TJX Cos profit beats; shares down on 2010 concerns

A TJ Maxx store is pictured in Dallas, Texas October 9, 2008.

NEW YORK (Reuters) - Off-price retailer TJX Cos Inc (TJX.N) reported a higher-than-expected quarterly profit on Tuesday, but investors questioned whether the company could hold on to shoppers once the economy improves, and its shares fell 3 percent.

TJX buys excess merchandise at below-wholesales prices and sells it at deep discounts, an approach that has drawn shoppers seeking to spend less on discretionary items such as clothes and home goods during the recession.

"Even when the recession ends, the importance of value to the consumer will remain, which plays to our strengths," TJX Chief Executive Carol Meyrowitz told analysts on a conference call. "This is the first time we are seeing an acceleration during a recession."

TJX said sales at stores open for at least a year had gotten off to a fast start in November and estimated they would rise between 3 and 5 percent in both December and January.

But analysts noted that other retailers were starting to catch up, slashing inventory to be more in line with demand, meaning TJX would not likely enjoy the same high margins or the ability to discount as deeply.

"Our concern for TJX is the stellar results of 2009 may not be carried into 2010," Jefferies & Co analyst Randal Konik said in a note. "If momentum does slow, the stock will likely have a difficult time outperforming peers and reaching new 'all-time' highs."

Shares were down 3 percent at $38.35 in afternoon trade.

ADVERTISING BOOST

Meyrowitz said the company had boosted its planned advertising for the holiday season, with a big push in television advertising starting this month.

The owner of the T.J. Maxx and Marshalls chains said profit rose to $347.8 million, or 81 cents a share, in the third quarter ended October 31, from $235.8 million or 54 cents a share a year earlier.

TJX reported overall sales rose 10.1 percent to $5.24 billion in the third quarter. It also reported same-store sales, or sales at stores open at least a year, were up 7 percent during the quarter.

Analysts on average forecast a profit of 80 cents per share, according to Thomson Reuters I/B/E/S, and sales of $5.25 billion during the quarter.

TJX said last week that sales at stores open at least a year in October had risen 10 percent and forecast that same-store sales in the fourth quarter would rise between 5 and 7 percent.

Its outlook for the fourth quarter is for profit from continuing operations of 65 to 71 cents per share.

(Additional reporting by Ben Klayman, editing by Michele Gershberg, Dave Zimmerman and Matthew Lewis)