The TJX Companies, Inc. Reports Q1 FY18 Results
Tuesday, May 16, 2017 8:35:00 AM ET --Consolidated comp store sales increased 1% over last year’s 7% increase
--Diluted EPS of $.82 compared with $.76 in the prior year
--Diluted EPS $.04 above high-end of Company’s plan primarily due to a benefit from an accounting change in share-based compensation as well as a benefit from foreign currency, which were both higher than expected
--Company maintains full year Fiscal 2018 outlook
--Returned $519 million to shareholders in the first quarter through share repurchases and dividends
The TJX Companies, Inc. (TJX ), the leading off-price retailer of
apparel and home fashions in the U.S. and worldwide, today announced
sales and earnings results for the first quarter ended April 29, 2017.
Net sales for the first quarter of Fiscal 2018 increased 3% to $7.8
billion and consolidated comparable store sales increased 1% over last
year’s 7% increase. Net income for the first quarter was $536 million
and diluted earnings per share were $.82 versus the prior year’s $.76.
Ernie Herrman, Chief Executive Officer and President of The TJX
Companies, Inc., stated, "For the first quarter, consolidated comparable
store sales were up 1% over last year’s strong 7% increase and at the
high end of our plan. Earnings per share were $.82 and above our plan.
Comp store sales growth was once again driven by customer traffic. We
achieved these results despite the unfavorable weather in parts of the
U.S. and Canada compared to last year. We were pleased to see sales
trends pick up as the quarter progressed. With our disciplined inventory
management, our merchandise margin was up, which speaks to the
resiliency and flexibility of our off-price retail model. Further, we
are confident that we are gaining market share at each of our four major
divisions. The second quarter is off to a solid start and we have
excellent liquidity in our inventories. This positions us extremely well
to capitalize on the plentiful buying opportunities we see for exciting
fashions and brands in the marketplace and bring them to consumers at
amazing values. As always, we will strive to surpass our goals and we
have great confidence in the continued, successful growth of TJX!"
Sales by Business Segment
The Company’s comparable store sales and net sales by division, in the
first quarter, were as follows:
First Quarter First Quarter
Comparable Store Sales(1,2) Net Sales ($ in millions)(3,4)
-------------------------------------------------------------------------------------------------------- -------------------- ------------------------------------------------------------------------------------
FY2018 FY2017 FY2018 FY2017
-------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
-------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Marmaxx(5,6) 0% +6% $4,967 $4,865
-------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
HomeGoods +3% +9% $1,121 $1,010
-------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
TJX Canada +3% +14% $739 $686
-------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
TJX International (Europe & Australia) 0% +4% $957 $981
-------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
-------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
TJX +1% +7% $7,784 $7,542
-------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
(1)Comparable store sales outside the U.S. calculated on a
constant currency basis, which removes the effect of changes in currency
exchange rates. (2)Comparable store sales exclude Sierra
Trading Post, tjmaxx.com and tkmaxx.com. (3)Net sales in TJX
Canada and TJX International include the impact of foreign currency
exchange rates. See below. (4)Figures may not foot due to
rounding. (5)Combination of T.J. Maxx and Marshalls.(6)Net
sales include Sierra Trading Post.
Impact of Foreign Currency Exchange Rates
Changes in foreign currency exchange rates affect the translation of
sales and earnings of the Company’s international businesses into U.S.
dollars for financial reporting purposes. In addition, ordinary course,
inventory-related hedging instruments are marked to market at the end of
each quarter. Changes in currency exchange rates can have a material
effect on the magnitude of these translations and adjustments when there
is significant volatility in currency exchange rates.
The movement in foreign currency exchange rates had a two percentage
point negative impact on consolidated net sales growth in the first
quarter of Fiscal 2018 versus the prior year. The overall net impact of
foreign currency exchange rates had a $.01 positive impact on first
quarter Fiscal 2018 earnings per share, compared with a $.05 negative
impact last year.
