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TJX Companies Earnings: 3 Big Takeaways

By Demitri Kalogeropoulos – Aug 19, 2021 at 2:06PM

Key Points

  • The rebound accelerated over the early summer weeks, especially in the HomeGoods franchise.
  • TJX is expecting a strong end to the year.
  • Management is as bullish as ever on its hopes to achieve $60 billion in annual sales over the long term.

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Here are the main highlights from a strong Q2 earnings report.

People are paying up for apparel these days, even at off-price retailers. TJX Companies (TJX -0.92%), the owner of the T.J. Maxx, Marshalls, and HomeGoods brands, announced surprisingly robust operating results for the second quarter. Management hiked its growth outlook, too, citing "very strong" demand in the first few weeks of the third quarter.

Let's dive right in.

Three people sitting on a bench while holding shopping bags.

Image source: Getty Images.

1. TJX is beating targets

Going into the report, most investors were looking for sales to jump nearly 70% versus a year earlier, when most of TJX Companies' stores were temporarily closed. The actual results were much stronger.

Revenue soared 81% overall, thanks to a 20% increase in comparable-store sales plus the benefit of having almost all locations running at full capacity. Demand for apparel is running strong, but the HomeGoods segment enjoyed even better results as consumers continued to spend aggressively on home furnishings.

"The performance of our home business across all of our divisions continued to be phenomenal," CEO Ernie Herrman said in a press release. Management described the Q2 sales result as being "well above our plans."

2. Higher prices are pushing profitability

The news was even better on earnings. TJX is selling more premium products and relying less on price cuts. And its stores are enjoying higher traffic than they were during the same period in 2019. These positive trends all combined to push profitability higher.

Adjusted operating margin rose as compared to the fiscal first quarter, despite higher costs on things like freight and labor. Segment profit, which describes the operating profit brought in by the retailing stores, jumped to $1.5 billion compared to $89 million a year ago and $1.2 billion in 2019. "Our exciting and eclectic mix of merchandise, great brands and values," Herrman said, "continued to draw customers into our stores around the world."

3. TJX management sets an ambitious long-term target

Management reiterated its bullish long-term outlook that sees the chain eventually reaching as high as $60 billion in annual sales compared to roughly $40 billion before COVID-19. Revenue for the first six months of this year came in just above $22 billion, making it likely the retailer will return to setting annual sales records in 2021.

The precise annual amount will depend a lot on economic conditions and the state of the pandemic during the holiday shopping season in Q4. But in the meantime, TJX is targeting a banner third quarter ahead. Sales are currently up in the mid-teens percentage range through the start of Q3, executives said. That strength is likely driving continued profit margin gains, too. And the availability of off-price merchandise is still excellent, the company said, which should have investors feeling less worried about an inventory glut due to high demand for full-price apparel.

Instead, the retailer is demonstrating once again that its off-price selling model works through a wide range of selling conditions. Shoppers are always looking for values, even as they allocate more cash toward categories like apparel and home furnishings. That fact bodes well for this leading off-price retailer, especially as it emerges from the pandemic in a stronger financial and market share position.

Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends The TJX Companies. The Motley Fool has a disclosure policy.

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