TJX Shares Rise on Strong Earnings (Update)

TJX's(TJX Quote) off-price business model is actually profiting from shoppers trading down, as the company posted its strongest quarter in history.

Profit in the first quarter climbed 8% to $209.2 million, or 49 cents a share, compared with $193.8 million, or 43 cents, in the year-ago period. Analysts expected earnings of 45 cents.

Sales inched up 1% to $4.35 billion from $4.3 billion last year, while same-store sales jumped 2%.

"Customer traffic increased significantly across virtually all of our divisions, as customers responded to our extreme values on ever-fresh assortments of great fashions and great brands," President and CEO Carol Meyrowitz, said in a statement. "Our strategies of planning comparable store sales conservatively, running our business with lean inventories and aggressively managing expenses drove strong bottom-line results."

On top of it all, the company was actually honest, admitting the uptick in traffic was not only due to spot-on merchandise, but also good weather, according to a RealMoney.com report on Monday.

TJX is seeing strength across all the concepts. Marmaxx, which constitutes the bulk of income, is strong in women's, children's and junior apparel.

The company's new and smaller concepts including A.J. Wright in the U.S., T.K. Maxx in the U.K. and Germany, and HomeSense in the U.K. are performing well despite the difficult environment, possibly providing platforms for future growth, Richard Jaffe, analyst at Stifel Nicolaus, wrote in a report on Tuesday.

"Additionally we believe these initiatives demonstrate management is continually trying new things and is not content with status-quo," he wrote.

Home Goods is generally struggling, but is benefiting from the Linens-N-Things liquidation.

And as other retailers, namely Mervyn's, Goody's, Boscov's and Linens N Things, shuttered, it provided an opportunity for TJX to capitalize on market share and real-estate opportunities.

"According to TJX, bankruptcies and store closures in the apparel and home fashion industries are expected to result in approximately 1,300 closed doors and $11 billion in market share opportunity," Jaffe wrote.

TJX has already begun to capitalize on the real-estate opportunity and increased its 2009 store openings to between 80 and 85, up from an original expectation of 65.

But despite the good news, TJX remains cautious in the near-term. The company expects second-quarter earnings in the range of 43 cents to 49 cents a share.

Shares were up 4% in afternoon trading to $29.06.

Rival Ross Stores(ROST Quote) is set to report its first-quarter earnings on Thursday.