(Bloomberg) -- Off-price retailer TJX Cos.’ strong quarterly results were undermined by lower-than-expected sales at TJ Maxx and Marshalls, dampening investor enthusiasm.
Comparable-store sales at the company’s Marmaxx division rose 2% for the quarter, below the average analyst estimate of 3.6%.
TJX shares fell as much as 2.4% in New York trading Wednesday before paring the loss. The stock has climbed more than 27% this year, outperforming the S&P 500 Consumer Discretionary Index and the broader S&P 500.
While overall comparable sales beat expectations, the valuation means TJX needed “nothing short of a flawless quarter to move the needle,” wrote William Blair analysts led by Dylan Carden. Citi analyst Paul Lejuez, meanwhile, wrote that “while the results were strong overall, the weaker Marmaxx comp may pressure the stock today.
TJ Maxx also raised its earnings outlook for the full year, and now expects earnings per share of $4.15 to $4.17, up from the previous range of $4.09 to $4.13. The company continues to see comparable-store sales rising 3% this year.
In the company release, Chief Executive Officer Ernie Herrman highlighted the appeal of the company’s “treasure hunt shopping experience,” adding that the fourth quarter, which includes the crucial holiday period, has started strong.
On the company’s call with investors, Herman said TJX sees the potential for another 1,200 stores, across the company’s brands, without offering a timeline for expansion. The company currently operates more than 5,000 locations across the US, Canada, Europe and Australia.
Tariffs
When asked about impact from the potential tariffs proposed by President-elect Donald Trump, Herrman said only a very small portion of the company’s direct imports come from China. He added the company stands to benefit from tariffs — like it did during the first Trump administration — if other retailers build up too much inventory before new levies are put in place.
TJX sources its merchandise from a range of sources, including from other companies that want to clear out a glut of inventory or from manufacturers that produced too much of a product.
“Manufacturers could bring in goods early — and this is what happened last time,” Hermann said during the call. “That could create additional availability of goods at advantageous prices for us, because we could take advantage of that opportunistically. And that’s as likely a scenario as anything.”
(Updates with CEO and analyst commentary and share trading. An earlier version of this story corrected the company’s full-year guidance.)
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