TJX Earnings: Treasure Hunting Continues To Attract Traffic, Lifting Sales and Profits; Shares Rich

We plan to increase our $71 fair value estimate by a mid-single-digit rate for narrow-moat TJX after digesting second-quarter results and nudging our full-year outlook higher. During the period, sales rose 8%, bolstered by same-store sales of 8% at Marmaxx and 4% at HomeGoods and benefiting from traffic rising across all divisions. More impressively, pretax margins of 10.4% handily outpaced the firm’s 9.3%-9.5% guidance, as lower freight costs and expense leverage on higher sales took hold. Given the outperformance in the second quarter, and continued momentum in the third quarter, the firm lifted its full-year outlook to include 3%-4% same store sales growth (from 2%-3% prior), a pretax margin of 10.7%-10.8% (10.3%-10.5%), and EPS to $3.66-$3.72 ($3.49-$3.58). Even when we nudge up our preearnings-call estimates for a pretax margin of 10.5% and EPS of $3.59 toward the updated outlook to within the revised ranges, we still view shares as rich, trading at 22.5 times our fiscal 2025 estimate.