The TJX Cos. Inc. – parent company of Sierra Trading Post – reported consolidated comparable store sales increased 1 percent over last year’s 7 percent increase. The performance marked the slowest gain of any quarter since 2014.

Net sales for the first quarter increased 3 percent to $7.8 billion.  Net income was $536 million and diluted earnings per share were 82 cents versus the prior year’s 76 cents.

The company currently has 12 Sierra Trading Post store locations.

Highlights of the quarter include:

  • Net sales increased 3 percent to $7.8 billion, over last year’s 10 percent increase
  • Consolidated comp store sales increased 1 percent over last year’s 7 percent increase
  • Diluted EPS of 82 cents compared with 76 cents in the prior year
  • Diluted EPS 4 cents above high-end of company’s plan primarily due to a benefit from an accounting change in share-based compensation as well as a benefit from foreign currency, which were both higher than expected
  • The company maintains its full year fiscal 2018 outlook
  • Returned $519 million to shareholders in the first quarter through share repurchases and dividends

Ernie Herrman, CEO and president of The TJX Companies, Inc., stated, “For the first quarter, consolidated comparable store sales were up 1 percent over last year’s strong 7 percent increase and at the high end of our plan. Earnings per share were 82 cents and above our plan. Comp store sales growth was once again driven by customer traffic. We achieved these results despite the unfavorable weather in parts of the U.S. and Canada compared to last year. We were pleased to see sales trends pick up as the quarter progressed. With our disciplined inventory management, our merchandise margin was up, which speaks to the resiliency and flexibility of our off-price retail model. Further, we are confident that we are gaining market share at each of our four major divisions. The second quarter is off to a solid start and we have excellent liquidity in our inventories. This positions us extremely well to capitalize on the plentiful buying opportunities we see for exciting fashions and brands in the marketplace and bring them to consumers at amazing values. As always, we will strive to surpass our goals and we have great confidence in the continued, successful growth of TJX.”

Margins

For the first quarter of fiscal 2018, the company’s consolidated pretax profit margin was 10.7 percent, a 0.2 percentage point decrease compared with the prior year.

Gross profit margin for the first quarter of fiscal 2018 was 29 percent, up 0.2 percentage points versus the prior year. This was primarily due to gains related to the company’s inventory hedges and a strong merchandise margin, partially offset by higher supply chain costs and expense deleverage on the 1 percent consolidated comparable store sales increase.

Selling, general and administrative costs as a percent of sales were 18.1 percent, up 0.4 percentage points versus the prior year’s ratio, primarily due to wage increases, as the company had anticipated.

Inventory

Total inventories as of April 29, 2017 were $3.7 billion, compared with $3.9 billion at the end of the first quarter last year. Consolidated inventories on a per-store basis as of April 29, 2017, including the distribution centers, but excluding inventory in transit and the company’s e-commerce businesses, were down 9 percent on a reported basis (down 7 percent on a constant currency basis) versus a 7 percent increase on both a reported and constant currency basis last year. The company is in an excellent inventory position entering the second quarter and has plenty of liquidity to take advantage of the terrific buying opportunities it sees in the marketplace for quality, branded merchandise.

Second Quarter and Full Year Fiscal 2018 Outlook

For the second quarter of fiscal 2018, the company expects diluted earnings per share to be in the range of 81 cents to 83 cents compared to 84 cents last year. This guidance reflects an assumption that the combination of foreign currency and transactional foreign exchange will negatively impact EPS growth by 4 percent and that wage increases will negatively impact EPS growth by an additional 2 percent. The company also expects the change in accounting rules for share-based compensation will positively impact EPS growth by 1 percent. This EPS outlook is based upon estimated consolidated comparable store sales growth of 1-2 percent.

For the 53-week fiscal year ending February 3, 2018, the company now expects diluted earnings per share in the range of $3.82 to $3.89. This represents a 10-12 percent increase over the prior year’s $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 $3.71 to $3.78. This would represent a 5-7 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 and that the combination of foreign currency and transactional foreign exchange will negatively impact EPS growth by 1 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 1-2 percent.

Photo courtesy Sierra Trading Post