The TJX Companies, Inc. Reports Above-Plan Q2 FY16 Results with 6% Comp Sales Growth and 7% Adjusted Earnings Per Share Increase; Raises Full Year Comp and EPS Guidance
The TJX Companies, Inc. (NYSE: TJX), the leading off-price retailer of
apparel and home fashions in the U.S. and worldwide, today announced
sales and earnings results for the second quarter ended August 1, 2015.
Net sales for the second quarter of Fiscal 2016 increased 6% to $7.4
billion and consolidated comparable store sales increased 6% over last
year's 3% increase. Net income for the second quarter was $549 million
and diluted earnings per share were $.80, a 7% increase over the prior
year's adjusted $.75, which excluded a $.02 per share debt
extinguishment charge from reported earnings per share of $.73.
For the first half of Fiscal 2016, net sales were $14.2 billion, a 6%
increase over last year. Consolidated comparable store sales for the
first half of Fiscal 2016 increased 5%. Net income for the first half of
Fiscal 2016 was $1.0 billion. Diluted earnings per share were $1.49, an
8% increase over the prior year's adjusted $1.38, which excluded a $.01
per share debt extinguishment charge from reported earnings per share of
$1.37.
Carol Meyrowitz, Chairman and Chief Executive Officer of The TJX
Companies, Inc., stated, "We are extremely pleased that our momentum
continued in the second quarter. Our 6% consolidated comparable store
sales growth and 7% adjusted EPS growth significantly exceeded our
expectations. It was great to see that comp sales were entirely driven
by customer traffic – our fifth consecutive quarter of sequential
traffic improvement – and that we had strong sales across all of our
divisions. Our flexible model and ability to offer an eclectic, exciting
merchandise mix at outstanding values continues to resonate with
consumers in all of our geographies. We were also very pleased with our
solid merchandise margins. We are proud of our strong comp sales,
traffic increases and merchandise margins, all of which are core to a
successful retail business. We enter the back half of the year in an
excellent position to keep our momentum going and have many exciting
initiatives planned. I am convinced that our gift-giving selections will
be better than ever this year, and that our fall and holiday marketing
campaigns will keep attracting more shoppers to our stores. Above all,
we will be offering consumers amazing values every day! The third
quarter is off to a solid start and we are raising our full year comp
sales and earnings per share guidance. Today, we are a nearly $30
billion retailer with a clear vision for growth, a differentiated
apparel and home fashions business, and world-class organization.
Looking ahead, we are confident that we will achieve, and hope to
surpass, our plans as we continue to bring value around the world and
grow TJX to a $40 billion-plus company!"
Sales by Business Segment
The Company's comparable store sales and net sales by division, in the
second quarter, were as follows:
Second Quarter
Second Quarter
Comparable Store Sales1,2
Net Sales ($ in millions)3,4
FY2016
FY2015
FY2016
FY2015
In the U.S.:
Marmaxx5,6
+4%
+2%
$4,806
$4,494
HomeGoods
+9%
+5%
$895
$773
International:
TJX Canada
+12%
+3%
$699
$696
TJX Europe
+5%
+6%
$963
$954
TJX
+6%
+3%
$7,364
$6,917
1Comparable store sales outside the U.S. calculated on a
constant currency basis, which removes the effect of changes in currency
exchange rates. 2Comparable store sales exclude Sierra
Trading Post, tjmaxx.com and tkmaxx.com sales. 3Sales in
Canada and Europe include the impact of foreign currency exchange rates.
See below. 4Figures may not foot due to rounding. 5Combination
of T.J. Maxx and Marshalls. 6Net sales include Sierra Trading
Post.
Impact of Foreign Currency Exchange Rates
Changes in foreign currency exchange rates affect the translation of
sales and earnings of the Company's international businesses into U.S.
dollars for financial reporting purposes. In addition, ordinary-course,
inventory-related hedging instruments are marked to market at the end of
each quarter. Changes in currency exchange rates can have a material
effect on the magnitude of these translations and adjustments when there
is significant volatility in currency exchange rates.
The movement in foreign currency exchange rates had a four percentage
point negative impact on consolidated net sales growth in the second
quarter of Fiscal 2016 versus the prior year. The overall net impact of
foreign currency exchange rates had a neutral impact on second quarter
Fiscal 2016 earnings per share, the same as last year's impact.
For the first six months of Fiscal 2016, the movement in foreign
currency exchange rates had a three percentage point negative impact on
consolidated net sales growth. The overall net impact of foreign
currency exchange rates had a $.04 negative impact on earnings per share
in the first six months of Fiscal 2016, compared with a $.02 negative
impact last year.
A table detailing the impact of foreign currency on TJX pretax earnings
and margins, as well as those of its international businesses, can be
found in the Investor Information section of the Company's website, tjx.com.
