The TJX Companies, Inc. (TJX) on Q1 2022 Results - Earnings Call Transcript

Operator: Ladies and gentlemen, thank you for standing by. And welcome to The TJX Companies First Quarter Fiscal 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this conference call is being recorded, as of today, May 19, 2021. I would now like to turn the conference call over to Mr. Ernie Herrman, Chief Executive Officer and President of The TJX Companies Incorporated. Please go ahead, sir. Ernie Herrman: Thank you, Ivy. Before we begin, Deb has some opening comments. Deb McConnell: Thank you, Ernie, and good morning. The forward-looking statements we make today about the company’s results and plans are subject to risks and uncertainties that could cause the actual results and the implementation of the company’s plans to vary materially. These risks are discussed in the company’s SEC filings, including without limitation the Form 10-K filed March 31, 2021. Further, these comments and the Q&A that follows are copyrighted today by The TJX Companies, Inc. Any recording, retransmission, reproduction or other use of the same for profit or otherwise without prior consent of TJX is prohibited and a violation of the United States copyright and other laws. Additionally, while we have approved the publishing of a transcript of this call by a third-party, we take no responsibility for inaccuracies that may appear on that transcript. Thank you. And now I’ll turn it back over to Ernie. Ernie Herrman: Good morning. Joining me and Deb on the call is Scott Goldenberg. As we’ve done throughout the pandemic, I’d like to start our call today by saying how truly grateful I am for the hard work and dedication of our global associates and their continued commitment to our health and safety protocols. I want to give special recognition to our store, distribution center and fulfillment center associates who continue to physically come into work. In recognition of their continued efforts, we awarded a vast majority of them an appreciation bonus, which was the fourth appreciation bonus that we have paid during the pandemic. While the health crisis is beginning to improve in some parts of the world, there are many areas that are still facing challenges or have become worse. Our hearts go out to everyone whose lives have been impacted by this virus. We are hopeful that more people around the world will have access to the vaccine in the coming months and that we can move past this health crisis soon. Moving to our business operations, during the first quarter, we were very pleased that our U.S. stores were able to stay open. However, we continue to have a significant number of our stores in Europe and Canada that were temporarily closed at certain times throughout the quarter due to government mandates. Currently, approximately 300 stores remain temporarily closed, all of which are in either Canada or Europe. Around the world, we continue to prioritize the health and well being of our associates and customers and our stores, our distribution centers and our offices. Scott Goldenberg: Thanks, Ernie, and good morning, everyone. I’d like to first echo Ernie’s comments and thank all of our global associates for their hard work and continued commitment to our business. I’ll start today with some additional details on our first quarter results. As Ernie mentioned, overall open only comp stores increased an outstanding 16%. As you described in the press release, our first quarter open only comp store sales compare fiscal 2022 sales to fiscal 2020 sales. In the first quarter, we continued to see a very strong increase in our average basket as consumers put more items into their carts. In the U.S., where we open -- where we were opened the entire quarter, customer traffic compared to fiscal 2020 increased for the first time since the start of the pandemic. At Marmaxx, we saw a significant improvement in customer traffic the fourth quarter and at HomeGoods customer traffic remained outstanding. Overall sales for the first quarter increased 129% over fiscal 2021, as stores were closed for approximately 50% of the first quarter last year. More importantly, when comparing to fiscal 2020, first quarter sales increased a very strong 9%, despite the negative impact of approximately $1.1 billion to $1.2 billion of lost sales due to the temporary closings of our stores across TJX for about 14% of the quarter. These closures were primarily in Europe, which was closed for about 76% of the quarter, including essentially all of February and March, and in Canada, which was closed for approximately 25% of the quarter. Pre-tax margin for the first quarter was 7.2% and merchandise margin was up slightly compared to fiscal 2020. During the quarter, we were very pleased with our strong mark-on and lower markdowns. However, these were mostly offset by significantly higher freight costs, which we expect to persist for the remainder of the year. Moving to the bottomline. First quarter earnings per share were $0.44. As detailed in our press release this morning, we believe the temporary store closures in Europe and Canada during the first quarter resulted in a significant loss of profit dollars, with an estimated negative impact to earnings per share of approximately $0.21 to $0.24. Additionally, I want to remind you that our first quarter pre-tax margin and earnings per share reflect some significant expense headwinds compared to the first quarter of fiscal 2020. These include approximately $200 million of net costs related to COVID, approximately 40 basis points of additional interest expense and incremental costs from freight, supply chain and wage pressures. As for inventory, it was up 3% last year and store levels are where we want them to be. Our buyers are doing a great job sourcing merchandise and have been able to chase the goods we need to satisfy consumer demand. To reiterate, availability of merchandise is excellent. Moving on to our cash flow and liquidity, we ended the quarter in a very strong liquidity position with $8.8 billion in cash. With our strong liquidity, we took several proactive actions to deleverage our balance sheet and reduce our annual interest expense. First in April, we paid down the $750 million note that was due to mature this coming June at par. Secondly, this morning, we announced make-whole calls for our $1.25 billion principal outstanding 3.5% notes maturing in 2025 and our $750 million outstanding 3.75% notes maturing in 2027, both of which were issued last April. As a result of this action, we are expecting a pre-tax debt extinguishment charge of approximately $250 million in the second quarter. We expect the net results of both of these actions to be a $2.7 billion reduction in our outstanding debt and over 900 -- and over $90 million of annualized interest expense savings. Further, after these actions and