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Why TJX Companies Inc. Stock Was Climbing Today

By Jeremy Bowman – Updated Feb 28, 2018 at 12:10PM

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Shares of the off-price retail giant surged on a strong fourth-quarter earnings report.

What happened

Shares of TJX Companies Inc. (TJX 0.43%) were moving higher today after the off-price retailer posted better-than-expected results in its fourth-quarter earnings report. Comparable sales and total revenue both impressed, and the company hiked its dividend and announced a new share buyback program. As of 11:31 a.m. EST, the stock was up 7.5%.

So what

The parent of T.J. Maxx, Marshall's, and HomeGoods said that comparable sales increased 4% with strong growth across all of its brands. Revenue increased 16% to $11 billion in the quarter, which included an extra week, beating expectations of $10.76 billion. Adjusted earnings per share increased 16% to $1.19, but that missed estimates of $1.27. 

A woman holding several shopping bags on her arm as she types on her smartphone.

Image source: Getty Images.

Still, investors were willing to overlook that miss due to strong comparable sales growth, a bright outlook for the current year, and more cash being returned to shareholders. TJX said it would raise its quarterly dividend by 25% to $0.39 a share, equivalent to a 1.85% dividend yield, and said it would repurchase $2.5 billion-$3 billion in stock this year.

About the quarter, CEO Ernie Herrman said both comparable sales and earnings per share "meaningfully exceeded expectations," and said customer engagement was up overall and was the primary driver of the comparable sales increase. 

Now what 

Like other retailers, TJX is set to benefit from the new tax law as the company expects a per-share benefit of $0.73-$0.75, meaning TJX sees earnings per share of $4.73-$4.83 this year, up from adjusted earnings per share of $3.85. Without the tax law, EPS would only be set to increase by 4%%-6%. Management said it expects comparable sales to increase 1-2% and for wage hikes to reduce EPS by 2%. In the first quarter of fiscal 2019, the company anticipates EPS of $1.00-$1.02, up from $0.82.

Off-price retailers have generally outperformed the broader industry in recent years. Though TJX has at times struggled, the company seems on track for now.

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

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