Market Overview

The TJX Companies, Inc. Reports Q3 FY19 Results with Very Strong Comp Sales Growth of 7%, Customer Traffic Up, and Above-Plan EPS; Updates Full-Year Guidance Reflecting Strong Q3 Performance

Share:
  • Above-plan consolidated comp store sales increase of 7%
  • Customer traffic was the primary driver of the comp sales increases
    at every division
  • Net sales increased 12% to $9.8 billion
  • Completed 2-for-1 common stock split; all per share amounts in this
    press release reflect the split
  • Above-plan diluted EPS of $.61, which includes a $.02 negative
    impact from a pension settlement charge that was not contemplated in
    the Company's most recent guidance, compared with $.50 in the prior
    year
  • Updates full-year Fiscal 2019 guidance, reflecting strong Q3
    results (details below)
  • Returned $841 million to shareholders in the third 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 third quarter ended November 3, 2018. Net
sales for the third quarter of Fiscal 2019 increased 12% to $9.8
billion. Consolidated comparable store sales increased 7% over the
comparable period last year ending November 4, 2017. Net income for the
third quarter was $762 million and diluted earnings per share were $.61,
versus the prior year's $.50. Excluding a $.09 benefit due to items
related to the 2017 Tax Cuts and Jobs Act ("2017 Tax Act"), and a $.02
negative impact from a pension settlement charge (described below),
adjusted diluted earnings per share for the third quarter were $.54.

For the first nine months of Fiscal 2019, net sales were $27.8 billion,
a 12% increase over last year. Consolidated comparable store sales for
the first nine months of Fiscal 2019 increased 6%. Net income for the
first nine months of Fiscal 2019 was $2.2 billion and diluted earnings
per share were $1.75, versus the prior year's $1.33. Excluding a $.26
benefit due to items related to the 2017 Tax Act, and a $.02 negative
impact from a pension settlement charge (described below), adjusted
diluted earnings per share for the first nine months of Fiscal 2019 were
$1.52.

Third Quarter and Year-to-Date FY2019
Reconciliation of Diluted EPS to Adjusted EPS

  Third Quarter  

Year-to-Date

    FY2019   FY2018   FY2019   FY2018
                 
Diluted EPS   $.61   $.50   $1.75   $1.33
Pension Settlement Charge   $.02   -   $.02   -
2017 Tax Act Benefit   ($.09)   -   ($.26)   -
                 
Adjusted Diluted EPS1   $.54   $.50   $1.52   $1.33

1Adjusted Diluted EPS totals may not foot due to
rounding.

 

CEO and President Comments

Ernie Herrman, Chief Executive Officer and President of The TJX
Companies, Inc., stated, "We are extremely pleased with our strong third
quarter results as both sales and earnings exceeded our expectations.
Consolidated comparable store sales grew 7%, and we are especially
pleased that this was driven by strong customer traffic at every
division. Earnings per share increased to $.61, also above our plan.
Marmaxx, our largest division, delivered an outstanding 9% comparable
store sales increase, and this marks the 17th consecutive
quarter that customer traffic was up at TJX and Marmaxx. Across our
geographies, customers responded to our great merchandise and great
values as we believe we continued to capture market share. We also saw
continued strength in our apparel businesses. With our very strong third
quarter results, we are updating our full-year outlook for sales and
earnings per share. The fourth quarter is off to a solid start and we
have many initiatives planned to keep driving traffic and sales this
holiday season and beyond. We are excited about our focus on gifting and
our marketing campaigns. We are well-positioned to capitalize on the
plentiful buying opportunities we see in the marketplace and ship fresh
merchandise assortments throughout the quarter. Longer term, we remain
confident that we will continue our successful growth in the U.S. and
around the world!"

Sales by Business Segment

The Company's comparable store sales and net sales by division, in the
third quarter, were as follows:

  Third Quarter   Third Quarter
Comparable Store Sales1,2   Net Sales ($ in millions)3,4
    FY2019   FY2018   FY2019   FY2018
                 
Marmaxx5,6   +9%   -1%   $5,973   $5,298
HomeGoods7   +7%   +3%   $1,464   $1,229
TJX Canada   +5%   +4%   $1,037   $983
TJX International (Europe & Australia)   +3%   +1%   $1,352   $1,252
                 
TJX   +7%   0%   $9,826   $8,762

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 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 negative impact on consolidated net sales growth in the third
quarter of Fiscal 2019 versus the prior year. The overall net impact of
foreign currency exchange rates had a $.01 negative impact on third
quarter Fiscal 2019 earnings per share, compared with a $.02 positive
impact last year.