including the tender refinancing this past November, we expect the average interest rate on our outstanding debt will be about 2.5%, which is in line with our pre-COVID level. Lastly, we declared a dividend of $0.26 per share in the first quarter. In the second quarter of fiscal 2022, we’re planning to declare a dividend at the same rate, subject to Board approval. Now to the second quarter, as a point of reference for the start of the second quarter, overall open only comp store sales trends remain similar to the first quarter. For overall sales we are current -- we currently have approximately 300 stores that are temporarily closed. Based on what we know today, overall, we expect stores to be closed for approximately 3% of the second quarter, which includes Canada being closed for an estimated 17% of the quarter and Europe being closed for about 7% of the quarter. We are planning a $275 million to $325 million negative impact to our overall second quarter sales due to the store closures. These expectations could be negatively impacted further, if current mandates are extended or new ones are put in place as they were last quarter. At this time, we are not planning any significant store closures in the back half of the year. In closing, we feel great about our first quarter results and the momentum of our business. We believe that a growing topline and a strong merchandise margin are excellent indicators of a healthy retailer. Additionally, we have a very strong balance sheet and are in excellent financial position to invest in our business to support our growth plans. Now we’re happy to take your questions. As we do every quarter, we’re going to ask you that you please limit your questions to one per person and one part to each question. We respectfully ask that everyone stick with this request to both keep the call on schedule and so that we can answer questions from as many analysts as we can. Thanks and now we will open it up for questions. Operator: Thank you. Our first question comes from Omar Saad. Your line is open. Omar Saad: Thanks for taking my question. Good morning. Really great quarter. I would love to actually hear more on the traffic side of the equation. We know you guys do a great job once you get people in stores. Can you talk a little bit about the consumer’s willingness to come back to the stores? How that’s been building? Is it vaccine-related? Are you seeing that older customer come in as they get vaccinated and start to return to in-person shopping again? Thanks, Scott. Thanks, Ernie. Ernie Herrman: Yeah. Great question, Omar. Traffic has been very healthy. Scott will give you a little bit of a trend line discussion there, but nothing in terms of -- nothing standing out in terms of a difference in age demographics by the way. But we have such a broad-based age demographics across the business, so probably less likely for us there. But, Scott, on the traffic trend. Scott Goldenberg: Yeah. It’s hard to get real reason on the age. What we’ve been seeing at least over the last couple of quarters is a significant number of the new customers that we’re getting back are… Omar Saad: Yeah. I know… Scott Goldenberg: … skewing even younger… Omar Saad: Yeah. Yeah. Scott Goldenberg: … remarkably at HomeGoods that’s even continuing. So, overall, the average age of the customers in both boxes is likely, when we finish up and get current results, probably, younger than it has been. So that’s really good. The traffic patterns, once we got past some of the weather issues that we called out on our last call have been consistently strong through. We’ll call it the Maple, the Fred , that February, March and continuing right up to, as Ernie talked about, similar sales today. And that’s at both more -- speaking really more Marmaxx and HomeGoods because of all of the closures that we’ve had. So the basket has been remarkably strong… Omar Saad: Okay. Ernie Herrman: Strong average basket, Omar. Scott Goldenberg: And has not really decreased at all, so customers continue to put more units and the traffic continues to be strong and consistently staying that way. Omar Saad: Thanks. Ernie Herrman: Thank you. Operator: Thank you. Our next question comes from Matt Boss. Your line is open. Matt Boss: Great and congrats on the improvement as well. Ernie Herrman: Thank you. Matt Boss: So, it’s kind of a two-part question, probably, more for Scott. I guess, first on merchandise margin. So the improvement this quarter relative to pre-pandemic despite the freight, I thought, was really impressive. I guess, so first, just sustainability or your ability to continue that trend in your opinion? But then second, at the EBIT margin level. So I think three months ago, Scott, you laid it out well, there’s a lot of moving parts. But I think you basically said at a three comp, you see 30 basis points to 40 basis points of underlying margin pressure, but then we needed to consider freight, supply chain and COVID costs this year. So am I thinking about these pieces right and any factors or changes to these factors to think about now that we’re three months later? Ernie Herrman: Yeah. Matt, I think you’re right, a lot of that is for Scott. I will just jump in on the merchandise margin, the healthy merchandise margin. Certainly, what we’re seeing and it -- fortunately, it lines up with our model, and again, I give the teams a lot of credit. We went in with the right amount of liquidity and so the teams did not -- I would say, they were right in the sweet spot of how much and this applies to all the divisions, most especially, obviously, right now, Marmaxx and HomeGoods buying to about the right level of trend. And then when you’re staying on trend like that with what’s going on the buyers have done a great job of being able to buy so opportunistically in the market. So that helped. The sales being so strong has been a big benefit on our markdown rate, also helping our merchandise margin. As I said in my script, it’s coming across, we’re making very advantageous buys across whether it’s the level of good vendors, moderate or best vendors, it’s been everywhere, but in trending categories, which has been key. So we’ve had certain categories that are outpacing the store and the merchants have done a great job of buying into those at the right cost and at the right retail, because, as you know, we’re ultra-sensitive about where we retail are good at, and so, again, I give them a lot of credit. I will tell you, we have a challenge down the road here as we look into probably more like the third quarter, where last year we were up against almost an artificial margin bump up based on what had happened in the country during the COVID shutdown. And so there might be a little bit of a mark-on or markdown jeopardy in a window there of a few months where it’s going to be a little more challenging and I