The TJX Companies Inc. reported sales in the second quarter fell 31.8 percent to $6.67 billion from $9.78 billion a year ago. The net loss came to $214.2 million, or 18 cents a share, against earnings of $759.0 million, or 62 cents, a year ago.

TJX said results were “well above its internal plans” although they missed Wall Street targets. The consensus loss was expected to be 9 cents a share on sales of $6.82 million.

Overall open-only comp-store sales were down 3 percent versus last year. Due to the temporary closing of all its stores as a result of COVID-19, the company’s 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 include stores initially classified as comp stores at the beginning of Fiscal 2021, and 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.

On an open-only comp basis, sales were down 6 percent at Marmaxx (U.S.), rose 20 percent at HomeGoods, were off 18 percent at TJX Canada, and down 1 percent at TJX International (Europe and Australia.)

TJX said its second-quarter results were negatively impacted by the temporary closure of its stores for nearly one-third of the quarter due to the impact of COVID-19. Further, the company’s net loss per share includes tax expense, which was primarily driven by a tax-loss carryback benefit recorded in the first quarter and reversed in the second quarter due to better than expected results.

For the first half of Fiscal 2021, net sales were $11.1 billion. Net loss was $1.1 billion and loss per share was 92 cents. The company’s first-half Fiscal 2021 results were negatively impacted by the temporary closure of its stores for approximately 40 percent of the first half of the year due to COVID-19.

CEO and President Comments
Ernie Herrman, Chief Executive Officer and President of The TJX Companies, Inc., stated, “It was so great to welcome back our Associates and loyal customers around the world this quarter. I am incredibly proud of the monumental effort of our Associates worldwide to reopen more than 4,500 stores in 9 countries, multiple distribution and fulfillment centers, and our e-commerce sites. Across our organization, our Associates worked tirelessly to help us operate safely in the current environment and bring our customers the excellent values we are known for. When we reopened, customer response to our values was beyond what we could have imagined.”

Hermann continued, “For the quarter, we were very pleased that both our top and bottom lines well exceeded our internal plans, despite our stores only being open for a little more than two-thirds of the second quarter, and that our merchandise margin was excellent. Further, we saw especially strong sales at our HomeGoods and Homesense chains, as well as the home departments within our other chains, across geographies. Specifically, HomeGoods delivered double-digit, open-only comp-store sales increases each month of the quarter. As to the future, we are confident that when more customers are comfortable with in-store shopping, we will be in a great position to continue gaining market share as we have for many years. We have been a trusted, value leader for more than 40 years, and we see a long runway of successful growth ahead for TJX.”

Business Update
More than 4,500 of the company’s worldwide stores, and each of its online shopping websites, are now reopened. Globally, the company has put in place practices to help protect the health and well-being of its employees and customers, including social distancing protocols, access to personal protective equipment, enhanced cleaning efforts, and occupancy limits. Further, the company has mandated that shoppers wear face coverings in its stores throughout the U.S. and Canada. In Europe and Australia, the company is following regional governmental face-covering requirements. The company is very pleased with customer feedback it has received related to the new health and safety protocols in its stores.

The company experienced very strong initial sales across all of its retail banners and countries upon reopening, some of which was due to pent-up consumer demand. Following the early wave of stronger than anticipated demand, the company’s traffic and sales moderated as it moved through the second quarter and into the third quarter. The company believes that this was due to a number of COVID-19-related factors, including the impact on consumer behavior and demand, and lighter inventories in its stores than it planned. The company was not able to optimize the inventory flow back to its stores, particularly in Canada, due to supply chain and logistics challenges at both the company and at some of its third-party affiliates as businesses ramped back up. The company has put strategies in place to mitigate some of these inventory delays.

Financial Update
The company ended the second quarter in a strong liquidity position with $6.6 billion of cash. During the second quarter, the company generated $3.4 billion of operating cash flow and paid off the $1.0 billion it drew down from its revolving credit facilities in March 2020. At the beginning of the third quarter, the company also increased its borrowing capacity under revolving credit facilities with a new $500 million facility, making a total of $1.5 billion available to the company. The company is in a strong financial position and will continue to be prudent with its expenses, capital spending, and shareholder distributions due to the current environment. The company does not expect to declare a dividend in the third quarter of Fiscal 2021 and has suspended its share buyback program.

Q2 FY21 Inventory
Total inventories as of August 1, 2020, were $3.7 billion, compared with $5.1 billion at the end of the second quarter last year. The year-over-year decline in balance sheet inventory was due to a combination of factors. These included lower planned store inventory levels in the second quarter primarily to promote social distancing for employees and customers, stronger than expected sales as stores reopened, and supply chain and logistics challenges at the company and some of its third-party affiliates as operations ramped up. Overall product availability in the marketplace remains excellent. The company is currently committed to inventory that is in-line with its sales plans and has significantly increased its buying since the middle of July to support inventory flow. Further, the company is flexing its buying towards the categories that have had the strongest demand upon reopening.

Outlook
For the third quarter, the company is planning overall open-only comp-store sales to decrease in the range of 10 percent to 20 percent. This is in-line with the sales trends it has seen since the middle of July and through August month-to-date. The company’s wide sales plan range reflects the uncertainty of the current environment and the difficulty in forecasting the impact of COVID-19 on consumer behavior, demand and traffic, in addition to the anticipated slower back-to-school selling season. Due to this uncertainty, the company does not believe it is currently able to provide meaningful further guidance and is not providing a financial outlook for Fiscal 2021 at this time.

Photo courtesy TJX Companies