The movement in foreign currency exchange rates had a one percentage
point positive impact on consolidated net sales growth in the first nine
months of Fiscal 2019 versus the prior year. The overall net impact of
foreign currency exchange rates had a $.01 positive impact on the first
nine months of Fiscal 2019 earnings per share, compared with a neutral
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."

Pension Settlement Charge

The Company recently purchased a group annuity contract under which the
pension benefit obligations for certain U.S. retirees and beneficiaries
under the Company's pension plan were transferred to an insurer in
exchange for $207 million in pension plan assets. As a result of this
transaction, the pension plan's total liability has been remeasured,
resulting in a non-cash settlement charge to the Company that reduced
third quarter Fiscal 2019 pretax income by $36 million and earnings per
share by $.02, which was not contemplated in the Company's most recent
guidance.

Margins

For the third quarter of Fiscal 2019, the Company's consolidated pretax
profit margin was 10.7%. Excluding the pension settlement charge
(described above), adjusted pretax profit margin was 11.0%, a 0.6
percentage point decrease compared with the prior year's 11.6%.

Gross profit margin for the third quarter of Fiscal 2019 was 28.9%, a
0.9 percentage point decrease versus the prior year. Strong expense
leverage was more than offset by increased freight costs, expenses
associated with the Company's supply chain, and an unfavorable
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 third quarter were 17.9%, a 0.2 percentage point decrease versus
the prior year's ratio.

Inventory

Total inventories as of November 3, 2018, were $5.5 billion, compared
with $4.7 billion at the end of the third quarter last year.
Consolidated inventories on a per-store basis as of November 3, 2018,
including the distribution centers, but excluding inventory in transit
and the Company's e-commerce businesses, were up 9% on a reported basis
(up 10% on a constant currency basis). The Company remains
well-positioned to take advantage of the plentiful buying opportunities
it sees in the marketplace and ship ever-changing gift assortments to
its stores and online throughout the holiday season.

Share Buyback, Dividend, and Stock Split

During the third quarter, the Company returned a total of $841 million
to shareholders. The Company repurchased a total of $600 million of TJX
stock, retiring 11.4 million shares, and paid $241 million in
shareholder dividends. For the first nine months of Fiscal 2019, the
Company repurchased a total of $1.6 billion of TJX stock, retiring 34.0
million shares, and paid $682 million in shareholder dividends. The
Company now expects to repurchase approximately $2.5 billion of TJX
stock in Fiscal 2019. The Company may adjust this amount up or down
depending on various factors. Also during the quarter, the Company split
its common stock 2-for-1 by means of a stock dividend, which was
distributed on November 6, 2018 to shareholders of record as of October
30, 2018.

Fourth Quarter and Full-Year Fiscal 2019 Outlook

For the fourth quarter of Fiscal 2019, the Company expects diluted
earnings per share to be in the range of $.66 to $.67 compared to
earnings per share of $.69 last year. Excluding an expected benefit of
approximately $.10 per share due to items related to the 2017 Tax Act,
the Company expects adjusted earnings per share to be in the range of
$.56 to $.57 compared to adjusted earnings per share of $.59 last year.
Similar to prior quarters, the Company expects the combination of
incremental freight costs and wage increases to negatively impact fourth
quarter EPS growth by approximately 5%. The Company also expects an
additional negative impact to EPS growth due to the timing of expenses.
This EPS outlook is based upon estimated consolidated comparable store
sales growth of 2% to 3%.

For the 52-week fiscal year ending February 2, 2019, the Company expects
diluted earnings per share to be in the range of $2.41 to $2.43 compared
to earnings per share of $2.02 last year. The Company's full-year
guidance includes an expected benefit of approximately $.36 per share
due to items related to the 2017 Tax Act and a $.02 negative impact from
the third quarter pension settlement charge (described above). Excluding
these items, the Company is increasing adjusted earnings per share
guidance to a range of $2.08 to $2.09 which reflects its strong third
quarter results. This would represent an 8% increase over the prior
year's adjusted earnings per share of $1.93. The Company expects that
the combination of incremental freight costs and wage increases will
negatively impact EPS growth by approximately 5%. This EPS outlook is
now based upon estimated comparable store sales growth of 5% on a
consolidated basis and 6% at Marmaxx.

The Company's earnings guidance for the fourth quarter and full-year
Fiscal 2019 assumes that currency exchange rates will remain unchanged
from the levels at the beginning of the fourth quarter.

