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TJX Companies Earnings: Still on Pace for Modest Growth in 2019

By Demitri Kalogeropoulos - Updated Aug 20, 2019 at 10:03AM

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The off-price giant affirmed its outlook despite slower sales gains in the second quarter.

TJX Companies (TJX -2.99%) is still attracting more customers to its stores. The off-price retailing giant this week reported fiscal second-quarter earnings that met management's targets and set it up for another year of modest growth in 2019.

Sales gains slowed for a second consecutive quarter but remained in solidly positive territory as the owner of T.J. Maxx, Marshalls, and Home Goods looks ahead to the key holiday shopping period.

Here's how the latest numbers compared to the prior year:

Metric

Q2 2019

Q2 2018

Growth

Revenue

$9.78 billion

$9.33 billion

5%

Net income

$759 million

$740 million

3%

Earnings per share

$0.62

$0.58

7%

Data source: TJX financial filings.

What happened this quarter?

Sales met management's outlook after having come in ahead of that forecast in each of the last four reports. TJX Companies saw a slight rebound in the Canada market and continued robust gains in Europe and Australia. Its core U.S. segment, on the other hand, struggled against comparisons with a booming prior-year period.

Two women share a secret while shopping.

Image source: Getty Images.

Here are the key highlights of the quarter:

  • Comparable-store sales growth landed at 2% compared to 5% last quarter and 6% at the end of fiscal 2018. The slowdown was mainly driven by softer gains in the U.S. market, which inched up 2%. The international segment grew at a robust 6% pace, and the Canada division rose 1% after holding flat in the prior quarter. Overall, the 2% global comps gain came on top of a 6% spike in the year-ago period.
  • Gross profit margin declined to 28.2% of sales from 28.9% a year ago. The drop was expected and driven by rising supply chain costs.
  • Other expenses fell so that pre-tax profit overall improved and pushed earnings to the high end of management's forecast.
  • Executives spent $300 million on stock buybacks and $200 million on dividends, lifting total direct shareholder returns to $650 million through the first half of 2019.

What management had to say

Executives highlighted the fact that growth was broad based and supported by improving market share. "We were very pleased that customer traffic drove our consolidated comp [gains]," CEO Ernie Herrman said in a press release, "and was up at each of our four major divisions."

Traffic improved for the 20th consecutive quarter in the core U.S. business, management noted. "This speaks to the consistency and fundamental strength of our treasure-hunt shopping experiences through many types of retail and economic environments," Herrman explained.

Looking forward

TJX Companies projected another slowdown in the current quarter, but mainly due to booming results in the year-ago period. Sales are forecast to rise by between 1% and 2% in the core Marshalls and T.J. Maxx franchises compared to a 9% spike last year.

Executives again affirmed a wider 2019 outlook that sees sales rising by between 2% and 3%, which implies a strong end to the year. Management was especially bullish regarding inventory holdings and cash levels. Approaching the critical holiday shopping season, the retailer is "well positioned to take advantage of the plentiful buying opportunities it sees in the marketplace for branded, fashionable merchandise," executives said.

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