All the key operating trends are moving in the right direction for The TJX Companies (NYSE:TJX). The off-price apparel and home furnishings retailer just announced healthy demand for its products through late October. Earnings are soaring compared to pre-pandemic levels, too, despite higher costs and wages.

The company warned that COVID-19 challenges are still clouding the short-term growth picture. But TJX is primed for a great finish to the year.

Let's dive right in.

A couple shopping at a mall.

Image source: Getty Images.

Sales trends were strong

CEO Ernie Herrman and his team said back in August that sales trends looked strong in the early third quarter. Yet investors were worried that the subsequent rise in COVID cases across the country might have stalled that momentum.

It didn't.

TJX reported a 14% two-year boost in comparable-store sales (comps) that was right in line with the previous two quarters. Shoppers again favored its HomeGoods brand that focuses on home furnishings. That segment notched a 34% comps spike when compared to two years earlier. But TJX also posted double-digit gains in its core T.J. Maxx and Marshalls segment. "I am extremely pleased with the continued strength of our business," Herrman said in a press release.

Cashing in

Like most of its retailing peers, the company spent more money in several expense categories, including wages and freight. Management also poured cash back into the business. Yet the profit picture improved.

Gross and operating margins both rose, in part thanks to higher prices and robust demand for more premium products. These wins allowed pre-tax earnings to jump to $1.39 billion from $1.12 billion two years ago. That equates to 11% of sales compared to 10.7% of sales in the same period in 2019. Earnings per share have jumped 24% in that two-year stretch.

Looking ahead

The retailer declined to issue a 2021 outlook, citing risks around the pandemic. But investors have plenty of data that implies a strong finish to the year. Just a handful of its stores are closed due to COVID restrictions heading into the fourth quarter, and sales trends through the first two weeks of November are trending higher by the mid single digits, executives said.

But the bigger growth signal is around inventory. TJX says it has secured enough high-quality products to keep shelves fully stocked in stores and on the e-commerce platform through the core shopping season. That should ease shareholders' worries about shipping bottlenecks potentially derailing growth in the year's biggest quarter.

Heading into this report, most investors expected the retailer to post about $48 billion in annual sales this year compared to $42 billion in 2019 before the pandemic struck. That forecast might edge higher given the strong demand trends heading into Black Friday.

TJX Companies has its sights set on bigger targets, aiming for $60 billion of annual sales over time. The business took a huge step away from that goal in 2020 but is now on pace to more than fully rebound from that COVID slump.

That's great news for shareholders who simply held through all of the volatility of the last several quarters. And it makes the dividend stock even more attractive as a long-term bet.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.