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

The TJX Companies, Inc.’s (TJX) third quarter of fiscal 2026 results showed how meaningfully easing freight costs is lifting profitability. Gross margin expanded 100 basis points to 32.6%, largely driven by stronger merchandise margin, with management explicitly citing lower freight costs as a primary tailwind. Pretax profit margin also rose to 12.7%, up 40 basis points from last year and 60 basis points above the high end of TJX’s plan. The question now is whether TJX can sustain or extend these gains as freight markets remain favorable.

The company noted that its freight-related margin benefit in the quarter stemmed from a combination of favorable ocean freight rates and efficiencies in the movement of merchandise. It also highlighted the exceptional availability of quality branded inventory, which is providing strong buying opportunities. With lower freight supporting merchandise margin and ample supply in the marketplace, TJX is positioned to capitalize on opportunistic purchasing, though the durability of freight savings will depend on broader transportation market conditions.

That said, the fiscal fourth quarter guidance signals moderation. Gross margin is expected to be 30.5-30.6%, only flat to up 10 bps year over year. This indicates that the fiscal third quarter’s substantial freight-driven expansion is unlikely to repeat at the same magnitude.

Overall, the company indicated that the freight benefit seen in the fiscal third quarter may moderate, noting that future savings will depend on broader market conditions rather than factors within its control.

How TJX Stacks Up Against WMT and BURL

Walmart Inc. (WMT) continues to post steady margin improvement in the third quarter of fiscal 2026, supported by disciplined inventory controls and a favorable business mix. While freight is not the primary margin lever for Walmart, efficiencies in fulfillment, a better merchandise mix and stronger eCommerce economics are helping it protect profitability. Walmart is also using its scale to manage overall supply-chain costs efficiently, supporting margin stability even as broader market conditions evolve.

Burlington Stores, Inc. (BURL) is benefiting from more direct freight-related tailwinds, reporting a 30-basis-point gross margin increase in the third quarter of fiscal 2025, including a 20-basis-point improvement in freight expense. These gains reflect stronger transportation efficiencies and ongoing cost-savings initiatives across the supply chain, underscoring Burlington Stores’ continued focus on operational discipline. As Burlington Stores advances its expense management efforts, it remains highly responsive to freight savings, with transportation costs continuing to play an important role in the overall margin performance.

TJX’s Price Performance, Valuation and Estimates

Shares of The TJX Companies have gained 4.8% in the past month compared with the industry’s growth of 2.1%.

From a valuation standpoint, TJX trades at a forward price-to-earnings ratio of 30.53X, up from the industry’s average of 30.16X.

The Zacks Consensus Estimate for TJX’s fiscal 2026 and 2027 earnings implies year-over-year growth of 9.4% and 8.9%, respectively.

TJX currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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