Will TJX Be Retail's Winner This Earnings Season?

NEW YORK ( TheStreet) -- Will TJX's ( TJX) so-called Maxinnistas be the answer to the latest quarter's retail earnings woes?

Retailers from Wal-Mart ( WMT) to Nordstrom ( JWN) last week reported lower-than-expected sales for the second quarter and tempered Wall Street expectations for the remainder of the year.

This week we'll hear from J.C. Penney ( JCP) and TJX on Tuesday, among others, with Target ( TGT) reporting Wednesday. More than one analyst believes that TJX could be the retail winner this earnings season.

For the July-ending quarter, the Framingham, Mass.-based company is expected to report quarterly earnings growth of 13% to 63 cents a share. Revenue is expected by analysts to climb 7% to $6.37 billion, according to Thomson Reuters.

Also see: Wal-Mart Disappoints On Earnings, Kohl's Profit Slips

Also see: Nordstrom: Earnings Beat, Revenue Misses

Given the current tough environment for apparel buying, as evidenced by softer sales from retailers that cater to both high and low-end consumers, TJX could possibly be the exception, as the parent company of the T.J. Maxx, Marshalls and HomeGoods chains, with its 2012 e-commerce acquisition of Sierra Trading Post, is one the best positioned retailers right now, according to more than one analyst.

"They're sitting pretty because the focus on fashion is real value. And they have HomeGoods as well as a home section in the Marshalls and T.J. Maxx and that has been an area that has been strong and will continue to be strong," says retail analyst Marie Driscoll of Driscoll Advisors.

Wal-Mart targets the "low-income customer where things really have hit them," Driscoll says. "T.J. Maxx has consumers all over the spectrum, so they're consumer profile I would say is middle America, maybe even a consumer with a little higher income, who's looking for a bargain."

Driscoll says the same consumer is also into outlet shopping and can also be found at places like Nordstrom Rack, which fared somewhat better than Nordstrom full-line stores, the company said last week.

TJX saw a 7% increase in comparable store sales for the second quarter of 2012. Driscoll is expecting comp sales for this year's second quarter to be slightly lower for the quarter, however unlike other retailers that have reported so far, Driscoll doesn't expect the company to lower guidance for the remainder of the year. She does caution that whatever TJX says about its e-commerce initiatives could throw a wrench in that forecast.

"I get the sense that retailers are a little spooked, but they're just being cautious. We could end up having a better back half than they are expecting," Driscoll says. "All that just really helps T. J. Maxx because it gives them inventory flow. If all of a sudden Macy's and Nordstrom says we can't take this, T.J. Maxx will buy it and put it on the floor at a great deal."

Patricia McKeever, managing director at MKM Partners, adds to the argument that the company continues to increase its market share, even in the sluggish consumer environment.

"We note that while TJX's same-store sales have risen between 4% and 7% in each of the past four years, company research suggests three quarters of the U.S. population hasn't shopped a T.J. Maxx or Marshall's store over the past year or so. We view this as a big opportunity," McKEevere wrote in a note on Thursday. Sh rates TJX a "buy."

Additionally, the company has been successful at attracting a younger customer, likely in the 25 to 39 age range.

"Overall, we believe TJX is still in a sweet spot with the consumer, as the company's somewhat better-off customer (vs. the typical discount store shopper) has greater capacity to spend vs. last year (stock market, housing recovery helping), yet remains intensely focused on value. We think solid trends have continued into 3Q13," the MKM Partners note said.

Not to be discounted, the home furnishings category has been one of the best performing sales categories all year. And when you have customers taking to social media with Tweets like the two examples below, TJX's strong hold on the off-price home décor and furnishings market gives it an additional leg up.

TJX's stock is up 20% for the year versus the S&P Retail Select Industry Index, up 27% for the year, of which it is a constituent of the index. The stock was trading up 0.6% to $50.81 on Monday.

"The general slowdown in specialty and department store sales has resulted in abundant buying opportunities in the marketplace and we believe off-pricers like TJX are well positioned to capitalize on those opportunities.," Jennifer Davis of Lazard Capital Markets wrote in a note on Friday. Davis has a "buy" rating on TJX.

-- Written by Laurie Kulikowski in New York.

To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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