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TJX Ups Fiscal 2020 Guidance, Notes Increased Supply Chain and Freight Costs

The TJX Cos. Inc. once again saw customer traffic gains at its brick-and-mortar stores in all four major divisions, leading to above-plan results even as gross margins were impacted by increased supply chain and freight costs.

In a Nutshell: Ernie Herrman, president and chief executive officer, said, “Once again this quarter, customer traffic was the primary driver of our consolidated comp increase and was up at each of our four major divisions. We believe this is a great indicator of the enduring appeal of our great values on an eclectic and exciting mix of merchandise and our treasure-hunt shopping experience, as well as the resiliency of our off-price retail model.”

The company’s Marmaxx division, which includes the U.S. operations of the TJX and Marshalls nameplates, Herrman said, were very strong in the apparel and home categories.

TJX also said it returned $589 million to shareholders in the first quarter through share repurchases and dividends.

Net Sales: The company said net sales for the three months ended May 4 rose 6.8 percent to $9.28 billion from $8.69 billion. Consolidated comparable store sales rose 5 percent on top of the 3 percent gain posted last year.

The company said Marmaxx had a comps gain of 6 percent on top of the year-ago increase of 4 percent. Its Home Goods division was up 1 percent, on top of last year’s 2 percent increase. TJX Canada comps were flat for the quarter, while TJX International in Europe and Australia had a comps spike of 8 percent, versus last year’s 1 percent increase.

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The company said gross margin for the quarter slipped 0.4 percent to 28.5 percent due to higher supply chain and freight costs. TJX also said total inventories at the end of the quarter were $5.1 billion, above the $4.4 billion level from a year ago.

Earnings: Net income slipped 2.3 percent to $700.18 million, or 57 cents a diluted share, from $716.38 million, or 56 cents, a year ago.

Wall Street was expecting diluted earnings per share of 55 cents on revenues of $9.21 billion.

The company guided second quarter diluted EPS at between 61 cents to 62 cents, versus 58 cents a year ago. It expects the “combination of incremental freight costs and store wage increases” to negatively impact second quarter EPS growth by 2 percent to 3 percent.

For the year ending Feb. 1, 2020, the retailer raised guidance for diluted EPS to the range of $2.56 to $2.61, versus $2.43 last year. The new guidance includes the assumption that the combination of incremental freight costs and store wage increases will negatively impact EPS growth by 3 percent to 4 percent.

CEO’s Take: According to Herrman, “With our above-plan first quarter results, we are raising our full-year earnings per share outlook. We are in an excellent position to take advantage of the abundant buying opportunities we are seeing in the marketplace for quality, branded merchandise and to keep flowing fresh, exciting assortments to our stores and online. We have many initiatives underway to keep driving sales and customer traffic, and feel great about our ability to continue gaining market share around the world.”