Is There Holiday Cheer for This Retailer?

Off-price apparel seller TJX (NYS: TJX) recently posted impressive third-quarter profits and is hopeful about the holiday season ahead.

Let's dig deeper.

The quarter
Net sales increased to $5.79 billion, a 5% increase compared to the same period last year. However, analysts were looking for higher overall sales. Although apparel sales were hurt by unexpected warm weather, they picked up toward the end of the quarter when the temperature dropped.

Third-quarter earnings increased to $406.5 million, gaining 9% compared to the year-ago period, as more consumers visited the company's off-price stores such as Marshalls and T.J.Maxx. Earnings per share of $1.06 beat Street estimates by a penny.

Same-store sales, which is an important measure of a retailer's financial health, increased 3% during the quarter. Same-store sales at T.J.Maxx and HomeGoods increased significantly by 4% and 5%, respectively. What pinched the company was the flat same-store sales growth in Europe because of softness in the economy there. Moreover, TJX stores in Canada saw a decline of 2% in same-store sales growth.

Retailer's season
The much-awaited holiday season is coming up in the fourth quarter. This is a very crucial time for all retailers as they earn a huge chunk of their annual sales from this period. With November starting off well for TJX, the management is confident about the upcoming season as well.

Several companies take on promotional activities and other strategies during the holiday season to attract customers. For instance, apparel retailers Gap (NYS: GPS) , Aeropostale (NYS: ARO) , and Ann Taylor (NYS: ANN) will be slashing prices and selling products with hard-to-resist tags. TJX plans to introduce new gift sets throughout the season and push marketing.

The Foolish bottom line
After a good performance this quarter, TJX has raised its same-store sales growth forecast for the next quarter to 2%-3%. Fools should watch TJX closely to know what happened during the holiday season.

Navjot Kaur does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Gap. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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