The TJX Companies, Inc. lifted its guidance for sales and EPS for the year after seeing third-quarter results exceed targets. Q3 same-store sales grew 7 percent at the Marmaxx segment and 9 percent at HomeGoods, driven entirely by customer traffic.

Net sales for the third quarter of fiscal 2024 were $13.3 billion, an increase of 9 percent versus the third quarter of Fiscal 2023. Overall comp store sales in the quarter increased 6 percent, well above the company’s plan for up 3 percent to 4 percent.

Q3 pretax profit margin was 12.0 percent, up 0.8 percentage points versus last year and above the company’s plan calling for pretax profit margin to be in the range of 11.3 percent to 11.5 percent,

Net income for the third quarter was $1.2 billion, or $1.03 per share, above the company’s expectations of EPS in the range of 95 cents to 98 cents. Diluted earnings per share were up 13 percent versus last year’s 91 cents and ahead 20 percent versus last year’s adjusted diluted earnings per share of 86 cents, which excluded a $.05 tax benefit related to the divestiture of the company’s minority investment in Familia.

In the third quarter of Fiscal 2024, the company closed its HomeGoods e-commerce business, which was not contemplated in the company’s guidance and negatively impacted diluted earnings per share by approximately $.03. Third quarter Fiscal 2024 diluted earnings per share also included an unplanned benefit of approximately $.03 from the timing of certain expenses which the company expects will reverse out in the fourth quarter of Fiscal 2024.

For the first nine months of Fiscal 2024, net sales were $37.8 billion, an increase of 7 percent versus the first nine months of Fiscal 2023. Overall comp store sales for the first nine months of Fiscal 2024 increased 5 percent. Net income for the first nine months of Fiscal 2024 was $3.1 billion. For the first nine months of Fiscal 2024, diluted earnings per share were $2.65, up 27 percent versus $2.08 in the first nine months of Fiscal 2023. For the first nine months of Fiscal 2024, diluted earnings per share were up 19 percent versus adjusted diluted earnings per share of $2.22 in the first nine months of Fiscal 2023, which excluded a $.14 net-of-tax charge related to a write-down and the divestiture of the company’s minority investment in Familia.

Ernie Herrman, CEO and president of The TJX Companies, Inc., stated, “I am extremely pleased with our third quarter performance and strong execution of our teams as our comp store sales, pretax profit margin, and earnings per share all exceeded our expectations. I am particularly pleased with the results at our Marmaxx and HomeGoods divisions, which delivered terrific comp sales increases entirely driven by customer traffic. Customer traffic was up across all divisions, our overall apparel sales remained very strong, and home sales were outstanding and accelerated sequentially versus the second quarter. Across our geographies and wide customer demographic, our values and exciting, treasure-hunt shopping experience continued to resonate with consumers. With our above-plan results in the third quarter, we are raising our full-year guidance for comp store sales and earnings per share. The fourth quarter is off to a strong start, and we are pursuing the plentiful deals we are seeing for great brands and great fashions in the marketplace. We are strongly positioned as a shopping destination for gifts this holiday selling season and are convinced that our values and fresh shipments to our stores and online throughout the season will be a major draw again this year. Going forward, we continue to see excellent opportunities to grow sales and customer traffic, capture market share, and drive the profitability of our company.”

Comparable Store Sales Performance
At Marmaxx (T.J. Maxx and Marshalls stores and Sierra stores), same-store sales were up 7 percent in the third quarter against an increase of 3 percent in the 2022 third quarter and a gain of 11 percent in the 2021 stores at comparable open-only stores.

At HomeGoods (HomeGoods and HomeSense stores in the U.S.), same-store sales were up 9 percent in the third quarter against a decline of 16 percent in the 2022 third quarter and a gain of 34 percent in the 2021 stores at comparable open-only stores.

Internationally, same-store sales were up +3 percent in the third quarter at TJX Canada and gained 1 percent at TJX International (Europe and Australia). Year-ago comparisons were not applicable.

Net Sales by Division
Marmaxx’s sales were $8,107 million against $7,455 million, up 9 percent. HomeGoods’ sales reached $2,208 million compared with $1,948 million a year ago, up 13 percent.