A table detailing the impact of foreign currency on TJX pretax earnings
and margins, as well as those of its international businesses, can be
found in the Investors section of tjx.com.
The foreign currency exchange rate impact to earnings per share does not
include the impact currency exchange rates have on various transactions,
which we refer to as "transactional foreign exchange."
Margins
For the first quarter of Fiscal 2018, the Company’s consolidated pretax
profit margin was 10.7%, a 0.2 percentage point decrease compared with
the prior year.
Gross profit margin for the first quarter of Fiscal 2018 was 29.0%, up
0.2 percentage points versus the prior year. This was primarily due to
gains related to the Company’s inventory hedges and a strong merchandise
margin, partially offset by higher supply chain costs and expense
deleverage on the 1% consolidated comparable store sales increase.
Selling, general and administrative costs as a percent of sales were
18.1%, up 0.4 percentage points versus the prior year’s ratio, primarily
due to wage increases, as the Company had anticipated.
Inventory
Total inventories as of April 29, 2017, were $3.7 billion, compared with
$3.9 billion at the end of the first quarter last year. Consolidated
inventories on a per-store basis as of April 29, 2017, including the
distribution centers, but excluding inventory in transit and the
Company’s e-commerce businesses, were down 9% on a reported basis (down
7% on a constant currency basis) versus a 7% increase on both a reported
and constant currency basis last year. The Company is in an excellent
inventory position entering the second quarter and has plenty of
liquidity to take advantage of the terrific buying opportunities it sees
in the marketplace for quality, branded merchandise.
Shareholder Distributions
During the first quarter, the Company repurchased a total of $350
million of TJX stock, retiring 4.5 million shares. The Company continues
to expect to repurchase approximately $1.3 to $1.8 billion of TJX stock
in Fiscal 2018. The Company may adjust this amount up or down depending
on various factors. Additionally, the Company increased its dividend by
20% in the first quarter, marking the 21st consecutive year
of dividend increases. The Company remains committed to returning cash
to its shareholders while reinvesting in the business to support the
near- and long-term growth of TJX.
Second Quarter and Full Year Fiscal 2018 Outlook
For the second quarter of Fiscal 2018, the Company expects diluted
earnings per share to be in the range of $.81 to $.83 compared to $.84
last year. This guidance reflects an assumption that the combination of
foreign currency and transactional foreign exchange will negatively
impact EPS growth by 4% and that wage increases will negatively impact
EPS growth by an additional 2%. The Company also expects the change in
accounting rules for share-based compensation will positively impact EPS
growth by 1%. This EPS outlook is based upon estimated consolidated
comparable store sales growth of 1% to 2%.
For the 53-week fiscal year ending February 3, 2018, the Company now
expects diluted earnings per share in the range of $3.82 to $3.89. This
represents a 10% to 12% increase over the prior year’s $3.46. The
Company’s full-year guidance includes an expected benefit of
approximately $.11 per share from the 53rd week in the
Company’s Fiscal 2018 calendar. Excluding this benefit, the Company
expects adjusted diluted earnings per share to be in the range of $3.71
to $3.78. This would represent a 5% to 7% increase over the prior year’s
adjusted $3.53, which excludes the combined $.07 impact of last year’s
debt extinguishment charge and pension settlement charge from GAAP EPS
of $3.46. This guidance reflects an assumption that wage increases will
negatively impact EPS growth by 2% and that the combination of foreign
currency and transactional foreign exchange will negatively impact EPS
growth by 1%. The Company also anticipates that the change in accounting
rules for share-based compensation will positively impact EPS growth by
2%. This EPS outlook is based upon estimated consolidated comparable
store sales growth of 1% to 2%.
The Company’s earnings guidance for the second quarter and full year
Fiscal 2018 assumes that currency exchange rates will remain unchanged
from the levels at the beginning of the second quarter.
