TJMaxx, Marshall’s, Home Goods Bucking Retail Trend

Off-price retailer TJX offered fresh evidence on Wednesday that even as tech-savvy customers flock to online shopping sites, they still love hunting for a good bargain at the store.

The parent company of TJMaxx, Marshall’s and Home Goods reported better-than-expected earnings results on Wednesday as shoppers in the fourth quarter continued to wander the aisles for discounts on the latest fashion apparel, accessories and home furnishings. The company reported a fourth-quarter revenue of $9.5 billion, a 6% jump from the same time in 2015; and last year marked its 21st consecutive year of comparable-store sales increases – a key metric for retailers that represents transactions at stores open at least a year.

“We were particularly pleased that customer traffic was the primary driver of our comp increases at every major division, which tells us our eclectic merchandise mix and amazing values continue to resonate with customers across geographies,” said the company’s president and CEO Ernie Herrman in a statement.

Part of TJX’s secret to success in a difficult retail environment is its ability to quickly react to constantly-shifting shopping trends, and buy in an opportunistic way to limit mark-down risk aimed at moving excess inventory, said CFRA equity analyst Tuna Amobi in a research note.

“With a clear value message in marketing and frequent in-flow of new assortments of a ‘treasure hunt’ shopping experience, we see TJX successfully engaging customers in an otherwise challenging retail environment,” he said.

With more customers coming through the doors and visiting more frequently, the company sees continued opportunity for growth despite the challenged retail environment. Last year, while other dominant U.S. chains like Macy’s (NYSE:M) were working to reduce costs and store counts, TJX grew its store base by nearly 6% without shuttering a single location. In the year ahead, Herrman announced plans to launch a second home concept complementary to its existing Home Goods brand in an effort to continue growing customer traffic and sales.

“While we are proud to have grown our Home Goods customer base for many years, we believe we remain signficiantly underpenetrated in total U.S. home market and enormous opportunity remains for us to grow market share in this space. Our customers are passionate about home goods and we are confident they will love our new home concept, too,” he said on the company’s earnings call.

Home Goods saw a 4% jump in fourth quarter same-store sales, the biggest increase of any of the brands in its portfolio. TJX said it plans to increase its Home Goods footprint with new stores this year, while opening four new-format home stores as well.

TJX, which marked 40 years of business last year, saw sales at stores open at least a year climb 3% as the company’s profits per share came in at $1.03, representing a 4% rise from the year ago period. Wall Street expected earnings of $1 per share on revenue of $9.44 billion. The off-price retailer also raised its quarterly dividend and announced a share buyback program.

Indeed, the retailer reported low to mid-single digit increases in sales at stores in the U.S. and Canada during the quarter, while its international businesses in Europe and Australia rose 2%. With steady customer foot traffic through its stores, TJX was able to keep its inventory in check throughout the year while many industry titans still struggle to strike the right balance as shoppers increasingly prefer to buy products – including apparel – online.

Excluding the impact of the strong U.S. dollar, the company said inventories were down 4% by the end of January, putting it in an “excellent” position to offer shoppers the latest spring merchandise at value prices.

Uncle Sam Delay Strikes Again

Looking ahead to the first quarter, the company warned investors diluted earnings per share would likely be in a range of 76 cents to 78 cents, in line with results from a year ago, while comp sales would be mostly flat. Wedbush Securities analyst Morry Brown said the guidance likely reflects a slow start to February thanks to delayed tax returns from the IRS that would have given shoppers more money to spend in the stores.

The company’s year-ahead outlook, though, is a little brighter. TJX forecasts adjusted earnings per share in the range of $3.69 to $3.78, which includes an expectation for a negative 2% impact from wage increases. TJX also expects comparable-store sales to between 1% and 2%.

TJX shares traded along the flat line following the earnings announcement Wednesday.

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