TJX Companies on Wednesday reported a respectable set of first-quarter numbers and managed to leave its full-year guidance unchanged despite the evolving tariff picture. The stock’s decline in response to the earnings report is a gift to investors. Revenue in the three months ended May 3 rose 5.1% on annual basis to $13.11 billion, exceeding the consensus estimate of $13.03 billion, according to LSEG. Earnings per share (EPS) in the period totaled 92 cents, beating expectations by a penny, LSEG data showed. Compared with the year-ago period, EPS declined by 1.1%. Same-store sales grew 3% across the company in the quarter, narrowly missing the FactSet consensus of 3.1%. Shares of the off-price retailer dropped more than 3% Wednesday, to roughly $130.65 apiece. The stock entered the session up nearly 12% year to date and just 10 cents below the all-time closing high it recorded on Monday. TJX YTD mountain TJX Companies’ year-to-date stock performance. Bottom line The parent company of T.J. Maxx, Marshalls and HomeGoods is still firmly within the retail industry winner’s circle — even if Wednesday’s report was not perfect despite the the top and bottom-line beats. The sellers may be disappointed that same-store sales and gross margins came up short of estimates. They also might take issue with TJX merely reiterating its full-year financial projections while providing weaker-than-expected guidance for the ongoing second quarter, partially due to some tariff hits. We’re not concerned, nor are we surprised to see this kind of share-price reaction considering the stock has been such a sturdy performer this year in a volatile market. If anything, it’s an opportunity for investors who have been waiting for their chance to buy into one of the best-run retailers around. “TJX is a buy right now,” Jim Cramer said on the Club’s Monthly Meeting on Wednesday. Growing same-store sales by 3%, fueled by an increase in customer transactions, in a three-month period marked by tariff uncertainty and weakening consumer sentiment is impressive. It shows how TJX’s reputation for providing great deals on clothes, home decor and much more attracts shoppers to its stores during a time of mounting recession fears. Indeed, TJX’s ability to thrive in any environment — but especially in disruptive periods that may challenge more traditional retailers, such as elevated inflation and supply chain snarls — is precisely why we own the stock. There is nothing in Wednesday’s results and conference call to suggest that TJX’s fundamental advantage as an off-price retailer has weakened. All one has to do is look at retail peer Target’s earnings report Wednesday — and its stock price over the past few years, for that matter — to gain a better appreciation of TJX’s performance. TJX Companies Why we own it : The owner of T.J. Maxx, Marshalls and HomeGoods is well-suited for the current economic environment, offering inflation-weary customers wide-ranging merchandise at compelling prices and a “treasure hunt” in-person shopping experience. It also is better suited to respond to tariffs than retailers that directly import most of their merchandise. Competitors : Ross Stores and Burlington Stores Last buy : March 11, 2025 Initiation : Aug. 24, 2022 What to make of TJX’s guidance? We’d argue the management team’s bias toward conservatism is once again on display here. That applies for both its light second-quarter outlook and its decision to leave its full-year targets unchanged in the wake of a good first quarter. While the tariff situation is not extreme as it was in early April after the U.S.-China pause, the coast is not all clear, either. In this kind of environment, there’s little benefit to providing a rosy forecast. All it does is increase the likelihood of disappointing investors down the road. “As always, they guided lower,” Jim said Wednesday. Jim likened TJX’s cautiousness to that of fellow Club name Palo Alto Networks , which also saw its stock fall Wednesday after the cybersecurity company did not raise its guidance alongside earnings Tuesday night. “These companies do not put themselves in harm’s way. They do not raise big because they know that is going to lead to sadness,” Jim said. Considering everything we heard Wednesday and the market reaction, we’re upgrading our rating on TJX to a buy-equivalent 1 and lifting our price target to $145 a share from $140. Quarterly commentary As seen in the chart above, TJX delivered better-than-expected results across its various store chains and geographies. Every single division in the U.S. and abroad saw increases in same-store sales and customer transactions during the quarter, CEO Ernie Herrman said on Wednesday’s call. Of course, it’s nice to see its largest segment by revenue in Marmaxx — home to the