Market Overview

The TJX Companies, Inc. Reports Above-Plan Q2 FY19 Results with Comp Sales Growth of 6% and EPS of $1.17; Raises Full-Year EPS and Comp Guidance

Share:
  • Consolidated comp store sales increased 6% over last year's 3%
    increase
  • Net sales increased 12% to $9.3 billion over last year's 6% increase
  • Diluted EPS of $1.17 compared with $.85 in the prior year
  • Customer traffic was the primary driver of the comp sales increases
    at every division
  • Increased full-year Fiscal 2019 diluted EPS and comparable store
    sales guidance
  • Returned $844 million to shareholders in the second quarter through
    share repurchases and dividends

The TJX Companies, Inc. (NYSE:TJX), the leading off-price apparel and
home fashions retailer in the U.S. and worldwide, today announced sales
and earnings results for the second quarter ended August 4, 2018. Net
sales for the second quarter of Fiscal 2019 increased 12% to $9.3
billion. Consolidated comparable store sales increased 6% over the
comparable period last year ending August 5, 2017. Net income for the
second quarter was $740 million and diluted earnings per share were
$1.17, versus the prior year's $.85. Excluding an $.18 benefit due to
items related to the 2017 Tax Cuts and Jobs Act, adjusted diluted
earnings per share were $.99. Further, customer traffic was the primary
driver of the comparable store sales increases at every division.

For the first half of Fiscal 2019, net sales were $18.0 billion, a 12%
increase over last year. Consolidated comparable store sales for the
first half of Fiscal 2019 increased 5%. Net income for the first half of
Fiscal 2019 was $1.5 billion and diluted earnings per share were $2.30,
versus the prior year's $1.67. Excluding a $.34 benefit due to items
related to the 2017 Tax Cuts and Jobs Act, adjusted diluted earnings per
share for the first half of Fiscal 2019 were $1.95.

Ernie Herrman, Chief Executive Officer and President of The TJX
Companies, Inc., stated, "We are extremely pleased with our second
quarter results. Both our consolidated comp store sales growth of 6% and
earnings per share of $1.17 significantly exceeded our expectations.
Marmaxx, our largest division, delivered a very strong 7% comparable
store sales increase. Customer traffic was once again the primary driver
of our comp store sales increases at all of our divisions as we continue
to reach a very wide customer demographic. Further, this marks the 16th
straight quarter of customer traffic increases for TJX and Marmaxx. We
have been attracting new customers to all our divisions, a significant
share of whom are younger customers. This is great for our business
today and for the future. Our teams delivered sharp execution of our
off-price fundamentals across the Company, and customers responded to
our great brands, fashions, and eclectic selections at excellent values.
We were especially pleased with the robust performance of our apparel
business. With our strong second quarter performance, we are raising our
guidance for full-year earnings per share and comparable store sales
growth. Looking forward, the third quarter is off to a very strong start
and we have many exciting opportunities we are pursuing in the second
half of the year. We are very confident that we will continue to gain
market share and grow successfully around the world!"

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
        FY2019     FY2018       FY2019     FY2018
                             
Marmaxx5,6       +7%     +2%       $5,848     $5,285
HomeGoods7       +3%     +7%       $1,327     $1,156
TJX Canada       +6%     +7%       $938     $832
TJX International (Europe & Australia)       +4%     +1%       $1,218     $1,085
                             
TJX       +6%     +3%       $9,331     $8,358
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. 3Net
sales in TJX Canada and TJX International 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. 7Net
sales in FY2019 include Homesense stores in the U.S.
 

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 one percentage
point positive impact on consolidated net sales growth in the second
quarter of Fiscal 2019 versus the prior year. The overall net impact of
foreign currency exchange rates had a neutral impact on second quarter
Fiscal 2019 earnings per share, compared with a $.03 negative impact
last year.

The movement in foreign currency exchange rates had a two percentage
point positive impact on consolidated net sales growth in the first half
of Fiscal 2019 versus the prior year. The overall net impact of foreign
currency exchange rates had a $.04 positive impact on the first half of
Fiscal 2019 earnings per share, compared with a $.03 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 Investors section of 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 the Company refers to as "transactional foreign exchange."

