Following sluggish third-quarter results, TJX Companies (TJX 0.76%) hinted at a sales growth rebound over the holiday season. The off-price apparel and home goods retailer delivered on that goal in its recently announced fourth-quarter earnings results.
Let's take a look at how the headline numbers compared to the prior-year period:
|
Metric |
Q4 2017 |
Q4 2016 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$10.96 billion |
$9.47 billion |
16% |
|
Net income |
$877 million |
$678 million |
25% |
|
Earnings per share |
$1.37 |
$1.03 |
33% |
Data source: TJX financial filings.
What happened this quarter?
Sales growth bounced back to a healthy pace following a flat result in the third quarter. Meanwhile, profitability declined slightly during the ultra-competitive holiday shopping season.
Image source: Getty Images.
Here are the key highlights of the quarter:
- Comparable-store sales rose across each of the company's four segments, with the metric at its core brands of Marshall's and TJ Maxx rising 3%. Overall, comps improved 4% to mark a big improvement from the prior quarter's flat result. That left full-year comps up 2% compared to a 5% increase in fiscal 2016.
- Gross profit margin worsened slightly, dipping to 27.9% from 28.3% a year ago.
- Expenses fell as a percentage of sales, and so adjusted operating profit margin held steady at 11%.
- The retailer booked a significant one-time gain from tax law changes while projecting ongoing benefits to profits and cash flow. In response, management announced plans to boost investments in its employees through bonuses, higher wages, and enhanced benefits including paid parental leave and increased retirement contributions.
What management had to say
Executives credited robust demand for delivering higher sales and profits than the management team had projected. "Customer traffic was up overall," CEO Ernie Herrman said in the company's press release, "as customers responded to our great brands and compelling, eclectic mix of merchandise at excellent values."
He continued, "We are also pleased with our full-year performance as we surpassed $35 billion in annual sales, an important milestone for our company." The 2% comps improvement marked the 22nd straight year of positive comps for the retailer, Herrman added.
Executives announced a 25% boost to the dividend and an aggressive stock repurchase plan that they said "underscores our confidence in our ability to continue delivering strong, profitable sales and cash flow." The $0.39/share quarterly dividend has a yield of roughly 2% at the stock's Feb. 27 closing price. The company plans to repurchase $2.5 billion to $3 billion of stock during the current fiscal year.
Looking forward
Looking out across the retailing landscape today, Herrman and his team said they see "abundant opportunities" to acquire brand-name merchandise at attractive prices as the industry continues to consolidate. That optimism formed the basis for the retailer's forecast of comps gains that are roughly equal to this past year's result.
Profits, after adjusting for tax law changes, should rise by between 4% and 6%. Given those healthy top- and bottom-line trends, investors can expect the company to keep expanding its store footprint after it added 258 stores, or approximately 4%, to its base over the past 12 months.
