While several retailers are beating Wall Street's earnings estimates, the actual numbers being reported for the second quarter are pretty dismal. Growth is nonexistent at Target
Well, look no further. TJX Companies
For the second quarter, TJX reported a same-store sales increase of 4% and a net sales increase of 4%. More important, those sales translated into a 31% jump in earnings. The retailer expanded its gross margin to 25.6%, up from 24.3% in the year-ago quarter. Management also kept its operating expenses in check.
Despite the solid earnings report, TJX shares traded down about 3% on the news, although they've since recovered. Apparently, traders were disappointed with TJX beating estimates by only a penny, and the market wasn't too impressed with management's outlook for the rest of the year, either. Management's guidance for the third quarter was $0.62 to $0.68, compared with the consensus estimate of $0.63, while its fourth-quarter guidance was $0.55 to $0.61, compared with the $0.67 consensus estimate.
Foolish investors would be wise to look past the guidance-versus-expectations game and focus on the long-term trends that will continue to help drive TJX's growth.
TJX's business is strong because it sells brand-name merchandise at discounts. More and more consumers are looking for ways to stretch their dollars, and they are no longer willing to pay full price for anything. Even some of the (relatively) value-conscious mall-based stores such as Aeropostale
Until we see a recovery on Main Street, consumers are not likely to revert to their spendthrift ways. That means more shoppers will continue to walk into TJX's stores.
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