The TJX Companies Inc. raised its guidance for the year as both sales and earnings per share exceeded expectations in the third quarter. The report also shows that the store count for Sierra Trading has grown to 46 from 39 a year ago.

Highlights include:

  • Consolidated comp store sales increase of 4 percent, well above the company’s guidance and over last year’s 7 percent increase
  • Customer traffic was the primary driver of the comp store sales increase at all four major divisions
  • Net sales increased 6 percent to $10.5 billion
  • Diluted EPS of $.68, well above the company’s guidance
  • Increased full-year Fiscal 2020 EPS guidance
  • Returned $778 million to shareholders in the third quarter through share repurchases and dividends
  • Completed investment of $225 million for a 25 percent ownership stake in privately held Familia, Russia’s only major off-price apparel and home fashions retailer. The company’s investment represents a non-controlling, minority position.

Net sales for the third quarter of Fiscal 2020 increased 6 percent to $10.5 billion. Consolidated comparable store sales increased 4 percent, over last year’s 7 percent increase. Net income for the third quarter was $828 million, and diluted earnings per share were $.68 versus $.61 in the prior year. This was an 8 percent increase versus the prior year’s adjusted $.63, which excluded a $.02 pension settlement charge.

Guidance had called for quarter earnings to be in the range of $.63 to $.65 and comparable-store sales growth of 1 percent to 2 percent on a consolidated basis. The company also estimated comparable store sales growth of 1 percent to 2 percent at Marmaxx.

For the first nine months of Fiscal 2020, net sales were $29.5 billion, a 6 percent increase over the same period last year. Consolidated comparable store sales for the first nine months of Fiscal 2020 increased 4 percent. Net income for the first nine months of Fiscal 2020 was $2.3 billion, and diluted earnings per share were $1.86.

Ernie Herrman, chief executive officer and president of The TJX Companies, Inc., stated, “We are extremely pleased with our strong performance in the third quarter as both sales and earnings per share exceeded our expectations. Consolidated comp store sales increased 4 percent over a very strong 7 percent increase last year, and earnings per share were $.68. We are especially pleased that Marmaxx, HomeGoods, and TJX Canada each delivered a sequential increase in their comp store sales growth, and TJX International maintained its strong momentum driven by excellent performance in Europe. Further, customer traffic was the primary driver of the comp store sales increases at each of these four major divisions. With our above-guidance third quarter results, we are raising our full-year earnings per share guidance. Looking ahead, the fourth quarter is off to a solid start and we have many initiatives underway to keep driving traffic and sales to our stores and online during the holiday season and beyond. We are convinced our holiday marketing campaigns will position us as a top shopping destination for exciting gifts at amazing prices. We are seeing fantastic, widespread availability of quality, branded merchandise and are in a great position to capitalize on these opportunities. Longer term, we are confident that we can gain additional market share and continue the successful growth of TJX in the U.S. and internationally!”

Sales by Business Segment

The company’s comparable store sales and net sales by division, in the third quarter, were as follows:

Impact of Foreign Currency Exchange Rates

Changes in foreign currency exchange rates affect the translation of sales and earnings of the company’s international businesses into U.S. dollars for financial reporting purposes. In addition, ordinary course, inventory-related hedging instruments are marked to market at the end of each quarter. Changes in currency exchange rates can have a material effect on the magnitude of these translations and adjustments when there is significant volatility in currency exchange rates.

The movement in foreign currency exchange rates had a one percentage point negative impact on consolidated net sales growth in the third quarter of Fiscal 2020 versus the prior year. The overall net impact of foreign currency exchange rates had a $.01 negative impact on third quarter Fiscal 2020 earnings per share, compared with a neutral impact last year.

The movement in foreign currency exchange rates had a one percentage point negative impact on consolidated net sales growth for the first nine months of Fiscal 2020 versus the prior year. The overall net impact of foreign currency exchange rates had a $.01 negative impact on the first nine months of Fiscal 2020 earnings per share, compared with a $.01 positive impact last year.

