By Charlie Lunan
The TJX Companies Inc. (NYSE: TJX) continued to buck the e-commerce mega-trend in the second quarter when its same-store sales grew 4 percent, due primarily to growing traffic at its 3,675 stores.
The growth was all the more impressive given that it came on top of 6 percent growth in same-store sales a year earlier and that currency translation knocked 2 percentage points off its consolidated net sales growth during the quarter.
The off-price retailer, whose TJMaxx, Marshalls and Sierra Trading Post stores serve as significant clearance outlets for athletic and outdoor apparel brands, reported net sales increased 7 percent to $7.9 billion in the fiscal second quarter ended July 30. The retailer earned net income of $1.1 billion, or slightly more than Big 5 Sporting Goods Inc.’s net sales last year, in the first half of the year, driven by a 6 percent rise in same-store sales.
“It was terrific to see our strong customer traffic and comps continue in the second quarter,” said TJX President and CEO Ernie Herrman. “We are extremely pleased that our comp-store sales growth was almost entirely driven by customer traffic. We are convinced that we are gaining consumer market share.”
TJX increased its store count by 14 during the quarter to a total of 3,675 stores, including 1,165 T.J. Maxx, 1,013 Marshalls and nine Sierra Trading Post stores in the United States. While the company also sells online, most of its growth continues to come from store expansion. This year it is on pace to open 200 new locations.
The retailer grew gross margin 30 basis points to 29.4 percent, primarily due to a strong increase in merchandise margins and gains related to the company’s inventory hedges. On a per-store basis, consolidated inventories as of July 30, 2016 were down 2 percent on a reported basis and were flat on a currency-neutral basis.
TJX raised its full-year guidance to reflect its strong second-quarter results. For the fiscal year ending January 28, 2017, the company now expects diluted earnings per share to grow 2 to 3 percent despite a -3 percent headwind from currency exchange rates and planned wage increases. This EPS outlook is based upon a raised estimate of consolidated comparable store sales growth of 3 to 4 percent.
“We see a market place that is loaded with quality branded goods,” said Herrman. “We are extremely pleased with the abundance of merchandise available to us for the fall and winter seasons.”
Lead photo courtesy Sierra Trading Post
