TJX Companies (TJX) has performed very well in the difficult retail environment as consumers continue to hunt for bargains.

The company reported solid quarterly results driven by sales growth and gross margin expansion. Management also raised its guidance for the remainder of the year, prompting many analysts to up their estimates.

Macy’s Loss is Your Gain

The company’s business model lends itself to perform well given nearly any economic environment.

TJX is an off-price retailer that sells name-brand goods at significant discounts. It does so by taking advantage of overstocking and canceled orders at full-priced retailers. TJX will buy this excess inventory at a steep discount and pass much of the savings on to its customers.

Its major stores include T.J. Maxx, Marshalls, and HomeGoods stores in the U.S.; Winners Apparel in Canada; and T.K. Maxx in Europe.

Earnings Per Share Up 20%

TJX reported second quarter 2011 earnings per share of $0.73, in-line with the Zacks Consensus Estimate. It was a 20% increase over the same quarter last year.

Sales were solid, growing 7% year-over-year. Same-store sales increased 3%. Sales were particularly strong in the HomeGoods division, which saw an 8% jump.

The gross margin improved from 25.6% of sales to 26.6%.

Raising Guidance

Management raised its guidance for 2011 following second quarter results to a range of $3.27 to $3.37. The Zacks Consensus Estimate is toward the top of this range at $3.36. This represents 18.5% growth over 2010 EPS.

The estimate for 2012 is currently 10% higher than 2011 EPS, at $3.71 per share.

Dividend Increases & Stock Buy Backs

TJX has an excellent history of dividend payments. The company has raised its dividend every year since 1997, and at an impressive 22% annual rate since 2000.

TJX currently yields 1.3%.

The company also repurchased 8.2 million shares in the quarter for approximately $356 million.

Reasonable Valuation

Valuation looks attractive. Shares trade at just 13.4x forward earnings, a discount to the industry average of 16.3x. Its PEG ratio is only 0.95.

Its price to sales ratio of 0.9 is a premium to its peers at 0.6, however.

TJX has a market cap of $18.0 billion. It is a Zacks #2 Rank (Buy) stock.

 
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