Margins

For the second quarter of Fiscal 2019, the Company's consolidated pretax
profit margin was 10.6%, a 0.1 percentage point decrease compared with
the prior year's 10.7%.

Gross profit margin for the second quarter of Fiscal 2019 was 28.9%, up
0.4 percentage points versus the prior year. This was primarily due to a
favorable year-over-year comparison related to the Company's inventory
hedges.

Selling, general and administrative (SG&A) costs as a percent of sales
for the second quarter were 18.2%, up 0.4 percentage points versus the
prior year's ratio. This was primarily due to previously announced IT
restructuring costs and expected wage increases.

Inventory

Total inventories as of August 4, 2018, were $4.5 billion, compared with
$3.9 billion at the end of the second quarter last year. Consolidated
inventories on a per-store basis as of August 4, 2018, including the
distribution centers, but excluding inventory in transit and the
Company's e-commerce businesses, were up 5% on a reported basis (on a
constant currency basis, up 6% compared to a decrease of 6% in the prior
year). The Company is in an excellent inventory position and has plenty
of liquidity to take advantage of the abundant buying opportunities it
sees in the marketplace for quality, branded merchandise.

Shareholder Distributions

During the second quarter, the Company returned a total of $844 million
to shareholders. The Company repurchased a total of $600 million of TJX
stock, retiring 6.4 million shares, and paid $244 million in shareholder
dividends. For the first half of Fiscal 2019, the Company repurchased a
total of $1.0 billion of TJX stock, retiring 11.3 million shares, and
paid $441 million in shareholder dividends. The Company continues to
expect to repurchase approximately $2.5 to $3.0 billion of TJX stock in
Fiscal 2019. The Company may adjust this amount up or down depending on
various factors.

Third Quarter and Full-Year Fiscal 2019 Outlook

For the third quarter of Fiscal 2019, the Company expects diluted
earnings per share to be in the range of $1.18 to $1.20. Excluding an
expected benefit of approximately $.18 per share due to items related to
the 2017 Tax Cuts and Jobs Act, the Company expects adjusted earnings
per share to be in the range of $1.00 to $1.02, compared to $1.00 last
year. This guidance assumes that foreign currency will negatively impact
EPS growth by approximately 4% and that wage increases will negatively
impact EPS growth by an additional 2%. This EPS outlook is based upon
estimated consolidated comparable store sales growth of 2% to 3% and
Marmaxx comparable store sales growth of 3% to 4%.

The Company is raising its full-year guidance to reflect its strong
second quarter results. For the 52-week fiscal year ending February 2,
2019, the Company now expects diluted earnings per share to be in the
range of $4.83 to $4.88, which represents a 20% to 21% increase over the
prior year's $4.04. The Company's full-year guidance includes an
expected benefit of approximately $.73 to $.74 per share due to items
related to the 2017 Tax Cuts and Jobs Act. Excluding this benefit, the
Company now expects adjusted earnings per share to be in the range of
$4.10 to $4.14, a 6% to 8% increase over the prior year's adjusted
$3.85, which excluded a $.17 net benefit due to items related to the
2017 Tax Cuts and Jobs Act, a benefit of approximately $.11 from the
extra week in the Company's Fiscal 2018 calendar, and a $.10 impairment
charge related to Sierra Trading Post from GAAP EPS of $4.04. This
guidance assumes that wage increases will negatively impact EPS growth
by 2%. This EPS outlook is now based upon estimated comparable store
sales growth of 3% to 4% on both a consolidated basis and at Marmaxx.

The Company's earnings guidance for the third quarter and full-year
Fiscal 2019 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 4, 2018, the Company increased
its store count by 53 stores to a total of 4,194 stores. The Company
increased square footage by 5% over the same period last year.

