TJX’s Q1 Results Beat Wall Street Expectations

TJX Cos. reported earnings and sales came in well ahead of year-ago pandemic-impacted levels and easily topped Wall Street targets. TJX’s report also indicated that Sierra Trading had 52 locations open at the close of the quarter, up from 48 a year ago.

Net sales for the first quarter ended May 1 were $10.1 billion, an increase of 129 percent versus the first quarter of Fiscal 2021 in which stores were closed for approximately 50 percent of the quarter due to COVID-19. Wall Street’s consensus estimate for sales was $8.61 billion.

Net sales for the first quarter of Fiscal 2022 increased 9 percent versus the first quarter of Fiscal 2020. Overall open-only comp-store sales increased 16 percent compared to the first quarter of Fiscal 2020. Net income for the first quarter was $534 million and diluted earnings per share were 44 cents. Wall Street’s consensus estimate had been 31 cents.

The company’s results for the first quarter of Fiscal 2022 were negatively impacted by the temporary closure of some of its stores due to COVID-19. Although the company’s stores in the U.S. were open for the first quarter, stores in Europe were closed for approximately 76 percent of the first quarter, and stores in Canada were closed for about 25 percent of the quarter. In total, the company had stores closed for approximately 14 percent of the first quarter due to COVID-19. The company estimates that these European and Canadian closures may have resulted in approximately $1.1 billion to $1.2 billion in lost sales during the first quarter of Fiscal 2022. This range of estimated lost sales assumes all European and Canadian stores operated at similar open-only comp-store sales trends as the fourth quarter of Fiscal 2021 and first quarter of Fiscal 2022. Based on management’s estimate of profit dollars on this range of lost sales, the company estimates that first-quarter Fiscal 2022 earnings per share were negatively impacted by approximately 21 cents to 24 cents.

CEO and President Comments
Ernie Herrman, CEO and president, TJX Companies, Inc. said, “I am extremely pleased with our first-quarter results, with overall open-only comp store sales up 16 percent and earnings per share of $.44, both well above our plan. I want to recognize the excellent work of our global associates across the organization, especially our store and distribution center associates who are physically coming into work to bring great value to our customers. Once again, we saw a phenomenal performance in our home businesses across all of our divisions. We also saw strong open-only comp-store sales increases in many other categories and positive open-only comp-store sales in overall apparel, which we believe benefitted from consumers beginning to resume more normal activities. Our U.S. divisions delivered outstanding double-digit open-only comp-store sales increases, and sales at our International divisions were very strong when stores were permitted to open. Clearly, our treasure-hunt shopping experience, eclectic mix of merchandise and great brands and values continue to resonate with shoppers across our geographies. As we start the second quarter, overall open-only comp-store sales trends remain similar to the first quarter. While the environment remains uncertain, particularly internationally, we are convinced we are strongly positioned as we emerge from this health crisis. Looking ahead, we see numerous opportunities to capture additional market share around the world and are excited about the runway for growth we see for TJX.”

Sales By Business Segment
Among concepts, same-store sales at Marmaxx (U.S.) rose 12 percent. Total sales reached $6,640 million against $2,698 million in 2020 and $5,802 million in 2019. Marmaxx consists of T.J. Maxx, Marshalls and Sierra.

HomeGoods (U.S.) comps grew 40 percent. Total sales reached $2,142 million against $760 million in 2020 and $1,397 million in 2019.

TJX Canada’s comps increased 9 percent. Total sales were $766 million against $380 million in 2020 and $848 million in 2019.

TJX International comps advanced 11 percent. Total sales reached $539 million against $572 million in 2020 and $1,231 million in 2019.

Open-only stores show the sales increase or decrease of these stores for the days the stores were open in the first quarter of Fiscal 2022 against sales for the same days in Fiscal 2020, prior to the emergence of the pandemic, which the company believes is a more useful comparison than against the first quarter of Fiscal 2021. Open-only comparable store sales exclude e-commerce sites.

Margins
For the first quarter Fiscal 2022, the company’s consolidated pretax profit margin was 7.2 percent. The company’s merchandise margin was up slightly compared to the first quarter of Fiscal 2020. Merchandise margin improvement versus Fiscal 2020 was due to strong market and lower markdowns, mostly offset by higher freight costs.

Cash and Dividend Update
The company ended the first quarter of fiscal 2022 with $8.8 billion of cash. The company declared a quarterly dividend of $.26 in the first quarter of Fiscal 2022 and expects to declare a similar dividend in the second quarter of Fiscal 2022, subject to Board approval.

Redemption of Senior Notes
In April 2021, the company redeemed its $750 million principal outstanding, 2.75 percent Notes due June 15, 2021 at par. Today, the company is also announcing make-whole calls for its $1.25 billion principal outstanding, 3.50 percent Notes due April 15, 2025, and its $750 million principal outstanding, 3.75 percent Notes due April 15, 2027. These make-whole calls are expected to settle on June 4, 2021, and once completed are expected to result in a pre-tax debt extinguishment charge of approximately $250 million in the second quarter of Fiscal 2022. The result of these three debt redemptions once completed is expected to be a $2.75 billion reduction of outstanding debt since the beginning of Fiscal 2022 and more than $90 million of annualized interest expense savings.

Inventory
Total inventories as of May 1, 2021, were $5.1 billion, compared with $4.9 billion at the end of the first quarter last year. Overall product availability in the marketplace remains excellent and the company has continued to flex its buying to the categories with the strongest demand. The company is well-positioned to deliver a fresh assortment of merchandise to its stores and e-commerce sites throughout the summer season.

Temporary Store Closings
The company currently has approximately 300 stores that are temporarily closed due to government mandates in response to the COVID-19 global pandemic. All of these stores are located in Canada and Europe. At this time, the company expects its stores in Canada and Europe will be temporarily closed for an estimated 17 percent and 7 percent of the second quarter of Fiscal 2022, respectively. In total, based on the restrictions currently in place, the company expects its stores to be closed for approximately 3 percent of the second quarter of Fiscal 2022. All of the company’s e-commerce businesses remain open.

Fiscal 2022 Open-Only Comp Store Sales
Due to the temporary closing of stores as a result of COVID-19, the company’s historical definition of comp-store sales is not applicable for the first quarter of Fiscal 2022. To provide a performance indicator for its stores as they reopen, the company has been temporarily reporting a new sales measure: open-only comp-store sales. The company’s open-only comp-store sales calculation includes stores initially classified as comp stores at the beginning of Fiscal 2021. This measure reports the sales increase or decrease of these stores for the days the stores were open in the first quarter of Fiscal 2022 against sales for the same days in Fiscal 2020, prior to the emergence of the global pandemic.

Outlook
For the start of the second quarter of Fiscal 2022, overall open-only comp-store sales trends remain similar to the first quarter. In the second quarter of Fiscal 2022, the company expects total sales, pretax margin, and earnings per share to be negatively impacted by the temporary store closings described above. Due to the continued uncertainty of the current environment, the company is not providing financial guidance at this time.

Photo courtesy TJX