TJX Companies, Inc. reported profits jumped 58.7 percent in the first quarter ended April 29 as same-store sales gained 3 percent. Earnings topped analyst estimates in the quarter and the off-pricer’s EPS guidance was raised for the year.
Highlights of the period include:
- Q1 FY24 pretax profit margin was 10.3 percent, well above the company’s plan;
- Q1 FY24 diluted earnings per share were $.76, well above the company’s plan;
- Q1 FY24 overall comp store sales increased 3 percent, at the high-end of the company’s plan, driven by an increase in customer traffic;
- Q1 FY24 comp store sales at Marmaxx increased 5 percent, driven by very strong sales in apparel and accessories categories;
- Returned $841 million to shareholders in Q1 FY24 through share repurchases and dividends; and
- Increases FY24 pretax profit margin and earnings per share guidance.
Net sales for the first quarter of Fiscal 2024 were $11.8 billion, an increase of 3 percent versus the first quarter of Fiscal 2023. Overall comp store sales increased 3 percent. Net income for the first quarter of Fiscal 2024 was $891 million and diluted earnings per share were 76 cents per share, up 55 percent versus $.49 in the first quarter of Fiscal 2023. First quarter Fiscal 2024 diluted earnings per share were up 12 percent versus last year’s first quarter adjusted diluted earnings per share of $.68, which excluded a $.19 charge related to a write-down of the company’s minority investment in Familia.
Earnings of 76 cents a share exceeded analysts’ consensus estimate of 71 cents. Revenues at $11.8 billion were slightly below with analysts’ consensus estimate of $11.8 billion.
Ernie Herrman, CEO and President of The TJX Companies, Inc., said, “I am very pleased with our first quarter performance. Our pretax profit margin and earnings per share both significantly exceeded our plan and our 3 percent comparable store sales increase was at the high end of our plan. Our comp sales growth was driven by an increase in overall customer traffic and a 5 percent comp sales increase at Marmaxx, our largest division. HomeGoods’ comp sales were down following extraordinary growth during the pandemic. TJX Canada and TJX International both delivered comp sales growth and customer traffic increases. With our above-plan profit performance we are raising our full-year guidance for both pretax profit margin and earnings per share. The strength and flexibility of our off-price business model, depth of our organization’s expertise, and our wide demographic reach all give me great confidence in our ability to continue to succeed in today’s retail environment. Every day, our global organization is focused on bringing customers around the world excellent values on great fashions and great brands and an exciting, treasure-hunt shopping experience. We are pleased that the second quarter is off to a good start and we are seeing phenomenal off-price buying opportunities in the marketplace. We are set up extremely well to continue shipping fresh and compelling merchandise to our stores and online throughout the spring and summer. Going forward, I am confident that we have significant opportunities to grow sales, drive customer traffic, capture market share, and improve the profitability of our company.”
Comparable Store Sales (FY2024 and FY2023) and Open-Only Comparable Store Sales (FY2022)
By concept, same-store sales at Marmaxx (U.S.) grew 5 percent in the latest quarter versus a 3 percent gain in the 2022 first quarter and a 12 percent gain in the 2021 first quarter. Marmaxx includes T.J. Maxx, Marshalls and Sierra stores. Same-store sales at HomeGoods (U.S.) were down 7 percent in the 2023 first quarter against a decline of 7 percent in the 2022 first quarter and a surge of 40 percent in the 2021 first quarter.
Internationally, same-store sales at TJX Canada were up 1 percent in the 2023 first quarter and same-store sales at TJX International (Europe & Australia) were ahead 4 percent in the latest quarter.
For the first quarter of Fiscal 2024, the company’s pretax profit margin was 10.3 percent, well above the company’s plan and above last year’s first quarter pretax profit margin of 7.5 percent. First quarter Fiscal 2024 pretax profit margin was up 0.9 percentage points versus last year’s first quarter adjusted pretax profit margin of 9.4 percent, which excluded a 1.9 percentage point negative impact from a charge related to a write-down of the company’s minority investment in Familia. The company’s above plan pretax profit margin was primarily driven by a larger than expected benefit from freight as well as the timing of some expenses.
