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The TJX Companies, Inc. (TJX - Analyst Report) reported earnings of 66 cents per share in the second quarter of fiscal 2014, beating the Zacks Consensus Estimate of 63 cents by 4.8%. Earnings were ahead of the year ago earnings of 56 cents by 18% and management’s guidance range of 61 cents to 63 cents.

The earnings upside was fueled by higher consumer traffic, improved margins and solid comparable-store sales growth for consecutive months. Currency fluctuations had no impact on earnings in the quarter.

Quarterly Details

Net sales of this leading off-price retailer grew 8.0% year over year to $6.442 billion in the reported quarter on the back of comparable store sales growth. However, foreign currency exchange had a negative impact of one percentage point on sales. Net sales marginally beat the Zacks Consensus Estimate of $6.385 billion.

TJX Companies' consolidated comparable store sales increased 4.0% in the quarter compared to a 7% increase in the comparable year-ago quarter. The year-over-year increase was driven by same-store sales growth of 4% at Marmaxx, 8% at Home Goods, 6% at TJX Europe and 2% at TJX Canada. Comparable-store sales increased on the back of strong customer traffic, driven by well-chosen stocks at the stores.

TJX Companies’ gross margin expanded 0.7 percentage points (pp) from the prior-year quarter to 28.8%. The margin expansion was mostly driven by increased merchandise sales margin and buying and occupancy expense leverage on sales.

Selling, general and administrative costs as a percentage of sales increased 0.2 pp year on year to 16.7% in the second quarter, driven by increased marketing spending and the impact of the company’s e-commerce businesses.

Share Repurchase

During the second quarter of 2013, the company spent a total of $325 million to repurchase 6.4 million common shares.

Outlook

Following the impressive second quarter results, the company raised the lower end of its earnings outlook for fiscal 2014. The company now expects earnings in the range of $2.74 – $2.78, compared with the previous expectation of $2.70 – $2.78. The Zacks Consensus Estimate for fiscal 2014 is $2.82 per share, higher than the company’s guidance range.

The company also expects to repurchase approximately $1.3 billion to $1.4 billion of shares in fiscal 2014.

For the third quarter of fiscal 2014, the company expects comparable store sales growth of 2%-3%. It also expects earnings per share in the range of 69 cents to 72 cents. The Zacks Consensus Estimate for the third quarter is pegged at 72 cents.

TJX currently holds a Zacks Rank #3 (Hold). Other stocks in the retail and wholesale sector worth considering include Green Mountain Coffee Roasters Inc (GMCR - Analyst Report), Haverty Furniture Cos. Inc. (HVT - Snapshot Report) and Fortune Brands Home & Security (FBHS - Snapshot Report), all of them holding a Zacks Rank #1.

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