TJX Companies Reports Weak Apparel Sales in Fiscal Q1

“For the first quarter, our consolidated comparable store sales increased 1 percent, and our earnings per share of $.64 were slightly below our expectations with a negative impact from foreign currency exchange rates that was larger than our guidance assumed,” said CEO Carol Meyrowitz. “While sales were not as strong as we would have liked, predominantly in our apparel business, I was very pleased that overall business trends improved as the quarter progressed. Further, our inventories and expenses were well managed, which helped protect our margins. We enter the second quarter in an excellent position. We like our lean inventory levels, which enable us to capitalize on the plentiful buying opportunities we are seeing in the marketplace and ship great fashions, brands and quality merchandise to our stores at amazing values. Additionally, we have exciting marketing initiatives planned to drive customer traffic. We are very confident in our ability to achieve our plans for the remainder of 2014 and beyond as we continue to bring value around the world!”

 

		First Quarter				First Quarter
		Comparable Store Sales1				Net Sales ($ in millions)2,3
		FY2015		FY2014		FY2015		FY2014
In the U.S.:
Marmaxx4,5		0%		+1%		$4,235		$4,136
HomeGoods		+3%		+7%		$757		$690
International:
TJX Canada		-1%		-1%		$608		$645
TJX Europe		+8%		+4%		$891		$719
TJX		+1%		+2%		$6,491		$6,190

 

 

The movement in foreign currency exchange rates had a neutral impact on consolidated net sales growth in the first quarter of Fiscal 2015 versus the prior year. The overall net impact of foreign currency exchange rates had a $.02 negative impact on first quarter Fiscal 2015 earnings per share, compared with a $.01 negative impact last year.

 

Margins
For the first quarter of Fiscal 2015, the company’s consolidated pretax profit margin was 11.3 percent, a 0.5 percentage point decrease compared with the prior year’s 11.8 percent margin. Gross profit margin for the first quarter of Fiscal 2015 was 27.9 percent, down 0.5 percentage points versus the prior year. This decline was primarily due to lower merchandise margins versus strong improvement last year and expense deleverage on the 1 percent consolidated comparable store sales increase. Selling, general and administrative costs as a percent of sales were 16.5 percent, unchanged from the prior year.

 

Inventory
Total inventories as of May 3, 2014, were $3.2 billion, compared with $3.1 billion at the end of the first quarter last year. Consolidated inventories on a per-store basis as of May 3, 2014, including the distribution centers, but excluding inventory in transit and the company’s e-commerce businesses, were flat on a reported basis (down 1 percent on a constant currency basis). The company enters the second quarter with lean inventory levels and well positioned to take advantage of the plentiful buying opportunities for branded, quality merchandise it is seeing in the marketplace.

 

Shareholder distributions
During the first quarter, the company repurchased a total of $360 million of TJX stock, retiring 6.0 million shares. The company continues to expect to repurchase approximately $1.6 to $1.7 billion of TJX stock in Fiscal 2015. The company may adjust the amount of this spending up or down depending on various factors. Additionally, the company increased its dividend by 21 percent in the first quarter, as it remains committed to returning cash to its shareholders while reinvesting in the business to support the near- and long-term growth of TJX.

 

Second quarter and full year fiscal 2015 outlook
For the second quarter of Fiscal 2015, the company expects diluted earnings per share to be in the range of $.70 to $.74 which would represent a 6 percent to 12 percent increase over last year’s $.66 per share. This outlook is based upon estimated consolidated comparable store sales growth of 2 percent to 3 percent.

 

The company tightened its guidance to reflect its first quarter results. For the fiscal year ending Jan. 31, 2015, the company now expects diluted earnings per share to be in the range of $3.05 to $3.17, down from their Februry guidance, which called from $3.05 to $3.19. The ocmpany reported diluted earnings per share of $2.94 in Fiscal 2014. Excluding an $.11 tax benefit in Fiscal 2014, this guidance would represent an 8 percent to 12 percent increase over the adjusted $2.83 in Fiscal 2014. This outlook continues to be based upon estimated consolidated comparable store sales growth of 1 percent to 2 percent.

 

The company’s earnings guidance for the second quarter and full year Fiscal 2015 assumes that currency exchange rates will remain unchanged from current levels.

 

 

Stores by concept
During the first quarter ended May 3, 2014, the company increased its store count by a net of 37 stores. The company increased square footage by 4 percent over the same period last year.

 

		Store Locations				Gross Square Feet*
		First Quarter				First Quarter
						(in millions)
		Beginning		End		Beginning		End
In the U.S.:
T.J. Maxx		1,079		1,085		31.2		31.3
Marshalls		942		947		28.9		29.0
HomeGoods		450		458		11.3		11.4
Sierra Trading Post		4		4		0.1		0.1
TJX Canada:
Winners		227		230		6.6		6.7
HomeSense		91		92		2.2		2.2
Marshalls		27		32		0.8		1.0
TJX Europe:
T.K. Maxx		371		380		11.6		11.9
HomeSense		28		28		0.6		0.6
TJX		3,219		3,256		93.3		94.3