TJX earnings get a boost from sales of clothing, accessories and home goods

By Ciara Linnane

Momentum has continued into the current quarter, and the company has raised guidance

TJX Cos.' stock rose 4% Wednesday after the discount retailer and parent to Marmaxx, HomeGoods and TJX International stores swept past estimates for the second quarter and raised its guidance.

The stock (TJX) was on track to close at a record, according to Dow Jones Market Data based on data going back to Jan. 21, 1972, after setting a fresh intraday high of 88.99 earlier in the session.

Framingham, Mass.-based TJX had net income of $989 million, or 85 cents a share, up from $810 million, or 69 cents a share, in the year-earlier period. Sales rose to $12.758 billion from $11.843 billion a year ago, ahead of the $12.450 billion FactSet consensus.

Same-store sales rose 6% to beat the FactSet consensus of 2.9%.

CEO Ernie Herrman said the numbers were ahead of the company's own expectations.

"Our overall apparel and accessories sales were very strong. Overall home sales significantly improved and returned to positive [comparable] sales growth, with HomeGoods posting a 4% comp sales increase. TJX Canada and TJX International also both delivered comp sales-growth and customer-traffic increases," Herman said in a statement.

Momentum has carried into the third quarter "and we are seeing tremendous off-price buying opportunities in the marketplace," he added.

Gross profit margins rose 2.6 percentage points to 30.2% in the quarter due to lower freight costs. The company's pretax margin was 10.4%, above its internal targets.

Inventory fell to $6.6 billion from $7.1 billion in the year-earlier period. The company generated $1.3 billion of operating cash flow and ended the quarter with $4.6 billion in cash.

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By segment, same-store sales rose 8% at Marmaxx. the company's largest division, which comprises Marshalls and T.J. Maxx stores. TJX Canada saw same-store sales rise 1%, while TJX International, which operates stores in Europe and Australia, saw same-store sales rise 3%.

Marmaxx sales rose 9% to $7.903 billion in the quarter, while HomeGoods sales were up 8% at $2.011 billion. TJX Canada's sales fell 2% to $1.223 billion and TJX International sales were up 8% at $1.621 billion.

The company raised its guidance and now expects full-year same-store sales to rise 3% to 4%, while FactSet expects 3% growth. The company expects full-year earnings per share of $3.66 to $3.72, while FactSet expects $3.59.

CFRA analyst Zachary Warring raised his 12-month price target to $85 from $80 but stuck with his hold rating on the stock.

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"TJX continues to execute operationally, maintains a fortress balance sheet, and continues to open new stores; however, we remain neutral due to stretched valuation (shares trading above 23x FY 24 EPS estimates)," he wrote in commentary.

The stock has gained 8% in the year to date, while the S&P 500 SPX has gained 16%.

-Ciara Linnane

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08-16-23 1135ET

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