TJX Companies raises full-year guidance after strong fourth-quarter sales growth

On Wednesday, TJX Companies, the parent company of discount retailers Marshalls, HomeGoods and TJ Maxx, announced an upward adjustment to its full-year earnings forecast after a strong sales quarter. The new projection is set at $4.09 to $4.13 per share, slightly below LSEG’s previous estimate of $4.14.

For the next quarter, TJX expects its earnings per share to be between $1.06 and $1.08, below the $1.10 analysts expected.

This earnings season has shown that even retailers that missed expected numbers haven’t seen significant declines in their stocks, which suggests investors may be bracing for a volatile second half of the year, potentially impacted by the U.S. presidential election and expected Federal Reserve rate adjustments. Reflecting this sentiment, TJX saw its stock price rise nearly 6% in afternoon trading.

Here’s a breakdown of TJX’s performance in its fiscal second quarter versus Wall Street expectations, as tracked by LSEG:

• Earnings per share reached 96 cents, beating the 92 cents forecast.
• Revenue: Reached $13.47 billion, beating forecast of $13.31 billion.

For the quarter ended Aug. 3, the company reported net income of $1.1 billion, or 96 cents a share, up from $989 million, or 85 cents a share, a year earlier. Revenue rose to $13.47 billion from $12.76 billion a year earlier.

TJX has demonstrated a solid sales trajectory and a promising outlook for fiscal 2024, which ended in February. However, the focus remains on the ability to maintain this momentum in subsequent quarters.

Expanding its global presence, TJX has announced a significant move by acquiring a 35% stake in Dubai-based retailer Brands for Less for $360 million. The partnership aims to strengthen TJX’s presence in the region where Brands for Less is a leading off-price retailer operating over 100 stores and an online platform primarily in the UAE and Saudi Arabia.

TJX said, “This acquisition marks a strategic step toward increasing our global presence by investing in an established retailer with significant growth prospects.”

Despite some challenges in Europe, particularly the UK, CEO Ernie Herrman acknowledged some execution shortcomings but remains optimistic about the company’s trajectory.

During the quarter, consolidated comparable store sales increased 4%, driven entirely by an increase in customer transactions. This growth was primarily driven by its Marmaxx division, which includes TJ Maxx, Marshalls and Sierra stores, where comparable sales increased 5%.

TJX CFO John Klinger credited the success to operational efficiency and reduced transportation costs, despite high supply chain costs.

Looking ahead, Herrman expressed confidence in the company’s strong start to the current quarter, supported by promising buying opportunities and the ability to deliver fresh, attractive merchandise throughout the fall and holiday season. The quarter was marked by the opening of TJX’s 5,000th store, marking a milestone in its expansion efforts.

As of Tuesday’s market close, TJX shares were up about 21% year-to-date, hitting a new high in May after solid quarterly earnings reports.

TJX continues to gain market share from competitors like Target and Macy’s by appealing to cost-conscious consumers who prioritize value and want new apparel.

Herrman also highlighted the particular appeal of TJX stores to the younger generation of Gen Z, who are drawn to the retailer’s combination of quality and affordability.

Analysts suggest that TJX’s business model allows the company to thrive in a variety of economic conditions, attracting a broad customer base that includes both low- and middle-income consumers during good times and higher-income shoppers looking for deals during bad economic times.

In summary, as TJX faces a potentially challenging retail landscape, it maintains a stable pricing strategy and solid market position, suggesting resilience despite broader economic pressures.