Stores by Concept
During the first quarter ended April 29, 2017, the Company increased its
store count by 50 stores to a total of 3,862 stores. The Company
increased square footage by 4% over the same period last year.
Store Locations* Gross Square Feet**
First Quarter First Quarter
(in millions)
-------------------------------------------------------------------------------------------------------- -------------------- ------------------------------------------------------------------------------------
Beginning End Beginning End
--------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
In the U.S.:
--------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
T.J. Maxx 1,186 1,191 33.5 33.6
--------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Marshalls 1,035 1,039 31.0 30.9
--------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
HomeGoods 579 596 14.2 14.5
--------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Sierra Trading Post 12 12 0.3 0.3
--------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
In Canada:
--------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Winners 255 258 7.2 7.2
--------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
HomeSense 106 109 2.5 2.6
--------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Marshalls 57 61 1.7 1.8
--------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
In Europe:
--------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
T.K. Maxx 503 515 15.0 15.3
--------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
HomeSense 44 46 0.9 0.9
--------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
In Australia:
--------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
T.K. Maxx 35 35 0.8 0.8
--------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
--------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
TJX 3,812 3,862 106.9 107.8
--------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
*Store counts above include both banners within a combo or a superstore. **Square
feet figures may not foot due to rounding.
About The TJX Companies, Inc.
The TJX Companies, Inc. is the leading off-price retailer of apparel and
home fashions in the U.S. and worldwide. As of April 29, 2017, the end
of the Company’s first quarter, the Company operated a total of 3,862
stores in nine countries, the United States, Canada, the United Kingdom,
Ireland, Germany, Poland, Austria, the Netherlands, and Australia, and
three e-commerce sites. These include 1,191 T.J. Maxx, 1,039 Marshalls,
596 HomeGoods and 12 Sierra Trading Post stores, as well as tjmaxx.com
and sierratradingpost.com
in the United States; 258 Winners, 109 HomeSense, and 61 Marshalls
stores in Canada; 515 T.K. Maxx and 46 HomeSense stores, as well as tkmaxx.com,
in Europe; and 35 T.K. Maxx stores in Australia. TJX’s press releases
and financial information are also available at tjx.com.
Fiscal 2018 First Quarter Earnings Conference
Call
At 11:00 a.m. ET today, Ernie Herrman, Chief Executive Officer and
President of TJX, will hold a conference call with stock analysts to
discuss the Company’s first quarter Fiscal 2018 results, operations and
business trends. A real-time webcast of the call will be available to
the public at tjx.com. A replay of the
call will also be available by dialing (866) 367-5577 through Tuesday,
May 23, 2017, or at tjx.com.
Non-GAAP Financial Information
The Company has used non-GAAP financial measures in this press release.
Adjusted financial measures refer to financial information adjusted to
exclude from financial measures prepared in accordance with accounting
principles generally accepted in the United States (GAAP) items
identified in this press release. The Company believes that the
presentation of adjusted financial results provides additional
information on comparisons between periods including underlying trends
of its business by excluding certain items that affect overall
comparability. Non-GAAP financial measures should be considered in
addition to, and not as an alternative for, the Company’s reported
results prepared in accordance with GAAP.
Important Information at Website
Archived versions of the Company’s conference calls are available in the
Investors section of tjx.com after they
are no longer available by telephone as are reconciliations of non-GAAP
financial measures to GAAP financial measures and other financial
information. The Company routinely posts information that may be
important to investors in the Investors section at tjx.com.
The Company encourages investors to consult that section of its website
regularly.