think to show the merchandise margin at these rates. And by the way, I’m talking aside from freight, which has obviously gone up everywhere. I’m talking kind of take that out of the equation. But we might have a little challenge there. However, we’re so opportunistic, I have faith that we can do better than what we’re probably thinking our challenges there. I will now let Scott talk to the margins. Scott Goldenberg: Yeah. I think just to reiterate a little what Ernie said on the merchandise margin in the back half. I mean, I think, if we compare it to -- again as we move, I think, the second quarter trying to make comparisons and we feel good about as Ernie, the overall merchandise margin, especially if you take freight out of the equation compared to two years ago. This third quarter last year where Ernie was comparing to 2021 is really on the mark-on and the markdowns. We also had some technical issues where we had some accruals in which -- and both on markdowns and shrink, which we reversed in the back half of the year, which are not a fiscal 2020 issue, but when comparing to last year or benefits that we saw last year in the back half that we won’t repeat. Ernie Herrman: That’s a good point, Scott. So just to clarify, Matt, what I was talking about on the challenge will be against in FY 2021, not against 2020 as much. Scott Goldenberg: So -- yeah. So the other aspect is in terms of some of the two-year flow-through, it’s hard to isolate, especially when you look at the quarter we’ve just had, when you have -- we have COVID costs, which we’re still roughly in full force and we can talk about that more. But I would expect those to moderate and Ernie can talk about them more as we move through the second quarter and back half of the year. I think what -- at least at the moment is stubborn and we’re still in the middle of assessing like everyone else are freight costs. But probably compared to both last -- what we -- when we talked three months ago and earlier in that, the freight costs are probably going to be stubbornly high at least for the rest of this year. As we’re dealing with the same issues of driver shortages and rate increases likely to be higher than what we had originally thought. So I think that piece of it is still -- is going to be persisting. Having said that, we have been, I think, as Ernie mentioned, we’re doing a great job of getting the goods. Paying more for it, but we’re getting goods. Our inventories are in good shape and the buyer -- and our planning and allocation teams have been allocating those goods and doing a great job as you can see by our sales. On the other hand, the wage costs have been -- there’s been pressure more. It’s still stubborn in the DCs as we’ve had a number of our DCs where we’ve had wage -- increase our wage rates. But on the positive side, both in the stores and the DCs, although, we have pockets of challenges, we’ve been able to hire back to our staffing -- close to our staffing levels we need to staff the store albeit at a deleverage compared to prior year. So, again, the positive is, we adjust as necessary, but we’ve been able to staff the stores and the distribution centers to meet the demand. So it’s hard to compare with the lost sales in Europe and with the COVID costs exactly what those breakpoints would be on sales at this point. Operator: Thank you. Our next question call comes from Paul Lejuez. Your line is open. Paul Lejuez: Hey. Thanks, guys. I want to talk about Marmaxx, specifically. Sales were up about $800 million or like 14.5% versus the first quarter of 2019 or you call it 2020, but margins are down 130 basis points. So I’m just curious, if you can talk specifically within that business, how the deleverage, where that’s coming from and what sort of increases you might need to see versus 2019 for margins to stabilize or is there some point in the year where you see the pressure points abating on that margin? Thanks. Ernie Herrman: Yeah. Scott Goldenberg: Yeah. Again, I can certainly answer to the first quarter. Well, the second quarter goes back to what -- how COVID costs, how we drop, how those decrease, what costs -- we have to see what costs, and Ernie can talk a little about this in terms of how much apparel sales and how that relates to expenses in average retail. So to... Ernie Herrman: But COVID cost is a big reason for the deleverage, as well as others, but… Scott Goldenberg: Yeah. The COVID costs alone to Ernie’s point… Ernie Herrman: Yeah. Scott Goldenberg: … in and of itself was more than the delta of the 130… Ernie Herrman: Right. Scott Goldenberg: … basis points. Ernie Herrman: That’s what I would say. Scott Goldenberg: But I don’t want to be straightforward on that. We obviously would have leveraged and did leverage on those sales. But net-net, those two kind of wash each other and then the rest has to do -- which could get better again in the back half of the year having to do. We -- our average retailers were down, but they did get better as we move through the quarter as our apparel sales started to improve. And also our -- and the rest of the deleverage was just due to our distribution center and wage costs. So the primary difference, I would say, they more or less offset each other was the COVID costs and the leverage, and then we still had the deleverage of wage in the DC expenses. Operator: Thank you. Our next question comes from Kimberly Greenberger. Your line is open. Kimberly Greenberger: Okay. Great. Thank you so much. Scott, I wanted to just talk a little bit about what’s going on at international. When I look at the profit swing here in the first quarter compared to two years ago, it’s about a $250 million negative profit swing from that $28 million operating income two years ago to the $222 million loss here this quarter. And if I -- if there’s a reason to believe that international, once it reopens and sort of gets back to normal in the future, if it goes back to 2000 -- calendar year 2019 profitability. It would suggest that actually operating income in aggregate here in the first quarter would have been up about 10% from two years ago and that’s even with all the COVID cost in there and all the freight inflation and the wages and everything else? So I’m just -- it looks like the weight in the P&L here in Q1, if I look at it from a different angle is really coming from that international piece and sort of everything else kind of came out in the wash and delivered pretty nice profit growth, if we sort of take that out? So to me it looks like you’re probably offsetting a lot of that -- a lot of those cost pressures. Am I correct in that assumption? And as we move through the year and those COVID costs start to come off, does that mean that actually margins could get back to and maybe above where you were sitting in calendar year 2019? Thanks. Scott Goldenberg: Yeah. A lot of