TJX Stores And Ross Stores Have Customer Appeal In 2023

Both TJX and Ross Stores
ROST
recently reported 1st quarter 2023 sales and earnings. Results were above expectations for both companies, and the outlook for fiscal 2023 should be very satisfying. Customers continue to shop and look for value purchases in off-price stores – and that’s driving business to these companies. Here is a recap of results for each.

TJX Stores reported $0.76 diluted earnings per share this quarter compared to $0.68 diluted earnings in the previous year. Sales increased +3% to $11,783 million compared to last year’s $11,406 million. Across the company brands, we see U.S. Miramax comparable sales increased +5%, HomeGoods dropped -7%, Canada dropped -1%, and international increased +3%. Ernie Herrman, CEO and President of The TJX Companies said: “I am very pleased with our first quarter performance which was driven by an increase in customer traffic and a 5% increase in Miramax…With our above-plan profit performance, we are raising our full-year guidance for both pre-tax profit margin and earnings per share.” Herrman continued to emphasize the availability of great fashion brands and the opportunity to be able to offer great values to customers as the reason for such strong results overall.

The company expects second quarter earnings to be in the range of $0.72 to $0.75 per share compared to last year’s $0.68. For the full year, the company expects sales to increase +2-3% and diluted earnings per share will be in the range of $3.49 to $3.58 with a $0.10 benefit since this is a 53-week reporting year. Last year, the company reported diluted earnings of $2.97.

The treasure hunt that is always emphasized as a reason to regularly shop the TJX brands has a unique appeal. Customers often find some designer label that has fashion appeal at great value pricing. Knowing the assortment constantly refreshes motivates customers to regularly return to stores to look for more unique values.

Ross Stores’ CEO Barbara Rentler reported earnings per diluted shares of $1.09 compared to last year’s $0.97. Sales increased +1% in Q1 2023; the company reported $4.5 billion compared to $4.3 billion in the first quarter of 2022. While the company is projecting a second quarter flat with last year, it is projecting earnings to be between $1.07 and $1.14 per share compared to last year’s $1.11. However, Rentler expressed some worries about the macroeconomic and geopolitical environment as well as the ongoing inflationary pressures are risks that could offset the customer’s discretionary spending.

POSTSCRIPT: In the current environment, with retailers and customers both worrying about the economy, inflation, and socio-political uncertainties, one can see the strong appeal of off-price stores and the growth they can enjoy. Off-price retailers these days can take advantage of the many macro challenges that have constrained consumer spending over these past few years and left retailers with unsold goods. They can buy overproduced or unused goods, sometimes even showroom remnants of collections from their respective fashion brand owners, fashion brand stores, and/or distribution networks in order to offer them to their consumers at the lowest price. My preference is with TJX stock.