Forward-looking Statement
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995: Various statements made in this release are forward-looking and
involve a number of risks and uncertainties. All statements that address
activities, events or developments that we intend, expect or believe may
occur in the future are forward-looking statements. The following are
some of the factors that could cause actual results to differ materially
from the forward-looking statements: execution of buying strategy and
inventory management; operational and business expansion and management
of large size and scale; customer trends and preferences; various
marketing efforts; competition; personnel recruitment, training and
retention; labor costs and workforce challenges; data security;
information systems and new technology; economic conditions and consumer
spending; adverse or unseasonable weather; serious disruptions or
catastrophic events; disruptions in the second half of the fiscal year;
corporate and retail banner reputation; quality, safety and other issues
with merchandise; expanding international operations; merchandise
importing; commodity availability and pricing; fluctuations in currency
exchange rates; fluctuations in quarterly operating results and market
expectations; mergers, acquisitions, or business investments and
divestitures, closings or business consolidations; compliance with laws,
regulations and orders and changes in laws, regulations and applicable
accounting standards; outcomes of litigation, legal proceedings and
other legal or regulatory matters; tax matters; real estate activities;
cash flow and other factors that may be described in our filings with
the Securities and Exchange Commission. We do not undertake to publicly
update or revise our forward-looking statements even if experience or
future changes make it clear that any projected results expressed or
implied in such statements will not be realized.
The TJX Companies, Inc. and Consolidated Subsidiaries
Financial Summary
(Unaudited)
(In Thousands Except Per Share Amounts)
13 Weeks Ended
----------------------------------------------------------------------------------------------------------
April 29, April 30,
2017 2016
------------------------------ ------------------------------
Net sales $ 7,784,024 $ 7,542,356
-------------------- ---------- -------------------- ----------
Cost of sales, including buying and occupancy costs 5,530,072 5,372,143
Selling, general and administrative expenses 1,411,603 1,335,050
Interest expense, net 9,841 10,194
-------------------- ---------- -------------------- ----------
Income before provision for income taxes 832,508 824,969
Provision for income taxes 296,229 316,623
-------------------- ---------- -------------------- ----------
Net income $ 536,279 $ 508,346
==================== ========== ==================== ==========
Diluted earnings per share $ 0.82 $ 0.76
Cash dividends declared per share $ 0.3125 $ 0.26
Weighted average common shares - diluted 654,799 670,388
The TJX Companies, Inc. and Consolidated Subsidiaries
Condensed Balance Sheets
(Unaudited)
(In Millions)
April 29, April 30,
2017 2016
---------------------------- ----------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,669.5 $ 1,944.2
Short-term investments 457.1 403.7
Accounts receivable and other current assets 685.8 624.8
Merchandise inventories 3,736.1 3,905.0
-------------------- -------- -------------------- --------------------
Total current assets 7,548.5 6,877.7
-------------------- -------- -------------------- --------------------
Property, net of depreciation 4,601.0 4,229.7
Goodwill 195.6 196.5
Other assets and tradename, net of amortization 418.4 400.8
-------------------- -------- -------------------- --------------------
TOTAL ASSETS $ 12,763.5 $ 11,704.7
==================== ======== ==================== ====================
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 2,174.7 $ 2,136.7
Accrued expenses and other current liabilities 2,430.7 2,160.0
-------------------- -------- -------------------- --------------------
Total current liabilities 4,605.4 4,296.7
-------------------- -------- -------------------- --------------------
Other long-term liabilities 1,071.5 908.5
Non-current deferred income taxes, net 304.7 349.0
Long-term debt 2,228.4 1,615.5
Shareholders’ equity 4,553.5 4,535.0
-------------------- -------- -------------------- --------------------
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 12,763.5 $ 11,704.7
==================== ======== ==================== ====================
The TJX Companies, Inc. and Consolidated Subsidiaries
Condensed Statements of Cash Flows
(Unaudited)
(In Millions)
13 Weeks Ended
----------------------------------------------------------------------------------------------------------------------------------------------