hypotheticals there. I think, you were looking at the first quarter, right? Where there was significant -- the two major delevers were the COVID costs and the loss on sales on Europe. Ernie Herrman: Europe and Canada. Scott Goldenberg: Europe and Canada. Yeah. With Europe being the bigger piece of that. So that is correct. As you would expect, you would offset a good chunk of that on the high average comps that we did get. And then, again, but the reason why we still would go down is, you still have higher than normal cost increases both in the wage and… Ernie Herrman: The freight. Scott Goldenberg: And the freight in DC, so... Ernie Herrman: Freight. Yeah. Scott Goldenberg: Not all of that will go away in the back half. So we’re not giving guidance, but I do -- I think as we’ve said before, obviously, we don’t know what the sales level, how high they could be. But you would expect us not, at this point, still to be reaching due to the some level of COVID costs and some of it is deleverage to be -- with the freight to be reaching the percent of 200 and fiscal 2020 or calendar 2019. Ernie Herrman: So, Kimberly, at a high level the way you said that is the way that I’m -- look, you can look at it that way this quarter, though, that if you had had. If we had had Europe and Canada on it, we would have had a lot on the wash, the differences. And Scott mentioned this, we had such an overachievement on the sales that, I mean, you’d have to be counting on a 16 open only comp sales and when the rest of Europe. If we have those type of comp sales, yeah, we’d have a different discussion, where maybe the margin is back to more like those levels. But that you’d have to have these way outpaced comp sales like we just did. Now to your other point though, and Scott mentioned it, we are looking at the COVID cost, it is something we can take a hard look at here in the near future as we move ahead each quarter and as the environment normalizes, we’re going to make some improvements on those lines. So that will help. So, I hope that answered -- hope that answered. We’re -- we do believe there’s sales upside all along. And another plus we have on the cost line is our average retail has been moderating. And Scott, I think, started to allude to this as we go forward even into the back half, we’re looking like it’s going to moderate even more, because we’re seeing some more best brands goods coming in on order as we get to the third quarter, which is going to help our average ticket and that should help our expense on processing come down a little bit. So, a very good question, a lot of moving parts. Kimberly Greenberger: Great color. Thanks. Ernie Herrman: Thank you. Operator: Thank you. Our next question comes from Paul Trussell. Your line is open. Paul Trussell: Good morning. My congrats as well on the improvement. I wanted to dig in a bit more on the topline and maybe you can discuss a bit more of what you’re seeing in terms of category standouts, in particular, is there any sight of the strength in home decelerating? And I would love to hear more about your ability to really stay in stock and to what extent you’re really out needing to case product in the marketplace… Ernie Herrman: Yeah. Paul Trussell: … to keep up with this robust demand? Ernie Herrman: Yeah. No. Great, Paul. So, standout categories, I’ll start with the most obvious one, which is our home business is remarkably consistent, as I said in the script. I mean, you’re looking at 40 comps kind of what we did in the first quarter, and again, that basically was where we were in every division, even in the full family stores in a T.J. Maxx or Marshalls up in Canada, Homesense, so remarkable consistency. And the neat thing there is we have a lot of broad-based consistency throughout our entire loan business. So whether it’s big ticket areas like whether it’s furnitures or rugs or decorative accessories, everything was good. There wasn’t really one category. And this is where I give our teams, planning and allocation and this is not just in the home area. Our buying teams, our planning and allocation teams have been getting the goods fueling it so that the second part of your question was the deceleration in home. We have really not seen it -- I don’t think we’re going to expect it to stay at that almost artificially high level than it did in the first quarter. But I think we have opportunity over the next quarter to stay up in the realm pretty close to that. And we’re not having a problem in the home area of stock -- staying at stock, which was the third part of your question and we’re not actually having a problem where apparel has now started to improve for us. Paul, I think you’re asking what else is standing out. So we have a handful of apparel categories, which I won’t give the specifics on which ones, but they are really kicking in as the quarter went on and going into the second quarter. And the nice thing that often happens is when the weather shifts and apparel kicks in, if there was a trend line prior, usually, our home business takes more of a hit where the consumer moves off of home for a little bit. And yeah, again, our homes is going to continue at 40 comps, but it did not move off hardly at all. And our apparel just kicked in and that’s one reason you’re seeing these outpaced comps from us really at this first quarter. Chasing product, flow of product has been a non-issue. I say, it’s a non-issue because the teams have really executed so well and they’re working so -- and I give logistics credit. I give really everybody involved credit to keep fuel. It’s not easy to keep fueling a 16 comp and that’s why I liked your question when you asked it, because it is an unusual time for us to be running an open only 16 comps. And I just, again, give credit to all The TJX associates that are involved in that. Because they’re making to happen, they have this position going into the second quarter every bit, as well as we were in the first quarter. Hopefully, that answers your question. Paul Trussell: Yes. Well, kudos to the team. Thank you for the color and best of luck. Ernie Herrman: Thank you, Paul. Operator: Thank you. Our next question comes from Ike Boruchow. Your line is open. Ike Boruchow: Hi, everyone. My congrats. Scott, two questions for you on the cost structure and COVID costs. $200 million, I think you said this quarter, which is down from $270 million a quarter, which is what you’re seeing in the back half. What’s your expectation for that over the remainder of the year, I assume that there should be less cost in the model given the reopening and vaccinations, but kind of curious your thoughts there? And then my rough math is that your SG&A per store, if I exclude the COVID cost is actually below where it was two years ago. Are you just -- are there things you’re doing to run the store leaner? Are the costs you’ve