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The TJX Companies' (TJX) Q1 Earnings Top Estimates, Sales Up

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The TJX Companies, Inc. (TJX - Free Report) reported first-quarter fiscal 2023 numbers, with the top and the bottom line increasing year over year. Earnings surpassed the Zacks Consensus Estimate, while net sales missed the same.

Q1 in Details

TJX Companies’ first-quarter adjusted earnings came in at 68 cents per share. In first-quarter fiscal 2022, the company’s earnings came in at 44 cents per share. The bottom line surpassed the Zacks Consensus Estimate of 60 cents per share.

Net sales came in at $11,406.5 million, up 13% from $10,086.7 million reported in the year-ago quarter.The metric missed the Zacks Consensus Estimate of $11,552 million. In the Marmaxx (U.S.) division, the company’s net sales came in at $6,872 million, up from $6,640 million reported in the year-ago quarter. The metric stood at $2,036 million, down from $2,142 million across the HomeGoods (U.S.) division. TJX Canada’s net sales came in at $1,082, higher than $766 reported in the year-ago quarter. TJX International’s (Europe & Australia) net sales were $1,417 million, up from $539 million posted in the year-ago quarter.

The TJX Companies, Inc. Price and EPS Surprise

 

The TJX Companies, Inc. Price and EPS Surprise

The TJX Companies, Inc. price-eps-surprise | The TJX Companies, Inc. Quote

 

U.S. comparable-store sales rounded down to flat year over year in the first quarter of fiscal 2023, compared with 17% increase in U.S. open-only comp store sales in the first quarter of fiscal 2022. Comp-store sales rose 3% in Marmaxx, driven by higher customer traffic. Comp-store sales fell 7% in the HomeGoods category.

The consolidated pretax profit margin came in at 7.5%. Excluding a 1.9 percentage point adverse impact from a charge associated with the write-down of the company’s minority investment in Familia, the adjusted consolidated pretax margin was 9.4%, up from 7.2% reported in the year-ago quarter. The upside can be attributed to the benefit of a reduction in pandemic-induced expenses and the annualization of international temporary store closures undertaken in the past year. The company’s pricing initiative and solid markon were also an upside. These upsides were somewhat offset by almost 2.2 percentage points of additional freight pressure and nearly 0.7 percentage points of incremental wage pressure.

The gross profit margin was 27.9%, down 0.2 percentage points. Selling, general and administrative (SG&A) costs as a percent of sales came in at 18.4%, down 2.1 percentage points from fiscal 2022’s level.

Other Updates

TJX Companies’ ended the quarter with cash and cash equivalents of $4,295.1 million, long-term debt of $3,355.8 million and shareholders’ equity of $5,595.4 million. For 13 weeks ended Apr 30, 2022, the company’s net cash used by operating activities stood at $634.5 million.

During the quarter, management returned $907 million to shareholders. The company repurchased $600 million in stock, retiring 9.5 million shares. The company paid $307 million in shareholder dividends. Management expects to buyback $2.25 to $2.50 billion of the company’s stock in fiscal 2023. In addition, management raised its dividend by 13% in the first quarter of fiscal 2023.

As of Apr 30, 2022, total inventories were $7 billion. Management is optimistic about its capabilities to provide fresh merchandise to its stores and online during the summer season.

On Mar 3, 2022, management unveiled that it is committed to offloading minority investment in Familia, an off-price retailer that runs in Russia.

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Outlook

Management highlighted that it is impressed with sales trends witnessed at the beginning of the second quarter of fiscal 2023. For second-quarter fiscal 2023, the company expects U.S. comparable store sales to be down 1%-3%. The company registered a 21% U.S. open-only comp store sales increase in the second quarter of fiscal 2022. For the second quarter of fiscal 2023, management anticipates earnings per share (EPS) in the range of 65-69 cents.

For fiscal 2023, management now expects U.S. comparable store sales to be up 1% to 2%. The company witnessed 17% U.S. open-only comp store sales growth in fiscal 2022. For fiscal 2023, it anticipates pretax margin in the range of 9.2% to 9.4%. The company expects adjusted pretax margin of 9.6%-9.8% in fiscal 2023. Adjusted EPS is envisioned in the range of $3.13 to $3.20 in fiscal 2023.

Shares of the Zacks Rank #4 (Sell) company have dropped 15.1% in the past three months compared with the industry’s decline of 0.6%.

Top 3 Retail Bets

Here are three better-ranked stocks – The Kroger Co. (KR - Free Report) , Target Corporation (TGT - Free Report) and Costco Wholesale Corporation (COST - Free Report) .

Kroger, a renowned supermarket company, carries a Zacks Rank #2 (Buy). The company has an expected EPS growth rate of 9.9% for three to five years. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Kroger’s current financial-year sales suggests growth of 3.2% from the year-ago period. KR has a trailing four-quarter earnings surprise of 22.1%, on average.

Target, which operates as a general merchandise retailer, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 21.3%, on average.

The Zacks Consensus Estimate for Target’s current financial-year sales suggests growth of 3.9% from the year-ago period. TGT has an expected EPS growth rate of 16.5% for three to five years.

Costco, the operator of membership warehouses, also holds a Zacks Rank #2. Costco has a trailing four-quarter earnings surprise of 13.3%, on average. The company has an expected EPS growth rate of 9.1% for three to five years.

The Zacks Consensus Estimate for COST’s current financial year sales suggests growth of nearly 14% from the year-ago period.