The TJX Companies Inc. reported earnings grew slightly and easily topped Wall Street’s consensus estimate. Overall open-only comp-store sales were down 5 percent versus last year.
Net sales for the third quarter of Fiscal 2021 were $10.1 billion, down from $10.45 billion. Wall Street’s consensus estimate had been $9.38 billion.
Net income for the third quarter was $867 million, or 71 cents a share, against $828 million, or 68 cents, in the prior year. Wall Street’s consensus estimate had been 40 cents. The company’s lower tax rate in the third quarter of Fiscal 2021 resulted in an increase in earnings per share of approximately 9 cents compared to the prior year. The lower tax rate was primarily due to a true-up of the company’s year-to-date tax rate as well as the shifting of income and loss positions across the company’s operating jurisdictions.
For the first nine months of Fiscal 2021, net sales were $21.2 billion. Net loss was $235 million and loss per share was 20 cents. The company’s results for the first nine months of Fiscal 2021 were negatively impacted by the temporary closure of its stores for approximately 27 percent of the first nine months of the year due to COVID-19.
CEO and President Comments
Ernie Herrman, chief executive officer and president of The TJX Companies, Inc., stated, “Our third quarter results significantly exceeded our plans on both the top and bottom lines as consumers were drawn to our compelling brands and values. This is such a great testament to our global Associates. I am particularly proud of their dedication to our health and safety protocols for Associates and customers, and grateful to our store, distribution and fulfillment center Associates who are physically coming into work to keep our business open. All of our divisions drove sales above our plans, and our home, beauty, and activewear businesses outperformed at Marmaxx, TJX Canada, and TJX International. At HomeGoods, we delivered another quarter of double-digit open-only comp store sales growth. To both leverage our strength in the home category and capitalize on our market share growth opportunities, we are pleased to share that we plan to rollout e-commerce on HomeGoods.com later next year. As we begin the fourth quarter, while significant uncertainty around COVID-19 remains, we are as focused as ever on bringing consumers exciting gift selections at excellent values. We plan to ship fresh assortments to our stores and online throughout the holiday selling season. Longer term, when we are past this health crisis, we are very confident that we will continue to gain more customers and drive the successful growth of TJX well into the future.”
For the third quarter of Fiscal 2021, the company’s consolidated pretax profit margin was 10.0 percent, a 0.7 percentage point decrease versus the prior year’s 10.7 percent. The company’s very strong merchandise margin increase was more than offset by significant operating costs related to COVID-19 and expense deleverage on the year-over-year sales decline.
Cash and Dividend Update
During the third quarter, the company generated $4.1 billion of operating cash flow and ended the quarter with $10.6 billion of cash. With the company’s strong liquidity position, TJX announced today that it expects to reinstate a quarterly dividend in the fourth quarter of Fiscal 2021, subject to the approval of the company’s Board of Directors. The company expects a quarterly dividend on its common stock of $.26 per share to be declared in December 2020 and payable in March 2021. This would represent a 13 percent increase in the per share dividend compared to the company’s previous dividend paid in March of 2020.
Temporary Store Closings
The company currently has approximately 470 stores that are temporarily closed due to local government mandates in response to COVID-19. The vast majority of these stores are located in Europe. The company’s tjmaxx.com e-commerce business in the UK remains open.
Open-Only Comp Store Sales
Due to the temporary closing of stores as a result of COVID-19, the company’s historical definition of comp store sales is not applicable this quarter. In order to provide a performance indicator for its stores as they reopen, the company is temporarily reporting a new sales measure: open-only comp store sales. Open-only comp store sales includes stores initially classified as comp stores at the beginning of Fiscal 2021 that have had to temporarily close due to COVID-19. This measure reports the sales increase or decrease of these stores for the days the stores were open in the current period against sales for the same days in the prior year.
Sales By Business Segment
By concept, sales at Marmaxx (U.S.) were down 10 percent. The segment includes T.J. Maxx, Marshalls and Sierra Trading. Sales of HomeGoods (U.S.) were up 15.0 percent, TJX Canada was down 7 percent and TJX International (Europe & Australia) was off 6 percent.
Open-only comp store sales includes stores initially classified as comp stores at the beginning of Fiscal 2021 that have had to temporarily close due to COVID-19. This measure reports the sales increase or decrease of these stores for the days the stores were open in the current period against sales for the same days in the prior year.
Q3 FY21 Inventory
Total inventories as of October 31, 2020, were $5.0 billion, compared with $6.3 billion at the end of the third quarter last year. The year-over-year decline in balance sheet inventory was due to a combination of factors, including lower planned store inventory levels, stronger than expected third quarter sales, and merchandise delivery delays due to continued bottlenecks in the supply chain. Overall product availability in the marketplace remains excellent and the company continues to shift its buying towards the categories that have had the strongest demand since reopening. The company is well positioned to ship a fresh assortment of gifts to its stores and online throughout the holiday season.
For the first two weeks of the fourth quarter, overall open-only comp store sales were down 7 percent, similar to the trend the company saw during the last week of October. Due to the increasing uncertainty of the current environment and the difficulty in forecasting the impact of COVID-19 on temporary store closures and consumer behavior, demand and traffic, the company is not providing guidance at this time.
Photo courtesy TJX Companies