TJ Maxx parent says holiday shopping is off to a ‘strong start,’ but its guidance tells another story

TJX Companies touted a “strong start” to the holiday shopping season on Wednesday, but its shares slid after the fast-growing retailer offered guidance that appeared to underwhelm Wall Street.

TJX comfortably beat Wall Street’s expectations during its fiscal third quarter, but it’s expecting earnings per share for its holiday quarter to be between $1.12 and $1.14, behind expectations of $1.18, according to LSEG.

Here’s how TJX performed compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: $1.14 vs. $1.09 expected
• Revenue: $14.06 billion vs. $13.95 billion expected

The company’s reported net income for the three-month period that ended Nov. 2 was $1.30 billion, or $1.14 per share, compared with $1.19 billion or $1.03 per share, a year earlier. 

Sales rose to $14.06 billion, up about 6% from $13.27 billion a year earlier.

“Across the Company, customer transactions drove our comp sales increases, which tells us that our values and treasure hunt shopping experience are appealing to a wide range of customers,” CEO Ernie Herrman said in a news release. “The fourth quarter is off to a strong start, and we are excited about our opportunities for the holiday selling season. In stores and online, we are offering consumers an ever-changing and inspiring shopping destination for gifts at excellent values, and feel confident that there will be something for everyone when they shop us.”

Following a year of torrid growth, the discounter behind Marshalls, HomeGoods and T.J. Maxx is still increasing sales. It’s winning over value-seeking consumers who are trading down from department stores like Macy’s and Kohl’s, and making strides with younger shoppers who don’t see off-price shopping as a stigma.

Earlier this year, TJX’s European business struggled due to issues with its execution, but the division posted strong results during the fiscal third quarter. Comparable sales increased 7% in TJX’s international channel.

Before the company reported, some analysts were concerned that TJX and other off-price retailers like Burlington Stores and Ross Stores could be disproportionately impacted by the unseasonably warm weather in October. Off-price retailers tend to be affected by unfavorable weather patterns more than traditional retailers because lower-income shoppers typically buy things when they need them — not ahead of time, Bank of America analysts wrote in a research note.

During the fall months, retailers with heavy exposure to apparel, such as TJX, count on shoppers coming in to buy new coats and other gear for the cooler weather. If its lower income consumer held off on those purchases because the weather was warm, it could have dinged TJX’s sales.

However, warmer than expected weather didn’t appear to have a major effect on TJX’s sales.