American consumers continued their shopping spree, helping The TJX Cos. Inc. accelerate sales at Marmaxx and HomeGoods.
In a Nutshell: Consolidated comparable store sales for the second quarter ended July 29 rose 6 percent. Comps at U.S. Marmaxx stores—including the T.J. Maxx and Marshalls nameplates—rose 8 percent, while comps at the U.S. HomeGoods business gained 4 percent. The last time both U.S. business posted positive comp sales growth in the same period was the fourth quarter ended Jan. 29, 2022.
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TJX president and CEO Ernie Herrman told investors in a conference call that overall apparel and accessories sales were “very strong” in the quarter, noting home banner sales “significantly improved” too. Comps at TJX Canada and TJX International for operations in Europe and Australia also rose 1 percent and 3 percent, respectively.
“Clearly, our terrific mix of branded fashionable merchandise and great values resonated with shoppers when they visited our stores,” he said.
The off-price retailer raised its full-year outlook after the strong results.
Looking ahead, Herrman said he’s still seeing tremendous off-price buying opportunities in the marketplace. The retailer has pulled back on early buys to take advantage of oversupply opportunities, and might pull back a bit more due to the expectation of in-season closeouts over the next six to 12 months.
“We have developed one of the most flexible brick-and-mortar retail models in the world. The flexibility of our close-to-need opportunistic buying allows our merchants to quickly react to the hottest trends in the marketplace and adapt to changing consumer preferences,” Herrman said. “The flexibility of our supply chain and store formats allows us to ship to our stores multiple times a week.”
He said that stores are merchandised individually, and the floor space can be “flexed” to support changing assortments. In addition to a buying organization of over 1,200 merchants, TJX’s vast network of over 21,000 vendors “is the reason whey we are so confident that there will always be more than enough inventory in the marketplace for us to buy,” Herrman said.
And if individual pricing isn’t generating sales, the company can adjust it accordingly, Herrman said, pointing to the company’s “90-plus percent” success rate.
“I think one of the most key strategic advantages we have is the fact that that our organization is set up to deliver a good, better, best scenario and if you look [at] most retailers around us, very few do that, he said. “They’re zeroing in on certain demographic segments [such as] age or fashion looks or different price levels, and we don’t do that and I think that will continue to be a benefit to us over the next five to 10 years.”
TJX chief financial officer John Klinger said on the call that because bankrupt Bed Bath & Beyond hadn’t been doing well for years, TJX has been able to snag market share “along the way.”
The company now expects to open “125 net new stores” for the year.
Net Sales: For the quarter, net sales rose 7.7 percent to $12.76 billion from $11.84 billion a year ago.
Klinger said apparel and accessories sales rose by high single digits and home was up by mid-single digits. The quarter benefitted from improving freight costs. Additionally, lower prices saw shoppers “putting more items into their cart,” he said.
For the six months, net sales were up 5.6 percent to $24.54 billion from $23.25 billion in the year-ago quarter.
Earnings: Net income rose 22.1 percent to $989 million, or 85 cents a diluted share, from $810 million, or 69 cents, a year ago.
Wall Street was expecting adjusted diluted EPS of 77 cents on revenue of $12.45 billion.
For the third quarter, the retailer expects diluted EPS in the range of 95 cents to 98 cents on a comparable store sales gain of 3 percent to 4 percent.
For the fourth quarter, the company guided adjusted diluted EPS in the range of $1.00 to $1.03, with comps up 3 percent to 4 percent.
For the fiscal year ending Feb. 3, 2024, adjusted diluted EPS was forecasted in the range of $3.56 to $3.62, with comps up 3 percent to 4 percent.
For the six months, net sales spiked up 34.6 percent to $1.88 billion, or $1.62 a diluted share, from $1.4 billion, or $1.18, in the same year-ago quarter.
CEO’s Take: “The third quarter is off to a very strong start and we feel great about our plans for the remainder of the year,” Herrman said. “We are convinced that our differentiated treasure hunt shopping experience and excellent values will continue to serve us well and allow us to capture additional market share across our geographies for many years to come.”