               
Store Locations1       Gross Square Feet2
Second Quarter Second Quarter
        (in millions)
        Beginning     End       Beginning     End
In the U.S.:                            
T.J. Maxx       1,231     1,236       34.2     34.3
Marshalls       1,073     1,077       31.4     31.4
HomeGoods       690     716       16.3     16.8
Sierra Trading Post       32     33       0.7     0.7
Homesense       4     8       0.1     0.2
In Canada:                            
Winners       269     270       7.4     7.5
HomeSense       119     120       2.8     2.8
Marshalls       78     79       2.1     2.2
In Europe:                            
T.K. Maxx       549     552       16.0     16.1
Homesense       55     61       1.1     1.2

In Australia:

                           
T.K. Maxx       41     42       0.9     0.9
                             
TJX       4,141     4,194       113.1     114.0
1Store counts above include both banners within a combo
or a superstore.
2Square 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 4, 2018, the end
of the Company's second quarter, the Company operated a total of 4,194
stores in nine countries, the United States, Canada, the United Kingdom,
Ireland, Germany, Poland, Austria, the Netherlands, and Australia, and
three e-commerce sites. These include 1,236 T.J. Maxx, 1,077 Marshalls,
716 HomeGoods, 33 Sierra Trading Post, and 8 Homesense stores, as well
as tjmaxx.com
and sierratradingpost.com
in the United States; 270 Winners, 120 HomeSense, and 79 Marshalls
stores in Canada; 552 T.K. Maxx and 61 Homesense stores, as well as tkmaxx.com,
in Europe; and 42 T.K. Maxx stores in Australia. TJX's press releases
and financial information are available at tjx.com.

Fiscal 2019 Second Quarter Earnings Conference
Call

At 11:00 a.m. ET today, Ernie Herrman, Chief Executive Officer and
President of TJX, will hold a conference call to discuss the Company's
second quarter Fiscal 2019 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 28, 2018, 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
Investors 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 Investors 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; various
marketing efforts; competition; personnel recruitment, training and
retention; labor costs and workforce challenges; data security;
information systems and implementation of new technologies; economic
conditions and consumer spending; adverse or unseasonable weather;
serious disruptions or catastrophic events; corporate and retail banner
reputation; quality, safety and other issues with our merchandise;
compliance with laws, regulations and orders and changes in laws,
regulations and applicable accounting standards; expanding international
operations; merchandise sourcing and transport; commodity availability
and 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; outcomes of litigation, legal proceedings and
other legal or regulatory matters; tax matters; disproportionate impact
of disruptions in the second half of the fiscal year; real estate
activities; inventory or asset loss; 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)

         
Thirteen Weeks Ended Twenty-Six Weeks Ended
August 4,
2018
  July 29,
2017
August 4,
2018
  July 29,
2017
 
Net sales $ 9,331,115   $ 8,357,700   $ 18,019,835   $ 16,141,724
 
Cost of sales, including buying and occupancy costs 6,635,815 5,972,675 12,814,054 11,502,747
Selling, general and administrative expenses 1,699,714 1,483,648 3,250,489 2,895,251
Interest expense, net 3,029   9,677   7,177   19,518
 
Income before provision for income taxes 992,557 891,700 1,948,115 1,724,208
Provision for income taxes 252,931   338,743   492,108   634,972
 
Net income $ 739,626   $ 552,957   $ 1,456,007   $ 1,089,236
 
Diluted earnings per share $ 1.17 $ 0.85 $ 2.30 $ 1.67
 
Cash dividends declared per share $ 0.39 $

0.3125

$ 0.78 $

0.625

 
Weighted average common shares – diluted 632,960 648,317 633,684 651,892
 

 

The TJX Companies, Inc. and Consolidated Subsidiaries
Condensed
Balance Sheets
(Unaudited)

(In Millions)

         
August 4,
2018
July 29,
2017
 
ASSETS
Current assets:
Cash and cash equivalents $ 2,872.7 $ 2,449.3
Short-term investments 502.8
Accounts receivable and other current assets 1,068.8 751.2
Merchandise inventories 4,498.5   3,864.5
 
Total current assets 8,440.0   7,567.8
 
Net property at cost 5,100.5 4,744.7
 
Goodwill 98.1 197.5
Other assets 472.8   425.6
 
TOTAL ASSETS $ 14,111.4   $ 12,935.6
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,683.3 $ 2,346.5
Accrued expenses and other current liabilities 2,454.5   2,310.0
 