taken out, do you think are sustainable once we kind of normalize, just kind of curious how you talk about the cost structure on a per store basis? Scott Goldenberg: Yeah. Great question. In terms of the COVID costs, we would -- right now we’d expect them to be coming down in the second quarter slightly. And -- but I think, as Ernie said, we’re going to evaluate that based on the environment and that we would be expecting them to be coming down substantially in the third quarter and fourth quarter. Ernie Herrman: In third quarter and fourth quarter, and to your point Ike, as the world more normalizes. What we’ve been trying to do is keep associate and customer safety still. I guess, we’ve looked at some of our -- and we’ve talked about this, we have the greeters at the front of our stores, which have -- it’s created a cost, but it’s also created a customer service improvement perception and the safety, which is why we do believe that some of those extra costs have allowed us to play offense to actually drive our sales ironically. And so we are going to ease our way off and not just do a pendulum swing quick move, because we believe it’s been helping our topline. However, we know we need to moderate on that, and we will do it just like Scott said and we’re going to take a hard look especially as you get to the third quarter and fourth quarter. So, hopefully, that -- I just want to give you some color on why we aren’t going to necessarily move off it as fast because it’s been a topline driver. Scott Goldenberg: In terms of your question on SG&A, I’d actually have to get back to you in terms of, we’re up about 4% on a per store basis versus 2020, but it’s -- this quarter, it’s a little difficult to have to segregate that out because you don’t -- you have still have a fair number of expenses in Europe and Canada without the typical type of sales that you might expect and then we had the outside sales in Marmaxx and HomeGoods. So, overall, we were up about 4% versus fiscal 2020. Ike Boruchow: Got it. Thank guys. Operator: Thank you. Our next question comes from Michael Binetti. Your line is open. Michael Binetti: Hey, guys. Thanks for all the detail and taking my question here. I guess, Scott, just a simple question to try and help me boil all this down. Can you help us think what the SG&A dollars are for the year and what you think COVID costs are for the year in the budget? And then with all the noise and you laid out the closures, I think, as we take the inputs you gave us, you probably excluding the closures would have been about $2 billion higher on sales versus first quarter fiscal 2020 and then when we add back your $0.21 to $0.24 that you pointed to, which was, I think, only for the closures, you’d be at about a 9.9% to 10.4% margin in the quarter, compared to the 10.1% in first quarter two years ago? So with that as a starting point, I know you’ve been asked to go through margins in a bunch of different ways. But with that as a starting point from here, it sounds like the incremental puts and takes all get sequentially better going forward except for freight, which you said you now got visibility that it’ll be tough. But as you look at 2Q, 3Q, 4Q, you see the COVID costs coming down, international reopening, some of the AUR tailwinds, some of the mix moving back towards apparel. Am I thinking about that right, that if we kind of reorient to the first quarter last year that way that we should see sequential improvement in the underlying margin going forward through the model? Scott Goldenberg: Again, a lot of this will depend -- I think, again, we’re still evaluating the COVID costs. So not -- again, not giving up the cost save other than we expect them to moderate both in dollars and as a percent sales impact. I think Ernie reiterated on, one, a lot of it is still will depend on the merchandise margin in terms of what the -- what our mark-on and markdown will be and the level of sales. So, again, if we have outsized sales and we’re able to buy better, the real wildcard is freight costs and how high they’re going to be in the back half of the year. But we didn’t say that a lot of the other cost wins are going to be at least for now, the wage and the distribution costs we’re cycling, opening up of both a lot of our facilities and we did a lot -- we opened six 3PLs or just additional, what we’ll call processing space last year that we’re going to go against in the back half and including Lordstown, a HomeGoods distribution center. So I don’t think our distribute -- our supply chain/wage are going to be levering at this point based on what we know and the wildcards really being merchandise margin and freight with COVID going down. So, I think the biggest benefit to us getting better in our overall margins will be how far does COVID get down and what’s our level of sales and if those stay high then we would expect to go to a higher level of pre-tax margin. Operator: Thank you. Our next question comes from Jay Sole. Your line is open. Jay Sole: Great. Thank you so much. Ernie, I think, in one of your answers to the questions, you mentioned something about sales upside, and I think in the press release, you mentioned that you’re seeing consumers begin to resume more normal activities. Can you just talk about whether the strength in the quarter that you’ve seen to date, how much do you think is still a tailwind from stimulus and how much is maybe just reopening consumers really just getting excited about going out and spend other things? And what the implication is for sales upside in Q2 and Q3 as you look out and the potential for sales growth rates remaining, to your point, unusually high? Ernie Herrman: Yeah. Great question. Yeah. So, obviously, when we looked at the first quarter and it’s tough to measure we can’t get at all that data specifically, we do believe the stimulus checks, et cetera, were part of it and clearly a pent-up demand issue, right, from people not having shopped and then we have the -- something we talked about, I think, it was in last call, you do have that revenge shopping aspect that I think comes out where people are passionate and want to get out there and we are entertaining. So, pieces of that, but you have the store closure thing we talked about, which is going on all around us. So we believe that, I would say, a chunk of our has not been just the stimulus and the two are the best of our knowledge and we wouldn’t be entering the second quarter with a similar trend, which is why we specifically when we did the release, we put that last bullet point there, which is, I guess, is a little bit more specific than we normally would on how we start a quarter and why we wanted to say that we are entering it similarly. So you understand that the overall stimulus check thing isn’t the only thing playing and it has to be some of those other issues