TJX And Ross Stores Prove Off-Price Retailers' Ability To Profit Even During Challenging Economic Times

On Wednesday, The TJX Companies, Inc. TJX reported its first quarter results, proving its resilience amid a challenging macroeconomic climate, unlike Target Corporation TGT. Although same-store sales growth and second quarter guidance was disappointing, the off-price retailer topped earnings estimates and raised its full year guidance, like its peer Like Ross Stores Inc ROST that reported its quarterly results on Thursday.  

TJX’s First Quarter Highlights

For the quarter ended on May 4th, TJX Companies reported net sales grew 6% to $12.48 billion while comparable store sales rose 3% due to an increase in customer transactions. TJX reported net income rose as much as 20% to $1.07 billion, with gross profit margin improving to 30.0% during the first quarter of fiscal 2025. Diluted earnings per share rose 22% YoY to $0.93. Pretax margin rose from last year’s comparable quarter (10.3%) to 11.1%. During the quarter, TJX added 18 stores, bringing its total to 4,972 stores.

TJX’s Guidance

For the full year, TJX guided for comparable store sales growth to be between 2% and 3%, while guiding for a pretax profit margin between 11% and 11.1%.

Ross Stores’ First Quarter Highlights

For the May quarter, Ross Stores reported revenue of $4.86 billion, which surpassed LSEG’s estimate of  Wall Street’s $4.83 billion. Earnings per share of $1.46 also surpassed Wall Street’s $1.35 estimate. Ross Stores also lifted its guidance

For the full year, Ross Stores also raised its earnings guidance up from its prior range that was between $5.64 to $5.89, as it now expects them between $5.79 and $5.98 per share. Ross Stores also expects fiscal 2024 comparable store to rise between 2% and 3%.

Unlike Target, Ross Stores and TJX began the second quarter on strong footing.

Unlike Target who reported another quarter of revenue decline and missed earnings estimates with its first quarter results, TJX and Ross Stores are off to a good start. Target reported its sales contracted 3% on a YoY basis, as consumers bought fewer everyday items like groceries and home decor. With its latest quarter, Target reflected softening trends in discretionary goods. Also, this was the first time since November 2022 that Target missed earnings expectations. Although Target, TJX and Ross Stores are all discounters, TJX and Ross Stores are in the ‘indulgent’ category as even during challenging times, “clothes still make the man” and self-indulging in one's wardrobe can help people feel better.

TJX and Ross Stores owe it all to steady demand for off-price offerings on the ‘indulgent’ front.

Despite ongoing uncertainty that is shaping the macroeconomic and geopolitical environment, along with prolonged inflation that is weakening the purchasing power of low-to-moderate income customers, TJX and Ross Stores achieved better than expected profitability due to strong demand and eased costs. With their latest reported quarters, TJX and Ross Stores are proof that off-retailers are like indestructible organisms that can flourish under all economic conditions. Especially when their offerings help people feel better or at the very least, influence how others perceive them.

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