According to Securities Times, TJX Companies (TJX.US) disclosed its financial results for the third quarter. Q3 earnings per share were $1.14, compared to $1.03 in the same period last year, with analysts expecting $1.09. Total revenue increased by 6% year-on-year to $14.1 billion, exceeding analysts' expectation of $13.95 billion. Q3 comparable store sales rose by 3%, surpassing market expectations and being at the high end of the company's guidance, driven by growth in customer transactions.

Sales were strong in the third quarter, with executives stating a strong start to the holiday season.

Earlier this year, due to execution issues, TJX's European business faced challenges, but the segment reported strong performance in the third quarter, with a 7% increase in comparable store sales for TJX's international channels.

Before the company released its financial report, some analysts were concerned that TJX and other discount retailers like Ross Stores (ROST.US) might be disproportionately affected by unusually warm weather in October. Analysts at Bank of America wrote in a research report that compared to traditional retailers, discount retailers are often more vulnerable to adverse weather patterns because low-income consumers tend to purchase goods when needed rather than in advance.

In the autumn months, many retailers such as TJX who sell a large amount of clothing rely on customers to purchase new coats and other gear to cope with cooler weather. If lower-income consumers delay purchases due to warmer weather, TJX's sales could be affected. However, the warmer-than-expected weather does not appear to have had a significant impact on TJX's sales. Q3 comparable store sales rose by 3%, exceeding market expectations and being at the high end of the company's guidance, driven by growth in customer transactions.

TJX Companies CEO Ernie Herrman said at a press conference, "The fourth quarter started strongly, and we are excited about the holiday sales season. In-store and online, we provide consumers with a constantly changing and inspiring shopping destination to purchase gifts of outstanding value. We believe that everyone will find something suitable for themselves when they buy our products."

TJX Companies is a well-known discount retailer, known for offering a diverse selection of products, including outfits, housewares, jewelry, and more. The company operates popular brands such as T.J. Maxx, Marshalls, and HomeGoods, which are key players in the discount retail industry. Originally, TJX's strategy was based on buying excess inventory from manufacturers or other retailers and selling branded clothing and other goods at much lower prices than department stores. As cost-conscious American consumers flocked to its discount stores to buy clothing, footwear, and other products, the company's stock price has risen by 27% year-to-date, outperforming the S&P 500 index's 24.05% increase over the same period.

Slowing growth in comparable store sales.

Firstly, the number of stores. The number of a retailer's stores typically determines how much revenue it can generate. TJX had 5,057 stores in the most recent quarter. Over the past two years, it has been opening new stores at a fast pace, with an average annual growth rate of 2.7%. This growth rate is faster than the overall consumer retail trade. When a retailer opens new stores, it usually means it is investing for growth because demand exceeds supply, especially in areas where consumers may not have stores nearby within a reasonable driving distance.

A change in a company's store count is just one aspect of the story. Another is the performance of existing stores and e-commerce sales, where comparable store sales are a strong metric because they measure the organic growth of a retailer's e-commerce platform and physical stores that have been in operation for at least a year.

Over the past two years, on average, the company's comparable store sales have grown at a remarkable rate of 4.3% per year. This performance indicates that the introduction of new stores has been beneficial to shareholders. This means that TJX's revenue growth can come from new stores, e-commerce, as well as increased foot traffic in existing stores and higher sales per customer.

However, in the most recent quarter, TJX's comparable store sales only increased by 3% year-on-year, indicating a slowdown compared to historical levels. This suggests that while the business is still performing well, it has lost some momentum.

Meanwhile, in October, the National Retail Federation (NRF) forecasted that the growth rate of holiday sales in the USA in 2024 will be lower than last year. NRF estimates that sales in the industry for November and December are expected to increase by 2.5% to 3.5% compared to the same period last year, lower than the 5.3% growth rate seen last year. The organization projects that consumer spending could reach up to $989 billion in U.S. dollars.

NRF President and CEO Matt Shay said in a conference call with reporters: 'We all see that consumer spending patterns have become more moderate.' He added that overall spending remains strong, although it has slowed compared to the abnormally high growth during the pandemic.

Shay pointed out that the shorter number of shopping days between Thanksgiving and Christmas this year is expected to have a negative impact on performance. Overall, based on institutional forecasts for the industry, although retail sales are expected to increase year-on-year in this quarter, their growth rate may be the slowest since 2018. In addition, consumers have less time this holiday season, with 5 fewer shopping days between Thanksgiving and Christmas compared to 2023.

Performance guidance falls short of expectations.

After a year of rapid growth, this discount store's sales continue to rise. It has won the favor of value-seeking consumers who are transitioning from high-end department stores like Macy's and Kohl's to more affordable discount retailers, and the company has gained market share among young shoppers who do not consider discount shopping a stigma.

While TJX Companies touted a 'strong start' to the holiday shopping season, the performance guidance it released disappointed Wall Street.

Looking ahead to the future, for the fourth quarter of the fiscal year 2025, the company continues to expect a 2% to 3% growth in comparable store sales, below market expectations; the current forecasted pre-tax profit margin is between 10.8% and 10.9%, with an upward adjustment to the diluted earnings per share guidance to be between $1.12 and $1.14. For the full fiscal year 2025, the company continues to expect a 3% growth in comparable store sales, below market expectations; the company is raising its pre-tax profit margin expectation to 11.3% and its diluted earnings per share expectation to $4.15 to $4.17, below market expectations.