The TJX Cos. Inc., which owns T.J. Maxx, Marshalls and Sierra Trading Post, reported first-quarter earnings rose 7.1 percent to $508.3 million, or 76 cents a share, easily exceeding Wall Street’s consensus estimate of 71 cents. Samecomparable store sales increased 7 percent

Net sales for the first quarter of Fiscal 2017 increased 10 percent to $7.5 billion and consolidated comparable store sales increased 7 percent over last year’s 5 percent increase. Net income for the first quarter was $508 million and diluted earnings per share were 76 cents, a 10 percent increase over the prior year’s 69 cents.

Ernie Herrman, Chief Executive Officer and President of The TJX Companies, Inc., stated, “It is great to start 2016 with such a strong quarter! Our momentum continued with a consolidated comparable store sales increase of 7 percent over 5 percent growth last year, and earnings per share increased 10 percent. We are particularly pleased with our very strong customer traffic, which drove the comp increases at every division. This tells us that our strategies to bring consumers exciting values on an eclectic and ever-changing mix of the right fashions and brands, sourced from across the globe, are working. We are confident that we are growing our customer base and gaining market share. With our excellent first quarter results, we are raising our full year earnings per share and comp sales guidance, and the second quarter is off to a solid start. We see many opportunities in the U.S. and internationally for continued successful growth. We are extremely focused on achieving our goals for 2016 and motivated to surpass them. TJX has an exciting future ahead, and we have a strategic long-term vision to grow to be a $40 billion company and beyond!”

Sales by Business Segment

The company’s comparable store sales and net sales by division, in the first quarter, were as follows:


Impact of Foreign Currency Exchange Rates

Changes in foreign currency exchange rates affect the translation of sales and earnings of the company’s international businesses into U.S. dollars for financial reporting purposes. In addition, ordinary course, inventory-related hedging instruments are marked to market at the end of each quarter. Changes in currency exchange rates can have a material effect on the magnitude of these translations and adjustments when there is significant volatility in currency exchange rates.

The movement in foreign currency exchange rates had a one percentage point negative impact on consolidated net sales growth in the first quarter of Fiscal 2017 versus the prior year. The overall net impact of foreign currency exchange rates had a $.05 negative impact on first quarter Fiscal 2017 earnings per share, compared with a $.03 negative impact last year.

A table detailing the impact of foreign currency on TJX pretax earnings and margins, as well as those of its international businesses, can be found in the Investor Information section of the company’s website, tjx.com.

The foreign currency exchange rate impact to earnings per share does not include the impact currency exchange rates have on various transactions, which we refer to as “transactional foreign exchange.”

Margins

For the first quarter of Fiscal 2017, the company’s consolidated pretax profit margin was 10.9 percent, a 0.2 percentage point decrease compared with the prior year.

Gross profit margin for the first quarter of Fiscal 2017 was 28.8 percent, up 0.5 percentage points versus the prior year, primarily due to strong buying and occupancy leverage on the 7 percent comp growth. This was partially offset by the mark-to-market adjustment on the company’s inventory-related hedges. Merchandise margins remained strong despite the negative impact of transactional foreign exchange at TJX Canada and TJX International.

Selling, general and administrative costs as a percent of sales were 17.7 percent, up 0.7 percentage points versus the prior year’s ratio, primarily due to wage increases and investments to support growth, as the company had anticipated.

Inventory

Total inventories as of April 30, 2016, were $3.9 billion, compared with $3.5 billion at the end of the first quarter last year. Consolidated inventories on a per-store basis as of April 30, 2016, including the distribution centers, but excluding inventory in transit and the company’s e-commerce businesses, were up 7 percent on both a reported and constant currency basis. The company is very comfortable with its inventory position entering the second quarter and the plentiful buying opportunities it sees in the marketplace for quality, branded merchandise.

Shareholder Distributions

During the first quarter, the company repurchased a total of $375 million of TJX stock, retiring 5.0 million shares. The company continues to expect to repurchase approximately $1.5 to $2.0 billion of TJX stock in Fiscal 2017. The company may adjust this amount up or down depending on various factors. Additionally, the company increased its dividend by 24 percent in the first quarter, marking the 20th consecutive year of dividend increases. The company 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 2017 Outlook

For the second quarter of Fiscal 2017, the company expects diluted earnings per share to be in the range of $.77 to $.79 compared to $.80 last year. This guidance reflects an assumption that wage increases will negatively impact EPS growth by 3 percent. The company also expects the combination of foreign currency and transactional foreign exchange will have an additional 2 percent negative impact on EPS growth. This EPS outlook is based upon estimated consolidated comparable store sales growth of 2 percent to 3 percent.

The company is raising its full year guidance to reflect its strong first quarter results. For the fiscal year ending January 28, 2017, the company now expects diluted earnings per share to be in the range of $3.35 to $3.42, which would represent a 1 percent to 3 percent increase over $3.33 in Fiscal 2016. This guidance reflects an assumption that the combination of foreign currency, transactional foreign exchange and wage increases will have a 6 percent negative impact on EPS growth. This EPS outlook is now based upon a raised estimate of consolidated comparable store sales growth of 2 percent to 3 percent.

Previously, it expected earnings in the range of  of $3.29 to $3.38 per share on same-store sales growth of 1 to 2 percent.

The company’s earnings guidance for the second quarter and full year Fiscal 2017 assumes that currency exchange rates will remain unchanged from the levels at the beginning of the second quarter.

Stores by Concept

During the first quarter ended April 30, 2016, the company increased its store count by 47 stores to a total of 3,661 stores. The company increased square footage by 5 percent over the same period last year.