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TJX Beats Estimates in Q4 and 2014, Puts Expansion Plans on Steroids

Global apparel and home fashions off-price leader TJX Companies (TJX) announced above-plan sales and earnings results for the fourth quarter and fiscal year ended Jan. 31, and accelerated store expansion plans for 2015 and beyond.

Net sales for the fourth quarter were $8.3 billion, a 6 percent increase over the prior year’s quarter. Consolidated comparable store sales increased 4 percent, driven by an 11 percent increase in comps at HomeGoods.

Marmaxx, which includes TJ Maxx and Marshalls but not e-commerce sales, had its best quarter of the year with a 3 percent same-store sales increase, helped by an improvement in women’s sportswear. Though average retail declined, units per transaction rose. Internationally, TJX Canada fared the best on a comp basis, up 7 percent. Europe saw a 2 percent rise on a constant currency basis.

Gross margin improved 60 basis points to 28.2% of sales.

Net income was $648 million and diluted earnings per share were $0.93, a 15 percent increase over last year’s $0.81 per share.

For the full fiscal year, net sales were $29.1 billion, a 6 percent increase over last year. Consolidated comparable store sales increased by 2%. HomeGoods had a 7 percent comp increase for the full year, while Marmaxx’s comp growth was one percent. Customer traffic improved sequentially in each quarter throughout the year.

Gross margin for the year was flat at 28.5% or sales.

Net income for the fiscal year was $2.2 billion, and diluted earnings per share were $3.15, 12 percent over last year and the sixth consecutive year of double-digit earnings-per-share growth.

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The company generated free cash flow of $2.1 billion for the year, $450 million more than last year.

CEO Carol Meyrowitz said in a statement, “We are very pleased to end 2014 with excellent results in the fourth quarter! Our earnings-per-share growth of 15 percent and comp increase of 4 percent significantly exceeded our expectations. We are particularly pleased our comps were almost entirely driven by customer traffic, as consumers responded to our exciting merchandise assortments, amazing values and effective marketing. Merchandise margins were also very strong. We are also very pleased with our full year 2014 performance. Our adjusted earnings per share growth of 12 percent over last year’s 15 percent increase marks our sixth consecutive year of double-digit EPS increases.”

Meyrowitz continued:

“In 2015, we are taking a prudent approach to planning our earnings per share growth. We are continuing to plan comp sales increases conservatively while we simultaneously strive to surpass our goals. We see tremendous U.S. and international potential for our Company. We are excited to be entering our seventh country, Austria, this spring, and to announce our plans to expand into our eighth country, The Netherlands, later this year. We are growing TJX as a global, value retailer and are well on our way to becoming a $40 billion company and beyond!”

The company intends to increase the regular quarterly dividend on its common stock to be declared in March 2015 and payable in June 2015 to $.21 per share, subject to the approval of the Company’s Board of Directors. This increase would represent a 20 percent increase in the current per share dividend and mark the 19th consecutive year that the company has raised the dividend. Over this period of time, the TJX dividend has grown at a compound annual rate of 23 percent.

The company also announced today its plan to repurchase approximately $1.8 to $1.9 billion of TJX stock during the fiscal year ending Jan. 30, 2016, which would be $100 million to $200 million more than last year.

Meyrowitz commented, “Our business continues to generate enormous amounts of cash and deliver strong financial returns. In Fiscal 2016, we plan to continue investing to support our growth while distributing cash to our shareholders. Our capital spending plans include investing in new stores, store remodels, and our supply chain and infrastructure. These actions underscore our confidence in our ability to continue delivering substantial increases in sales, earnings, and cash flow, and generate superior financial returns.”

The company also announced that its full- and part-time hourly U.S. store associates will earn at least $9.00 per hour beginning in June. Sometime during 2016, all hourly U.S. store associates employed for six months or more will earn at least $10 per hour.

In the current fiscal year, the company expects earnings per share to be in the $3.17-$3.25 range, a bit conservative because of the anticipated impact of currency exchange rates and increased labor rates.

The company plans to keep upgrading the shopping experience by making the stores better. In 2015, they plan to remodel approximately 225 stores, some of which will be in a new Marshalls prototype, which will be rolled out this year.

Unlike many retailers, who are focusing growth on the online or omnichannel area, TJX feels it still has tremendous brick-and-mortar global growth potential, even in the US, where, according to Meyrowitz, “plenty of white space remains for aggressive growth of Marmaxx and HomeGoods.”

The company has increased its estimates for long-term store growth potential to 5,475 stores, 325 more stores than our prior target. This would be more than 2,000 stores, or greater than 60 percent growth over our current base. In the U.S. alone, we see the potential to add over 1,400 stores.

The company plans to add 181 net new stores this year, representing square footage growth of 5 percent, for a total of about 3,576 stores by year end. This includes 70 net new stores at Marmaxx, 40 more stores at HomeGoods, and one additional Sierra Trading Post store this year. Internationally, at TJX Canada, 20 new stores are planned, and at TJX Europe, 50 stores this year, nine more than last year.