TJX’s first-quarter sales bested Wall Street estimates, with apparel sales picking up while home remained strong.
In a Nutshell: Despite starting the year with supply chain backlogs driving shortages, inventory is now in a good position, TJX said.
“Overall product availability in the marketplace remains excellent and the company has continued to flex its buying to the categories with the strongest demand,” it said, adding that it “is well positioned to deliver a fresh assortment of merchandise to its stores and e-commerce sites throughout the summer season.”
Across all divisions, home saw “phenomenal” quarterly sales trends, with TJX seeing positive open-only comp store sales in apparel, largely due to consumers resuming their social schedules, as well as increases in many other categories, CEO Ernie Herrman said. International sales were also strong where stores were permitted to open, he added.
Roughly 300 stores in Europe and Canada remained temporarily closed as of Wednesday. All TJX e-commerce sites remained operational in the quarter, it said.
Herrman told Wall Street analysts that first-quarter results showed that shoppers seemed “happy with the brands and values they found” in TJX stores.
“Open-only comp sales were also outstanding across each of our divisions, which indicates to us that our value proposition continues to resonate in all of our geographies,” he continued.
Herrman said $10.09 billion marked a “first-quarter sales record, despite the temporary closing of our stores for approximately 14 percent of the quarter.” Merchandise margin remains healthy, and the “buying environment is excellent with the marketplace loaded with a great selection of merchandise across good, better and best brands and trending categories,” he added.
Herrman believes the company’s off-price business model will continue to resonate when the world returns to normal. More than 1,100 buyers located in 12 countries across four continents sourcing from 21,000 vendors continue fueling TJX’s mission of delivering value—great brands and fashion at tantalizing prices and good quality. He cited the company’s more than 500 home buyers as driving a differentiated merchandise mix versus competitors. What’s more, TJX has added thousands of new apparel and home vendors over the past year. Herrman pointed to the flexibility of its “buying store formats and distribution network” as allowing TJX to seize on consumer trends and hot categories as demand waxes and wanes.
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“With our fast-growing inventories, our customers can discover something new in store and online every time they visit. Lastly, is our global presence with nearly 45 years of operating expertise in the U.S., 30-plus years in Canada and more than 25 years in Europe. We are an off-price leader in every country we operate in. Even in Australia, a country we have entered more recently, we are an off-price leader,” Herrman said. “We have spent decades establishing relationships with vendors and landlords and building out our global buying offices, distribution networks, systems and infrastructure. Further, we have expansive country specific knowledge of consumer shopping habits and have earned customer loyalty. We believe our well-established global off-price retail model and level of international expertise as a tremendous advantage and our size and scale would be very difficult to replicate.”
Herrman believes TJX can augment its market share, and grow its store base, potentially adding 1,600 stores for 6,275 total. He cited “terrific” real estate availability as unlocking opportunities to either open new stores or relocate existing ones.
Net Sales: For the three months ended May 1, net sales more than doubled to $10.09 billion from $4.41 billion. In comparison to pre-pandemic levels, net sales were up 9 percent versus the same quarter in 2019.
With all comparisons looking at results from two years ago, TJX comp store sales were up 16 percent. By business, U.S. Marmaxx stores for TJ Maxx and Marshalls saw comp store sales up 12 percent, with U.S. HomeGoods jumping 40 percent. TJX Canada store comps were up 9 percent and TJX International for Europe and Australia gained 11 percent.
By division, U.S. Marmaxx saw sales more than double to $6.64 billion from $2.70 billion. U.S. HomeGoods grew sales nearly three-fold to $2.14 billion from $759.9 million. TJX Canada’s sales more than doubled to $765.5 million from $379.6 million. TJX International sales slipped 6 percent to $538.9 million from $571.6 million.
TJX’s pre-tax profit margin for the quarter was 7.2 percent, slightly up from 2019’s first quarter. The improvement was due to strong markon—the difference between the cost and the initial retail price of goods—and lower markdowns, mostly offset by higher freight costs.
Total inventories at the end of the quarter were $5.1 billion, versus $4,9 billion a year ago.
On the call, Scott Goldenberg, senior executive vice president and chief financial officer, said store-level inventories “are where we want them to be. Our buyers are doing a great job sourcing merchandise and have been able to chase the goods we need to satisfy consumer demand. To reiterate, availability of merchandise is excellent.”
Earnings: TJX posted net income of $533.9 million, or 44 cents a diluted share, against a net loss of $887.5 million, or 74 cents, a year ago.
Wall Street was expecting 31 cents in adjusted diluted earnings per share on revenue of $8.62 billion.
TJX said that for the start of the second quarter, “open-only comp store sales trends remain similar to the first quarter.” For the second quarter, it expects total sales, pre-tax margin and earnings per share to be negatively impacted from temporary store closings in parts of Europe and Canada.
The company operated 4,639 stores globally at the end of the first quarter.
CEO’s Take: “While the environment remains uncertain, particularly internationally, we are convinced we are strongly positioned as we emerge from this health crisis. Looking ahead, we see numerous opportunities to capture additional market share around the world and are excited about the runway for growth we see for TJX,” Herrman said.