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TJX Outperforms Q1 Sales and Earnings Estimates, Raises Full-Year Guidance

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Off-price retail company TJX, announced first quarter sales and earnings results Tuesday that exceeded Wall Street expectations on both the top and bottom lines, sending its stock up by almost three percent on the day.

Net sales increased 6 percent to $6.9 billion, beating analyst estimates of $6.8 billion. The movement in foreign currency exchange rates had a three percentage point negative impact on consolidated net sales growth in the first quarter versus the prior year. In The U.S., Marmaxx (TJ Maxx and Marshall’s combined) net sales increased by 6 percent, while HomeGoods rose by 16 percent. Including the impact of currency fluctuations, TJX Canada net sales edged up by 2 percent while sales in Europe fell by almost 3 percent.

Comparable store sales increased by 5 percent on a constant currency basis. By division, they grew by 3 percent for Marmaxx in the U.S. and by 9 percent for HomeGoods.  Internationally, comps rose 11 percent in Canada and 3 percent in Europe.

Gross margins partly compensated for the impact of the strong dollar on foreign sales, however, increasing 40 basis points to 28.3% of net sales from the prior year period, primarily due to strong merchandise margin improvement and, to a lesser extent, buying and occupancy leverage.

SG&A expense as a percent of sales was 17 percent, up 0.5 percentage points versus the prior year’s ratio, primarily due to a combination of higher employee payroll costs, incremental investments and pension costs.

Net income for the first quarter was $475 million, or $0.69 per share, an 8 percent increase over the prior year period’s income of $454 million, or $.64 per share, and well above analyst consensus estimates of $0.66. The overall net impact of foreign currency exchange rates had a $.04 negative impact on earnings per share, compared with a $0.02 negative impact last year.

“We are extremely pleased with our continued momentum and first quarter performance,” said CEO Carol Meyrowitz in a statement. “Our 5 percent consolidated comparable store sales growth and 8% increase in earnings per share were both well above our plan. Our outstanding values and exciting mix of apparel and home fashions continue to resonate with shoppers across all of our geographies. It was great to see that, similar to last quarter, comp sales were almost entirely driven by customer traffic and we had a significant increase in units sold. At the same time, we also saw a strong increase in our merchandise margins.”

TJX is raising its full year guidance to reflect its strong first quarter results. For the current fiscal year, the company now expects diluted earnings per share to be in the range of $3.21 to $3.27 versus $3.15 last year. This earnings outlook is based upon a raised estimate of consolidated comparable store sales growth of 2 percent to 3 percent.

During the first quarter, the company increased its store count by a net of 46 stores. It increased square footage by 5 percent over the same period last year.

Next month, TJX plans to raise worker wages to at least $9 per hour.

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