The foreign currency exchange rate impact to earnings per share does not
include the impact currency exchange rates have on various transactions,
which we refer to as "transactional foreign exchange."
Margins
For the second quarter of Fiscal 2016, the Company's consolidated pretax
profit margin was 12.0%, a 0.3 percentage point decrease compared with
the prior year's adjusted 12.3% margin, which excluded an approximately
0.3 percentage point debt extinguishment charge (referred to above) from
the reported margin of 12.0%.
Gross profit margin for the second quarter of Fiscal 2016 was 29.1%, up
0.5 percentage points versus the prior year, primarily due to buying and
occupancy leverage on the 6% comp growth. Merchandise margins were flat
to last year despite a negative impact from transactional foreign
exchange at the Company's international divisions and increased supply
chain costs related to a substantial increase in units sold during the
quarter.
Selling, general and administrative costs as a percent of sales were
16.9%, up 0.7 percentage points versus the prior year's ratio, primarily
due to a combination of the Company's wage initiative, incremental
investments and pension costs, as the Company had anticipated, as well
as a contribution to The TJX Foundation.
Inventory
Total inventories as of August 1, 2015, were $3.7 billion, compared with
$3.4 billion at the end of the second quarter last year. Consolidated
inventories on a per-store basis as of August 1, 2015, including the
distribution centers, but excluding inventory in transit and the
Company's e-commerce businesses, were up 1% on a reported basis (up 4%
on a constant currency basis). The Company enters the third quarter in
an excellent inventory position to take advantage of the plentiful
buying opportunities for branded, quality merchandise it is seeing in
the marketplace and ship fresh assortments throughout the fall and
holiday seasons.
Shareholder Distributions
During the second quarter, the Company repurchased a total of $440
million of TJX stock, retiring 6.6 million shares. For the first half of
Fiscal 2016, the Company spent a total of $855 million in repurchases of
TJX stock, retiring 12.7 million shares. The Company continues to expect
to repurchase approximately $1.8 to $1.9 billion of TJX stock in Fiscal
2016. The Company may adjust this amount up or down depending on various
factors.
Third Quarter and Full Year Fiscal 2016 Outlook
For the third quarter of Fiscal 2016, the Company expects diluted
earnings per share to be in the range of $.80 to $.82 compared to $.85
last year. This guidance reflects an assumption that the combination of
foreign currency, transactional foreign exchange, the Company's wage
initiative, incremental investments to support growth, and pension costs
would have a 13% negative impact on EPS growth. The Company expects the
foreign currency impact to third quarter EPS growth to be significantly
greater than originally planned due to the continued decline of the
Canadian Dollar. This EPS outlook is based upon estimated consolidated
comparable store sales growth of 2% to 3%.
The Company is raising its full year earnings per share guidance. For
the fiscal year ending January 30, 2016, the Company now expects diluted
earnings per share to be in the range of $3.24 to $3.28 versus $3.15 in
Fiscal 2015. Excluding a $.01 debt extinguishment charge in Fiscal 2015,
this guidance would represent a 3% to 4% increase over the adjusted
$3.16 in Fiscal 2015. This EPS raise reflects the benefit from the
Company's strong second quarter and a higher comp store sales growth
assumption for the second half of the year, largely offset by expected
additional foreign currency headwinds and higher supply chain costs than
originally planned. The guidance for EPS growth also reflects a 9%
negative impact from the same factors affecting estimated EPS growth in
the third quarter, detailed above. This EPS outlook is now based upon a
raised estimate of consolidated comparable store sales growth of 3% to
4%.
The Company's earnings guidance for the third quarter and full year
Fiscal 2016 assumes that currency exchange rates will remain unchanged
from the levels at the beginning of the third quarter.
Stores by Concept
During the second quarter ended August 1, 2015, the Company increased
its store count by a net of 20 stores. The Company increased square
footage by 4% over the same period last year.
Store Locations
Gross Square Feet*
Second Quarter
Second Quarter
(in millions)
Beginning
End
Beginning
End
In the U.S.:
T.J. Maxx
1,126
1,130
32.4
32.4
Marshalls
987
990
30.0
30.0
HomeGoods
498
503
12.4
12.5
Sierra Trading Post
6
6
0.2
0.2
TJX Canada:
Winners
239
240
6.8
6.8
HomeSense
97
97
2.3
2.3
Marshalls
39
39
1.2
1.2
TJX Europe:
T.K. Maxx
416
423
12.8
13.0
HomeSense
33
33
0.7
0.7
TJX
3,441
3,461
98.7
99.0
*Square feet figures may not foot due to rounding.
About The TJX Companies, Inc.
