TJX Cos. On Wednesday, it said holiday sales rose 13% as shoppers flocked to the discount retailer in search of bargains.
Despite the strong quarter and end of the fiscal year, the company issued guidance that reflected Wall Street’s expectations as it prepares for tougher competitive conditions in the coming year and an uncertain growth trajectory.
Here’s how TJX performed in the fiscal fourth quarter compared to Wall Street’s expectations, based on an analyst survey from LSEG, formerly known as Refinitiv:
- Earnings per share: $1.22 vs. expected $1.12
- Revenue: $16.41 billion vs. expected $16.21 billion
For the quarter ended Feb. 3, the company reported net income of $1.4 billion, or $1.22 per share, compared with $1.04 billion, or 89 cents per share, a year earlier. Excluding an extra week in the quarter, TJX reported earnings per share of $1.12.
Revenue rose to $16.41 billion, up about 13% from $14.52 billion a year ago. The sales for the same period last year included one week less.
According to LSEG, earnings per share for the current quarter are expected to be 84 cents to 86 cents, given the upper limit of Wall Street expectations of 82 cents to 93 cents. Full-year earnings per share are expected to be $3.94 to $4.02, compared to estimates of $3.88 to $4.40.
TJX shares closed slightly higher. The company’s shares are up more than 7% year to date since Wednesday’s close.
TJX, which includes TJ Maxx, Marshall’s, Sierra and HomeGoods, has become the de facto leader in the off-price segment due to its ability to offer a wide range of premium branded products and attract higher-income shoppers looking for cheaper options given the ongoing inflation.
In the last year, the company has raised its sales and profit forecast several times. It struck a positive tone ahead of the holiday season as other retailers issued cautious or disappointing forecasts amid slowing demand and an uncertain economy.
During the holidays, consumers were laser-focused on finding the best deals and discounts, spending record amounts on Black Friday and Cyber Monday and retreating when promotions weren’t available. TJX was well positioned during the period as consumers were able to purchase a wide selection of gifts at prices that tend to be lower than competitors.
“We believe there is a lot of opportunity in retail,” TJX CEO Ernie Herrman said on the company’s earnings call Wednesday. “Customers are reacting extremely positively to our sales dynamics.”
During the quarter, comparable sales at Marmaxx, which includes TJ Maxx, Marshall’s and Sierra stores, rose 5%, more than the 4.6% increase analysts had expected, according to StreetAccount.
While comparable growth was slightly flat compared to the previous quarter, TJX’s numbers are up from last year’s hard numbers, so the two-year growth rate has actually accelerated, said retail analyst Neil Saunders, managing director at GlobalData, in a note.
In the U.S., sales at TJ Maxx and Marshalls rose 11.7%, on top of a 7% increase a year ago, Saunders noted.
“Most of this was due to consumers either wanting to spend less overall or wanting to get more for their money. Fortunately, those who chose to shop at TJ Maxx and Marshalls not only looked at price, but also chose the chains based on quality and selection,” Saunders said. “This flight to value that is essentially a sort of recruitment of sergeants, was very beneficial over a quarter of a year, which is traditionally expensive for most households.”
While other retailers report weak home furnishings sales amid high interest rates and a sluggish real estate market, TJX is bucking the trend with its HomeGoods banner. According to StreetAccount, comparable sales rose 7% in the quarter, compared with analysts’ expected 4.7% rise.
The numbers are based on somewhat simpler comparisons, as comparable sales at HomeGoods fell 7% in the year-ago quarter. But the chain benefits from consumers who may not be able to buy a new home because of high interest rates but would like to spruce up their existing spaces.
HomeGoods could also benefit from the decline of Bed Bath & Beyond’s stores, attracting customers who prefer to buy home furnishings in a physical retail store rather than online, where the new Bed Bath can now be found exclusively, Saunders said.
The company said it sees an additional opportunity for market share after Macy’s recently announced it would close 150 stores.
“With the Macy’s store closures, there are many overlapping categories that are blending the business we operate,” Herrman said.
TJX’s supply was better than usual because so many of its suppliers had high inventory levels in 2022 and 2023 and relied on the off-price retailer to address this oversupply. With inventories now leveling out across the industry, Wall Street will be eager to see how TJX’s supply performs and whether it can sustain last year’s growth and demand.
TJX’s guidance appears to reflect these concerns. In the coming year, the company will have to contend with much tougher competition, meaning its growth trajectory remains uncertain. Some analysts expect the current fiscal year to see more muted growth as the company looks to retain new customers it has acquired rather than continuing to attract new buyers.
In a research note by Jane Hali & Associates, store inspections in New York, Florida, Texas and California revealed “fewer notable brand names in the luxury, affordable luxury and contemporary sectors.” While inventory levels were flat in the previous quarter, some stores appeared to have too much inventory and “too much inventory,” the note said.
At the end of the quarter, total inventories were $6 billion, compared to $5.8 billion at the end of fiscal 2023, the company said. Consolidated inventory per store, which includes distribution centers and excludes inventory in transit, TJX’s e-commerce sites and Sierra stores, increased 1%.
Read the full earnings release here.
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2024-02-28 22:04:18
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