A table detailing the impact of foreign currency on TJX’s pretax earnings and margins, as well as those of its international businesses, can be found in the Investors section of tjx.com.

The foreign currency exchange rate impact to earnings per share does not include the impact currency exchange rates have on various transactions, which the company refers to as “transactional foreign exchange.”

Margins

For the third quarter of Fiscal 2020, the company’s consolidated pretax profit margin was 10.7 percent. This was flat versus the prior year’s 10.7 percent and a 0.3 percentage point decrease versus the prior year’s adjusted 11.0 percent, which excluded a negative 0.3 percentage point impact from a pension settlement charge.

Gross profit margin for the third quarter of Fiscal 2020 was 28.8 percent, a 0.1 percentage point decrease versus the prior year. Selling, general and administrative (SG&A) costs as a percent of sales for the third quarter were 18.0 percent, a 0.1 percentage point increase versus the prior year.

Inventory

Total inventories as of November 2, 2019, were $6.3 billion, compared with $5.5 billion at the end of the third quarter last year. Consolidated inventories on a per-store basis as of November 2, 2019, including the distribution centers, but excluding inventory in transit, the company’s e-commerce sites, and Sierra stores, were up 9 percent on a reported basis and constant currency basis. The company is well-positioned to take advantage of the fantastic buying opportunities it sees in the marketplace and ship ever-changing gift assortments to its stores and online throughout the holiday season.

Shareholder Distributions

During the third quarter, the company returned a total of $778 million to shareholders. The company repurchased a total of $500 million of TJX stock, retiring 9.0 million shares, and paid $278 million in shareholder dividends. For the first nine months of Fiscal 2020, the company repurchased a total of $1.15 billion of TJX stock, retiring 21.3 million shares, and paid $795 million in shareholder dividends. The company expects to repurchase $1.5 to $1.75 billion of TJX stock in Fiscal 2020. The company may adjust this amount up or down depending on various factors.

Investment in Familia

On November 18, 2019, the company completed an investment of $225 million for a 25 percent ownership stake in privately held Familia, Russia’s only major off-price apparel and home fashions retailer. TJX’s investment represents a non-controlling, minority position. Familia currently operates more than 275 stores throughout Russia. This transaction gives TJX an opportunity to invest in an established, off-price retailer with significant growth potential in the Russian market. The company’s ownership in Familia is expected to be slightly accretive to earnings per share beginning in Fiscal 2021. The company will record this investment using the equity method of accounting from the date of the investment. Further, TJX will report its share of Familia’s financial results on a one quarter delay. BofA Securities acted as financial advisor and Ropes & Gray LLP provided legal counsel to the company in connection with this transaction.

Fourth Quarter and Full-Year Fiscal 2020 Outlook

For the fourth quarter of Fiscal 2020, the company expects diluted earnings per share to be in the range of $.74 to $.76 versus earnings per share of $.68 in the prior year. This EPS outlook is based upon estimated comparable store sales growth of 2 percent to 3 percent on a consolidated basis and at Marmaxx.

For the 52-week fiscal year ending February 1, 2020, the company now expects diluted earnings per share to be in the range of $2.61 to $2.63. This would represent a 7 percent to 8 percent increase over the prior year’s $2.43, which included a $.02 negative impact from a pension settlement charge. The company expects diluted earnings per share to increase 7 percent over the prior year’s adjusted $2.45, which excluded the pension settlement charge. This EPS outlook is based upon estimated comparable store sales growth of 3 percent on a consolidated basis and 3 percent to 4 percent at Marmaxx.

Previous guidance had called for earnings per share to be in the range of $2.56 to $2.61 based upon estimated comparable store sales growth of 2 percent to 3 percent on a consolidated basis and at Marmaxx.

The company’s earnings guidance for the fourth quarter and full-year Fiscal 2020 assumes that currency exchange rates will remain unchanged from the levels at the beginning of the fourth quarter.

Stores by Concept

During the third quarter ended November 2, 2019, the company increased its store count by 107 stores to a total of 4,519 stores. The company increased square footage by 4 percent over the same period last year.