The TJX Companies, Inc. reported that net sales for the second quarter of Fiscal 2018 increased 6 percent to $8.4 billion and consolidated comparable store sales increased 3 percent on top of last year’s 4 percent increase. Net income for the second quarter was $553 million and diluted earnings per share were 85 cents, versus the prior year’s 84 cents a share.

For the first half of Fiscal 2018, net sales were $16.1 billion, a 5 percent increase over last year. Consolidated comparable store sales for the first half of Fiscal 2018 increased 2 percent. Net income for the first half of Fiscal 2018 was $1.1 billion. Diluted earnings per share were $1.67, a 4 percent increase over the prior year’s $1.60.

Ernie Herrman, CEO and President of The TJX Companies, Inc., stated, “Customer traffic was up and was the primary driver of our comp store sales growth at every division and overall merchandise margin was up, which we see as excellent indicators of the fundamental strength, consistency and flexibility of our business. In addition, we are confident that we are gaining market share at each of our four major divisions. Looking ahead, we see exciting opportunities for our business in the second half of the year. We believe we are set up extremely well to take advantage of the abundant buying opportunities in the marketplace. We have great liquidity in our inventories and we continue to grow our global sourcing universe of over 18,000 vendors, as we constantly open new vendor relationships and strengthen our existing ones. Above all, we are focused on giving consumers compelling reasons to shop us by offering an ever-changing, eclectic mix of brands and fashions at excellent values and making our shopping experience entertaining and inspiring. As always, we will strive to surpass our goals and we have great confidence in the continued, successful growth of TJX!”

Marmaxx division comps, which includes TJ Maxx and Marshall’s, were up 2 percent in the quarter on top of a 4 percent comp in the prior-year period. Net sales reached $5.28 billion, up from $5.10 billion in the comp period last year. Net sales figures includes Sierra Trading Post.

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.

For the second quarter of Fiscal 2018, the movement in foreign currency exchange rates had a one percentage point negative impact on consolidated net sales growth. The overall net impact of foreign currency exchange rates had a 4 cents negative impact on second quarter Fiscal 2018 earnings per share, compared with a 3 cents positive impact last year.

For the first six months of Fiscal 2018, the movement in foreign currency exchange rates had a one percentage point negative impact on consolidated net sales growth. The overall net impact of foreign currency exchange rates had a 3 cents negative impact on earnings per share in the first six months of Fiscal 2018, compared with a 1 cent negative impact last year.

Margins

For the second quarter of Fiscal 2018, the company’s consolidated pretax profit margin was 10.7 percent, a 0.9 percentage point decrease compared with the prior year.

Gross profit margin for the second quarter of Fiscal 2018 was 28.5 percent, down 0.9 percentage points versus the prior year. This was primarily due to losses related to the company’s inventory hedges. Importantly, merchandise margin increased again this quarter.

Selling, general and administrative costs as a percent of sales were 17.8 percent, up 0.1 percentage points versus the prior year’s ratio, primarily due to wage increases, as the company had anticipated.

Inventory

Total inventories as of July 29, 2017, were $3.9 billion, flat compared to the end of the second quarter last year. Consolidated inventories on a per-store basis as of July 29, 2017, including the distribution centers, but excluding inventory in transit and the company’s e-commerce businesses, were down 6 percent on both a reported basis and constant currency basis. The company enters the third quarter in an excellent inventory position and has plenty of liquidity to take advantage of the abundant buying opportunities in the marketplace for quality, branded merchandise.

Shareholder Distributions

During the second quarter, the company repurchased a total of $550 million of TJX stock, retiring 7.5 million shares. During the first half of the year, the company repurchased a total of $900 million of TJX stock, retiring 12 million shares. The company now expects to repurchase approximately $1.5 to $1.8 billion of TJX stock in Fiscal 2018. The company may adjust this amount up or down depending on various factors. Through its dividend program, under which the current dividend represents a 20 percent increase versus last year, the company returned to shareholders $201 million in the second quarter and $369 million in the first half of the year.

Third Quarter and Full Year Fiscal 2018 Outlook

For the third quarter of Fiscal 2018, the company expects diluted earnings per share to be in the range of 98 cents to $1.00. This would represent an 18 percent to 20 percent increase over the prior year’s EPS of 83 cents and an 8 percent to 10 percent increase over the prior year’s adjusted 91 cents, which excludes the combined 8 cents impact of last year’s debt extinguishment charge and pension settlement charge. This guidance reflects an assumption that wage increases will negatively impact EPS growth by 1 percent. The company also anticipates that the combination of foreign currency and transactional foreign exchange will positively impact EPS growth by 3 percent and that the change in accounting rules for share-based compensation will positively impact EPS growth by an additional 2 percent. This EPS outlook is based upon estimated consolidated comparable store sales growth of 1 percent to 2 percent.

For the 53-week fiscal year ending February 3, 2018, the company now expects diluted earnings per share in the range of $3.89 to $3.93. This represents a 12 percent to 14 percent increase over the prior year’s EPS of $3.46. The company’s full-year guidance includes an expected benefit of approximately 11 cents per share from the 53rd week in the company’s Fiscal 2018 calendar. Excluding this benefit, the company expects adjusted diluted earnings per share to be in the range of $3.78 to $3.82. This would represent a 7 percent to 8 percent increase over the prior year’s adjusted $3.53, which excludes the combined 7 cents impact of last year’s debt extinguishment charge and pension settlement charge from GAAP EPS of $3.46. This guidance reflects an assumption that wage increases will negatively impact EPS growth by 2 percent. The company also anticipates that the change in accounting rules for share-based compensation will positively impact EPS growth by 2 percent. This EPS outlook is based upon estimated consolidated comparable store sales growth of 1 percent to 2 percent.

The company’s earnings guidance for the third quarter and full year Fiscal 2018 assumes that currency exchange rates will remain unchanged from the levels at the beginning of the third quarter.

Stores by Concept

During the second quarter ended July 29, 2017, the company increased its store count by 51 stores to a total of 3,913 stores. The company increased square footage by 5 percent over the same period last year.