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TJX Companies (TJX) Q2 Earnings In Line, Sales Lag Estimates

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The TJX Companies, Inc. TJX posted second-quarter fiscal 2020 results, wherein earnings and sales improved year over year and benefited from continued improvement in customer traffic. However, sales missed the Zacks Consensus Estimate.

The TJX Companies, Inc. Price, Consensus and EPS Surprise


The TJX Companies, Inc. Price, Consensus and EPS Surprise

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


Quarterly Details

The company’s earnings came in at 62 cents per share, which grew 7% year over year. Further, the bottom line came in line with the Zacks Consensus Estimate and met the upper end of management’s guidance.

Net sales advanced about 5% year over year to $9,781.6 million but fell short of the Zacks Consensus Estimate of $9,883 million. Net sales growth included a 1% adverse impact from currency movements.

Sales were backed by solid comparable store sales (comps), which gained from robust customer traffic across all segments. TJX Companies' consolidated comps grew 2% year over year.

Comps rose 1%, 6% and 2% in TJX Canada, TJX International and Marmaxx segments, respectively, while it remained flat at the HomeGoods segment.

Gross margin fell 0.7 percentage point (pp) to 28.5%, owing to elevated supply-chain expenses and lower merchandise margins.

Selling, general and administrative costs as a percentage of sales declined 0.5 pp year over year to 17.7%, mainly due to lower IT restructuring costs.

Other Financial Updates

The company ended the quarter with cash and cash equivalents of $2,186.4 million, long-term debt of $2,235.1 million and total shareholders’ equity of $5,302.6 million. Cash provided by operating activities for 26 weeks ended Aug 3, 2019, was $899.2 million.

Consolidated inventories on a per-store basis (including distribution centers and excluding e-commerce, inventory in transit and Sierra stores) increased 6% (up 7% on a constant-currency basis) year over year. Given its impressive inventory position, the company is well poised to take advantage of solid opportunities in the market for branded merchandise.

During the reported quarter, TJX Companies returned $579 million to its stockholders via dividend payouts and share buybacks. In the second quarter, the company repurchased 5.6 million shares for $300 million and paid out dividend worth $279 million. In the first half of fiscal 2020, management paid out dividends worth $517 million and repurchased 12.3 million shares for $650 million. TJX Companies intends to buy back shares worth nearly $1.75 billion in fiscal 2020.

TJX Companies opened 31 stores during the second quarter, taking the total count to 4,412.

Fiscal 2020 Guidance

The company is impressed with its quarterly performance and also began the third quarter on a strong note. Management is encouraged about its strategic initiatives and constant efforts to boost customer traffic and sales.

Management reiterated its bottom-line guidance for fiscal 2020. TJX Companies projects earnings per share of $2.56-$2.61, indicating year-over-year growth of 5-7% (including last year’s pension settlement charges) and 4-7% (excluding last year’s pension settlement charges). The Zacks Consensus Estimate is currently pegged at $2.63.

Further, consolidated comps are expected to grow 2-3% and comps at Marmaxx are also expected to increase in the same range.

Q3 View

The company expects consolidated comps growth of 1-2% for the quarter. Comps at Marmaxx are expected to grow in the same range. The company expects earnings of 63-65 cents per share compared with adjusted earnings of 63 cents reported in the year-ago quarter.

The consensus mark for third-quarter earnings is pegged at 68 cents.

We note that this Zacks Rank #3 (Hold) stock has gained 3.7% in the past six months compared with the industry’s growth of 14.7%.

3 Retail Stocks to Bet on

Target TGT, with a Zacks Rank #2 (Buy), has a long-term earnings per share growth rate of 7.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Burlington Stores BURL, also with a Zacks Rank #2, has a long-term earnings per share growth rate of 17%.

PriceSmart (PSMT - Free Report) , with a Zacks Rank #2, has delivered average positive earnings surprise of 31.3% in the trailing four quarters.

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