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TJX Companies Beats EPS

TJX

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The TJX Companies, Inc.’s (TJX - Analyst Report), adjusted earnings of 56 cents per share in the second quarter of fiscal 2013 beat the Zacks Consensus Estimate of 55 cents by a penny, and shot up 24.4% from year-ago earnings.

Growth was fueled by higher consumer traffic on the back of fresh stocks in the stores and solid comparable-store sales growth for consecutive months.

Quarterly Details

Total net sales of this leading off-price retailer during the quarter grew 9.0% year over year to $5.95 billion, driven by solid growth in consolidated comparable-store sales. However, net sales lagged the Zacks Consensus Estimate of $5.98 billion.

TJX Companies' consolidated comparable store sales increased 7.0% in the quarter, driven by same-store sales growth of 7% at Marmaxx, 9% at Home Goods, 10% at TJX Europe and 5% at TJX Canada.

Sales exceeded management’s expectations on the back of strong performance in all the stores in the U.S., Canada and Europe. Further, well-chosen stocks at the stores consistently improved customer traffic during the period.

TJX Companies’ gross margin expanded 80 basis points from the prior-year quarter to 28.1%.  The margin expansion was mostly driven by merchandise margin improvement.

Selling, general and administrative costs as a percentage of sales decreased 40 basis points from the prior year to 16.5% in the first quarter, driven by expense leverage.

Share Repurchase and Dividend

During the reported quarter, the company repurchased 7.1 million of its common stock worth $300 million.

Outlook

For the third quarter of fiscal 2013, the company expects diluted EPS to be in the range of 56 cents to 59 cents, representing growth of 6% to 11% from the prior-year quarter levels. The Zacks Consensus Estimate for the third quarter of fiscal 2013 is 62 cents, higher than the company’s guidance range. The guidance includes consolidated comparable-store sales growth of 2% to 4%.

In its second quarter earnings conference call, the company raised its adjusted earnings guidance for fiscal 2013 to between $2.39 and $2.45 from previous expectations of $2.38 and $2.44.

The Zacks Consensus Estimate for fiscal 2013 is $2.46, higher than the company’s guidance range. Moreover, the company expects consolidated comparable store sales growth of 4% to 5% for fiscal 2013 compared to the previous guidance of 2% to 3%.

Our Recommendation

Currently, we have a Neutral recommendation on The TJX Companies, Inc. The stock carries a Zacks #2 Rank (a short-term Buy rating).

We appreciate the company’s consistent rise in same store sales for several months. The company has performed well in Europe and North America where the ongoing economic challenges have resulted in the consumer spending being shifted from high priced branded products to the low priced items offered by discount stores. However, rising input costs and lack of international presence remain persistent overhangs.

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