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TJX Ups Q3 and FY14 Outlook

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Discount retailer, The TJX Companies Inc. (TJX - Free Report) has raised its third quarter and full year 2014 guidance. It also announced its store expansion plan and introduced its long term earnings and top line growth target.

Third Quarter and Fiscal 2014 Guidance Upped

For the third quarter of fiscal 2014, TJX now expects earnings per share to be in the range of 73 cents to 74 cents higher than the previous outlook of a range of 69 cents to 72 cents. The guidance is 18% to 19% increase over the prior year earnings reported by the company.

TJX now expects third quarter comparable stores to grow by 4% compared to a growth range of 2%-3% expected previously. The company had reported a comp growth of 7% in the prior year period.

Following the increase in the third quarter outlook, management raised its expectations for the full year. For fiscal 2014, TJX now expects earnings to be in the range of $2.78 to $2.82 higher than previous expectations of  $2.70 – $2.78. The guidance reflects a 13% to 14% increase over the prior year’s earnings of $2.47. The outlook excludes benefit from the 53rd week in the fiscal 2013 calendar. TJX maintained its fourth-quarter earnings guidance of 77 cents to 80 cents a share.

Store Expansion Policy

TJX is scheduled to host an investor day in Framingham, Mass today. It will discuss increased opportunity for its stores in current markets in the conference.

TJX has an aggressive store opening policy. It is regularly opening stores and expanding speedily across the U.S., Europe and Canada. Total number of stores grew from 2,905 in fiscal 2012 to 3,050 in fiscal 2013. During its second quarter earnings conference call TJX announced that it aims to open 3,200 stores by the end of fiscal 2014, which is 50% higher than the current store count of the company.

TJX is focusing on long term store growth and is geared to expand its Marmaxx division stores in the U.S. by a greater number than it had previously estimated of store growth range of 2400–2600 stores. Store remodeling and new stocks have led to strong comps gain of 4% backed by 3% growth in apparel comps and 5% growth in home fashions. The company also expects to exceed its target of increasing HomeGoods store count by 750–825 stores in fiscal 2014.

TJX is also putting greater focus on its performance in Europe. It plans to achieve a 10% profit margin compared to 8% margin targeted earlier. The company unlike its peers have been performing consistently well in Europe despite the ongoing macroeconomic headwinds in the region. It plans to open 750 to 875 stores in Europe by fiscal 2014.

Introduced Long Term Targets

TJX plans to maintain earning per share growth of 10% -13% for the next three years. TJX aims to maintain a top line growth of 6% to 7% backed by 2% comps growth, 4%-5% square footage growth, 1%-2% segment profit margin expansion and 3%-4% from TJX’s share buyback program.

We are encouraged by the optimistic outlook of TJX Companies, which carries a Zacks Rank #2 (Buy) and we remain confident that the discount retailer will meet its long term growth targets if it maintains its current business momentum for the coming years.

Slow recovery of the U.S. economy, coupled with high debt crisis in the European countries has compelled the consumers to shift from high-end products to low-priced goods. Accordingly, discount stores, like TJX companies, Ross Stores (ROST - Free Report) , Dollar General Inc. (DG - Free Report) and Fred’s Inc. are witnessing top-line growth even during recessionary times as they offer branded clothing at discounted prices.

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