Leading off-price retailer TJX Companies (NYSE:TJX) is scheduled to announce its fiscal third-quarter results on Wednesday. Third-quarter earnings could be under pressure due to high inflation and currency headwinds. That said, Wall Street analysts remain bullish about the company’s ability to navigate a challenging environment and fare better than other retailers.
TJX Companies sells its merchandise, like apparel and home goods, at considerable discounts compared to full-price retailers and department stores. The company operates stores in the U.S., Canada, Europe, and Australia.
Inflation Expected to Impact TJX’s Q3 Results
Inflation and fears of an economic downturn are impacting consumer spending on discretionary goods, and this might reflect in TJX’s Q3 results. Back in August, TJX guided for Q3 earnings per share (EPS) in the range of $0.77 to $0.81. The company expects Q3 U.S. comparable store sales to decline in the range of 3% to 5%. It expects overall sales in the range of $12.1 billion to $12.3 billion in the quarter.
Meanwhile, analysts expect TJX’s Q3 EPS to decline 5% to $0.80 and sales to fall nearly 2% to $12.3 billion. In the fiscal second quarter (ended July 31 2022), TJX’s sales were down 2% to $11.8 billion, reflecting the impact of weak consumer spending.
Meanwhile, Q2 EPS increased 8% to $0.69, thanks to the company’s effective expense management. TJX has a low-cost structure that helps it drive higher profitability than other retailers.
Is TJX Stock a Good Buy?
Last week, Gordon Haskett analyst Charles Grom upgraded TJX stock to a Buy from Hold and raised the price target to $80 from $60. The analyst turned bullish after his firm’s recent store manager survey indicated better trends at TJX and Ross Stores (ROST).
Grom added that the survey results indicated that TJX is likely to fare better than Ross Stores as a greater number of the company’s stores reflected sales and traffic trends that were above or in line with expectations. Also, TJX’s stores saw lesser promotional activity than Ross’ locations.
On TipRanks, TJX Companies stock earns a Strong Buy consensus rating based on 12 Buys and two Holds. The average TJX stock price target of $78.07 implies nearly 7% upside potential from current levels.
Conclusion
TJX Companies is expected to deliver better results than its full-price rivals and department stores due to its off-price business model and low-cost structure. However, it might not be completely immune to inflation and other headwinds.
Wall Street remains optimistic about the retailer’s growth potential. TJX aims to expand to a $60 billion-plus revenue company over the long term.