The TJX Companies, Inc. is the leading off-price retailer of apparel and
home fashions in the U.S. and worldwide. As of August 1, 2015, the end
of the Company's second quarter, the Company operated a total of 3,461
stores in seven countries, the United States, Canada, the United
Kingdom, Ireland, Germany, Poland, and Austria, and three e-commerce
sites. These include 1,130 T.J. Maxx, 990 Marshalls, 503 HomeGoods and 6
Sierra Trading Post stores, as well as tjmaxx.com
and sierratradingpost.com
in the United States; 240 Winners, 97 HomeSense, and 39 Marshalls stores
in Canada; and 423 T.K. Maxx and 33 HomeSense stores, as well as tkmaxx.com,
in Europe. TJX's press releases and financial information are also
available at tjx.com.
Fiscal 2016 Second Quarter Earnings Conference
Call
At 11:00 a.m. ET today, Carol Meyrowitz, Chairman and Chief Executive
Officer of TJX, will hold a conference call with stock analysts to
discuss the Company's second quarter Fiscal 2016 results, operations and
business trends. A real-time webcast of the call will be available to
the public at tjx.com.
A replay of the call will also be available by dialing (866) 367-5577
through Tuesday, August 25, 2015, or at tjx.com.
Non-GAAP Financial Information
The Company has used non-GAAP financial measures in this press release.
Adjusted financial measures refer to financial information adjusted to
exclude from financial measures prepared in accordance with accounting
principles generally accepted in the United States (GAAP) items
identified in this press release. The Company believes that the
presentation of adjusted financial results provides additional
information on comparisons between periods including underlying trends
of its business by excluding certain items that affect overall
comparability. Non-GAAP financial measures should be considered in
addition to, and not as an alternative for, the Company's reported
results prepared in accordance with GAAP.
Important Information at Website
Archived versions of the Company's conference calls are available in the
Investor Information section of tjx.com
after they are no longer available by telephone as are reconciliations
of non-GAAP financial measures to GAAP financial measures and other
financial information. The Company routinely posts information that may
be important to investors in the Investor Information section at tjx.com.
The Company encourages investors to consult that section of its website
regularly.
Forward-looking Statement
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995: Various statements made in this release are forward-looking and
involve a number of risks and uncertainties. All statements that address
activities, events or developments that we intend, expect or believe may
occur in the future are forward-looking statements. The following are
some of the factors that could cause actual results to differ materially
from the forward-looking statements: execution of buying strategy and
inventory management; operational and business expansion and management
of large size and scale; customer trends and preferences; marketing,
advertising and promotional programs; competition; personnel
recruitment, training and retention; labor costs and workforce
challenges; economic conditions and consumer spending; data security;
information systems and new technology; adverse or unseasonable weather;
serious disruptions or catastrophic events; seasonal influences;
corporate and retail banner reputation; merchandise quality and safety;
expanding international operations; merchandise importing; commodity
pricing; fluctuations in currency exchange rates; fluctuations in
quarterly operating results and market expectations; mergers,
acquisitions, or business investments and divestitures, closings or
business consolidations; compliance with laws, regulations and orders;
changes in laws and regulations; outcomes of litigation, legal matters
and proceedings; tax matters; real estate activities; cash flow and
other factors that may be described in our filings with the Securities
and Exchange Commission. We do not undertake to publicly update or
revise our forward-looking statements even if experience or future
changes make it clear that any projected results expressed or implied in
such statements will not be realized.
The TJX Companies, Inc. and Consolidated Subsidiaries
Financial Summary
(Unaudited)
(In Thousands Except Per Share Amounts)
13 Weeks Ended
26 Weeks Ended
August 1,
2015
August 2,
2014
August 1,
2015
August 2,
2014
Net sales
$
7,363,731
$
6,917,212
$
14,229,368
$
13,408,388
Cost of sales, including buying and occupancy costs
5,219,191
4,935,856
10,139,432
9,613,856
Selling, general and administrative expenses
1,247,538
1,122,758
2,416,195
2,195,808
Loss on early extinguishment of debt
-
16,830
-
16,830
Interest expense, net
10,808
11,150
22,432
20,745
Income before provision for income taxes
886,194
830,618
1,651,309
1,561,149
