth guidance, but it's likely that the positive comps momentum will continue, especially since the company is enjoying increased customer traffic and rising merchandise margins right now. Those encouraging trends imply additional market share gains ahead for the leader in the off-price retailing niche.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends The TJX Companies. The Motley Fool has a disclosure policy.