April 29, April 30,
2017 2016
----------------------------------------------- -----------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 536.3 $ 508.3
Depreciation and amortization 172.5 157.0
Deferred income tax provision 8.2 16.1
Share-based compensation 24.1 25.0
(Increase) in accounts receivable and other assets (38.9 ) (9.3 )
(Increase) in merchandise inventories (88.6 ) (161.6 )
(Decrease) in accounts payable (57.0 ) (96.4 )
(Decrease) in accrued expenses and other liabilities (104.4 ) (8.0 )
Other (3.8 ) 14.1
-------------------- ------- -------------------- -------------------- ------- --------------------
Net cash provided by operating activities 448.4 445.2
-------------------- ------- -------------------- -------------------- ------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (258.5 ) (266.2 )
Purchases of investments (233.1 ) (165.4 )
Sales and maturities of investments 289.9 144.8
Other - (2.3 )
-------------------- ------- -------------------- -------------------- ------- --------------------
Net cash (used in) investing activities (201.7 ) (289.1 )
-------------------- ------- -------------------- -------------------- ------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments for repurchase of common stock (350.0 ) (341.2 )
Proceeds from issuance of common stock 52.0 63.9
Cash dividends paid (168.6 ) (140.1 )
Other (17.5 ) 13.0
-------------------- ------- -------------------- -------------------- ------- --------------------
Net cash (used in) financing activities (484.1 ) (404.4 )
-------------------- ------- -------------------- -------------------- ------- --------------------
Effect of exchange rate changes on cash (22.9 ) 97.0
-------------------- ------- -------------------- -------------------- ------- --------------------
Net (decrease) in cash and cash equivalents (260.3 ) (151.3 )
Cash and cash equivalents at beginning of year 2,929.8 2,095.5
-------------------- ------- -------------------- -------------------- ------- --------------------
Cash and cash equivalents at end of period $ 2,669.5 $ 1,944.2
==================== ======= ==================== ==================== ======= ====================
The TJX Companies, Inc. and Consolidated Subsidiaries
Selected Information by Major Business Segment
(Unaudited)
(In Thousands)
13 Weeks Ended
-------------------------------------------------------------------------------------------------------------------
April 29, April 30,
2017 2016
----------------------------- -------------------- -------------------- ----------------------------------------
Net sales:
In the United States:
Marmaxx $ 4,967,135 $ 4,865,375
HomeGoods 1,121,269 1,010,436
TJX Canada 738,771 685,577
TJX International 956,849 980,968
-------------------- --------- -------------------- -------------------- -------------------- --------------------
Total net sales $ 7,784,024 $ 7,542,356
==================== ========= ==================== ==================== ==================== ====================
Segment profit:
In the United States:
Marmaxx $ 687,165 $ 708,857
HomeGoods 152,092 138,210
TJX Canada 102,880 57,472
TJX International 6,860 14,347
-------------------- --------- -------------------- -------------------- -------------------- --------------------
Total segment profit 948,997 918,886
General corporate expense 106,648 83,723
Interest expense, net 9,841 10,194
-------------------- --------- -------------------- -------------------- -------------------- --------------------
Income before provision for income taxes $ 832,508 $ 824,969
==================== ========= ==================== ==================== ==================== ====================
The TJX Companies, Inc. and Consolidated Subsidiaries Notes to
Consolidated Condensed Statements
1. During the first quarter ended April 29, 2017, TJX repurchased 4.5
million shares of its common stock at a cost of $350 million. In
February 2017, the Company announced that the Board of Directors
approved an additional $1 billion stock repurchase program. TJX records
the repurchase of its stock on a cash basis, and the amounts reflected
in the financial statements may vary from the above amounts due to the
timing of settlement of repurchases.
2. On September 7, 2016 TJX issued $1.0 billion of 2.250% ten year
notes. The Company used a portion of the proceeds to redeem its $375
million 6.950% notes prior to their scheduled maturity of April 15,
2019. On October 12, 2016 the Company completed the redemption of the
6.950% notes pursuant to the terms of the indenture and recorded a
pre-tax loss on the early extinguishment of debt of $51.8 million in the
third quarter ended October 29, 2016.
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SOURCE: The TJX Companies, Inc.
The TJX Companies, Inc.
Debra McConnell
Global Communications
(508) 390-2323
