Home Depot, TJX Buck Retail Trends

Not all retailers are in a funk. Americans are still visiting stores to pick out new kitchen cabinets or hunt down deals on designer clothes.

On Tuesday, home-improvement chain Home Depot Inc. reported a 4.7% jump in sales at established stores during the second quarter, while TJX Cos., the parent of T.J. Maxx and other off-price chains, posted a 4% increase at existing stores. Both companies are forecasting similar gains for the rest of the year.

Both Home Depot and TJX have enjoyed a much better stretch of sales than the broader retail market by operating in sectors where consumers are willing to spend and building models that can blunt the intrusion of online competitors like Amazon.com Inc. Their growth has outpaced that of department stores like Macy's Inc., which has tabbed more stores for closing, and big-box chains like Target Corp. and Wal-Mart Stores Inc., which both report later this week.

Other chains are benefiting as competitors falter. Dick's Sporting Goods Inc. on Tuesday raised its profit outlook for the year, as the impact from closeout sales at its bankrupt competitor Sports Authority Inc. wasn't as bad as feared. "We are definitely seeing market share coming to us," CEO Ed Stack said. Sales rose 2.8% at existing stores in the second quarter and they are expected to rise up to 3% for the year.

The latest results show that the consumer, whether helped by rising wages or feeling flush from their home value rising to near peak levels, are willing to spend. "The fundamentals for consumers are good, they're just spending their money differently," said Carol Tome, Home Depot's finance chief.

TJX says its model, where it buys goods through closeouts and sells them at discounted prices, is helping win over shoppers. "We are convinced that we are attracting new customers, driving more frequent visits to our stores, and gaining market share," CEO Ernie Herrman told analysts on Tuesday. It also operates the HomeGoods and Marshalls chains.

Home Depot and rival Lowe's Co.'s, which reports earnings Wednesday, are both buffeted by the rising housing market, which is spurring homeowners to take on pricey projects like renovating bathrooms or replacing roofs. Home Depot on Tuesday said the number of transactions over $900 rose 8.1% in the period and that the number of items purchased at a time rose because more ambitious projects require more tools and parts.

"You're looking at 40, 50, 60, even 70 items in the basket," CEO Craig Menear said. In the second quarter, Home Depot's profit rose 9.3%, while revenue climbed 6.6% to $26.47 billion. For the full year, the Atlanta-based company expects same-store sales to rise 6.3%.

Executives at TJX said they expect sales at existing stores to rise 3% to 4% this year and plan to add hundreds of stores in North America in coming years. The Framingham, Mass., company's profit rose 2.3% to $562.2 million in the second quarter, while revenue rose 7% to $7.88 billion.

But TJX's shares took a hit after its third-quarter outlook disappointed investors. The company cautioned that higher wages, investment projects and foreign currency swings would pressure profits. Shares of TJX, which hit a high Monday, fell 5.5% to $78.12 on Tuesday.

Suzanne Kapner contributed to this article.

Write to Paul Ziobro at Paul.Ziobro@wsj.com

(END) Dow Jones Newswires

August 16, 2016 17:15 ET (21:15 GMT)

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