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The TJX Companies, Inc.’s (TJX - Analyst Report) adjusted earnings of 62 cents per share in the third quarter of fiscal 2013 were in line with the Zacks Consensus Estimate. Also, the reported earnings increased 17% from the year-ago quarter.

The earnings upside was fueled by higher consumer traffic on the back of fresh stocks in the stores and solid comparable-store sales growth for consecutive months.

Quarterly Details

Total net sales of this leading off-price retailer grew 11.0% year over year to $6.41 billion in the reported quarter, driven by solid growth in consolidated comparable store sales. Net sales beat the Zacks Consensus Estimate of $6.37 billion.

TJX Companies' consolidated comparable store sales increased 7.0% in the quarter, driven by same-store sales growth of 7% at Marmaxx, 6% at Home Goods, 11% at TJX Europe and 4% at TJX Canada.

Comparable store sales growth exceeded management’s expectations of 2% to 4% on the back of strong performance in all the stores in the U.S., Canada and Europe. Further, well-chosen stocks at the stores improved customer traffic during the period.

TJX Companies’ gross margin expanded 0.7 percentage point from the prior-year quarter to 28.8%.  The margin expansion was mostly driven by increased merchandise margin.

Selling, general and administrative costs as a percentage of sales increased 0.5 percentage point year on year to 17.0% in the third quarter, driven by expense leverage.

Share Repurchase

During the reported quarter, the company repurchased 8.9 million of its common stock worth $400 million.

Outlook

For the fourth quarter of fiscal 2013, the company expects diluted EPS to be in the range of 72 cents to 75 cents, representing growth of 16% to 21% from the prior-year quarter. The Zacks Consensus Estimate for the fourth quarter of fiscal 2013 is 76 cents, higher than the company’s guidance range.

The guidance includes consolidated comparable store sales growth of flat to 2%. The company expects the adjusted earnings (excluding the benefit from the 53rd week in the Fiscal 2013 calendar) in the range of 65 cents to 68 cents, representing 5% to 10% increase from prior year quarter.

The company also raised its fiscal 2013 adjusted earnings guidance to the range of $2.45 to $2.48 per share, higher than the prior guidance range of $2.44 to $2.47. The higher end of the company’s new guidance range is in line with the Zacks Consensus Estimate of $2.48. Moreover, the company raised the estimates for consolidated comparable store sales growth to a range of 5% to 6% for fiscal 2013, up from the previous guidance of 4% to 5%.

Our recommendation

A peer of Pepsico, Inc. (PEP - Analyst Report), TJX Companies once again posted solid comparable store sales and increased the full year earnings estimates. Same store sales grew on the back of higher customer traffic in the U.S., Canada and Europe divisions. The company performed well in Europe and North America; where the lingering economic challenges have resulted the consumer spending to move from high-priced branded products to the low-priced items offered by the discount stores. However, rising input costs and lack of international presence remain persistent overhangs.

The TJX Companies, Inc. currently has a Zacks #2 Rank (short-term Buy rating). For the long term, we have a Neutral recommendation on the stock.

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