in our business model store closures. By the way, I do believe our business model now resonates more than it even did pre-COVID. I think consumers, if ever they have even more so now with all the stress of what’s happened in the last year, they appreciate the treasure hunt entertainment, me time as I mentioned in the script, quote-unquote, me time, they, I think our model and the fact that we talked about earlier on the call, we’ve delivered a lot of exciting merchandise, which plays right into this time period. I think that’s the vast majority of why we’re getting the sales. And to point that’s why I think there’s sales upside as we look out. Scott Goldenberg: Yeah. I’d… Ernie Herrman: You know what I mean it’s not just from the different stimulus government packages that have taken place, where we wouldn’t be seeing what seems to be a pretty consistent trend. Scott Goldenberg: But I think it goes back to what Ernie said, just a couple questions ago where, for the third quarter, fourth quarter and first quarter our home sales were disproportionately benefiting us or the biggest piece of helping us out. But the home sales now have continued to be strong and what’s driving it as the apparel sales have gone up from the fourth quarter and as we’ve moved and continued to be strong -- to be a big benefit, as we’ve moved through up until as we speak today. So if that -- so the stimulus, as Ernie said was, is best we can term was more of a March, April factor, it probably waning as best we can determine. But now it has to do with the wardrobe people -- they didn’t buy a lot of apparel last year in the first and second quarter and that’s I think contributing to our strength right now. Ernie Herrman: So Jay to add one other thing in terms of market share gain as I look out here. Through the -- really through the balance of the year is one of the advantages we continue to have in this home business. We learned to even improve on it is the way we learn to some of the merchants, a lot of merchants lunch or work virtually in a very effective manner. And our home division has a, as I mentioned, we have over 500 plus buyers in our home division that have collaborated just beyond even what we did before, as well as we have satellite offices for not just home that are overseas that are now buying more merchandise for us than they did before. So when you -- I feel we can continue to actually now drive and even more eclectic mix of home, which has the advantage that the consumer can buy it that day, if it’s a piece of furniture they can try it and buy it. I mean, think, about all the delivery issues that have taken place or so that’s all an added plus. So, in addition to the apparel thing, Scott, was talking about, as well as some other that are hot categories in the industry, such as the beauty business. We have -- I give that team a lot of credit. We’ve really been doing a nice job. They collaborate strongly across division. And again some of the learnings that have taken place, I think, we’re going to have a slight bit of advantage over what we did pre-COVID and the way we’re able to flex and leverage all the different division’s merchant knowledge. So I know long way, but that’s a whole other piece that is make us feel even better about the future. Scott Goldenberg: Yeah. And one thing we said when we’re generally running well is the both at HomeGoods and Marmaxx, the consistency of the sales regionally, the consistency of the sales based on household income as best we can determine, consistency, in terms of the age of our stores -- our stores whether it’s at HomeGoods and Marmaxx that are over 10 years and depending -- even going up as is all the 20 years and 30 years are doing significant comps. So it’s that broad base sales that we’re doing and then the good news is, at HomeGoods almost all our stores and Marmaxx, the 90%-plus, where our stores are in the suburban, ex-urban and rural areas. That’s where our stores are located and so their strong strength across all of those three areas and the one area that’s not doing as well would be the urban stores, but we just don’t have that many of them. Jay Sole: Got it. Thank you for all the detail. Ernie Herrman: Thank you. Operator: Thank you. And our last question comes from John Kernan. Your line is open. John Kernan: Many congrats on managing through the quarter and congrats on the topline momentum. Scott… Scott Goldenberg: Thank you. John Kernan: … has the guidance for freight and supply chain costs gotten worse since you gave the fourth quarter out -- the outlook in the fourth quarter? I think it was 50 basis points to 60 basis points of pressure off count fiscal 2020 year, has that gotten worse? And then when we think about the leverage point in the model and the COVID costs continue to come out of SG&A. What do you think is the comp leverage point? Is it four to five in the model? How do we think about getting back to that 10.6% operating margin from fiscal 2020? Scott Goldenberg: Yeah. We had -- again, we have two -- we’ve been saying this for the last that more than ever in cover too many puts and takes to get at this point what the breakeven in terms of getting back to the margins. We expect our margins to get better as we move into the back half and we would expect them to get, significantly better next year to be -- we’ll have to see what level our sales get to in the back half and then what, how some of these costs on freight and supply chain and wage pressure to determine what level of margin we’re going to actually settle in at. But other than we expect both the back half, but certainly next year to be going up significantly in our pre-tax margins. In terms of freight. Yes, in terms of just even versus three months ago, we would expect -- we’re not finalized at this point. But we certainly expect freight costs to persist and would be higher than what we would have anticipated three months ago. John Kernan: Got it. So worse than the 60 basis points to 70 basis points of pressure. Scott Goldenberg: We should have given. I don’t remember, giving the basis points, but we would be worse. It would just be worse than what we would have thought. John Kernan: Got it. Thank you. Ernie Herrman: If you look John around the industry, it’s just the freight rates continue to escalate. John Kernan: Understood. Ernie Herrman: Yeah. Okay. I believe that was our last call. I would like to thank you all for joining us today. We’ll be updating you again on our second quarter earnings call in August and from the team here at TJX, we hope you all stay well and we wish you good health. Take care. Operator: Ladies and gentlemen, that concludes your conference call for today. You may all disconnect and thank you for participating.
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TJX Beats on Q1 Results but Stock Slips 2% on Soft EPS Guidance

