TJX Cos. The company raised its full-year forecast on Wednesday after reporting one other quarter of strong sales, but its outlook still fell just wanting Wall Street expectations.
The discounter behind Marshalls, HomeGoods and TJ Maxx now expects annual profits of between $4.09 and $4.13, in accordance with LSEG, in comparison with estimates of $4.14.
For the present quarter, TJX expects earnings per share between $1.06 and $1.08, in comparison with estimates of $1.10.
So far this earnings season, retailers that disappoint with their forecasts haven’t seen a significant negative impact on their stocks, suggesting that investors are bracing for uncertainty within the second half of the 12 months ahead of the U.S. presidential election and a possible rate cut by the Federal Reserve. TJX shares rose nearly 6% in afternoon trading.
The discounter has for the second fiscal quarter in comparison with Wall Street expectations, based on an analyst survey conducted by LSEG:
- Earnings per share: 96 cents in comparison with 92 cents expected
- Revenue: $13.47 billion in comparison with expected $13.31 billion
The company reported net income for the three-month period ended Aug. 3 was $1.1 billion, or 96 cents per share, compared with $989 million, or 85 cents per share, a 12 months earlier.
Sales rose from $12.76 billion within the previous 12 months to $13.47 billion.
Throughout its 2024 fiscal 12 months, which led to February, TJX posted strong sales gains and solid guidance, but investors have been curious to see how the corporate will beat those numbers in the approaching quarters and whether it could proceed to grow.
The company sees overseas as its key growth opportunity and announced Wednesday that it’s acquiring a 35 percent stake in Dubai-based retailer Brands for Less for $360 million. The privately held brand is the one major off-price player within the region and operates greater than 100 stores, mostly within the United Arab Emirates and Saudi Arabia, in addition to an e-commerce business, TJX said in a news release.
“As TJX looks to continue its global growth, this transaction provides the Company with an opportunity to invest in an established off-price retailer with significant growth potential,” TJX said. “The Company’s investment in BFL is expected to be modestly accretive to earnings per share beginning in fiscal 2026.”
Europe, especially the UK, was an even bigger challenge for TJX, in accordance with CEO Ernie Herrman.
“We were a little disappointed with our European business,” Herrman said within the earnings call. “A significant portion of that was due to our own performance.”
Still, Herrman said TJX is on the best track.
For the quarter, consolidated comparable sales rose 4% and were “due entirely to an increase in customer transactions,” indicating more customers are coming into stores, TJX said. That increase is above the two.8% increase expected by analysts, in accordance with StreetAccount.
Growth was primarily driven by TJX’s Marmaxx division within the U.S., which incorporates TJ Maxx, Marshalls and Sierra stores. Marmaxx’s comparable sales rose 5% within the quarter, in comparison with estimates of two.9%, in accordance with StreetAccount. HomeGoods posted a 2% comparable sales increase — lower than the three% analysts had expected, StreetAccount said — while the general home furnishings market stays flat.
TJX also benefited from operational improvements and lower freight costs, in accordance with CFO John Klinger, although these were partially offset by higher supply chain costs.
As Marmaxx gains momentum, Klinger said, the corporate has “opportunities to further grow our largest division.”
In the present quarter, development has already “got off to a strong start,” said Herrman.
“We see excellent buying opportunities in the market and are well positioned to deliver fresh and attractive merchandise to our stores and online throughout the fall and holiday selling season. We achieved a milestone for our business in the second quarter by reaching our 5,000thth Store,” said Herrman. “Long-term, we are excited about our potential to gain additional market share in all of our regions and continue our global growth.”
Through Tuesday’s close, TJX stock has risen about 21% year-to-date. The stock hit a brand new high in May after the corporate reported strong quarterly results.
The retailer has taken market share from competitors akin to Goal And Macy’s and has grow to be a paradise for price-conscious consumers who’re careful about their money but still wish to afford latest clothes.
“Consumers will continue to look for added value,” Herrman said.
In May, Herrman said the corporate’s success was partially since it had “become a cooler place to shop” and had gained traction with younger Generation Z customers who’re more excited by finding good, quality bargains than shopping at high-end brands.
In Wednesday’s conference call, Herrman said TJX is attracting an “outsized number” of younger customers.
Some analysts say TJX’s business model helps the corporate perform well in any economic environment. In good times, lower- to middle-income consumers have the money to purchase unnecessary items like latest clothes, shoes and residential accessories, and in bad times, higher-income customers come to stores searching for deals on the brand-name clothing they’re used to.
Even though consumers are faced with rising prices within the supermarket, for instance, TJX’s average selling prices have remained “fairly constant,” in accordance with Herrman and Klinger.
“When you look at our merchandise market, it’s increasingly about making better purchases, not just retail,” Herrman said.
However, a pointy decline in consumer spending, which some analysts have warned about, could hit the corporate no matter its value proposition.
