TJX Companies(TJX 2.51%) reported second quarter fiscal 2026 results on August 20, 2025, with comparable sales up 4% year-over-year, diluted earnings per share (EPS) of $1.10, up 15% year-over-year, and a pretax profit margin of 11.4% -- well above company guidance. Management raised full-year fiscal 2026 sales, margin, and EPS guidance, highlighting strength across all divisions, robust transaction trends, and aggressive global expansion plans. The following analysis details key aspects impacting the long-term investment thesis, including margin resilience under tariffs, global growth runway, and distinct customer value strategy. The fiscal year ends on January 31, 2026.
Pretax profit margin at TJX expands on operational leverage and cost mitigation
Gross margin rose 30 basis points year-over-year, benefiting from favorable hedges, while operating SG&A decreased 30 basis points, aided by both expense timing and underlying efficiency gains. Inventory per store rose 10% year-over-year, reflecting aggressive merchandise purchasing amid strong product availability.
"Second quarter pretax profit margin of 11.4% was up 50 basis points versus last year and well above our plan. Gross margin increased 30 basis points versus last year primarily due to favorable hedges. Merchandise margin was flat despite higher tariff costs versus last year. Importantly, we are very pleased with our mitigation strategies, which allowed us to offset the tariff pressure we saw in the second quarter. SG&A decreased 30 basis points versus last year. This was primarily due to operational efficiencies as well as a benefit from the timing of certain expenses, some of which we expect to reverse out in the third quarter. Net interest income negatively impacted pretax profit margin by 10 basis points versus last year. Second quarter diluted earnings per share of $1.10 increased 15% versus last year and was also well above our expectations. Lastly, we were extremely pleased that our second quarter pretax profit margin came in 90 basis points above the high end of our plan. This was due to a combination of items, including lower than expected tariff costs, expense leverage on above-plan sales, and the timing of certain expenses."
Successful execution of cost controls and flexible sourcing strategies enabled TJX to deliver margin expansion and earnings outperformance despite persistent tariff headwinds and higher incentive costs, underscoring the company's resilient, adaptable business model.
TJX prioritizes international and domestic expansion for long-term growth
All four major operating segments delivered positive comparable sales, with TJX Canada and International reporting 9% and 5% comparable sales increases, respectively, and corresponding segment profit margin gains of 100 and 80 basis points year-over-year on a constant currency basis. Management cited global store expansion, with just over 130 net new stores targeted for fiscal 2026, and a pipeline of 1,800-plus additional potential stores in current countries and Spain.
"Next, we see the long-term potential to open an additional 1,800 plus stores in just our current countries and Spain. We also see great growth potential with our joint venture in and investment in The Middle East. Importantly, I am extremely confident that there will be plenty of quality merchandise available to support our store growth plans. We believe we can keep delivering the best merchandise values and shopping experience to our customers around the world. Lastly and most importantly is the longevity and knowledge of our talent, which I believe is unmatched. Throughout TJX, our management teams have deep decades-long off-price experience in the U.S. and internationally. We take great pride in our TJX University and other teaching and training programs and are laser-focused on succession planning to ensure we develop the next generation of leaders for our company."
The scale of TJX’s store expansion strategy, backed by best-in-class operational expertise and a robust global buying organization, provides a significant runway for sustained sales growth and margin diversity across multiple regions.
TJX maintains price leadership strategy to reinforce customer loyalty and market share gains
Despite widespread industry price increases, TJX continues to use a dynamic, competitive-based pricing model, leveraging broad vendor relationships and merchandise flexibility to preserve its value perception. Customer surveys cited in the call reveal rising consumer value perceptions, and management highlighted the company’s ability to adjust offerings by region and demographic, as well as across age and income groups.
"we kind of use other retailers around us to route the door pricing and our buyers work it backwards. So they look at what the out-the-door pricing is around, and then we say, yes. And by the way, this was part of your question. Are we going to our pricing percentage gap, is that going to change or not? So this is where the art form comes in and the secret sauce. We don't go by an exact percentage because sometimes on a say you have a women's top, for example, that's that that we think the right phenomenal value on that is $19.99. And that top is being sold. That top's retail went up in another store their out-the-door sale price is, you know, $35. And, oh, maybe we could go to 25. We may not go because and this is the art form. Because in our mix, we have possibly have made so many other great buys with all of the availability that's out there. That we have to now that buyer says, I have to compete in my own mix now for the customer."
This flexible, market-driven pricing approach enables TJX to maintain its value proposition and customer loyalty, even as competitors raise prices, supporting continued market share gains.
Looking Ahead
Management raised full-year fiscal 2026 EPS guidance to $4.52-$4.57, up 6%-7% from $4.26 last year, and lifted full-year comparable sales guidance to 3% for fiscal 2026, with consolidated sales expected at $59.3 billion-$59.6 billion. Pretax profit margin is projected at 11.4%-11.5% for fiscal 2026, flat to down 10 basis points year-over-year, and net interest income is expected to delever pretax profit margins by 10 basis points for fiscal 2026. For the third quarter of fiscal 2026, comparable sales are forecast to rise 2%-3%, with pretax profit margin seen at 12%-12.1%, and EPS projected at $1.17-$1.19, representing 3%-4% year-over-year growth. Guidance for fiscal 2026 assumes continued tariff headwinds will be fully mitigated but not reduced, and approximately 130 net new stores will be opened in fiscal 2026.