Fourth Quarter and Full-Year FY2019
Reconciliation of Diluted EPS to Adjusted EPS Guidance

  Fourth Quarter   Full-Year
    FY2019 Guidance   FY2018 Actual   FY2019 Guidance   FY2018 Actual
                 
Diluted EPS   $.66 to $.67   $.69   $2.41 to $2.43   $2.02
Pension Settlement Charge   -   -   $.02   -
2017 Tax Act Benefit   ($.10)   ($.09)   ($.36)   ($.09)
Benefit of Extra Week in Fiscal 2018   -   ($.06)   -   ($.06)
Sierra Trading Post Impairment Charge   -   $.05   -   $.05
                 
Adjusted Diluted EPS1   $.56 to $.57   $.59   $2.08 to $2.09   $1.93

1Adjusted Diluted EPS totals may not foot due to
rounding.

 

Stores by Concept

During the third quarter ended November 3, 2018, the Company increased
its store count by 102 stores to a total of 4,296 stores. The Company
increased square footage by 4% over the same period last year.

  Store Locations1   Gross Square Feet2
Third Quarter Third Quarter
    (in millions)
    Beginning   End   Beginning   End
In the U.S.:                
T.J. Maxx   1,236   1,247   34.3   34.4
Marshalls   1,077   1,091   31.4   31.6
HomeGoods   716   745   16.8   17.4
Sierra Trading Post   33   35   0.7   0.8
Homesense   8   16   0.2   0.4
In Canada:                
Winners   270   271   7.5   7.5
HomeSense   120   125   2.8   2.9
Marshalls   79   88   2.2   2.4
In Europe:                
T.K. Maxx   552   566   16.1   16.3
Homesense   61   68   1.2   1.3
In Australia:                
T.K. Maxx   42   44   0.9   1.0
                 
TJX   4,194   4,296   114.0   116.0

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 November 3, 2018, the end
of the Company's third quarter, the Company operated a total of 4,296
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 1,247 T.J. Maxx, 1,091 Marshalls,
745 HomeGoods, 35 Sierra Trading Post, and 16 Homesense stores, as well
as tjmaxx.com
and sierratradingpost.com
in the United States; 271 Winners, 125 HomeSense, and 88 Marshalls
stores in Canada; 566 T.K. Maxx and 68 Homesense stores, as well as tkmaxx.com,
in Europe; and 44 T.K. Maxx stores in Australia. TJX's press releases
and financial information are available at tjx.com.

Fiscal 2019 Third 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
third 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, November 27, 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 Thirty-Nine Weeks Ended
November 3,
2018
  October 28,
2017
November 3,
2018
  October 28,
2017
 
Net sales $ 9,825,759   $ 8,762,220   $ 27,845,594   $ 24,903,944
 
Cost of sales, including buying and occupancy costs 6,983,483 6,150,020 19,797,537 17,652,767
Selling, general and administrative expenses 1,756,448 1,584,219 5,006,937 4,479,470
Pension settlement charge 36,122 36,122
Interest expense, net 3,188   7,981   10,365   27,499
 
Income before provision for income taxes 1,046,518 1,020,000 2,994,633 2,744,208
Provision for income taxes 284,265   378,564   776,373   1,013,536
 
Net income $ 762,253   $ 641,436   $ 2,218,260   $ 1,730,672
 
Diluted earnings per share $ 0.61 $ 0.50 $ 1.75 $ 1.33
 
Cash dividends declared per share $ 0.195 $ 0.156 $ 0.585 $ 0.469
 
Weighted average common shares – diluted 1,257,562 1,285,762 1,264,100 1,297,344
 

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

   
November 3,
2018
October 28,
2017
 
ASSETS
Current assets:
Cash and cash equivalents $ 2,711.8 $ 2,364.2
Short-term investments 511.6
Accounts receivable and other current assets 1,061.8 788.3
Merchandise inventories 5,543.4   4,725.9
 
Total current assets 9,317.0   8,390.0
 
Net property at cost 5,165.9 4,858.3
 
Goodwill 97.3 196.4
Other assets 445.0   433.0
 
TOTAL ASSETS $ 15,025.2   $ 13,877.7
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,340.6 $ 2,986.4
Accrued expenses and other current liabilities 2,673.2   2,481.6
 
Total current liabilities 6,013.8   5,468.0
 
Other long-term liabilities 1,284.9 1,160.0
Non-current deferred income taxes, net 236.7 374.3
Long-term debt 2,232.9 2,229.8
 