Provision for income taxes
336,859
312,994
627,373
589,208
Net income
$
549,335
$
517,624
$
1,023,936
$
971,941
Diluted earnings per share
$
0.80
$
0.73
$
1.49
$
1.37
Cash dividends declared per share
$
0.21
$
0.175
$
0.42
$
0.35
Weighted average common shares – diluted
685,322
705,200
688,579
709,220
The TJX Companies, Inc. and Consolidated Subsidiaries
Condensed Balance Sheets
(Unaudited)
(In Millions)
August 1,
2015
August 2,
2014
ASSETS
Current assets:
Cash and cash equivalents
$
1,910.8
$
2,183.3
Short-term investments
327.5
285.0
Accounts receivable and other current assets
680.7
623.3
Current deferred income taxes, net
128.2
114.0
Merchandise inventories
3,749.6
3,388.2
Total current assets
6,796.8
6,593.8
Property, net of depreciation
3,996.0
3,776.0
Other assets
239.7
240.8
Goodwill and tradename, net of amortization
308.5
311.4
TOTAL ASSETS
$
11,341.0
$
10,922.0
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
2,259.0
$
2,148.4
Accrued expenses and other current liabilities
1,901.9
1,676.5
Total current liabilities
4,160.9
3,824.9
Other long-term liabilities
888.2
727.9
Non-current deferred income taxes, net
391.9
470.7
Long-term debt
1,624.0
1,623.8
Shareholders' equity
4,276.0
4,274.7
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
11,341.0
$
10,922.0
The TJX Companies, Inc. and Consolidated Subsidiaries
Condensed Statements of Cash Flows
(Unaudited)
(In Millions)
26 Weeks Ended
August 1, 2015
August 2, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
1,023.9
$
971.9
Depreciation and amortization
298.5
291.7
Loss on early extinguishment of debt
-
16.8
Deferred income tax provision
(14.9
)
9.6
Share-based compensation
43.8
42.0
(Increase) in accounts receivable and other assets
(109.1
)
(74.4
)
(Increase) in merchandise inventories
(525.3
)
(406.9
)
Increase in accounts payable
249.6
367.2
(Decrease) in accrued expenses and other liabilities
(15.5
)
(122.5
)
Other
(22.4
)
(7.0
)
Net cash provided by operating activities
928.6
1,088.4
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions
(404.9
)
(425.1
)
Purchases of investments
(225.6
)
(193.5
)
Sales and maturities of investments
159.7
195.2
Net cash (used in) investing activities
(470.8
)
(423.4
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt
-
749.5
Payments on early extinguishment of debt
-
(416.4
)
Payments for repurchase of common stock
(851.1
)
(799.8
)
Proceeds from issuance of common stock
48.0
30.5
Cash dividends paid
(262.9
)
(224.3
)
Other
34.0
7.0
Net cash (used in) financing activities
(1,032.0
)
(653.5
)
Effect of exchange rate changes on cash
(8.8
)
22.1
Net (decrease) increase in cash and cash equivalents
(583.0
)
33.6
Cash and cash equivalents at beginning of year
2,493.8
2,149.7
Cash and cash equivalents at end of period
$
1,910.8
$
2,183.3
The TJX Companies, Inc. and Consolidated Subsidiaries
Selected Information by Major Business Segment
(Unaudited)
(In Thousands)
13 Weeks Ended
26 Weeks Ended
August 1,
2015
August 2,
2014
August 1,
2015
August 2,
2014
Net sales:
In the United States:
Marmaxx
$
4,805,883
$
4,493,878
$
9,301,293
$
8,728,633
HomeGoods
895,378
773,071
1,775,571
1,530,223
TJX Canada
699,347
695,924
1,319,559
1,304,344
TJX Europe
963,123
954,339
1,832,945
1,845,188
Total net sales
$
7,363,731
$
6,917,212
$
14,229,368
$
13,408,388
Segment profit:
In the United States:
Marmaxx
$
715,546
$
685,614
$
1,367,849
$
1,308,688
HomeGoods
112,135
94,635
233,434
192,840
TJX Canada
119,681
95,024
164,853
139,047
TJX Europe
50,874
55,614
77,229
93,875
Total segment profit
998,236
930,887
1,843,365
1,734,450
General corporate expense
101,234
72,289
169,624
135,726
Loss on early extinguishment of debt
-
16,830
-
16,830
Interest expense, net
10,808
11,150
22,432
20,745
Income before provision for income taxes
$
886,194
$
830,618
$
1,651,309
$
1,561,149
The TJX Companies, Inc. and Consolidated Subsidiaries Notes to
Consolidated Condensed Statements
1. During the second quarter ended August 1, 2015, TJX repurchased 6.6
million shares of its common stock at a cost of $440 million. For the
six months ended August 1, 2015, TJX repurchased 12.7 million shares of
its common stock at a cost of $855 million. In February 2015 the Company
announced an additional $2 billion stock repurchase program. TJX records
the repurchase of its stock on a cash basis, and the amounts reflected
in the financial statements may vary from the above amounts due to the
timing of settlement of repurchases.
2. During last year's second quarter the Company issued $750 million of
2.75% seven year notes and used a portion of the proceeds to redeem its
$400 million 4.20% notes prior to their scheduled maturity. The
redemption of the 4.2% notes resulted in a pre-tax loss on the early
extinguishment of debt of $16.8 million during the second quarter ended
August 2, 2014. The charge for the early extinguishment of this debt
reduced net income for the fiscal 2015 second quarter by $.02 per share.
