TJX Companies Inc. ( TJX - Analyst Report ) reported adjusted earnings of 55 cents per share in the first quarter of 2013. Although earnings just slivered past the Zacks Consensus Estimate of 54 cents, they shot up 41% from the year-ago earnings of 39 cents.

Growth was fueled by higher comparable store sales for consecutive months and consumer traffic on the back of fresh stocks in the stores.

Foreign currency movement had a one percentage point negative impact on consolidated net sales growth in the first quarter of fiscal 2013 over the prior-year period.

Quarterly Details

Total net sales during the quarter grew 11.0% year over year to $5.8 billion, which surpassed the Zacks Consensus Estimate of $5.7 billion.

TJX Companies' consolidated same-store sales increased 8.0% in the quarter,driven by same-store sales growth at Marmaxx (+8.0%), Home Goods (+9.0%), TJX Europe (+13.0%) and TJX Canada (+6%).

TJX's gross margin expanded 1.3 percentage points from the prior-year quarter to 28.2%. The margin expansion was mostly driven by buying and occupancy leverage and merchandise margin improvement.

Selling, general and administrative costs as a percent of sales increased 0.9 percentage points from the prior year to 16.2% in the first quarter.

Cash Flow, Balance Sheet

TJX exited the quarter with cash and cash equivalents of $1.6 billion, compared with$1.43 billion in the prior-year quarter. Quarter-end long-term debt was flat sequentially at $774.5 million with shareholders equity of $3.3 billion. The company generated $704.6 million of cash from operations.

Share Repurchase and Dividend

During the reported quarter, the company repurchased 6.5 million shares worth $250 million of its common stock. The company increased its dividend by 21% in the first quarter.

Guidance

Based on quarterly earnings, the company updated its outlook for fiscal 2013 to a range of $2.27 to $2.37 per share, which represents a 14% to 19% increase over the prior-year’s adjusted earnings per share from continuing operations of $1.93. As per the Zacks Consensus estimate, the fiscal 2013 earnings are expected to be $2.39.

For the second quarter 2013, the company expects earnings per share on a GAAP basis to be in the range of 47 to 50 cents, a 4% to 11% increase over 45 cents per share reported last year. As per the Zacks Consensus Estimate, the fiscal 2013 earnings are expected to be 51 cents.

Our Take

We are encouraged by the company’s flexible off-price business model allowing it to react to market trends. TJX has a low-cost structure compared to many other traditional retailers. It focuses aggressively on expenses throughout its business.

However, the highly competitive nature of the business is a matter of concern. Stiff competition from Kohl’s Corporation ( KSS - Analyst Report ) and Target Corporation ( TGT - Analyst Report ) coupled with slow recovery of the U.S. economy are matters of concern.

Currently TJX holds a Zacks #2 Rank, implying a short-term Buy recommendation. On a long-term basis, we maintain a Neutral rating.