Shareholders' equity 5,256.9   4,645.6
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 15,025.2   $ 13,877.7
 

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

 

Thirty-Nine Weeks Ended

November 3,
2018
  October 28,
2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,218.3 $ 1,730.7
Depreciation and amortization 601.2 532.4
Pension settlement charge 36.1
Deferred income tax (benefit) provision (15.6 ) 35.8
Share-based compensation 77.4 77.2
Decrease (increase) in accounts receivable and other assets 26.9 (138.7 )
(Increase) in merchandise inventories (1,442.6 ) (1,042.7 )
Increase in accounts payable 902.5 733.3
Increase (decrease) in accrued expenses and other liabilities 64.4 (3.8 )
Other 9.2   5.2  
 
Net cash provided by operating activities 2,477.8   1,929.4  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (873.0 ) (827.5 )
Purchases of investments (157.2 ) (630.1 )
Sales and maturities of investments 634.3 658.2
Other 26.7    
Net cash (used in) investing activities (369.2 ) (799.4 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments for repurchase of common stock (1,591.4 ) (1,239.0 )
Proceeds from issuance of common stock 239.6 89.2
Cash dividends paid (682.3 ) (566.9 )
Other (21.5 ) (19.1 )
Net cash (used in) financing activities (2,055.6 ) (1,735.8 )
 
Effect of exchange rate changes on cash (99.7 ) 40.2  
 
Net (decrease) in cash and cash equivalents (46.7 ) (565.6 )
Cash and cash equivalents at beginning of year 2,758.5   2,929.8  
 
Cash and cash equivalents at end of period $ 2,711.8   $ 2,364.2  
 

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

   
Thirteen Weeks Ended Thirty-Nine Weeks Ended
November 3,
2018
  October 28,
2017
November 3,
2018
  October 28,
2017
Net sales:    
In the United States:
Marmaxx $ 5,973,476 $ 5,298,479 $ 17,202,115 $ 15,550,253
HomeGoods 1,463,892 1,228,768 4,060,569 3,506,435
TJX Canada 1,036,884 983,236 2,828,456 2,554,033
TJX International 1,351,507     1,251,737   3,754,454     3,293,223
Total net sales $ 9,825,759     $ 8,762,220   $ 27,845,594     $ 24,903,944
 
Segment profit:
In the United States:
Marmaxx $ 762,911 $ 666,092 $ 2,343,682 $ 2,100,138
HomeGoods 166,090 163,835 455,540 457,272
TJX Canada 182,170 206,472 446,089 392,581
TJX International 102,432     87,066   191,949     132,893
Total segment profit 1,213,603 1,123,465 3,437,260 3,082,884
 
General corporate expense 127,775 95,484 396,140 311,177
Pension settlement charge 36,122 36,122
Interest expense, net 3,188     7,981 10,365     27,499
Income before provision for income taxes $ 1,046,518     $ 1,020,000   $ 2,994,633     $ 2,744,208
 

  The TJX Companies, Inc. and Consolidated Subsidiaries
Notes to Consolidated Condensed Statements
 
1. On September 17, 2018, TJX announced that its Board of Directors
approved a two-for-one stock split of the Company's common stock in
the form of a stock dividend, payable November 6, 2018 to the
shareholders of record at the close of business on October 30, 2018.
The split was subject to shareholder approval of an increase in the
number of authorized shares which was approved at a special
shareholder meeting on October 22, 2018. The stock split increased
common stock issued and outstanding by 617 million shares. All
historical per share amounts and references to common stock
activity, as well as basic and diluted earnings per share amounts,
have been adjusted to reflect the two-for-one stock split.
 
2. During the third quarter ended November 3, 2018, TJX repurchased and
retired 11.4 million shares of its common stock at a cost of $0.6
billion on a "trade date" basis. During the nine months ended
November 3, 2018, TJX repurchased and retired 34.0 million shares of
its common stock at a cost of $1.6 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.
 
3. During the third quarter the Company purchased a group annuity
contract pursuant to which the pension benefit obligations for
certain U.S. retirees and beneficiaries under the Company's pension
plan were transferred to an insurer in exchange for $207 million in
pension plan assets. As a result of this transaction, the pension
plan's total liability has been remeasured, resulting in a non-cash
settlement charge to the Company that reduced third quarter fiscal
2019 pretax income by $36.1 million and earnings per share by $0.02.
 
4. 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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