Why Is TJX Stock Going Up?

Off-price retailer The TJX Companies, Inc. (NYSE:TJX) is having a good time on Wall Street at the moment. Over the past five years, the stock has gone on a tear, raking in a 100% plus gain for investors. By way of comparison, the broader SPDR S&P 500 ETF Trust (NYSEARCA:SPY) has returned about 85% over the same period.

More recently as well, this outperformance has stood. Over the past nine months, the company’s stock has gained about 31%, while the market ETF returned about 18%. The question stands now how far can TJX’s stock run before it plateaus? We examine the sustainability of the bull run and whether it’s due to come to a screeching halt.

The Retail Sector and the Scope for Off-Price Retail

If we compare to decades past, social media has completely changed the fashion landscape. Nowadays, with the click of a button, fashion trends can be accessed from anywhere in the world. Lots of young people look up to fashion influencers to set fashion trends, and companies have also realized the soft power of social media now, which is why marketing on online platforms and with the help of content creators has gained popularity.

These trends have sparked a hunt for more affordable options when self-styling. Indeed it’s a primary reason why off-price retail is quite popular with the younger population. Gen Z customers, while having lesser wealth than their older counterparts, still hold a lot of spending power. Their desire to spend on fashion inevitably leads them towards off-price retail options to stretch their money over more items.

The younger cohort of customers also seemingly doesn’t feel the stigma of buying from off-price retailers. And why should they? Gone are the days when off-price retail meant outdated fashion, low-quality products, and damaged goods. Nowadays, off-price retail means brands are looking to offload their excess inventories, and consumers are willing to buy products at low prices.

The general retail market landscape has also bounced back last year from the broad-based inflation scare. December’s U.S. retail sales grew by 0.4% as consumers spent on a range of goods. Retail sales were hot despite consumer prices increasing the highest in nine months, and that indicated strong labor and wage gains (a strong underlying economy that propped up consumer spending basically).

Still, inflation has tipped the scales in favor of off-price retailers, a trend that is likely to stay, given that the young population has embraced them. Analysts also posited that consumers remain pressured by inflation, and that has caused discretionary items to face some demand issues. This is expected to help off-price retailers because retail store closures and department store weakness are likely to spell more market share for them.

TJX Companies has managed to attract a lot of customers through its treasure-hunt shopping experience so what does it all boil down to for shareholders?

Why Is TJX Stock Going Up?

TJX stock is going up on the back of higher than expected sales and earnings that beat analysts expectations last quarter.

Management last reported third quarterly results for fiscal 2025 when net sales of $14.06 billion rose by 6% from the prior year’s period. It also posted a $1.14 earnings per share, recording an 11% jump.

The company’s stock was materially influenced by the results because they were better than analysts expectations. The analysts surveyed by LSEG were expecting $13.95 billion in net sales and $1.09 per share earnings. TJX Companies touted a strong start to the holiday season as the reason for this outperformance.

TJX’s comparable store sales grew by 3%, which was a little bit worse than the 6% growth it had posted in the third quarter of fiscal 2024. The top brass stated that the European segment has been fundamental behind its top line performance.

For income investors, TJX also regularly pays dividends, last declaring a $0.375 per share dividend, which is payable to shareholders on March 6, 2025.

What Is TJX Companies Doing Now?

Management is clearly focusing on growing the conglomerate’s store footprint but it also has a keen eye on market segments and geographies to stay ahead of the curve. For the third quarter, the company managed to inflate the store count by 56 stores.

In the same period, TJX Companies completed its investment in the joint venture with Grupo Axo, S.A.P.I. de C.V. (Axo). Axo is a global brand operator in Mexico and South America that sells both full-price and off-price clothing. The JV basically comprises Axo’s physical store business in Mexico. TJX also has the right to increase its ownership.

The company also acquired a minority stake in Dubai-based off-price branded retailer Brands For Less (BFL). Although near-term gains might be marginal at best, the long-term benefits might make up for it. TJX now expects comparable store sales to stay at a 3% growth for the full fiscal year. Yet, its earnings per share outlook was raised to be in the range of $4.15 to $4.17.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.