The TJX Companies, Inc. increased its guidance for sales and earnings for the year after reporting second-quarter results that easily exceeded the off-pricer’s guidance.

Net sales for the second quarter of Fiscal 2024 were $12.8 billion, an increase of 8 percent versus the second quarter of Fiscal 2023.

Overall comp store sales increased 6 percent, topping company guidance in the range of 2 percent to 3 percent.

Q2 FY24 pretax profit margin was 10.4 percent, up 1.2 percentage points versus last year and well above the company’s plan in the range of 9.3 percent to 9.5 percent.

Net income for the second quarter of Fiscal 2024 was $989 million, up 22.1 percent from $810 million a year ago. Diluted earnings per share were 85 cents, up 23 percent versus 69 cents in the second quarter of Fiscal 2023. TJX had projected earnings per share to be in the range of 72 cents to 75 cents.

For the first half of Fiscal 2024, net sales were $24.5 billion, an increase of 6 percent versus the first half of Fiscal 2023. First half Fiscal 2024 overall comp store sales increased 4 percent. Net income for the first half of Fiscal 2024 was $1.9 billion. For the first half of Fiscal 2024, diluted earnings per share were $1.62 versus $1.18 in the first half of Fiscal 2023, an increase of 37 percent, and were up 19 percent versus last year’s first half adjusted earnings per share of $1.36, which excluded an $.18 charge related to a write-down of the company’s minority investment in Familia.

Ernie Herrman, CEO and president of The TJX Companies, Inc., said, “I am extremely pleased with our second quarter performance. Our comparable store sales increase of 6 percent, pretax profit margin, and earnings per share all significantly exceeded our plans. Our overall comp sales growth was driven by customer traffic, which increased at every division. It was terrific to see Marmaxx, our largest division, drive an 8 percent comp sales increase. Our overall apparel and accessories sales were very strong. Overall home sales significantly improved and returned to positive comp sales growth, with HomeGoods posting a 4 percent comp sales increase. TJX Canada and TJX International also both delivered comp sales growth and customer traffic increases. With our above-plan results, we are raising our full-year outlook for comparable store sales, pretax profit margin, and earnings per share. I want to recognize the sharp execution of our teams across TJX who focus every day on bringing customers around the world excellent values on great fashions and great brands and an exciting, treasure-hunt shopping experience. The third quarter is off to a very strong start and we are seeing tremendous off-price buying opportunities in the marketplace. We are in an outstanding position to continue shipping fresh and compelling merchandise to our stores and online throughout the fall and holiday selling seasons. Going forward, we continue to see excellent opportunities to grow sales and customer traffic, capture market share, and drive the profitability of our company.”

Net Sales By Division
By division, same-store sales at Marmaxx (including T.J. Maxx, Marshalls and Sierra Trading ) were up 5 percent after climbing 3 percent a year ago and 12 percent in the 2021 second quarter.

Same-store sales at HomeGoods were down 7 percent against a decline of 7 percent a year ago and a jump of 40 percent in the second quarter of 2021.

Internationally, same-store sales at TJX Canada were up 1 percent in the latest quarter while sales at TJX International (Europe & Australia) were up 4 percent.

Margins
For the second quarter of Fiscal 2024, the company’s pretax profit margin was 10.4 percent, well above the company’s plan and 1.2 percentage points above last year’s second-quarter pretax profit margin of 9.2 percent. The company’s above-plan pretax profit margin was driven by a better-than-expected benefit from lower freight costs as well as expense leverage on the company’s above-plan sales.

Gross profit margin for the second quarter of Fiscal 2024 was 30.2 percent, a 2.6 percentage point increase versus the second quarter of Fiscal 2023. This increase was driven by a higher merchandise margin due to a significant benefit from lower freight costs.

SG&A costs as a percent of sales for the second quarter of Fiscal 2024 were 20.1 percent, a 1.7 percentage point increase versus the second quarter of Fiscal 2023. This increase was primarily due to higher incentive compensation accruals, a reserve related to a German government COVID program receivable, incremental store wage and payroll costs, and a contribution to the TJX Foundation.

Net interest income benefitted the second quarter of Fiscal 2024 pretax profit margin by 0.4 percentage points versus the prior year.

Impact Of Foreign Currency Exchange Rates
The movement in foreign currency exchange rates had a neutral impact on the company’s net sales growth in the second quarter of Fiscal 2024 versus the prior year. The overall net impact of foreign currency exchange rates had a $.01 negative impact on second quarter Fiscal 2024 diluted earnings per share.

The movement in foreign currency exchange rates had a neutral impact on the company’s net sales growth in the first half of Fiscal 2024 versus the prior year. The overall net impact of foreign currency exchange rates had a $.01 negative impact on the first half of Fiscal 2024 diluted earnings per share.