Total current liabilities 5,137.8   4,656.5
 
Other long-term liabilities 1,289.3 1,116.5
Non-current deferred income taxes, net 225.1 392.7
Long-term debt 2,232.1 2,229.1
 
Shareholders' equity 5,227.1   4,540.8
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 14,111.4   $ 12,935.6
 

 

The TJX Companies, Inc. and Consolidated Subsidiaries
Condensed
Statements of Cash Flows
(Unaudited)
(In Millions)

     
Twenty-Six Weeks Ended
August 4,
2018
    July 29,
2017
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,456.0 $ 1,089.2
Depreciation and amortization 396.3 348.1
Deferred income tax (benefit) provision (18.2 ) 38.9
Share-based compensation 49.9 49.5

Decrease (Increase) in accounts receivable and other assets

40.6

 

(109.3 )
(Increase) in merchandise inventories (385.6 ) (168.8 )
Increase in accounts payable 237.7 84.6
(Decrease) in accrued expenses and other liabilities

(180.5

) (270.1 )
Other (35.5 ) 40.9  
 
Net cash provided by operating activities 1,560.7   1,103.0  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (573.9 ) (506.9 )
Purchases of investments (152.9 ) (426.5 )
Sales and maturities of investments 629.1 480.6
Other 26.6    
Net cash (used in) investing activities (71.1 ) (452.8 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments for repurchase of common stock (990.0 ) (884.7 )
Proceeds from issuance of common stock 163.5 60.8
Cash dividends paid (440.9 ) (369.5 )
Other (18.2 ) (18.3 )
Net cash (used in) financing activities (1,285.6 ) (1,211.7 )
 
Effect of exchange rate changes on cash (89.8 ) 81.0  
 
Net increase (decrease) in cash and cash equivalents 114.2 (480.5 )
Cash and cash equivalents at beginning of year 2,758.5   2,929.8  
 
Cash and cash equivalents at end of period $ 2,872.7   $ 2,449.3  
 

         

The TJX Companies, Inc. and Consolidated Subsidiaries
Selected
Information by Major Business Segment
(Unaudited)
(In
Thousands)

 
Thirteen Weeks Ended Twenty-Six Weeks Ended
August 4,
2018
  July 29,
2017
  August 4,
2018
  July 29,
2017
Net sales:    
In the United States:
Marmaxx $ 5,847,721 $ 5,284,639 $ 11,228,639 $ 10,251,774
HomeGoods 1,327,346 1,156,398 2,596,677 2,277,667
TJX Canada 937,736 832,026 1,791,572 1,570,797
TJX International 1,218,312     1,084,637   2,402,947     2,041,486
Total net sales $ 9,331,115     $ 8,357,700   $ 18,019,835     $ 16,141,724
 
Segment profit:
In the United States:
Marmaxx $ 830,315 $ 746,881 $ 1,580,771 $ 1,434,046
HomeGoods 142,090 141,345 289,450 293,437
TJX Canada 138,735 83,229 263,919 186,109
TJX International 48,691     38,967   89,517     45,827
Total segment profit 1,159,831 1,010,422 2,223,657 1,959,419
 
General corporate expense 164,245 109,045 268,365 215,693
Interest expense, net 3,029     9,677   7,177     19,518
Income before provision for income taxes $ 992,557     $ 891,700   $ 1,948,115     $ 1,724,208
 

The TJX Companies, Inc. and Consolidated Subsidiaries
Notes to
Consolidated Condensed Statements

  1. During the second quarter ended August 4, 2018, TJX repurchased 6.4
    million shares of its common stock at a cost of $0.6 billion on a
    "trade date" basis. During the six months ended August 4, 2018, TJX
    repurchased and retired 11.3 million shares of its common stock at a
    cost of $1.0 billion, on a "trade date" basis. In February 2018, the
    Company announced that the Board of Directors had approved a new stock
    repurchase program that authorizes the repurchase of up to an
    additional $3.0 billion of TJX common stock from time to time. 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 the fourth quarter ended February 3, 2018, the Company recorded
    a $99.3 million impairment charge, primarily goodwill, related to
    Sierra Trading Post.

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