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TJX Boosts Sales, Profits in Third Quarter

Firm still holding open-to-buy for fourth-quarter in-season purchasing.

T.J. Maxx

The TJX Cos. Inc. on Tuesday set the third-quarter bar at a high level for its fellow off-price retailers.

The company reported sales and profits that were both higher than expected and checked in with higher gross and operating margins.

For the three months ended Nov. 2, the Framingham, Mass.-based firm reported net income of $622.7 million, or 86 cents a diluted share, 34.9 percent above the $461.6 million, or 62 cents, reported a year ago. Adjusted earnings per share, eliminating the benefit of a tax adjustment, was 75 cents, 1 cent above analysts’ consensus estimates.

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Sales in the quarter rose 8.9 percent to $6.98 billion, from $6.41 billion in the 2012 period, and above the $6.91 billion estimated by Wall Street. Gross margin ticked up to 29.3 percent of sales from 28.8 percent.

The company maintained its fourth-quarter guidance for earnings of between 77 and 80 cents a share, based on expectations of same-store sales growth of between 1 and 2 percent. Full-year guidance was raised to reflect the strength of the third-quarter results.

The firm, which last month outlined its vision for becoming a $46 billion firm with over 5,100 stores in the coming years, said that comparable-store sales for the quarter were up 5 percent, including a 4 percent increase at the Marmaxx unit comprised of TJ Maxx and Marshalls, where net sales rose 7.8 percent to $4.48 billion, accounting for 64.2 percent of total sales. Comps rose 10 percent at HomeGoods, 2 percent at the Canadian operations and 5 percent in Europe. Net sales at HomeGoods were up 16 percent to $740 million, with Canada reporting a 2.2 percent increase to $786 million and Europe ahead 15.3 percent to $972 million.

“Going into the fourth quarter, we are in great shape,” said Carol Meyrowitz, chief executive officer, on a morning conference call. “We have plenty of open-to-buy in a marketplace flooded with outstanding products. I believe our gift-giving selection this year will be the best we have ever had.”

She added that buyers would be purchasing products for TJX stores into December. “Our commercials will be on TV every single week in the U.S. throughout the holiday season and overall impressions will be up significantly.”

Stifel Nicolaus analyst Richard Jaffe reiterated his “buy” rating for the stock and raised the target price to $72 from $65.

He said the company was off to a “strong start in the fourth quarter” and in a good position to capitalize on buying opportunities. He was also encouraged by increased ad expenditures for holiday, both on the basis of dollars spent and as a percentage of sales. Meyrowitz told analysts that the company’s advertising spend had risen 10 basis points as a percentage of sales but didn’t provide a specific figure.

Inventories finished the third quarter at $3.66 billion, up 11.1 percent from year-ago levels, but were down on a per-store basis.

On a generally down day for U.S. equities, TJX shares rose 1 percent to $63.12 and set an all-time high of $63.93 in midday trading. Fellow off-pricers Ross Stores Inc. and Burlington Stores Inc., which have yet to report third-quarter results, also benefited, with their shares up 0.1 percent and 1.2 percent, respectively, to $80.95 and $29.79. The S&P Retailing Industry Group slid 0.3 percent to 916.64, its second consecutive down day.

For the nine months, TJX’s net income rose 19.5 percent to $1.56 billion, or $2.14 a share, as sales picked up 8 percent to $19.61 billion.