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TJX Beat Wall Street Q4 Estimates, Setting the Stage for 2020 Growth

The TJX Cos. Inc. reported fourth-quarter results that bested Wall Street’s expectations, and it provided fiscal 2021 guidance that project comparable store gains, pointing to continued growth in the year ahead.

In a Nutshell: TJX’s results show that the off-price retail sector continues to perform well, despite what has been a lackluster holiday and fourth quarter for many other retail channels. While the department store sector continues to struggle, even discounters suffered rare misses with Target Corp. warning last month of a subpar year-end period and Walmart Inc. earlier this month noting a decline in apparel sales.

“We saw strength across the company, with each major division delivering comp sales growth of 4 percent of higher, all over strong increases last year and all primarily driven by customer traffic. Our exciting brands and gift-giving assortments at great values, supported by our marketing, attracted customers around the globe during the holiday season and beyond,” Ernie Herrman, TJX’s president and CEO, said.

Separately, the company cited its strong cash flow in the decision to increase the regular quarterly dividend on its common stock to 26 cents a share, a 13 percent rise, which will be declared in March and payable in June 2020. This marks the 24th consecutive year that TJX has raised the dividend. The company also plans to repurchase between $1.75 billion to $2.25 billion of TJX stock during fiscal 2021.

“Our business continues to generate large amounts of cash and deliver strong financial returns. In 2020, we plan to continue investing to support the growth of TJX while continuing our long history of distributing cash to our shareholders. Our capital spending plans include investing in new stores, store remodels and our supply chain and infrastructure,” Herrman said.

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Net Sales: For the three months ended Feb. 1, net sales rose 9.7 percent to $12.21 billion from $11.13 billion. Consolidated comparable sales in the fourth quarter rose 6 percent, on top of a 6 percent gain in the same year-ago quarter. Gross profit margin in the quarter was 28.4 percent, a 0.6 percentage point gain from last year. The company also said inventories as of Feb. 1 were $4.9 billion, versus $4.6 billion in the prior year’s quarter.

“The company enters the new fiscal year in an excellent inventory position and is well-positioned to continue shipping fresh, spring merchandise to its stores and take advantage of the fantastic buying opportunities it sees in the marketplace,” the company said.

By segment, Marmaxx–its T.J. Maxx and Marshall’s nameplates, along with the Sierra Trading Postbusiness–saw U.S. sales rise 8 percent to $7.40 billion, while HomeGoods was up 13.0 percent to $1.95 billion. TJX Canada sales were up 9 percent to $1.13 billion and TJX International sales gained 14.3 percent to $1.72 billion.

At the quarter’s close, the company operated a total of 4,529 stores. Store locations include 3,290 doors in the U.S., 484 in Canada, 672 in Europe and 54 in Australia.

Earnings: Net income rose 17.0 percent to $984.8 million, or 81 cents a diluted share, from $841.5 million, or 68 cents, a year ago.

Wall Street was expecting 77 cents on revenues of $11.83 billion.

For the fiscal 2021 year ending Jan. 30, TJX guided diluted earnings per share in the range of $2.77 to $2.83, a gain of 4 percent to 6 percent over 2020’s $2.67 based on comparable sales growth estimates of 2 percent to 3 percent for its Marmaxx operation.

For the first quarter of fiscal 2021, diluted EPS was guided to the range of 59 cents to 60 cents, versus the prior-year quarter’s 57 cents. TJX is forecasting comp store sales growth of 2 percent to 3 percent in the quarter.

CEO’s Take: “Looking ahead to 2020, the year is off to a solid start and our global organization remains focused on bringing great values to shoppers every day. We see plentiful opportunities for TJX in today’s retail landscape and are confident we will continue to capture market share. We look forward to many more successful years ahead and continued growth around the world,” Herrman said.