Among the things investors should like about TJX Companies (NYSE:TJX) is its popularity among working-class and middle-class consumers who are looking to save money. The apparel and home fashion retailer offers brand-name merchandise at a discount at its T.J. Maxx, MarshallsHomeGoodsSierra and Homesense stores and their online counterparts, appealing to a wide swath of consumers. This makes TJX stock ideal during rocky economic times.

Given this and management’s commitment to returning cash to shareholders, I believe TJX stock is a good choice for conservative investors.

Retailer Attracts Price-Conscious Consumers

The retailer’s discount products are a good fit for today’s macro environment. With the cost of food and just about everything else still climbing, TJX Companies’ stores appeal to price-conscious working-class and middle-class consumers, and likely even some higher-end shoppers who are seeking to cut expenses without sacrificing quality.

In the company’s most recent fiscal quarter, ended Jan. 28, comparable-store sales in the United States rose 4%, even as consumers were confronted with rising interest rates and inflation eating into their discretionary budgets.

Company Delivering Strong Financial Results

On Feb. 22, the company reported better-than-expected fiscal fourth-quarter sales of $14.5 billion, up 5% from a year ago. Diluted earnings per share of 89 cents were up 14% year over year and met expectations.

For the full fiscal year, sales rose 3% to $49.9 billion, while diluted earnings per share increased 10% to $2.97.

For the current fiscal year, management forecast EPS of $3.39 to $3.51. Analysts had been expecting $3.57 per share, and TJX stock sold off around 2% following the announcement. Since then, shares are roughly flat.

Despite the lower-than-expected guidance, TJX Companies’ report was solid. Moreover, the company said it will buy back $2 billion to $2.5 billion of its shares this fiscal year. And it upped its quarterly dividend by 13% to 33.25 cents, bringing its current yield to 1.7%.

Quality Merchandise and a Fun Shopping Experience

In a Feb. 14 note to investors, Cowen analyst John Kernan wrote, as reported by Seeking Alpha: “Our checks with industry consultants indicate effective execution with high-quality branded seasonal merch within TJX’s banners which bodes well for traffic, conversion and margin.”

Kernan, who rates TJX stock an “outperform,” raised his price target on shares to $88 from $85. That implies upside of 14% from current levels.

My wife frequently shops at the retailer’s flagship T.J. Maxx stores. She believes they sell high-quality, brand-name clothing at lower prices than other chains. The only problem she mentioned is actually positive for T.J. Maxx and TJX stock. Specifically, she noted: “Their stores are busy now, so it’s more difficult to find the products you’re looking for.”

Even though I’m not much of a shopper, I enjoy the company’s Marshalls stores, where I can find many interesting low-price items. For example, I recently bought tea bags, coffee pods and a gym bag at my local Marshalls. When it comes to Marshalls, I agree with TJX Companies Chief Executive Officer (CEO) Ernie Herrman’s statement that TJX provides a “treasure-hunt shopping experience, every day.”

The Bottom Line on TJX Stock

TJX stock has a forward price-earnings ratio of 22.7, which is a bit steep. But analysts, on average, expect the company’s earnings per share to jump 13% in fiscal 2023 to $3.52 and another 11% to $3.90 in fiscal 2024.

Given the expected double-digit profit growth and the company’s ability to leverage macroeconomic trends, I’m upbeat on the outlook for TJX stock and believe it’s a good choice for conservative investors looking for a relatively defensive name.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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