Inventory
Total inventories as of July 29, 2023, were $6.6 billion, compared to $7.1 billion at the end of the second quarter of Fiscal 2023. Last year, the company’s total inventories in the second quarter reflected the early arrival of merchandise and a larger in-transit balance as a result of supply chain delays. Consolidated inventories on a per-store basis as of July 29, 2023, including distribution centers, but excluding inventory in transit, the company’s e-commerce sites, and Sierra stores, were down 6 percent on both a reported and constant currency basis. On a constant-currency basis reflects inventory adjusted for the impact of foreign currency exchange rates, if any, as described above. The company is well-positioned to take advantage of a marketplace that is loaded with outstanding quality, branded merchandise and is in a great position to flow exciting merchandise to its stores and online throughout the fall and holiday shopping seasons.

Cash and Shareholder Distributions
For the second quarter of Fiscal 2024, the company generated $1.3 billion of operating cash flow and ended the quarter with $4.6 billion of cash. In the second quarter of Fiscal 2024, the company paid down $500 million of maturing debt.

During the second quarter of Fiscal 2024, the company returned $932 million to shareholders. The company repurchased a total of $550 million of TJX stock, retiring 6.7 million shares, and paid $382 million in shareholder dividends during the quarter. During the first half of Fiscal 2024, the company returned a total of $1.8 billion to shareholders, which includes repurchasing a total of $1.05 billion of TJX stock, retiring 13.2 million shares, and paying $723 million in shareholder dividends.

The company continues to expect to repurchase approximately $2.0 to $2.5 billion of TJX stock during the fiscal year ending February 3, 2024. The company may adjust this amount up or down depending on various factors. The company remains committed to returning cash to its shareholders while continuing to invest in the business to support the near- and long-term growth of TJX.

Pension Payout Offer
The company offered eligible, former TJX employees who have not started their pension benefit an opportunity to receive a voluntary lump sum payout of their vested pension plan benefit. As a result, the company anticipates a non-cash settlement charge, which may negatively impact Fiscal 2024 earnings per share by approximately $.01 to $.02. Any actual settlement charge may be higher or lower depending on participation rates and other factors. This potential non-cash settlement charge is expected to be incurred in the third quarter of Fiscal 2024 and would impact the company’s pretax profit margin and earnings per share results. The potential impact of this pension payout offer is not included in the company’s Fiscal 2024 outlook below. The company expects to exclude the impact of this potential charge from the company’s third quarter and full-year Fiscal 2024 adjusted pretax profit margin and adjusted earnings per share results.

Third Quarter, Fourth Quarter, and Full Year Fiscal 2024 Outlook
For the third quarter of Fiscal 2024, the company is planning overall comparable store sales to be up 3 percent to 4 percent, pretax profit margin to be in the range of 11.3 percent to 11.5 percent, and diluted earnings per share to be in the range of $.95 to $.98.

For the fiscal year ending February 3, 2024, the company is now planning overall comparable store sales to be up 3 percent to 4 percent, up 2 percent to 3 percent previously. For the 53-week fiscal year ending February 3, 2024, the company is increasing its expectations for pretax profit margin to a range of 10.7 percent to 10.8 percent (10.3 percent to 10.5 percent previously) and diluted earnings per share to be in the range of $3.66 to $3.72 ($3.49 to $3.58 previously). The company’s full-year guidance includes an expected pretax profit margin benefit of approximately 0.1 percentage point and diluted earnings per share benefit of approximately $.10 due to the 53rd week in the company’s Fiscal 2024 calendar. Excluding these expected benefits, the company now expects the full-year Fiscal 2024 adjusted pretax profit margin to be in the range of 10.6 percent to 10.7 percent (10.2 percent to 10.4 percent previously) and adjusted diluted earnings per share to be in the range of $3.56 to $3.62 ($3.39 to $3.48 previously).

Based on the company’s third quarter and full-year Fiscal 2024 outlook, the company is planning fourth quarter Fiscal 2024 overall comparable store sales to be up 3 percent to 4 percent, pretax profit margin to be in the range of 10.7 percent to 10.9 percent and earnings per share to be in the range of $1.10 to $1.13. The company’s fourth quarter Fiscal 2024 outlook includes an expected pretax profit margin benefit of approximately 0.4 percentage points and a diluted earnings per share benefit of approximately $.10 due to the extra week in the company’s fourth quarter Fiscal 2024 calendar. Excluding these expected benefits, the company is planning the fourth quarter Fiscal 2024 adjusted pretax profit margin to be in the range of 10.3 percent to 10.5 percent and adjusted diluted earnings per share to be in the range of $1.00 to $1.03.

Photo courtesy TJX