Shares of the off-price retailer TJX Companies (NYSE:TJX) initially declined after third quarter results for its current fiscal year failed to live up to investor hopes. This has been a tough year for the industry, and even though TJX has enjoyed success with its treasure hunt shopping experience, that hasn't saved the stock from suffering a similar fate to that of its peers.

TJX Chart

Data by YCharts.

Q3 by the numbers


Q3 2017

Increase (Decrease) Over Last Year


$8.76 billion


Earnings per Share



Comparable Store Sales



Total Number of Stores



Chart by author. Data source: TJX Companies quarterly report.

Home Goods posted positive 3% comparable sales, Canada was up 4%, and Europe and Australia were up 1%. However, comparable sales at TJ Maxx and Marshalls in the U.S. -- where the bulk of the company's revenue is derived -- fell by 1%. That left comps flat for the quarter, with a 5.7% gain in total revenue coming from new store openings.

The flat comps were disappointing as investors have grown accustomed to positive foot traffic for years. The third quarter of 2015 and 2016 both notched a 5% increase in comps for the company.

Nevertheless, the bottom line still grew by double digits. Contributing to the increase were lower merchandise costs, lower interest expense from paying off debt, and the company purchasing 2.8% of its outstanding shares since the same quarter last year. The $1.00 earnings per share was at the high end of guidance given during the second quarter report.

The outside of a TJ Maxx at an intersection in an urban setting. People and cars are passing by in the foreground.

Image source: TJX Companies.

A busy quarter ahead

Retail this year has grappled with disruption from the internet and heavy discounting among brick-and-mortar competitors fighting over shrinking foot traffic. The TJX family has been largely immune to those trends until this year, with year-to-date comparable sales mustering only 1% growth.

The company's strategy over the years has revolved around sourcing overstock merchandise at steep discounts and offering it to shoppers as bargain bin inventory. However, with other brick-and-mortar retailers willing to squeeze profit margins to win over patrons, the steady growth TJX has enjoyed the last few years could start to slow.

The busy holiday shopping season is upon us, though, and management thinks full-year comparable sales could still end up as much as 2% higher than 2016. Full-year earnings per share are expected to be up as much as 14%.

Time to stock up?

None of this means that TJX Companies' run is over. The retailer is still finding ways to grow with new store openings overseas and the expansion of its Home Goods concept stateside offsetting weaker traffic.

This year's share price decline and rising profits have left TJX with a trailing price-to-earnings ratio of 19 times and a forward multiple of 16. That implies continued bottom line growth. More importantly, though, is free cash flow -- or money left over after basic operations are funded. That metric has flattened out recently, but price to free cash flow over the last 12-month stretch is at 18.

TJX Price to Free Cash Flow (TTM) Chart

Data by YCharts.

TJX Companies stock itself appears to be approaching discount prices. Company management thinks so too, as it expects to purchase another $250 to $550 million of shares during the final quarter of the year. With the company still on the up-and-up, this recent pullback looks like a great time to buy.

Nicholas Rossolillo has no position in any of the stocks mentioned. The Motley Fool recommends The TJX Companies. The Motley Fool has a disclosure policy.