However, one notable exception to the weak results is TJX (TJX), the off-price retailer that owns and operates T.J. Maxx, Marshalls, and HomeGoods stores.
Before the open, it issued another solid quarterly report and raised its FY20 guidance as it continues to see strong customer traffic and demand for its apparel and home goods categories.
TJX generated EPS of $0.57, exceeding its guidance of $0.53-$0.54 and the Street's expectation of $0.55. On the top line, revenue grew by 6.8% to $9.28 bln, also edging out the $9.21 bln consensus.
Click here to access its earnings press release.
The standout metric continues to be comparable store sales growth which continues to easily outpace the field. For Q1, comp growth hit +5%, ahead of the 2-3% forecast it provided in its 4Q18 report. Marmaxx, its largest division (Marshalls and T.J. Maxx), led the way with a robust +6% increase.
The 5% figure is impressive on its own, but when stacked up against some of its main peers it looks even better. For instance, KSS, JCP, and Dillard's (DDS) just reported Q1 comps of -3.4%, -5.5%, and 0%, respectively.
The natural question is, "How is TJX managing to outperform the competition by such a wide margin?"
According to management, it comes down to its value proposition, shopping experience, and optimized supply chain. TJX uses a "good-better-best" assortment of items and it frequently adds or changes out inventory to align itself with hot trends and consumer demand. The company likens this to a "treasure hunt" experience for its shoppers.
In order to accomplish this, TJX must have a nimble and flexible supply chain and logistics system. This is a major competitor advantage for the company since it can buy close to need and change its floor space to quickly accommodate shifting consumer preferences. Large department stores typically don't have that adaptability, leaving them with stale and unwanted inventory on their floors.
Like most other retailers, TJX is dealing with rising transportation and freight costs though. This is the primary reason why its gross margin dipped to 28.5% from 28.9% in the year ago period. The company expects these cost pressures to continue throughout the year.
While TJX did slightly raise its FY20 EPS guidance to $2.56-$2.61 from 2.55-$2.60, it stated that higher freight and store wage costs will negatively impact EPS growth by 3-4%.
Another blemish is that instead of raising its FY20 comp growth guidance, the company left it unchanged at +2-3%. With Q1 comps of +5%, this indicates an expected slowdown for the remainder of the year. However, it's important to keep in mind that TJX has been outperforming its own expectations. So more difficult numbers in the second half of the year will likely still represent stronger growth than most of its peers.
Key Takeaways: TJX remains a "best in class" stock following another strong quarterly performance. It's model of creating a "treasure hunt" buying experience continues to resonate well with consumers.
Its supply chain and logistics continue to be a key competitive advantage. However, rising freight costs are expected to take a bit out of its earnings growth this year.
So far this morning, the stock's reaction to the beat-and-raise quarter is negative, but the poor results from peers KSS and DDS aren't helping matters.
There could also be some disappointment that TJX only reaffirmed its FY20 comp guidance, rather than bump it higher after outperforming expectations this quarter.
Overall, the story remains a positive one for TJX as it continues to separate itself from the competition.