TJX Retained at Neutral

We recently reiterated our Neutral recommendation on The TJX Companies (TJX - Analyst Report). The company posted first-quarter fiscal 2013 earnings of 55 cents per share, inching past the Zacks Consensus Estimate by a penny. Reported earnings shot up 41% from the prior-year earnings of 39 cents a share.

The better-than-expected first quarter results came on the back of an 11.0% year-on-year rise in net sales. The growth was driven by higher same-store sales in all of its stores.

Over the past several months, the company has been reporting higher same-store sales. Buoyed by strong sales, management raised its second quarter fiscal 2013 estimates.

Strong performance from domestic and the international stores (Canada and Europe) led to sales growth that outpaced management’s expectations. Further, well-chosen stocks at the stores consistently improved customer traffic during the period.

Ongoing economic challenges in the developed nations have compelled the consumer spending to shift from high-end products to low priced goods. This is a benefit for discount stores like TJX Companies, which demonstrates top-line growth even during recessionary times.

However, the company is facing challenges with increasing input costs, which are hurting its margins. The company fears that this will become severe in the coming quarters.

Absence of international exposure deprives TJX of the benefits of high growth opportunities of the developing nations like China, Brazil, India, Mexico, Russia and Southeast Asia.

Based in Framingham, Massachusetts, The TJX Companies, Inc. is the leading off-price retailer of apparel and home fashions in the U.S. Currently, TJX Companies carries a Zacks #2 Rank (short-term Buy rating).