TJ Maxx parent TJX Cos (TJX.N) posted better-than-expected first-quarter results and raised its annual profit forecast on Wednesday, betting on easing costs and strong demand for its affordable products.
Cooling inflation and lower prices compared to department stores have boosted sales of products across categories, including discretionary items that had slumped as inflation-wary customers limited shopping to essentials.
The company's decade-old daily "treasure hunt" strategy also helped to attract more customers, while lower freight costs and better inventory management strengthened its margins to 30%, a 1.1 percentage points increase compared to a year earlier.
"TJX in particular is benefiting as wealthy shoppers trade down to cheaper retailers, and customers across income levels look to score designer goods at an affordable price," Rachel Wolff, senior analyst from eMarketer, said.
Shares of the company were up 2% in premarket trading after TJX lifted annual earnings estimates to $4.03 to $4.09 per share from $3.94 to $4.02 it had previously forecast.
Walmart's positive annual forecast and Home Depot's (HD.N) unchanged full-year expectation signal that shoppers in the United States have been resilient and retailers could see better recovery in discretionary demand.
TJX maintained its annual sales forecast and reported a 6% rise to $12.48 billion in net sales for the first quarter ended MAy 4 from a year earlier, compared with LSEG estimates of $12.46 billion.
On an adjusted basis, its profit of 93 cents per share beat analysts' estimate of 87 cents per share.
However, Target (TGT.N) reported lower-than-expected earnings for the reported quarter as consumers cut back spending on non-essentials, and said it expects consumer caution to persist, sending its shares down about 8% on Wednesday.
