The TJX Companies, Inc. Reports Q3 FY19 Results with Very Strong Comp Sales Growth of 7%, Customer Traffic Up, and Above-Plan EPS; Updates Full-Year Guidance Reflecting Strong Q3 Performance
- Above-plan consolidated comp store sales increase of 7%
- Customer traffic was the primary driver of the comp sales increases at every division
-
Net sales increased 12% to
$9.8 billion - Completed 2-for-1 common stock split; all per share amounts in this press release reflect the split
-
Above-plan diluted EPS of
$.61 , which includes a$.02 negative impact from a pension settlement charge that was not contemplated in the Company’s most recent guidance, compared with$.50 in the prior year - Updates full-year Fiscal 2019 guidance, reflecting strong Q3 results (details below)
-
Returned
$841 million to shareholders in the third quarter through share repurchases and dividends
For the first nine months of Fiscal 2019, net sales were
Third Quarter and Year-to-Date FY2019 Reconciliation of Diluted EPS to Adjusted EPS
Third Quarter |
Year-to-Date |
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FY2019 | FY2018 | FY2019 | FY2018 | |||||
Diluted EPS | $.61 | $.50 | $1.75 | $1.33 | ||||
Pension Settlement Charge | $.02 | - | $.02 | - | ||||
2017 Tax Act Benefit | ($.09) | - | ($.26) | - | ||||
Adjusted Diluted EPS1 | $.54 | $.50 | $1.52 | $1.33 | ||||
1Adjusted Diluted EPS totals may not foot due to rounding. |
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CEO and President Comments
Sales by Business Segment
The Company’s comparable store sales and net sales by division, in the third quarter, were as follows:
Third Quarter | Third Quarter | |||||||
Comparable Store Sales1,2 | Net Sales ($ in millions)3,4 | |||||||
FY2019 | FY2018 | FY2019 | FY2018 | |||||
Marmaxx5,6 | +9% | -1% | $5,973 | $5,298 | ||||
HomeGoods7 | +7% | +3% | $1,464 | $1,229 | ||||
TJX Canada | +5% | +4% | $1,037 | $983 | ||||
TJX International (Europe & Australia) | +3% | +1% | $1,352 | $1,252 | ||||
TJX | +7% | 0% | $9,826 | $8,762 | ||||
1Comparable store sales outside the U.S. calculated on a constant currency basis, which removes the effect of changes in currency exchange rates. 2Comparable store sales exclude Sierra Trading Post, tjmaxx.com, and tkmaxx.com. 3Net sales in TJX Canada and TJX International include the impact of foreign currency exchange rates. See below. 4Figures may not foot due to rounding. 5Combination of T.J. Maxx and Marshalls. 6Net sales include Sierra Trading Post. 7Net sales include Homesense stores in the U.S. |
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Impact of Foreign Currency Exchange Rates
Changes in foreign currency exchange rates affect the translation of sales and earnings of the Company’s international businesses into U.S. dollars for financial reporting purposes. In addition, ordinary course, inventory-related hedging instruments are marked to market at the end of each quarter. Changes in currency exchange rates can have a material effect on the magnitude of these translations and adjustments when there is significant volatility in currency exchange rates.
The movement in foreign currency exchange rates had a one percentage
point negative impact on consolidated net sales growth in the third
quarter of Fiscal 2019 versus the prior year. The overall net impact of
foreign currency exchange rates had a
The movement in foreign currency exchange rates had a one percentage
point positive impact on consolidated net sales growth in the first nine
months of Fiscal 2019 versus the prior year. The overall net impact of
foreign currency exchange rates had a
A table detailing the impact of foreign currency on TJX pretax earnings and margins, as well as those of its international businesses, can be found in the Investors section of tjx.com.
The foreign currency exchange rate impact to earnings per share does not include the impact currency exchange rates have on various transactions, which the Company refers to as “transactional foreign exchange.”
