Editor’s note: The company said it was happy with the “plentiful buying opportunities it sees in the marketplace for quality, branded merchandise.”
The TJX Companies, Inc. Reports Above-Plan Q1 FY17 Results with 7% Comp Sales Growth and 10% Increase in Earnings Per Share; Raises Full Year EPS and Comp Guidance
The TJX Companies, Inc. (TJX), the leading off-price retailer of apparel and home fashions in the U.S. and worldwide, today announced sales and earnings results for the first quarter ended April 30, 2016. Net sales for the first quarter of Fiscal 2017 increased 10% to $7.5 billion and consolidated comparable store sales increased 7% over last year’s 5% increase. Net income for the first quarter was $508 million and diluted earnings per share were $.76, a 10% increase over the prior year’s $.69.
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% over 5% growth last year, and earnings per share increased 10%. 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 $40 billion company and beyond!”
Sales by Business Segment
The Company’s comparable store sales and net sales by division, in the first quarter, were as follows:
First Quarter First Quarter
Comparable Store Sales1,2 Net Sales ($ in millions)3,4
FY2017 FY2016 FY2017 FY2016
In the U.S.:
Marmaxx5,6 +6% +3% $4,865 $4,495
HomeGoods +9% +9% $1,010 $880
TJX Canada +14% +11% $686 $620
TJX International (Europe & Australia)7 +4% +3% $981 $870
TJX +7% +5% $7,542 $6,866
1Comparable store sales outside the U.S. calculated on a constant currency basis, which removes the effect of changes in currency exchange rates. 2Comparable store sales exclude Sierra Trading Post, tjmaxx.com, tkmaxx.com and Trade Secret sales. 3Net sales in Canada, Europe and Australia include the impact of foreign currency exchange rates. See below. 4Figures may not foot due to rounding. 5Combination of T.J. Maxx and Marshalls. 6Net sales include Sierra Trading Post. 7FY2017 net sales include Trade Secret.
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%, a 0.2 percentage point decrease compared with the prior year.
Gross profit margin for the first quarter of Fiscal 2017 was 28.8%, up 0.5 percentage points versus the prior year, primarily due to strong buying and occupancy leverage on the 7% 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%, 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% 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% 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%. The Company also expects the combination of foreign currency and transactional foreign exchange will have an additional 2% negative impact on EPS growth. This EPS outlook is based upon estimated consolidated comparable store sales growth of 2% to 3%.
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% to 3% 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% negative impact on EPS growth. This EPS outlook is now based upon a raised estimate of consolidated comparable store sales growth of 2% to 3%.
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.
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% over the same period last year.
About The TJX Companies, Inc.
The TJX Companies, Inc. is the leading off-price retailer of apparel and home fashions in the U.S. and worldwide. As of April 30, 2016, the end of the Company’s first quarter, the Company operated a total of 3,661 stores in nine countries, the United States, Canada, the United Kingdom, Ireland, Germany, Poland, Austria, the Netherlands, and Australia, and three e-commerce sites. These include 1,163 T.J. Maxx, 1,010 Marshalls, 534 HomeGoods and 8 Sierra Trading Post stores, as well as tjmaxx.com and sierratradingpost.com in the United States; 250 Winners, 104 HomeSense, and 45 Marshalls stores in Canada; 471 T.K. Maxx and 41 HomeSense stores, as well as tkmaxx.com, in Europe; and 35 Trade Secret stores in Australia. TJX’s press releases and financial information are also available at tjx.com.
