The TJX Companies Inc. reported margin improvement and same store sales growth in the third quarter ended Nov. 1, but lowered its earnings guidance for the fourth quarter and full fiscal year due to different than anticipated effects from currency exchange rates as well as charges related to investments for the future.  The company still expects adjusted earnings per diluted share to grow 9 to 11 percent from fiscal 2014.

The off-price retailer announced  net sales for the third quarter ended Nov. 1 increased 6 percent to $7.4 billion, and consolidated comparable store sales increased 2 percent over last years 5 percent increase. Net income for the third quarter was $595 million and diluted earnings per share were $.85 compared with last years $.86 per share, which included a tax benefit of $.11. Excluding this benefit, diluted earnings per share increased 13 percent on an adjusted basis over last years adjusted $.75 per share. The impact of foreign currency exchange rates to this years third quarter earnings per share was neutral versus the companys expectation of a $.01 per share benefit.

For the first nine months of Fiscal 2015, net sales were $20.8 billion, a 6 percent increase over last year and consolidated comparable store sales increased 2 percent over last years 3 percent increase. Net income for the first nine months of Fiscal 2015 was $1.6 billion and diluted earnings per share were $2.22. Excluding a second quarter debt extinguishment charge, which rounded to a $.01 per share impact for the first nine months of Fiscal 2015, adjusted diluted earnings per share were $2.23, a 10 percent increase over last years adjusted $2.03, which excludes the third quarter tax benefit (referred to above) from reported diluted earnings per share of $2.14.

I am very pleased with our third quarter performance,” said Carol Meyrowitz, Chief Executive Officer of The TJX Companies, Inc. “Our comp sales increase of 2 percent was at the high end of our plan against 5 percent growth last year, our strongest quarter of 2013. On an adjusted basis, we drove a 13 percent EPS increase over 21 percent growth last year. We are particularly pleased that customer traffic continued to gain momentum in the third quarter despite unusually warm weather, which we believe dampened sales throughout TJX Europe starting in September and hurt Marmaxx in October. Having said that, the fourth quarter is off to a very strong start. We remain very confident in the short- and long-term growth prospects for our business as we grow TJX to a $40 billion-plus company.

Margins
For the third quarter of Fiscal 2015, the companys consolidated pretax profit margin was 13.0 percent, up 0.4 percentage points over a strong increase in the prior year. The gross profit margin for the third quarter of Fiscal 2015 was 29.4 percent, up 0.1 percentage points versus strong growth the prior year. Selling, general and administrative costs as a percent of sales were 16.2 percent in the third quarter, a 0.4 percentage point improvement from the prior year, due to items in the third quarter last year and expense favorability.

Inventory
Total inventories as of Nov. 1, 2014 were $4.0 billion, compared with $3.7 billion at the end of the third quarter last year. Consolidated inventories on a per-store basis as of Nov. 1, 2014, including the distribution centers, but excluding inventory in transit and the companys e-commerce businesses, were up 2 percent on a reported basis (up 3 percent on a constant currency basis) versus a 4 percent decrease last year as the company transitioned to gift giving a bit earlier than last year. TJX enters the fourth quarter in an excellent position to capitalize on the plentiful buying opportunities it is seeing in the marketplace and ship ever-changing gift selections to its stores throughout the holiday season.

Fourth Quarter and Full Year Fiscal 2015 Outlook
For the fourth quarter of Fiscal 2015, the company is updating its diluted earnings per share guidance to be in the range of $.86 to $.90, which would represent a 6 percent to 11 percent increase over last years $.81 per share. This guidance now assumes an expected $.02 per share negative impact from foreign currency exchange rates, versus the prior assumption of foreign currency being neutral, as well as a $.02 per share negative impact due to a combination of additional expenses and investments for the future. The company is maintaining its outlook for estimated consolidated comparable store sales growth to be 1 percent to 2 percent and merchandise margins to be up.

The company is updating its full year guidance range to reflect its third quarter results and fourth quarter guidance. On a reported basis, for the fiscal year ending Jan. 31, 2015, the company now expects diluted earnings per share to be in the range of $3.07 to $3.11 versus $2.94 in Fiscal 2014. This guidance now assumes an expected $.03 per share negative impact from foreign currency exchange rates, versus the prior assumption of a $.01 per share negative impact.

On an adjusted basis, excluding the second quarter debt extinguishment charge (referred to above) of an estimated $.02 per share, this guidance would be $3.09 to $3.13. This guidance for adjusted EPS would represent a 9 percent to 11 percent increase over the prior years adjusted EPS of $2.83, which excludes the $.11 per share tax benefit. Further, this outlook continues to be based upon estimated consolidated comparable store sales growth of 1 percent to 2 percent.

The companys earnings guidance for the fourth quarter and full year Fiscal 2015 assumes that currency exchange rates will remain unchanged from the levels at the beginning of the fourth quarter.

Stores by Concept

During the third quarter ended Nov. 1, 2014, the company increased its store count by a net of 106 stores. The company increased square footage by 4 percent over the same period last year.