Investors have some well-founded worries when it comes to buying shares of most national retailers. The industry is characterized by low profit margins and intense competition, after all. Disruption from e-commerce is intensifying those risks, too, making it harder to find companies with advantages that will endure over the next decade and beyond.

If those concerns have you avoiding the industry altogether in hopes of finding more predictable earnings growth elsewhere, you might want to reconsider that decision. TJX Companies (NYSE:TJX) offers investors a compelling mix of sales strength and profitability -- all wrapped up in a business model that has delivered through a wide range of retailing environments.

Two women share a secret while shopping.

Image source: Getty Images.

Winning again

The off-price retailing giant just closed out a strong fiscal 2019 that illustrated many of those assets. Sales growth at its existing store base of more than 4,000 shops sped up to 6% from 2% in the prior year. TJX supplemented those gains by adding 236 new locations to its global footprint, which today stretches across the U.S., Canada, Europe, and Australia.

That result was good enough to beat Target (NYSE:TGT), whose 5% comp sales increase marked its best performance in over a decade. TJX outperformed Target without the assistance of booming e-commerce sales, too, since it does not include those gains in its reported comparable-store sales figures. Strip out digital sales, and Target's comp sales growth would have been a more modest 3.2%. In contrast, TJX notched a 7% increase at its core T.J. Maxx and Marshalls brands last year.

Check out the latest earnings call transcript for TJX Companies.

Earning profits

Like most of its rivals, TJX is dealing with profitability challenges driven by higher supply-chain costs and increased wages. The off-price giant has added to that pressure by aggressively boosting compensation for employees, including by offering perks like paid parental leave and longer paid vacations.

The fact that these issues haven't seriously hurt margins is a testament to TJX's flexible off-price selling approach. Gross margin held steady at about 29% of sales last year, as the company took advantage of plenty of attractive inventory buying opportunities. And in contrast to Target and Walmart, which are spending billions on building massive digital fulfillment networks, TJX has seen its expenses rise more modestly, mainly due to added labor costs.

The future

CEO Ernie Herrman and his executive team believe their latest results demonstrate how physical shopping will remain a huge growth avenue in the years ahead. That's why the company believes it can expand to over 6,000 stores in just its existing markets over time, up from about 4,300 today. At the same time, TJX's flexible and constantly rotating inventory assortment of apparel and home furnishings should keep it relatively protected from online-only challengers, just as it has in recent years.

In fact, the company recently closed its 23rd consecutive year of comparable-store sales growth, which is a claim that neither Walmart nor Target can make.  

Not coincidentally, TJX has raised its dividend in each of the last 23 years, including an 18% hike in 2019 and a 25% boost in the prior year. Two more raises and the company will qualify as one of just a handful of retailers in the exclusive Dividend Aristocrat club. That type of winning streak strongly suggests durable competitive advantages, especially when considered with the retailer's accelerating market share gains in recent years.