The TJX Companies (TJX 106.14, +4.49, +4.42%), an off-price retailer of apparel
and home fashions, is trading nicely higher today after reporting Q2 (Jul)
results this morning. Let's take a closer look.
TJX is the largest off-price retailer of apparel and home fashions. It operates a total of 4,194 stores in nine countries (the U.S., Canada, the U.K., Ireland, Germany, Poland, Austria, the Netherlands and Australia). In the U.S., its flagship brand is T.J. Maxx (1,236 stores) but it has other major brands as well, including Marshalls (1,077 stores) and HomeGoods (716 stores). In addition, it operates Winners (270 stores), HomeSense (120), and Marshalls (79) in Canada. And in Europe, it operates 552 T.K. Maxx and 61 HomeSense stores. That's not a misprint: they operate as T.K. Maxx in Europe and T.J. Maxx in the US.
TJX acquired Marshalls in 1995. Both chains sell family apparel (including footwear and accessories), home fashions (including home basics, accent furniture, lamps, rugs, wall decor, decorative accessories, and giftware) and other merchandise. TJX differentiates T.J. Maxx and Marshalls through different product assortment (an expanded assortment of fine jewelry and accessories and a designer section called The Runway at T.J. Maxx and a full line of footwear, a broader men's offering, and a juniors' department called The Cube at Marshalls). This differentiated shopping experience at T.J. Maxx and Marshalls encourages customers to shop both chains.
TJX offers its customers a rapidly changing assortment of brand name and designer merchandise at prices generally 20-60% below department and specialty store regular prices. Its stores are known for their value proposition, and they offer a treasure hunt shopping experience through the rapid turn of inventories. TJX uses opportunistic buying strategies to acquire merchandise cheaply in a variety of ways. It's also able to leverage its substantial size to get volume discounts from suppliers.
Turning to the Q2 (Jul) results, EPS grew 38% year/year to $1.17 from $0.85 last year. That $1.17 number was well above prior guidance of $1.02-1.04. Revenue rose 11.6% year/year to $9.33 bln, which was above market expectations. The guidance for Q3 (Oct) came in at EPS of $1.18-1.20, which is below market expectations. However, TJX is known for low-balling guidance then often reporting a nice beat (the same thing happened this quarter), so we would not read too much into that.
Same store comps in JulQ were good at +6%, which was well above prior guidance of +1-2%. This was led by Marmaxx (TJ Maxx plus Marshalls) at +7%. TJX Canada at +6% did quite well also. HomeGoods comps came in at +3%, but they were lapping a difficult +7% comp in the prior year period. Of note, TJX always presents same store comps on a constant currency basis, so it does not reflect changes in foreign exchange rates. Many other retailers do include the impact of FX. In terms of comp guidance, TJX expects OctQ comps to come in around +2-3%, including Marmaxx comps of +3-4%.
TJX says it was extremely pleased with its JulQ results. Both comp store sales growth of +6% and its EPS significantly exceeded expectations. Marmaxx, its largest division, delivered a very strong +7% comp. Customer traffic was once again the primary driver of its comp store sales increases at all of its divisions as TJX continues to reach a very wide customer demographic. Further, this marks the 16th straight quarter of customer traffic increases for TJX and Marmaxx.
TJX says it has been attracting new customers to all of its divisions, a significant share of whom are younger customers. This is great for business today and for the future. TJX was especially pleased with the robust performance of its apparel business. Looking forward, OctQ is off to a very strong start.
In sum, the JulQ results were quite good. As some other retailers have struggled, TJX has been doing a good job in terms of reporting EPS and comp upside. The stock has been in a nice and steady uptrend, which makes it attractive to longer term investors. It has gone from the $67 area in mid-November to a new all-time high above $105 today on the strong earnings results.
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