TJX Companies (NYSE:TJX) delivered better-than-expected first-quarter results, but shares fell over 2% intra-day today as earnings guidance for the current quarter and full year came in below Wall Street estimates.

The off-price retail giant reported Q1 adjusted earnings per share of $0.92, just ahead of the $0.91 consensus. Revenue rose 5% year-over-year to $13.1 billion, beating expectations of $13 billion. Comparable store sales increased 3%, showing continued consumer demand strength.

Despite the solid performance, TJX’s Q2 EPS outlook of $0.97 to $1.00 fell short of analysts’ forecast of $1.04. For the full fiscal year 2026, the company reiterated its prior EPS guidance of $4.34 to $4.43—below the consensus of $4.49.

Looking ahead, TJX expects Q2 comparable sales growth of 2% to 3% and a pretax margin of 10.4% to 10.5%. It maintained its full-year outlook for consolidated comp sales growth in the 2% to 3% range.

The lower-than-expected profit outlook overshadowed otherwise healthy Q1 results, weighing on investor sentiment.

The TJX Companies, Inc. (NYSE:TJX) Stock Update and Financial Outlook

  • John Kernan from TD Securities sets a price target of $142 for NYSE:TJX, indicating a potential increase of 5.24%.
  • Despite a slight expected decrease in earnings per share, TJX anticipates a rise in quarterly revenue to $13.03 billion, up from $12.48 billion a year earlier.
  • TJX's market capitalization stands at approximately $147.28 billion, with a recent trading volume of 2,785,489 shares on the NYSE.

The TJX Companies, Inc. (NYSE:TJX) is a leading off-price retailer of apparel and home fashions, operating stores under various names, including T.J. Maxx, Marshalls, and HomeGoods. Competing with other retail giants like Ross Stores and Burlington, TJX has been a significant player in the retail sector. On May 21, 2025, John Kernan from TD Securities set a price target of $142 for TJX, suggesting a potential increase of 5.24% from its then-current price of $134.93.

TJX is preparing to release its first-quarter earnings results. Analysts expect earnings of 91 cents per share, slightly down from 93 cents per share in the same period last year. Despite this, the company anticipates a rise in quarterly revenue to $13.03 billion, up from $12.48 billion a year earlier. This growth indicates a positive outlook for the company's financial health.

Previously, TJX reported flat fourth-quarter FY25 sales at $16.4 billion, surpassing the analyst consensus estimate of $16.20 billion. This performance demonstrates TJX's ability to meet and exceed market expectations, even in challenging conditions. The company's market capitalization is approximately $147.28 billion, reflecting its significant presence in the retail sector.

On Tuesday, TJX shares experienced a minor decline of 0.1%, closing at $134.93. The current stock price is $131.91, a decrease of 2.24% or $3.02. Today, the stock has traded between a low of $129.99 and a high of $133. Over the past year, TJX has reached a high of $135.85 and a low of $99.22, indicating some volatility in its stock performance.

Today's trading volume for TJX is 2,785,489 shares on the NYSE. This level of activity suggests continued investor interest in the company. As TJX prepares to release its earnings, investors will be keenly watching for any developments that could impact the stock's future performance.

The TJX Companies, Inc. (NYSE: TJX) Stock Analysis: A Look at the Off-Price Retailer's Prospects

  • The consensus price target for NYSE:TJX has increased by 15.6% over the past year, indicating analyst confidence in the company's performance and strategic initiatives.
  • TJX's expansion efforts, both domestically and internationally, are seen as a key driver of growth, aligning with the consumer trend towards off-price retail.
  • Despite a positive outlook, Wells Fargo analyst Ike Boruchow has set a price target of $60 for TJX, as the company prepares to announce its first-quarter earnings with expected earnings of 91 cents per share and revenue of $13 billion.

The TJX Companies, Inc. (NYSE: TJX) is a leading off-price retailer, known for its wide range of apparel and home goods. With a strong presence in the U.S. and international markets, TJX operates popular store brands like T.J. Maxx, Marshalls, and HomeGoods. The company competes with other major retailers such as Ross Stores and Burlington.

Over the past year, analysts have shown increased optimism about TJX's stock, as evidenced by the rise in the consensus price target from $122.82 to $142. This 15.6% increase reflects confidence in the company's performance and strategic initiatives. TJX's strong earnings performance, highlighted by its ability to manage costs and maintain robust sales, likely contributes to this positive sentiment.

The company's expansion efforts, both domestically and internationally, further bolster its growth prospects. With a significant number of stores across various regions, TJX's market presence is robust. This expansion aligns with the growing consumer trend towards off-price retail, as shoppers seek value in uncertain economic times.

Despite the positive outlook, Wells Fargo analyst Ike Boruchow has set a price target of $60 for TJX, reflecting recent forecast changes. This target comes as TJX prepares to announce its first-quarter earnings, with analysts forecasting earnings of 91 cents per share and revenue of $13 billion. While earnings are expected to decline by 2% from the previous year, sales are anticipated to rise by 4%.

The broader market context also plays a role in shaping analyst expectations. The S&P 500 has shown resilience despite a recent U.S. debt downgrade by Moody's. As TJX prepares to release its earnings, investors are closely watching comparable store sales figures amid high interest rates and signs of cooling inflation.

TD Cowen Raises TJX Price Target to $142, Cites Earnings Growth Durability

TD Cowen raised its price target on The TJX Companies (NYSE:TJX) to $142 from $140 while reiterating a Buy rating, citing a favorable buying environment and growing confidence in earnings growth durability.

The firm believes the recent reduction in China tariff rates is a major tailwind for TJX, given its significant vendor exposure to the region. Combined with ongoing supply chain adjustments, the off-price retailer is well-positioned to capitalize on strong inventory availability heading into the second half of fiscal 2025.

Field checks indicate a supportive merchandising environment, particularly for TJX’s MarMaxx division, with potential upside to same-store sales in Q1.

TD Cowen sees shareholder returns increasingly driven by sustainable earnings per share growth rather than multiple expansion, and values the stock at 28x 2027 estimated EPS and 18x EV/EBITDA.

The TJX Companies, Inc. (NYSE:TJX) Quarterly Earnings Insight

  • Wall Street analysts estimate TJX's earnings per share (EPS) to be $0.90, reflecting a 3.2% decline from the previous year.
  • The company's revenue is projected to reach approximately $13 billion, marking a 4% increase from the same quarter last year.
  • TJX has delivered an average earnings surprise of 5.5% over the past four quarters.

The TJX Companies, Inc. (NYSE:TJX) is a leading off-price retailer of apparel and home fashions, operating stores under various names, including T.J. Maxx, Marshalls, and HomeGoods. As a major player in the retail sector, TJX competes with giants like Target, Home Depot, and Lowe's. The company is set to release its quarterly earnings on May 21, 2025.

