The TJX Companies Inc. reported a net loss of $887 million, or 74 cents a share, in the first quarter against earnings of $700.2 million, or 57 cents, a year ago. Sales declined 52.5 percent to $4.4 billion from $9.28 billion a year ago.
TJX said the company’s first-quarter results were negatively impacted by the temporary closure of its stores for approximately half of the quarter due to the COVID-19 pandemic. As a result, the company reported a substantial pre-tax loss versus an original expectation of significant pre-tax income. The vast majority of the variance was a result of lost merchandise margin, corresponding to the lost sales from temporary store closures. The company also had an inventory write-down charge and continued to incur payroll expenses while stores were closed. These costs were mostly offset by significant expense reductions which benefited the company later in the quarter, as well as government credits related to COVID-19.
The company’s first-quarter cash flow was also negatively impacted by the temporary closure of its stores due to the COVID-19 pandemic. This was primarily due to the company paying the vast majority of its merchandise costs, expenses payable, and payroll as planned for the first quarter, despite a substantial loss of sales from store closures. Further, the company had shareholder distributions of approximately $480 million, which included its fourth-quarter dividend payment and first-quarter share buyback prior to suspending the program. The company is confident that it currently has sufficient liquidity for the remainder of the year.
CEO and President Comments
Ernie Herrman, chief executive officer and president of The TJX Companies, Inc., stated, “In these unprecedented times, our hearts are with everyone around the world who has been affected by the COVID-19 pandemic, including our Associates and their families, our customers, and the communities we serve. Throughout our 43-year history, we have navigated through many challenging economic and retail environments, and I am convinced that we will manage through this as well. While the pandemic has resulted in our making difficult decisions, TJX has always been and remains a fundamentally strong company. We have a senior management team with decades of TJX and off-price retail experience, who are fully dedicated to managing through this crisis while ensuring the long-term stability and strength of TJX and returning the company to its path of long-term, successful growth. I want to thank our global Associates who are doing excellent work in the midst of this, and we are all looking forward to the day when our business is fully open again and we can welcome our Associates and customers back worldwide.”
Herrman continued, “As to our sales results, we saw strong trends prior to the impact of COVID-19. For the month of February, we delivered a 5 percent consolidated comp increase driven by customer traffic. All four major divisions had a February comp increase of 5 percent or better. As various states and countries reopen for business, health and safety remain at the forefront of our decision making. We have been pleased to reopen as many stores as we have in May, as well as our e-commerce websites. Although it’s still early and the retail environment remains uncertain, we have been encouraged with the very strong sales we have seen with our initial reopenings. We believe this very strong start speaks to our compelling value proposition and the appeal of our treasure-hunt shopping experience, as well as pent-up demand. It has been great to see, especially for the teams working so hard on the reopening preparations and our Associates welcoming back our customers. We are currently seeing plentiful off-price buying opportunities, which, as we look to the remainder of the year, gives us confidence in having excellent brands and quality merchandise available to us. With our flexible business model and the ability to adapt quickly to changing market conditions and customer preferences, we will be pursuing these buying opportunities. Above all, we are convinced that our mission to deliver great value to consumers every day will continue to be our enduring retail formula today and in the future.”
Beginning May 2, 2020 the company started to reopen stores in select states and countries in accordance with local government guidelines. To date, the company has reopened more than 1,600 of its stores worldwide. Initial sales overall have been above last year’s sales across all states and countries for the over 1,100 stores that have been reopened for at least a week. However, it is still early in the quarter and sales could fluctuate. In the U.S., the company has fully or partially reopened in 25 states. Internationally, TJX Canada began reopening stores in some provinces this week, and stores in Germany, Austria, Poland, the Netherlands, and Australia are fully open. Stores in the U.K. and Ireland remain closed. The company also reopened its four e-commerce websites in the U.S. and U.K. The company expects to continue reopening stores around the world in a phased approach as more states and countries reopen for retail. The company believes that it could be mostly reopened by the end of June based on current government guidance.
Fiscal 2021 Outlook
The company continues to expect its results to be significantly impacted by the ongoing COVID-19 pandemic. Due to the high level of uncertainty around store reopenings, the current retail environment, and future consumer demand, it remains difficult to forecast a financial outlook for the remainder of the year. Therefore, the company is not providing a Fiscal 2021 financial outlook at this time.
Photo courtesy TJX Cos.