Sticking with the same-store sales theme for the moment, the company reported an increase of 4% across its entire business. There was, however, some variability among the different concepts. Foreign concepts T.K. Maxx (United Kingdom) and Winners and HomeSense (Canada) delivered 10% and 6% respectively, but domestic offering A.J. Wright turned in only 1% same-store sales gains.
Same-store sales alone don't do a good job of describing this quarter's performance. Total sales were up 9% compared to last year, and the company also reported increases in gross margin and pre-tax profit margins. On the balance sheet, the company had an improved cash position and showed continued improvement in the management of inventory and other working capital accounts. This overall combination means the company's operating cash flows were 10% higher than last year's, and with lower capital expenditures this year, free cash flow through the first six months was a positive $24.7 million instead of negative.
The company has also continued its share repurchases, buying back 15.9 million shares so far this year for $381 million (about $23.96 a share). The company expects to repurchase another $269 million this year, for a total of $650 million in the year. Over the past five years, the company's repeated buybacks have reduced its diluted share count by more than 14%.
With all the good news, the company's shares are finally starting to trend toward $30, which I believe is in the ballpark of their true worth. That leaves TJX still undervalued by about 10% to 15%. This isn't bad, but it's a far cry from the past year or so, when the company has at times been undervalued by 30% to 50%. Considering the performance TJX has showed of late and its optimism for the future, I'd be interested in shares on any material dip in price.
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