TJX Companies Delivers Sales Beat in 2Q16 on Higher Traffic
TJX Companies Impresses Investors in 2Q16, Raises Outlook
Strong sales growth in 2Q16
TJX Companies (TJX) saw sales increase by 6.5% to $7.4 billion in the second quarter of fiscal 2016, compared with the same quarter of the previous year. The quarter ended on August 1, 2015. The off-price retailer exceeded the consensus Wall Street analyst sales estimate of $7.26 billion.
Sales driven by strong traffic
TJX Companies’ sales growth in 2Q16 was driven by higher consumer traffic. This is the fifth consecutive quarter in which the company experienced sequential improvement in consumer traffic across its stores. Despite improved macro conditions in the US, price-conscious consumers prefer to shop at off-price retail stores such as TJX Companies, Ross Stores (ROST), Burlington Stores (BURL), and Nordstrom’s (JWN) Rack stores.
Ross Stores and Nordstrom reported sales growth of 8.7% and 9.1%, respectively, in their second quarters. Ross Stores attributed the strong growth to attractive merchandise selection. Nordstrom’s 2Q15 sales growth was a result of continued strength in the company’s online channels and its off-price Rack stores.
Meanwhile, Macy’s (M), and Kohl’s (KSS) disappointed investors with weaker sales in the second quarter. Macy’s sales declined by 2.6%, and Kohl’s reported only 0.6% sales growth in its second quarter.
Currency headwinds
TJX Companies’ operations in Canada and Europe expose the company to currency fluctuations. In 2Q16, currency fluctuations had a four percentage point adverse impact on TJX Companies’ net sales growth and a neutral impact on the company’s 2Q16 earnings per share on a year-over-year basis.
Currency headwinds had a three percentage point impact on the company’s net sales growth in the first half of fiscal 2016. TJX Canada and TJX Europe together accounted for 22.2% of net sales in the first six months of fiscal 2016.
TJX Companies makes up 0.2% of the portfolio holdings of the iShares MSCI ACWI ETF (ACWI) and 1.7% of the Vanguard Consumer Discretionary ETF (VCR).
The next part of this series considers the firm’s US performance during 2Q16.
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