Budget-Conscious Shoppers Send TJ Maxx Earnings Higher

NEW YORK (AP) - TJX Companies Inc., parent of T.J. Maxx and other discount stores, said Tuesday that its second-quarter net income climbed 14 percent as it lured in budget-conscious shoppers.

The company also raised its earnings outlook for the year, a sign that it expects the momentum to continue. Investors pushed shares up more than 2 percent on a day when broader markets fell.

TJX stores sell name-brand clothing and other goods at steep discounts, and the weak economy has driven more customers there. But CEO Carol Meyrowitz said the company is positioned for both good and bad economies because it adapts quickly as shoppers' desires change, "zigging and zagging in many ways."

"We're very good at shifting categories and I believe that we can respond faster to pricing and fashion trends than just about any other retailer," Meyrowitz said in a call with analysts.

She also said that the uncertain economy could actually benefit TJX by creating more opportunities on the buying side, which should bring in new customers. TJX, which also owns the Marshalls and HomeGoods brands, buys surplus designer clothing and other brand-name goods from their makers, and then sells them at steep discounts.

TJX is also trying to attract customers by remodeling stores, preparing to introduce online shopping in the U.S., and spending more on advertising, including European TV commercials. Meyrowitz said that more customers are visiting the stores and buying more when they do. But there's room to grow: Seventy-five percent of U.S. shoppers have not visited a T.J. Maxx or Marshalls in the past year.

Revenue rose 8 percent to $5.47 billion, topping analysts' predictions of $5.44 billion. Net income was up 14 percent to $348 million from $305 million. On a per-share basis, earnings were 90 cents, beating analysts' predictions for 88 cents.

Massachusetts-based TJX gets 76 percent of its revenue in the U.S. It has made moves into Canada and Europe, with mixed success.

Meyrowitz said that results in Canada had been disappointing. Revenue fell 3 percent at Canadian stores open at least a year, compared to a 4 percent increase for the company overall. Meyrowitz said the company is working on "better execution" for the women's and children's businesses.

Meyrowitz also acknowledged missteps in Europe, where revenue at stores open at least a year was flat. She said the company is slowing store growth and focusing on more country-specific goods.

"TJX Europe, recently the most concerning concept in TJX's portfolio, appears to be on the road to recovery," RBC Capital Markets analyst Howard Tubin wrote in a note to clients.

Executives said TJX is trying to improve its supply chain operations, aiming to reduce inventory levels at each store and turn inventories faster. "We're very, very far from really shipping the right goods to the right store at the right time," Meyrowitz said. "We still do quite a bit manually, so this is going to be a year-over-year process."

Meyrowitz also noted how swings in cotton prices had affected clothing makers. Many companies have raised prices to deal with the higher costs for raw materials like cotton. TJX didn't say whether it had raised prices, but Meyrowitz did say that TJX remains focused on distancing itself from the prices of traditional retailers.

The company raised its earnings outlook for the year to $3.78 to $3.86 per share. Three months ago it had predicted $3.70 to $3.82.