Solid September Comps at TJX

Consolidated same-store sales at The TJX Companies Inc. (TJX - Analyst Report), an off-price retailer of apparel and home fashions, climbed 6.0% year over year in the five-week period ended September 29, 2012. This compares favorably with the 4.0% increase in same-store sales in the year-ago period. As for total sales, it climbed 10.0% year over year for the aforementioned period to $2.5 billion.

As for the 35-week period ended September 29, 2012, comparable sales climbed 8% from the year-ago period. Total sales for the same period went up 10.0% year over year to $16.1 billion.

Comparable sales jumped again on the back of higher customer traffic in the U.S., Canada and Europe divisions. Marmaxx Group, the company's largest division reported consolidated comparable store sales growth of 6% during the five-week period ended September 29, 2012, whereas TJX Europe delivered a growth of 13% for the same time period despite economic uncertainties in the region.

Guidance Update

With strong September comparable store sales and expectation of a solid holiday season ahead, TJX was expected to raise its earnings guidance for the third quarter of fiscal 2013. However, the company revealed a correction to its pension accrual for prior fiscal years, which would result in a one-time charge of 2 cents in the third quarter. TJX thus reiterated its previous earnings guidance at the higher end of the range of 56 to 59 cents per share.

Store Update

As of September 29, 2012, TJX Companies operated 1,018 T.J. Maxx, 904 Marshalls, and 409 HomeGoods stores in the U.S. In Canada, it operated 222 Winners, 87 HomeSense, and 13 Marshalls stores. The company operated 341 T.K. Maxx and 24 HomeSense stores in Europe.

Our Recommendation

TJX has been reporting an increase in comparable store sales for the past several quarters driven by higher demand and increased consumer traffic.

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

Its close competitor, Kohl's Corporation (KSS - Analyst Report) reported a 2.7% decline in comparable store sales for the five-week period ended September 29, 2012. Total sales also plunged 1.4% to $1.61 billion.

The TJX Companies carries a Zacks #2 Rank (short-term Buy rating). Over the long-term, the stock has a Neutral recommendation.