The TJX Companies, Inc. (NYSE: TJX) reported net sales for the fiscal second quarter ended July 30 increased 7 percent to $7.9 billion and consolidated comparable store sales increased 4 percent over last year’s 6 percent increase.

The off-price retailer, whose stores serve as a significant clearance outlet for athletic and outdoor apparel brands, reported net income reached $562 million, or 84 cents per diluted share, up 5 percent from the prior year’s 80 cents.

For the first half of fiscal 2017, net sales were $15.4 billion, an 8 percent increase over last year. Consolidated comparable store sales increased 6 percent and net income reached $1.1 billion during the first half. Diluted earnings per share were $1.60, a 7 percent increase over the prior year’s $1.49.

“It was terrific to see our strong customer traffic and comps continue in the second quarter,” said Ernie Herrman, CEO and President of The TJX Companies, Inc. “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 as our excellent values on a compelling selection of brands and fashions are drawing customers to our retail brands around the world. We also are very pleased that our apparel, including accessories, and home businesses both performed well. Further, we saw a strong merchandise margin increase.”

The company increased its store count by 14 stores during the quarter, including one Sierra Trading Post, to a total of 3,675 stores. Square footage increased 5 percent from the same period last year. These include 1,165 T.J. Maxx, 1,013 Marshalls, 538 HomeGoods and 9 Sierra Trading Post stores, as well as tjmaxx.com and sierratradingpost.com in the United States; 250 Winners, 104 HomeSense, and 45 Marshalls stores in Canada; 473 T.K. Maxx and 43 HomeSense stores, as well as tkmaxx.com in Europe and 35 Trade Secret stores in Australia.

TXJ Companies said movement in foreign currency exchange rates knocked 2 percentage points off its consolidated net sales growth in the second quarter. The overall net impact of foreign currency exchange rates had a 3 cents positive impact on second-quarter fiscal 2017 earnings per share, compared with a 2 cents positive impact last year.

Margins
For the second quarter of fiscal 2017, the company’s consolidated pretax profit margin was 11.6 percent, a 0.4 percentage point decrease compared with the prior year.

Gross profit margin for the second quarter of fiscal 2017 was 29.4 percent, up 0.3 percentage points versus the prior year, primarily due to a strong increase in merchandise margins and gains related to the company’s inventory hedges.

Selling, general and administrative costs as a percent of sales were 17.7 percent, up 0.8 percentage points versus the prior year’s ratio, primarily due to wage increases and investments to support growth, as the company had anticipated.

Inventory
Total inventories as of July 30, 2016 were $3.9 billion, compared with $3.7 billion at the end of the second quarter last year. Consolidated inventories on a per-store basis as of July 30, 2016, including the distribution centers but excluding inventory in transit and the company’s e-commerce businesses, were down 2 percent on a reported basis (flat on a constant currency basis). The company enters the third quarter in an excellent inventory position to take advantage of the plentiful buying opportunities it sees in the marketplace and ship fresh, branded assortments throughout the fall and holiday seasons.

Third Quarter and Full Year Fiscal 2017 Outlook
For the third quarter of fiscal 2017, the company expects diluted earnings per share to be in the range of 83 cents to 85 cents compared to 86 cents last year. This guidance reflects an assumption that wage increases will negatively impact EPS growth by 3 percent. The company also expects the combination of foreign currency and transactional foreign exchange will have an additional 3 percent negative impact on EPS growth. This EPS outlook is based upon estimated consolidated comparable store sales growth of 2 percent to 3 percent.

The company is raising 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 be in the range of $3.39 to $3.43, which would represent a 2 to 3 percent increase over $3.33 in fiscal 2016. This guidance reflects an assumption that wage increases will negatively impact EPS growth by 3 percent. The company also expects the combination of foreign currency and transactional foreign exchange will have an additional 3 percent negative impact on EPS growth. This EPS outlook is now based upon a raised estimate of consolidated comparable store sales growth of 3 to 4 percent.

The company’s earnings guidance for the third quarter and full year of fiscal 2017 assumes that currency exchange rates will remain unchanged from the levels at the beginning of the third quarter.

“The third quarter is off to a solid start, and we see plentiful opportunities for our business in the second half of the year and beyond,” said Herrman. “We remain laser focused on achieving our goals for 2016 and are passionate about surpassing them. We continue on the road to becoming a $40 billion plus company!”