Pension Settlement Charge
The Company recently purchased a group annuity contract under which the
pension benefit obligations for certain U.S. retirees and beneficiaries
under the Company’s pension plan were transferred to an insurer in
exchange for
Margins
For the third quarter of Fiscal 2019, the Company’s consolidated pretax profit margin was 10.7%. Excluding the pension settlement charge (described above), adjusted pretax profit margin was 11.0%, a 0.6 percentage point decrease compared with the prior year’s 11.6%.
Gross profit margin for the third quarter of Fiscal 2019 was 28.9%, a 0.9 percentage point decrease versus the prior year. Strong expense leverage was more than offset by increased freight costs, expenses associated with the Company’s supply chain, and an unfavorable year-over-year comparison related to the Company’s inventory hedges.
Selling, general and administrative (SG&A) costs as a percent of sales for the third quarter were 17.9%, a 0.2 percentage point decrease versus the prior year’s ratio.
Inventory
Total inventories as of
Share Buyback, Dividend, and Stock Split
During the third quarter, the Company returned a total of
Fourth Quarter and Full-Year Fiscal 2019 Outlook
For the fourth quarter of Fiscal 2019, the Company expects diluted
earnings per share to be in the range of
For the 52-week fiscal year ending
The Company’s earnings guidance for the fourth quarter and full-year Fiscal 2019 assumes that currency exchange rates will remain unchanged from the levels at the beginning of the fourth quarter.
Fourth Quarter and Full-Year FY2019 Reconciliation of Diluted EPS to Adjusted EPS Guidance
Fourth Quarter | Full-Year | |||||||
FY2019 Guidance | FY2018 Actual | FY2019 Guidance | FY2018 Actual | |||||
Diluted EPS | $.66 to $.67 | $.69 | $2.41 to $2.43 | $2.02 | ||||
Pension Settlement Charge | - | - | $.02 | - | ||||
2017 Tax Act Benefit | ($.10) | ($.09) | ($.36) | ($.09) | ||||
Benefit of Extra Week in Fiscal 2018 | - | ($.06) | - | ($.06) | ||||
Sierra Trading Post Impairment Charge | - | $.05 | - | $.05 | ||||
Adjusted Diluted EPS1 | $.56 to $.57 | $.59 | $2.08 to $2.09 | $1.93 | ||||
1Adjusted Diluted EPS totals may not foot due to rounding. |
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Stores by Concept
During the third quarter ended
Store Locations1 | Gross Square Feet2 | |||||||
Third Quarter | Third Quarter | |||||||
(in millions) | ||||||||
Beginning | End | Beginning | End | |||||
In the U.S.: | ||||||||
T.J. Maxx | 1,236 | 1,247 | 34.3 | 34.4 | ||||
Marshalls | 1,077 | 1,091 | 31.4 | 31.6 | ||||
HomeGoods | 716 | 745 | 16.8 | 17.4 | ||||
Sierra Trading Post | 33 | 35 | 0.7 | 0.8 | ||||
Homesense | 8 | 16 | 0.2 | 0.4 | ||||
In Canada: | ||||||||
Winners | 270 | 271 | 7.5 | 7.5 | ||||
HomeSense | 120 | 125 | 2.8 | 2.9 | ||||
Marshalls | 79 | 88 | 2.2 | 2.4 | ||||
In Europe: | ||||||||
T.K. Maxx | 552 | 566 | 16.1 | 16.3 | ||||
Homesense | 61 | 68 | 1.2 | 1.3 | ||||
In Australia: | ||||||||
T.K. Maxx | 42 | 44 | 0.9 | 1.0 | ||||
TJX | 4,194 | 4,296 | 114.0 | 116.0 | ||||
1Store counts above include both banners within a combo
or a superstore. |
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About
Fiscal 2019
At
Non-GAAP Financial Information
The Company has used non-GAAP financial measures in this press release.
Adjusted financial measures refer to financial information adjusted to
exclude from financial measures prepared in accordance with accounting
principles generally accepted in
Important Information at Website
Archived versions of the Company’s conference calls are available in the Investors section of tjx.com after they are no longer available by telephone, as are reconciliations of non-GAAP financial measures to GAAP financial measures and other financial information. The Company routinely posts information that may be important to investors in the Investors section at tjx.com. The Company encourages investors to consult that section of its website regularly.
