TJX Companies (TJX) and Foot Locker (FL) are set to deliver quarterly results this week, as consumers continue to be squeezed by a slowing economy and still-persistent inflation. But the Club holdings are well-positioned to navigate an increasingly complicated economic landscape while retaining customer loyalty — and we remain long-term buyers of each. Off-price retailer TJX reports its April quarter on Wednesday before the opening bell. Analysts expect revenue to rise 3.5 % year-over-year to $11.8 billion and earnings-per-share (EPS) to climb 4.4 % to 71 cents, according to Refinitiv. Sneaker retailer Foot Locker reports its April quarter Friday before the opening bell, with Refinitiv estimates calling for a revenue slide of 8.3 % annually to $1.9 billion and an EPS decline of 49 % to 81 cents. Both earnings reports come as new government data Tuesday showed retail sales grew at a slower rate than expected in April, the last month of their fiscal quarters. Inflation , meanwhile, continued to rise last month on an annual basis, even as the numbers showed the pace of price increases cooling. TJX Companies TD Cowen favors TJX over competitors Ross Stores (ROSS) and Burlington (BURL), with an outperform, or buy, rating and price target of $89 per share. "Our intra-quarter checks with industry consultants suggested TJX appearing to be the best positioned from an execution and inventory standpoint," analysts at TD Cowen wrote in a recent note. They expect TJX to deliver a first-quarter earnings beat and raised their growth estimate for total comparable sales to 2.3%, up from 1.3%. The analysts noted that TJX beat consensus sales estimates by more than 3%, on average, over the past eight quarters, while beating on EPS in seven of those quarters. TJX YTD mountain TJX's stock performance year-to-date. At the same time, home-goods retailer Bed Bath & Beyond's recent bankruptcy creates an opening for TJX to gain market share by mopping up BB & B's excess inventory, according to TD Cowen. TJX, which operates stores like T.J. Maxx, Marshalls and HomeGoods, is "likely uniquely positioned to benefit from these opportunities," the analysts wrote. That's a position we share . Telsey Advisory Group expects "continued outperformance given the strength of the company's execution" but said TJX's home business "remains a soft spot," with post-pandemic consumer spending still normalizing. Still, the analysts said high-quality brands are helping TJX gain "further market share of the consumer's wallet" in a challenging economy. The firm has an outperform rating on TJX stock, with a price target of $95 per share. Foot Locker CEO Mary Dillon, who took over the top job at the start of the year, is in the process of implementing her "Lace Up" turnaround plan that includes diversifying the company's offerings away from Nike to include popular brands like On, Hoka and Puma. As part of the restructuring, Foot Locker plans to exit 400 underperforming stores, wind down lackluster brands, launch new store concepts and accelerate investments in technology and its loyalty program. But these initiatives will take time to translate into earnings, with Citi predicting Foot Locker won't see growth until the second half of this year. As a result, the firm lowered its first-quarter EPS estimates to 83 cents, down from a prior estimate of $1.05 a share. FL YTD mountain Foot Locker's stock performance year-to-date. Citi also cited decelerating credit card activity in the athletic footwear and apparel category as a potential headwind. As a result, the firm now expects Foot Locker's comparable sales to have declined by 8% in the first quarter, compared with a prior forecast for a 3% decline. Comparable sales had climbed by 4% in Foot Locker's fourth quarter. Telsey Advisory Group forecasted "meaningful operating margin compression" for the quarter, calling 2023 a "reset year" for the company. But like us, analysts at Telsey take a long-term view that "over the next several years, Foot Locker can accelerate growth, improve its market positioning and expand its operating margin toward its pre-pandemic level under new leadership." The firm has an outperform rating on FL stock, with a price target of $50 per share. Bottom line Trading of TJX stock is typically volatile ahead of its earnings reports, so we advise investors to sit tight. Last quarter, TJX's earnings were weighed down by a shrinkage, or theft, issue at some of its stores. If that issue resolved in the most recent quarter, it should likely take some pressure off margins. The company's freight costs should be coming down, too, which should also serve as a margin tailwind. We're also encouraged that the off-price retailer will be a beneficiary of Bed Bath & Beyond going under, absorbing inventory in its popular HomeGoods department. Foot Locker is going through a transitionary period as it reinvents itself, so our expectations are low for the first quarter. "Don't expect anything from Foot Locker," Jim Cramer said Monday. "If anything, it's a chance that it could drop." In the case of a stock-price pullback, we'd consider buying up more shares. We initiated a position in the company back in March because we are believers that it will be a turnaround story. We wanted to invest early in Foot Locker's revamp to be at the front of the stock's potential run. It's the first quarter of a reset year — but after that, growth should accelerate, paving the way for the stock to move higher. (Jim Cramer's Charitable Trust is long TJX, FL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