T.J. Maxx, Marshalls and outdoor-focused Sierra chains in the U.S. — beat expectations. But just as encouraging is the strong performance from the HomeGoods and TJX International segments, which both saw an 8% year over year increase in revenues. The home business, in particular, really stands out given the sluggish housing market overall. That includes both the home furnishings and decor sold at T.J. Maxx and Marshalls, as well at the HomeGoods and Homesense stores. “Bucking a trend in the home industry right now is our home business, highlighted by HomeGoods,” Herrman said. “Very proud of those teams and what we’re doing versus the industry.” He also said on the call: “We are convinced that we can continue to grow our share of the U.S. home fashions market.” One notable miss in the chart above was TJX’s gross margin, which came in at 29.5% in the quarter compared with estimates of 30%. The company chalked this up to some foreign-exchange hedges that it uses to protect itself when purchasing inventory outside of a local currency. The key thing for investors to know is that some of the negative impact will be offset in future quarters when TJX actually pays the invoice for the merchandise, CFO John Klinger explained on the call. “So, it’s a timing between quarters,” he said. Tariffs and all their far-reaching implications were predictably a big topic on Wednesday’s call. While TJX’s minimal exposure to direct imports is very beneficial in this time period — thanks to being an off-price retailer that sources its inventory from other vendors — it is not completely above the fray. Klinger said TJX expects the ongoing second quarter to be its “most impacted” quarter by tariff pressures “because the tariffs were put in place after we had placed the orders for goods that we directly import.” That is one reason why TJX’s pretax profit margin guidance for Q2 came in below expectations. More generally, executives estimated that less than 10% of its inventory is directly imported. Zooming out even further, Herrman was confident in TJX’s ability to navigate through this moment and use it to its advantage in both securing high-quality merchandise to stock its shelves and stuff its clothing racks. He said TJX can adjust its approach to acquiring inventory as needed, perhaps scaling back on some of its upfront buying. But crucially, Herrman indicated that TJX remained committed to keeping its prices significantly lower where the products are priced at other retailers — between 20% to 60% below others is what the company aims for. Herrman was asked how TJX would respond if it acquires merchandise at a particular price, anticipating that its competition will raise prices, only for that competition to hold the line on prices. “We would not raise [our retail price] because our contract to the customer is to stay at the appropriate gap between us and the out the door somewhere else,” Herrman said. To be sure, Herrman suggested he does not expect that to be a common problem for TJX to encounter because of the way its buyers are trained. “They know enough from talking in advance to their vendors where the costs are potentially going on an item in a category. … They’re not buying six months in advance. That allows them to be educated when they retail the goods. And really, it does allow us to be more profitable, I think, on buying in this type of environment.” Guidance For TJX’s fiscal 2026 second quarter, here’s what the company expects to deliver (all estimates are from FactSet): Same-store sales in the range of 2% to 3% growth, which at the midpoint of 2.5% is below the consensus projection for a 2.9% increase. Pretax profit margin in the range of 10.4% to 10.5%, which would represent a decrease from 10.9% in the year-ago period. That also is below analysts’ expectations for 10.9%. Earnings per share (EPS) in the range of 97 cents to $1.00, compared with the consensus EPS estimate of $1.04. As mentioned, TJX also reiterated its full-year guidance across all the metrics for which it provides an outlook. It is as follows: Same-store sales growth between 2% to 3%. Pretax profit margin in the range of 11.3% to 11.4%, versus 11.5% in the prior fiscal year. EPS in the range of $4.34 to $4.43, which would be a 2% annual increase at the low end and a 4% increase at the high end. (Jim Cramer’s Charitable Trust is long TJX. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Merchandise is offered for sale at a T. J. Maxx store on February 28, 2024 in Chicago, Illinois.
Scott Olson | Getty Images
TJX Companies on Wednesday reported a respectable set of first-quarter numbers and managed to leave its full-year guidance unchanged despite the evolving tariff picture. The stock’s decline in response to the earnings report is a gift to investors.