TJX Canada’s sales were $1,317 million versus $1,285 million, up 2 percent on a reported basis and 5 percent on a currency-neutral basis. TJX International (Europe & Australia) sales were $1,633 million compared with $1,479 million last year, rising 10 percent on a reported basis and 3 percent on a currency-neutral basis.

Margins
For the third quarter of Fiscal 2024, the company’s pretax profit margin was 12.0 percent, above the company’s plan and 0.8 percentage points above last year’s third quarter pretax profit margin of 11.2 percent. The company’s pretax profit margin was above its plan primarily due to expense leverage on the company’s above-plan sales and an approximately 0.4 percentage point benefit from the timing of certain expenses. The company expects this unplanned benefit from the timing of expenses will reverse in the fourth quarter of Fiscal 2024. The closing of HomeGoods’ e-commerce business was not contemplated in the company’s guidance and had an approximately 0.3 percentage point negative impact on third quarter Fiscal 2024 pretax profit margin.

Gross profit margin for the third quarter of Fiscal 2024 was 31.1 percent, a 2.0 percentage point increase versus the third quarter of Fiscal 2023. This increase was driven by a higher merchandise margin due to a significant benefit from lower freight costs as well as expense leverage on the company’s above-plan sales.

SG&A costs as a percent of sales for the third quarter of Fiscal 2024 were 19.4 percent, a 1.4 percentage point increase versus the third quarter of Fiscal 2023. This increase was primarily due to incremental store wage and payroll costs, higher incentive compensation accruals, and approximately 0.3 percentage points of costs from closing HomeGoods’ e-commerce business.

Net interest income benefitted the third quarter Fiscal 2024 pretax profit margin by 0.3 percentage points versus the prior year.

Inventory
Total inventories as of October 28, 2023, were $8.3 billion, compared to $8.3 billion at the end of the third quarter Fiscal 2023. Consolidated inventories on a per-store basis as of October 28, 2023, including distribution centers, but excluding inventory in transit, the company’s e-commerce sites, and Sierra stores were flat on both a reported and constant currency basis. Constant currency basis reflects inventory adjusted for the impact of foreign currency exchange rates, if any, as described above. The company is reporting it is in a great position to take advantage of an outstanding marketplace that is loaded with quality, branded goods and deliver an ever-changing assortment of gifts to its stores and online through this holiday season.

Fourth Quarter and Full Year Fiscal 2024 Outlook
For the fourth quarter of Fiscal 2024, the company continues to expect overall comparable store sales to be up 3 percent to 4 percent. The company now expects the pretax profit margin to be in the range of 10.4 percent to 10.6 percent, previously, 10.7 percent to 10.9 percent, and diluted earnings per share to be in the range of $1.07 to $1.10, previously, $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 cents due to the extra week in the company’s fourth quarter Fiscal 2024 calendar. Excluding these expected benefits, the company is now expecting the fourth-quarter Fiscal 2024 adjusted pretax profit margin to be in the range of 10.0 percent to 10.2 percent, previously, 10.3 percent to 10.5 percent, and adjusted diluted earnings per share to be in the range of $.97 to $1.00, previously, $1.00 to $1.03. The company’s fourth quarter Fiscal 2024 outlook now includes a negative 0.4 percentage point impact on adjusted pretax profit margin and a negative $.03 impact to diluted earnings per share from the expected reversal of the third quarter Fiscal 2024 benefit from the timing of expenses.

For the fiscal year ending February 3, 2024, the company is now expecting overall comparable store sales to be up 4 percent to 5 percent, previously 3 percent to 4 percent. For the 53-week fiscal year ending February 3, 2024, the company expects the pretax profit margin to be approximately 10.8 percent, previously, 10.7 percent to 10.8 percent and is increasing its outlook for diluted earnings per share to be in the range of $3.71 to $3.74, previously, f $3.66 to $3.72. The company’s full-year guidance includes an expected pretax profit margin benefit of approximately 0.1 percentage point and a 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 expects full-year Fiscal 2024 adjusted pretax profit margin to be approximately 10.7 percent, previously,  10.6 percent to 10.7 percent, and now expects adjusted diluted earnings per share to be in the range of $3.61 to $3.64, previously $3.56 to $3.62.

Photo courtesy TJX Companies