TJX Companies (TJX) closed lower Wednesday despite reporting third-quarter results that beat estimates. BMO Managing Director Simeon Siegel tells Yahoo Finance Live that "you're looking at a report where they beat the quarter, raised the full-year, they gave you, as they normally do, a conservative fourth quarter guide, but they're telling you they're still taking share."

Siegel explains his bullish case for TJX, arguing that the company is a trade-down option for shoppers. "I think people will still go to T.J. because of what they offer...TJX does not sell cheap clothing, they sell expensive clothing cheap. So they are giving you a reason to be in their store, its' not simply to check the box on a need," Siegel says.

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Video Transcript

JOSH LIPTON: And looking at another key name in retail, TJX, parent company, of course, of TJ Maxx under pressure, despite better than expected earnings. The guidance spooking Wall Street. The company warning of some weakness for the holiday quarter. Joining us now is BMO managing director Simeon Siegel. So Simeon, let me ask you about this. The stock's down about 3% right now. Just, what did you make of the print, and is the guidance really what's causing maybe just a bit of nervousness from investors today?

SIMEON SIEGEL: Hey, good to see you. Back to back retail analysts, look at that. Get to follow Lasser. Hey, guys. So I think listen, there's an interesting corollary to almost everything he just said on the flip side. So here, we do have a business that's selling soft goods and they're selling them really well, comping high single digits. They're also comping homes. So you're looking at products that people did overpurchase during the pandemic, and yet, TJ's able to sell them.

So I think what we have right now is a company that was maybe overcrowded on the long side. It was just understood to be a compounder, so we're giving a little bit back from what we have gained. But you're looking at a report where they beat the quarter, raised the full year. They gave you, as they normally do, a conservative fourth quarter guide, but they're telling you they're still taking share.

JULIE HYMAN: Yeah, I mean, Simeon, it's almost the opposite of Target, in some ways, right? That this is a company that is seeing growth, but people are looking at the glass as sort of half empty, instead of half full. I mean, what do you make of Michael's argument that if things tighten further economically, that people might want to make fewer trips? And so maybe they're going to buy clothing and home goods at a Target versus also going to a TJ Maxx or a Home Goods.

SIMEON SIEGEL: It was like a fascinating segment to listen to. And Michael-- I love Michael. And so listening to him kind of play out this thesis makes a lot of sense. What I will say right now, though, is, TJ is doing well in this environment. You could make the argument there the tradedown. And so I remember-- and Julie, how many times have you been like, this is reminiscent of so many Peloton conversations, where during the pandemic, you think about what was overpurchased, and then where did it slow down, and how long did it take.

TJ is a business that actually, at the beginning of the pandemic, didn't work because it didn't have e-commerce, but then once people realized, OK, here is this product. It's available to me. Their stores are convenient, and I want to go to them. It doesn't really matter if I'm shopping somewhere else for food. I need to find my way into the soft goods here, and that's where I think when you brought up soft lines versus hard lines, it's important to show that MarMaxx, right, TJ, Marshalls, when we think about something that sells a lot of clothes, continue to sell a lot of clothes.

And so I think people will still go to TJ because of what they offer. And you and I have talked about this a lot. TJX does not sell cheap clothing. They sell expensive clothing cheap. So they're giving you a reason to be in their store. It's not simply to check the box on a need.

JOSH LIPTON: And so you have the equivalent of a buy on the name. What are the catalysts ahead that investors should have on their radar?

SIMEON SIEGEL: So I think that if-- listen, if they wouldn't have guided Q4 down, if the stock wouldn't have been doing really well, and frankly, I look at the rest of my group, and today is a huge short squeeze day for companies that people don't theoretically like, whereas here's a company that people do, I think that today is an interesting dynamic that I would look past. So frankly, I think the next catalyst is tomorrow, and I say that only half in jest. But I think realistically, what we need to see is just an ongoing ability for this company to take share.

I think that we know, as shoppers, that TJX does a great job at taking market share from the consumer. But I think what we're finding out increasingly is they're also taking an important market share from the brands, from the vendors. They're becoming a very important destination in the retail ecosystem. This is no longer just a compendium of other people's mistakes. This is a go-to place that if you're a brand, you want to make sure you're selling into. That's going to continue to push up the valuation, and that's going to continue to push up the numbers.