TJX Beats on Q3 Earnings, Raises FY14 View

Zacks

The TJX Companies, Inc. (TJX) reported earnings of 86 cents per share in the third quarter of fiscal 2014, beating the Zacks Consensus Estimate of 74 cents by 16.2%. Earnings were ahead of the year-ago earnings of 75 cents by 21% and management's guidance range of 84 cents to 85 cents.

The earnings upside was fueled by higher consumer traffic, improved margins and solid comparable-store sales growth for consecutive months.

Quarterly Details

Net sales of this leading off-price retailer grew 9.0% year over year to $7.0 billion in the reported quarter on the back of comparable store sales growth. Net sales marginally beat the Zacks Consensus Estimate of $6.9 billion.

TJX Companies' consolidated comparable store sales increased 5.0% in the quarter compared to a 7% increase in the comparable year-ago quarter. The year-over-year increase was driven by same-store sales growth of 4% at Marmaxx, 10% at Home Goods, 5% at TJX Europe and 2% at TJX Canada. Comparable-store sales increased on the back of strong customer traffic, driven by well-chosen stocks at the stores.

TJX Companies' gross margin expanded 0.5 percentage points (pp) from the prior-year quarter to 29.3%. The margin expansion was mostly driven by increased merchandise sales margin and buying and occupancy expense leverage on sales.

Selling, general and administrative costs as a percentage of sales increased 0.4 pp year on year to 16.6% in the third quarter, mainly due to several unfavorable impacts in the previous year.

Share Repurchase

During the second quarter of 2013, the company spent a total of $375 million to repurchase 6.8 million common shares.

Outlook

Following the impressive third quarter results, the company raised the lower end of its earnings outlook for fiscal 2014. The company now expects earnings in the range of $2.80 - $2.83, up 13%-15% from the previous year earnings of $2.47. The Zacks Consensus Estimate for fiscal 2014 is $2.85 per share, higher than the company's guidance range.

For the fourth quarter of fiscal 2014, the company expects comparable store sales growth of 1%-2%. It maintained its earnings per share outlook of a range of 77 cents to 80 cents. The Zacks Consensus Estimate for fourth quarter fiscal 2014 is 84 cents per share, higher than the company's guidance range.

TJX currently holds a Zacks Rank #2 (Buy). Other stocks in the retail discount sector worth considering include Big Lots Inc (BIG), Dollar Tree Inc. (DLTR) and Pricesmart Inc. (PSMT). All of them holding a Zacks Rank #2 (Buy).

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