TJX Companies (NYSE:TJX) will kick off its new fiscal year with a first-quarter earnings report due out before the market opens on Tuesday, May 22. Expectations are high, given the off-price retailer's recent sales growth rebound and new plans for higher cash returns to investors.

But TJX Companies will have to justify its premium stock price by showing improvements in its operating and financial results next week. Here are some of the trends that show how well the retailer is succeeding on these points.

Two customers shopping for clothes.

Image source: Getty Images.

Steady sales growth

Like its industry rival Ross Stores (NASDAQ:ROST), TJX Companies managed healthy sales growth in 2017, punctuated by accelerating gains over the critical holiday shopping period. Customer traffic was positive across its core TJ Maxx and Marshalls brands in the fourth quarter, leading to a 3% increase in comparable store sales, or sales at existing locations. Ross Stores posted a more robust 5% boost, and TJX Companies also modestly underperformed Target, which grew comps by 4% over the holidays.

CEO Ernie Herrman and his team are targeting a 2% comps improvement in 2018, which would match last year's pace and keep steady with 1% to 2% increase that Ross Stores is expecting for the year. Executives said back in March that consolidation in the full price segment of the retailing industry is creating "abundant opportunities" for its buyers to pack its shelves with high quality merchandise, and so investors will be looking for signs of continued success here in the form of modestly positive comps and rising customer traffic.

Higher profits

Its off-price sales model produces consistent growth (revenue has ticked up at existing locations in each of the last 22 years) -- but also generates impressive earning power. TJX Companies' $2.6 billion of operating income last year drove a slight increase in bottom line profitability as net margin ticked up to 7.3% of sales from 7% a year ago. That put the retailer solidly ahead of full-price rivals like Target and Walmart, yet still behind apparel specialist Ross Stores.

ROST Profit Margin (TTM) Chart

Data source: ROST Profit Margin (TTM) data by YCharts.

Investors are hoping that its growing sales base will help TJX Companies continue its streak of modest profitability increases this year. Specifically, they're looking for gross profit margin to tick up from the current 29% rate.

Given the positive customer traffic trends, management saw room for a "significant" increase in this metric back in March, and we'll find out this week whether that's still the case today.

Rising cash returns

TJX Companies' generates plenty of cash each year, but that flow should be larger than normal in 2018. Tax law changes will boost net income, for example, while freeing the company to move at least $1 billion from its Canadian business into the U.S. segment.

Management is directing a large chunk of the resulting cash windfall toward the business through moves like higher wages, enhanced vacation benefits, and one-time bonuses. Investors stand to get significant increased returns, too, through a planned doubling of stock repurchase spending this year even as quarterly dividend payouts rise by 25%.

Look for executives to issue updated guidance on these capital spending plans as management tries to strike the right balance between investing in future growth and rewarding its shareholders.

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.