TJX, Home Depot Beat Estimates as Retailers Cope With Slump

TJX Cos. (TJX), Dick’s Sporting Goods (DKS) Inc. and Home Depot Inc. (HD) delivered better-than-projected earnings today, showing that aggressive discounting and demand for housewares are helping some retailers cope with a broader slump.

TJX, the discount apparel company that owns T.J. Maxx and Marshalls, posted 75 cents in second-quarter profit, topping the 73 cents predicted by analysts. The Framingham, Massachusetts-based company also raised its profit forecast after comparable-store sales grow faster than estimated. Dick’s beat second-quarter earnings projections as well, helped by same-store growth, though it said promotions and advertising would weigh on profit in the rest of the year.

The results, together with a rosy outlook from Home Depot, fueled investor optimism after a series of disappointing retail earnings reports. Wal-Mart Stores Inc. (WMT), the world’s largest retailer, posted stagnant U.S. same-store sales last week, marking the sixth straight period of no growth. That followed a report from the Commerce Department that retail sales were little changed in July, hampered by a lack of wage gains.

“People are looking for bargains,” said Bridget Weishaar, a Chicago-based analyst at Morningstar Investment Services Inc. That’s benefiting a company like TJX, which is built around offering name-brand products at clearance prices, she said. “For a lot of their competitors, offering those discounts means taking a hit on the margins.”

Photographer: Patrick T. Fallon/Bloomberg

The better-than-projected earnings, together with a rosy outlook from Home Depot Inc., fueled investor optimism after a series of disappointing retail earnings reports. Close

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Photographer: Patrick T. Fallon/Bloomberg

The better-than-projected earnings, together with a rosy outlook from Home Depot Inc., fueled investor optimism after a series of disappointing retail earnings reports.

Shares Gain

TJX shares jumped 8.6 percent to $58.56 at the close in New York, the biggest daily gain since February 2009. Dick’s rose 1.6 percent to $44.21, while Atlanta-based Home Depot climbed 5.6 percent to $88.23.

Home Depot, the largest U.S. home-improvement retailer, exceeded second-quarter profit estimates and raised its forecast for the year, bolstered by sales of seasonal merchandise. Rising home prices are encouraging consumers to spend more on renovations.

Shoppers are making up for a late spring in much of the U.S., which pushed sales of landscaping materials and other items into the second quarter. TJX, which has a household wares chain called HomeGoods, also is benefiting from consumers’ sprucing up their residences. HomeGoods’ same-store sales jumped 8 percent last quarter, double the rate of the total company.

Last quarter got off to a slow start for clothing companies, with leftover merchandise still sitting on shelves, said Richard Jaffe, a New York-based analyst at Stifel Nicolaus & Co. Things began picking up in July as new merchandise arrived, but shoppers need more prodding than they once did, he said.

“The consumer needs to be inspired to buy,” Jaffe said.

Shrinking Paychecks

While home values are ticking up, consumers’ wages aren’t keeping pace. Inflation-adjusted average weekly earnings dropped 0.2 percent in the 12 months through June, the worst performance since October 2012, according to Labor Department data.

That’s taken a toll on a broad swath of retailers, including Wal-Mart, Macy’s Inc. (M) and Target Inc. Wal-Mart, which relies more heavily on low-income shoppers, also is contending with cuts in food-stamp programs.

Heavy discounts and promotions remain widespread, even at companies posting sales gains last quarter. Dick’s, based in Coraopolis, Pennsylvania, had stepped up price cuts and advertising in a bid to coax hesitant shoppers into stores. TJX Chief Executive Officer Carol Meyrowitz also credited the company’s marketing campaigns with helping fuel demand.

“We are very confident in our ability to deliver another strong year,” she said.

To contact the reporters on this story: Lindsey Rupp in New York at lrupp2@bloomberg.net; Lauren Coleman-Lochner in New York at llochner@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net James Callan

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