Can TJX Extend Margin Gains as Freight Costs Continue to Ease?

Core Insights - The TJX Companies, Inc. reported a significant increase in profitability due to easing freight costs, with gross margin expanding by 100 basis points to 32.6% and pretax profit margin rising to 12.7% [1][7] - The company is benefiting from favorable ocean freight rates and efficiencies in merchandise movement, alongside strong availability of quality branded inventory [2] - Guidance for the fiscal fourth quarter indicates a moderation in margins, with gross margin expected to be between 30.5% and 30.6%, suggesting that the substantial gains from the third quarter may not be repeated [3] Financial Performance - TJX's gross margin increased by 100 basis points to 32.6% in the third quarter, primarily driven by lower freight costs and strong merchandise margins [7] - The pretax profit margin rose by 40 basis points year-over-year, exceeding the company's expectations [1] - The Zacks Consensus Estimate for TJX's fiscal 2026 and 2027 earnings indicates year-over-year growth of 9.4% and 8.9%, respectively [9] Comparison with Competitors - Walmart Inc. continues to show steady margin improvement, supported by disciplined inventory controls and a favorable business mix, although freight is not the primary margin lever for Walmart [4] - Burlington Stores, Inc. reported a 30-basis-point gross margin increase in the third quarter, benefiting from direct freight-related tailwinds and ongoing cost-saving initiatives [5] Valuation Metrics - TJX shares have gained 4.8% in the past month, outperforming the industry growth of 2.1% [6] - The company trades at a forward price-to-earnings ratio of 30.53X, slightly above the industry's average of 30.16X [8]