Gross profit margin for the first quarter of Fiscal 2024 was 28.9 percent, a 1.0 percentage point increase versus the first quarter of Fiscal 2023. Merchandise margin increased and was driven by a significant benefit from lower freight costs and strong markon from better buying. SG&A costs as a percent of sales for the first quarter of Fiscal 2024 were 19.0 percent, a 0.6 percentage point increase versus the first quarter of Fiscal 2023. Net interest income benefitted first quarter Fiscal 2024 pretax profit margin by 0.5 percentage points versus the prior year.
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. Given the global operations of the company, to facilitate comparability, the company has provided sales growth and inventory on a constant currency basis, which assumes a constant exchange rate between periods for translation based on the rate in effect for the prior period.
The movement in foreign currency exchange rates had a 1.3 percentage point negative impact on the company’s net sales growth in the first quarter of Fiscal 2024 versus the prior year. The overall net impact of foreign currency exchange rates had a neutral impact on first quarter Fiscal 2024 diluted earnings per share.
Total inventories as of April 29, 2023 were $6.4 billion, compared to $7.0 billion at the end of the first quarter of Fiscal 2023. As a reminder, total inventories in the first quarter of Fiscal 2023 were elevated primarily due to a larger in-transit balance as a result of supply chain delays. Consolidated inventories on a per-store basis as of April 29, 2023, including distribution centers, but excluding inventory in transit, the company’s e-commerce sites, and Sierra stores, were down 5 percent on a reported basis (with inventory on a constant-currency basis down 4 percent, which reflects inventory adjusted for the impact of foreign currency exchange rates, as described above). The company noted confidence and is well-positioned to take advantage of the outstanding availability of quality, branded merchandise in the marketplace and flow fresh merchandise to its stores and online throughout the spring and summer.
Cash and Shareholder Distributions
For the first quarter of Fiscal 2024, the company generated $745 million of operating cash flow and ended the quarter with $5.0 billion of cash.
During the first quarter of Fiscal 2024, the company returned $841 million to shareholders. The company repurchased a total of $500 million of TJX stock, retiring 6.5 million shares, and paid $341 million in shareholder dividends during the quarter. The company continues to expect to repurchase approximately $2.0 to $2.5 billion of TJX stock during the fiscal year ending February 3, 2024. The company may adjust this amount up or down depending on various factors. In addition, the company increased its dividend by 13 percent in the first quarter of Fiscal 2024. The company remains committed to returning cash to its shareholders while continuing to invest in the business to support the near- and long-term growth of TJX.
Pension Payout Offer
The company will offer eligible, former TJX Associates who have not yet commenced their pension benefit an opportunity to receive a voluntary lump sum payout of their vested pension plan benefit. As a result, the company anticipates a non-cash settlement charge, which may negatively impact Fiscal 2024 earnings per share by approximately $.01 to $.02. Any actual settlement charge may be higher or lower depending on participation rates and other factors. This potential non-cash settlement charge is expected to be incurred in the third quarter of Fiscal 2024 and would impact the company’s pretax profit margin and earnings per share results. The potential impact of this pension payout offer is not included in the company’s Fiscal 2024 outlook below. The company expects to exclude the impact of this potential charge from the company’s Fiscal 2024 adjusted pretax profit margin and adjusted earnings per share results.
Second Quarter and Full Year Fiscal 2024 Outlook
For the second quarter of Fiscal 2024, the company is planning overall comparable store sales to be up 2 percent to 3 percent. For the second quarter of Fiscal 2024, the company expects pretax profit margin to be in the range of 9.3 percent to 9.5 percent and diluted earnings per share to be in the range of $.72 to $.75.
For the fiscal year ending February 3, 2024, the company continues to plan overall comparable store sales to be up 2 percent to 3 percent. For the 53-week fiscal year ending February 3, 2024, the company is increasing its expectations for pretax profit margin to a range of 10.3 percent to 10.5 percent and diluted earnings per share to be in the range of $3.49 to $3.58. The company’s full-year guidance includes an expected pretax 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 now expects full-year Fiscal 2024 adjusted pretax profit margin to be in the range of 10.2 percent to 10.4 percent and adjusted diluted earnings per share to be in the range of $3.39 to $3.48.
Stores By Concept
During the first quarter ended April 29, 2023, the company increased its store count by 30 stores to a total of 4,865 stores and increased square footage by 0.5 percent versus the prior quarter.
Photo courtesy TJX Companies