Despite a projected decline in EPS, TJX's revenue growth indicates strong sales momentum and customer growth, even amid rising wage and payroll expenses. This growth is significant, highlighting the company's resilience and strategic positioning in the competitive retail market.

Investors and analysts are closely monitoring retail earnings reports to gauge U.S. consumer spending habits. TJX, alongside Target, serves as a key indicator of consumer behavior, especially in the context of ongoing discussions about inflation and tariffs. Analysts are particularly interested in the company's pricing strategies in response to potential tariff impacts.

The market's positive sentiment, driven by easing tariff-related tensions and a finalized deal with the UK, may influence TJX's performance and investor reactions. With an average earnings surprise of 5.5% over the past four quarters, TJX's upcoming earnings report could impact short-term stock price movements.

Financially, TJX showcases strong market positioning with a price-to-earnings (P/E) ratio of approximately 31.59, a price-to-sales ratio of about 2.67, and an enterprise value to sales ratio of around 2.81. These metrics indicate investor confidence and the company's market value relative to its sales and revenue. Additionally, a debt-to-equity ratio of approximately 1.52 and a current ratio of about 1.18 highlight TJX's financial leverage and liquidity, respectively.

The TJX Companies, Inc. (NYSE:TJX) Quarterly Earnings Preview

  • Earnings Per Share (EPS) is predicted to be $1.15, aligning closely with the Zacks Consensus Estimate of $1.16, indicating a 3.6% increase year-over-year.
  • The company is expected to report revenue of $16.2 billion, a slight decrease of 1.3% from the previous year, yet fiscal 2025 revenue is anticipated to grow by 3.7% to $56.2 billion.
  • Average Brokerage Recommendation (ABR) stands at 1.26, with 20 out of 23 firms rating TJX as a Strong Buy, showcasing a positive investment outlook.

The TJX Companies, Inc. (NYSE:TJX) is a leading off-price retailer of apparel and home fashions, operating popular stores such as T.J. Maxx, Marshalls, and HomeGoods. Known for offering brand-name merchandise at discounted prices, TJX attracts a broad consumer base and competes with other retailers like Ross Stores and Burlington.

On February 26, 2025, TJX is set to release its quarterly earnings. Analysts predict an earnings per share (EPS) of $1.15 and revenue of $16.2 billion. This aligns closely with the Zacks Consensus Estimate, which anticipates an EPS of $1.16, marking a 3.6% increase from the previous year. However, revenue is expected to decrease by 1.3% year-over-year.

Analysts play a significant role in shaping investor perceptions. TJX holds an average brokerage recommendation (ABR) of 1.26, indicating a strong buy sentiment. Out of 23 firms, 20 rate TJX as a Strong Buy, reflecting a positive outlook. This consensus suggests that TJX is viewed favorably as an investment opportunity.

Despite the projected revenue decline, TJX's fiscal 2025 revenue is expected to grow by 3.7% to $56.2 billion. This growth is supported by the company's strong market presence and diverse product offerings. TJX's ability to capture consumer interest has been a key factor in its success.

Financially, TJX has a price-to-earnings (P/E) ratio of 28.12, indicating how the market values its earnings. The price-to-sales ratio is 2.42, and the enterprise value to sales ratio is 2.56, providing insights into its market valuation. With a debt-to-equity ratio of 1.56, TJX shows moderate financial leverage, while a current ratio of 1.19 indicates its capacity to meet short-term obligations.

The TJX Companies, Inc. (NYSE:TJX) Quarterly Earnings Preview

  • Earnings Per Share (EPS) is predicted to be $1.15, aligning closely with the Zacks Consensus Estimate of $1.16, indicating a 3.6% increase year-over-year.
  • The company is expected to report revenue of $16.2 billion, a slight decrease of 1.3% from the previous year, yet fiscal 2025 revenue is anticipated to grow by 3.7% to $56.2 billion.
  • Average Brokerage Recommendation (ABR) stands at 1.26, with 20 out of 23 firms rating TJX as a Strong Buy, showcasing a positive investment outlook.

The TJX Companies, Inc. (NYSE:TJX) is a leading off-price retailer of apparel and home fashions, operating popular stores such as T.J. Maxx, Marshalls, and HomeGoods. Known for offering brand-name merchandise at discounted prices, TJX attracts a broad consumer base and competes with other retailers like Ross Stores and Burlington.

On February 26, 2025, TJX is set to release its quarterly earnings. Analysts predict an earnings per share (EPS) of $1.15 and revenue of $16.2 billion. This aligns closely with the Zacks Consensus Estimate, which anticipates an EPS of $1.16, marking a 3.6% increase from the previous year. However, revenue is expected to decrease by 1.3% year-over-year.

Analysts play a significant role in shaping investor perceptions. TJX holds an average brokerage recommendation (ABR) of 1.26, indicating a strong buy sentiment. Out of 23 firms, 20 rate TJX as a Strong Buy, reflecting a positive outlook. This consensus suggests that TJX is viewed favorably as an investment opportunity.

Despite the projected revenue decline, TJX's fiscal 2025 revenue is expected to grow by 3.7% to $56.2 billion. This growth is supported by the company's strong market presence and diverse product offerings. TJX's ability to capture consumer interest has been a key factor in its success.

Financially, TJX has a price-to-earnings (P/E) ratio of 28.12, indicating how the market values its earnings. The price-to-sales ratio is 2.42, and the enterprise value to sales ratio is 2.56, providing insights into its market valuation. With a debt-to-equity ratio of 1.56, TJX shows moderate financial leverage, while a current ratio of 1.19 indicates its capacity to meet short-term obligations.