TJX (TJX)

Off-price retail company TJX (NYSE:TJX) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 6.9% year on year to $14.4 billion. On the other hand, next quarter’s revenue guidance of $14.41 billion was less impressive, coming in 2.1% below analysts’ estimates. Its GAAP profit of $1.10 per share was 8.5% above analysts’ consensus estimates.

Company Overview

Initially based on a strategy of buying excess inventory from manufacturers or other retailers, TJX (NYSE:TJX) is an off-price retailer that sells brand-name apparel and other goods at prices much lower than department stores.

Discount retailers understand that many shoppers love a good deal, and they focus on providing excellent value to shoppers by selling general merchandise at major discounts. They can do this because of unique purchasing, procurement, and pricing strategies that involve scouring the market for trendy goods or buying excess inventory from manufacturers and other retailers. They then turn around and sell these snacks, paper towels, toys, clothes, and myriad other products at highly enticing prices. Despite the unique draw and lure of discounts, these discount retailers must also contend with the secular headwinds of online shopping and challenged retail foot traffic in places like suburban strip malls.

Off-price and discount retail competitors include Ross Stores (NASDAQ:ROST), Burlington Stores (NYSE:BURL), and Ollie’s Bargain Outlet (NASDAQ:OLLI)

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $57.93 billion in revenue over the past 12 months, TJX is a behemoth in the consumer retail sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices. However, its scale is a double-edged sword because it’s harder to find incremental growth when you’ve penetrated most of the market. For TJX to boost its sales, it likely needs to adjust its prices or lean into foreign markets.

As you can see below, TJX grew its sales at a tepid 6.4% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts), but to its credit, it opened new stores and increased sales at existing, established locations.

This quarter, TJX reported year-on-year revenue growth of 6.9%, and its $14.4 billion of revenue exceeded Wall Street’s estimates by 1.7%. Company management is currently guiding for a 2.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 4.8% over the next 12 months, a slight deceleration versus the last six years. We still think its growth trajectory is attractive given its scale and suggests the market is forecasting success for its products.

Number of Stores

The number of stores a retailer operates is a critical driver of how quickly company-level sales can grow.

TJX sported 5,134 locations in the latest quarter. Over the last two years, it has opened new stores quickly, averaging 2.6% annual growth. This was faster than the broader consumer retail sector.

When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.

Same-Store Sales

The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales is an industry measure of whether revenue is growing at those existing stores and is driven by customer visits (often called traffic) and the average spending per customer (ticket).

TJX’s demand has been spectacular for a retailer over the last two years. On average, the company has increased its same-store sales by an impressive 4.1% per year. This performance suggests its rollout of new stores is beneficial for shareholders. We like this backdrop because it gives TJX multiple ways to win: revenue growth can come from new stores, e-commerce, or increased foot traffic and higher sales per customer at existing locations.

In the latest quarter, TJX’s same-store sales rose 4% year on year. This performance was more or less in line with its historical levels.

TJX has bad unit economics for a retailer, giving it less room to reinvest and grow its presence. As you can see below, it averaged a 30.4% gross margin over the last two years. That means TJX paid its suppliers a lot of money ($69.57 for every $100 in revenue) to run its business.

TJX’s gross profit margin came in at 30.7% this quarter, in line with the same quarter last year and exceeding analysts’ estimates by 2.2%. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting it strives to keep prices low for customers and has stable input costs (such as labor and freight expenses to transport goods).

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

TJX’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 11.1% over the last two years. This profitability was solid for a consumer retail business and shows it’s an efficient company that manages its expenses well. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Looking at the trend in its profitability, TJX’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, TJX generated an operating margin profit margin of 11.2%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

TJX’s EPS grew at a decent 10% compounded annual growth rate over the last six years, higher than its 6.4% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

In Q2, TJX reported EPS of $1.10, up from $0.96 in the same quarter last year. This print beat analysts’ estimates by 8.5%. Over the next 12 months, Wall Street expects TJX’s full-year EPS of $4.38 to grow 6.7%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

TJX has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 7.5% over the last two years, quite impressive for a consumer retail business.

Taking a step back, we can see that TJX’s margin dropped by 1 percentage points over the last year. This decrease came from the higher costs associated with opening more stores.

TJX’s free cash flow clocked in at $1.33 billion in Q2, equivalent to a 9.2% margin. This result was good as its margin was 1.3 percentage points higher than in the same quarter last year. Its cash profitability was also above its two-year level, and we hope the company can build on this trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

TJX’s five-year average ROIC was 27.9%, placing it among the best consumer retail companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

TJX reported $4.64 billion of cash and $13.12 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $7.62 billion of EBITDA over the last 12 months, we view TJX’s 1.1× net-debt-to-EBITDA ratio as safe. We also see its $88 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed that TJX beat analysts’ revenue and EPS expectations this quarter. We were also happy its gross margin outperformed Wall Street’s estimates. On the other hand, its EPS guidance for next quarter missed and its revenue guidance for next quarter fell short of Wall Street’s estimates. Overall, this print was mixed but still had some key positives. The stock traded up 3.6% to $139.50 immediately following the results.

Updated: November 11, 2025 at 9:33 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

There are multiple reasons why we think TJX is an amazing business. Although the company’s revenue growth was a little slower over the last six years, its coveted brand awareness makes it a household name consumers consistently turn to. On top of that, TJX’s stellar ROIC suggests it has been a well-run company historically.

TJX’s P/E ratio based on the next 12 months is 30.6x. There’s some optimism reflected in this multiple, but we don’t mind owning a high-quality business, even if it’s slightly expensive. We’re in the camp that investments like this should be held for at least three to five years to negate the short-term price volatility that can come with relatively high valuations.

Wall Street analysts have a consensus one-year price target of $151.84 on the company (compared to the current share price of $146.07).