In mid-November, TJX Companies (NYSE:TJX) executives were optimistic about their prospects heading into the holiday shopping sales period even though their growth pace had just ground to a halt. Investors will soon find out whether that aggressive outlook was appropriate as the off-price retailer is set to announces fourth-quarter earnings results on Wednesday, Feb. 28.

Let's take a closer look at what to expect from the report.

Two women sharing a secret while shopping.

Image source: Getty Images.

Steady sales growth

Business momentum slowed in the most recent quarter, with comparable-store sales coming in flat after accelerating to a 3% pace in the prior quarter. CEO Ernie Herrman and his team blamed weather for most of that decline. Hurricanes caused temporary store closures, they said, while unseasonably warm temperatures dampened apparel demand at its TJ Maxx and Marshalls brands.

As a result, TJX Companies approached the 2017 holiday shopping season at an unusually weak expansion pace. The flat and decelerating comps contrasts with the prior year, when comps were 5% before accelerating to a robust 6% in the fiscal fourth quarter.

The good news is that key metrics point to healthy growth trends apart from the weather-related slump. Customer traffic was higher across all of its retailing divisions in the third quarter, and profit margin improved, too. Together, these numbers support management's claim that the off-price business model can deliver consistent sales growth and profitability even as department store chains and other retailers struggle. They also form the foundation for management's forecast that comps will rebound into slightly positive territory in the fourth quarter.

Healthy profits

Gross profit margin ticked up by 0.3 percentage points last quarter, and that financial success offset increased spending on wages to keep overall profitably steady. TJX Companies also trimmed its inventory holdings, which left it in an ideal position heading into the holidays. "Our organization sharply executed our off-price fundamentals of opportunistic buying," Herrman told investors in November, "lean inventory discipline, and being strategic and targeted in the flow of merchandise to our stores." It's no surprise, then, that Herman and his team are predicting a solid end to the fiscal year when it comes to profits. 

Executives forecast earnings between $1.25 per share and $1.27 per share in the fourth quarter for a roughly 22% increase over the prior year. After accounting for temporary benefits, adjusted earnings growth should be closer to 12%.

For the year, then, investors can expect reported earnings to rise by around 14% from last year's $3.46 per share haul. Profit gains should be robust even after stripping out one-time factors like an extra sales week. Adjusted earnings are on pace to rise 8% for the full year, compared to a 4% boost in 2016.

Modest outlook

Finally, investors should get their first look at management's expectations for the 2018 fiscal year on Wednesday. This time last year, the company forecast comps gains of between 1% and 2% following 2016's 5% jump that pushed the retailer over $33 billion in annual sales. Assuming customer traffic trends stayed positive, it's likely they'll be a similarly modest prediction for the new year.

That healthy profit growth, meanwhile, should give TJX Companies room to ramp up its cash returns to shareholders. This shift would show up in a larger stock repurchase target, and perhaps another head-turning dividend boost to follow last year's 20% hike.

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