We’re lifting our price target on off-price retailer TJX after another strong quarter

Shoppers never know exactly what they will find at a T.J. Maxx, Marshalls, or HomeGoods. Investors, on the other hand, are finding earnings from their parent company rather predictable. TJX Companies on Wednesday delivered a better-than-expected quarter but light outlook. The market was hardly concerned, sending shares up 3%, because TJX consistently under-promises and over-delivers. Sales in its fiscal 2025 fourth quarter totaled $16.35 billion, exceeding the consensus estimate of $16.2 billion, according to LSEG. Revenue was down slightly year over year. But direct comparisons were skewed by an extra week in TJX’s prior fiscal year. Adjusted earnings per share (EPS) in the three months ended Feb. 1 came in at $1.23, topping expectations of $1.16, LSEG data showed. Same-store sales rose 5% from the year-ago period, well ahead of the 3.1% growth projected by analysts, according to FactSet. 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. Competitors : Ross Stores and Burlington Stores Last buy : May 2, 2024 Initiation : Aug. 24, 2022 Bottom line TJX validated its status as a core holding in the Club’s portfolio with another set of strong numbers — this time for the important holiday shopping period — and likely conservative guidance to ensure executives keep their credibility among investors. Trust is not easily rebuilt. In all four quarters of TJX’s fiscal 2025, EPS came in above the high end of the guidance range. “They always lowball the forecast, and they did it again,” Jim Cramer said Wednesday morning, as he showed off a belt purchased at a T.J. Maxx for roughly $14. “That’s why that stock is up big,” Jim said — and not just on Wednesday. Over the past 12 months, TJX shares have advanced 27%, crushing a basket of retail stocks up less than 2% in that stretch, and outperforming the S & P 500 ‘s gain of nearly 18%. TJX 1Y mountain TJX Companies 1 year Considering everything we heard Wednesday, it’s clear the wind is still at TJX’s back. The company also announced another 13% increase to its annual dividend payout — its 28th increase over the past 29 years. It also plans to buy back up to $2.5 billion in stock in fiscal 2026, which would be equal to what it repurchased in fiscal 2025. We’re bumping up our price target to $140 a share, given the strong quarterly performance, but keeping our 2 rating , meaning we’d wait for a pullback before adding to the position. Commentary Simply put, TJX’s stores have a reputation as great places to shop for quality products — sweaters, mirrors, luggage and, of course, belts — at fair prices, so people keep coming back. Indeed, TJX’s 5% increase in same-store sales, a crucial metric in the retail industry, was driven by an increase in transactions, rather than selling the same amount of merchandise at higher prices. It’s a global dynamic too, as TJX Canada and TJX International, which consists of stores in Europe and Australia, delivered same-store sales growth of 10% and 7%, respectively, in the fiscal fourth quarter. HomeGoods in the U.S. was up 5%, while T.J. Maxx and Marshall’s in the U.S., known as Marmaxx, was up 4%. Marrmaxx also includes Sierra, its much smaller, outdoor-focused chain. TJX’s same-store sales, or comparable-store sales, include locations that have been open for two consecutive fiscal years. Starting this fiscal year, TJX will start including its e-commerce business in its same-store sales figure, though CFO John Klinger said it should not have a material impact on its growth rate. “We are confident that we continue to attract new shoppers in every country we operate in,” CEO Ernie Herrman said on the conference call. Hermann said he was especially pleased with the Canadian and international divisions’ outperformance, citing strong inventory strategies around Christmas, and expects another strong year in those markets. Herrmann noted TJX is planning an expansion into Spain, with a goal of getting to 100 stores. He also expressed excitement about TJX’s other international endeavors . TJX’s off-price model has benefited from several factors in recent years, including elevated inflation that strained consumers’ budgets and made the company’s low prices even more appealing. The struggles of department store competitors and supply chain disruptions during the Covid pandemic also ripened the merchandizing environment for TJX, allowing it to stock its racks and shelves with wide-ranging products. As it stands now, inflation has moderated but hardly disappeared, and there’s also a growing belief on Wall Street that the U.S. economy is softening and consumer confidence is weakening. In other words, the appetite for good deals should remain. On the supply chain front, President Donald Trump ‘s tariff policies led companies to pull forward shipments into the U.S. , and some of those goods may end up in TJX’s hands if retailers need to offload them. TJX’s exposure to direct imports from China is an “extremely small percentage,” executives said, which is another point in its favor. The same goes for other retailers, such as Macy’s , that continue to close stores , which leads to both merchandise for TJX buyers to pick at and real estate opportunities to add new stores or relocate to better locations. “I’m excited about the sales and margin opportunity in this environment because this is pretty much a textbook situation” for its off-price model, Herrman said. “Challenging environment overall, but those tend to work pretty well for TJX,” he said. Guidance The chart below includes TJX’s guidance for the current quarter and full-year fiscal 2026. There’s a lot of red, but it may very well prove conservative, especially considering how upbeat Herrman was on the call. A few things to keep in mind: TJX’s guidance assumes unfavorable foreign exchange rates, which weighs on sales, margins, and earnings. Plus, in the first half of the year, the company is baking in a “small negative impact” tied to merchandise from China that it committed to before the tariffs went into effect. Executives stressed the medium and long-term impact of tariffs is not a major concern. On the fiscal 2026 Q1 guidance, specifically, the company had to contend with some poor weather in parts of the U.S., like other retailers and restaurant operators, as we found out when our newest Club name Texas Roadhouse delivered forward guidance. “In the areas where it was normal weather, we were pleased with how we were performing,” TJX’s Herrman said. It’s just we had those pockets of weather that hit us on those spots. But again, we’re feeling very good about the normal weather pattern areas and where we’ll head in the future.” Correction: This story has been updated to reflect that TJX’s outdoor-focused chain is called Sierra. (Jim Cramer’s Charitable Trust is long TJX, TXRH. See here for a full list of the stocks.) 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A Marshalls and HomeGoods store entrance in Miami, Florida.

Jeff Greenberg | Universal Images Group | Getty Images

Shoppers never know exactly what they will find at a T.J. Maxx, Marshalls, or HomeGoods. Investors, on the other hand, are finding earnings from their parent company rather predictable.