Forward-looking Statement
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995: Various statements made in this release are forward-looking and
involve a number of risks and uncertainties. All statements that address
activities, events or developments that we intend, expect or believe may
occur in the future are forward-looking statements. The following are
some of the factors that could cause actual results to differ materially
from the forward-looking statements: execution of buying strategy and
inventory management; operational and business expansion and management
of large size and scale; customer trends and preferences; various
marketing efforts; competition; personnel recruitment, training and
retention; labor costs and workforce challenges; data security;
information systems and implementation of new technologies; economic
conditions and consumer spending; adverse or unseasonable weather;
serious disruptions or catastrophic events; corporate and retail banner
reputation; quality, safety and other issues with our merchandise;
compliance with laws, regulations and orders and changes in laws,
regulations and applicable accounting standards; expanding international
operations; merchandise sourcing and transport; commodity availability
and pricing; fluctuations in currency exchange rates; fluctuations in
quarterly operating results and market expectations; mergers,
acquisitions, or business investments and divestitures, closings or
business consolidations; outcomes of litigation, legal proceedings and
other legal or regulatory matters; tax matters; disproportionate impact
of disruptions in the second half of the fiscal year; real estate
activities; inventory or asset loss; cash flow and other factors that
may be described in our filings with the
The TJX Companies, Inc. and Consolidated Subsidiaries |
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Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||
November 3, 2018 |
October 28, 2017 |
November 3, 2018 |
October 28, 2017 |
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Net sales | $ | 9,825,759 | $ | 8,762,220 | $ | 27,845,594 | $ | 24,903,944 | |||||||
Cost of sales, including buying and occupancy costs | 6,983,483 | 6,150,020 | 19,797,537 | 17,652,767 | |||||||||||
Selling, general and administrative expenses | 1,756,448 | 1,584,219 | 5,006,937 | 4,479,470 | |||||||||||
Pension settlement charge | 36,122 | — | 36,122 | — | |||||||||||
Interest expense, net | 3,188 | 7,981 | 10,365 | 27,499 | |||||||||||
Income before provision for income taxes | 1,046,518 | 1,020,000 | 2,994,633 | 2,744,208 | |||||||||||
Provision for income taxes | 284,265 | 378,564 | 776,373 | 1,013,536 | |||||||||||
Net income | $ | 762,253 | $ | 641,436 | $ | 2,218,260 | $ | 1,730,672 | |||||||
Diluted earnings per share | $ | 0.61 | $ | 0.50 | $ | 1.75 | $ | 1.33 | |||||||
Cash dividends declared per share | $ | 0.195 | $ | 0.156 | $ | 0.585 | $ | 0.469 | |||||||
Weighted average common shares – diluted | 1,257,562 | 1,285,762 | 1,264,100 | 1,297,344 | |||||||||||
The TJX Companies, Inc. and Consolidated Subsidiaries |
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November 3, 2018 |
October 28, 2017 |
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ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 2,711.8 | $ | 2,364.2 | |||
Short-term investments | — | 511.6 | |||||
Accounts receivable and other current assets | 1,061.8 | 788.3 | |||||
Merchandise inventories | 5,543.4 | 4,725.9 | |||||
Total current assets | 9,317.0 | 8,390.0 | |||||
Net property at cost | 5,165.9 | 4,858.3 | |||||
Goodwill | 97.3 | 196.4 | |||||
Other assets | 445.0 | 433.0 | |||||
TOTAL ASSETS | $ | 15,025.2 | $ | 13,877.7 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 3,340.6 | $ | 2,986.4 | |||
Accrued expenses and other current liabilities | 2,673.2 | 2,481.6 | |||||
Total current liabilities | 6,013.8 | 5,468.0 | |||||
Other long-term liabilities | 1,284.9 | 1,160.0 | |||||
Non-current deferred income taxes, net | 236.7 | 374.3 | |||||
Long-term debt | 2,232.9 | 2,229.8 | |||||
Shareholders’ equity | 5,256.9 | 4,645.6 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 15,025.2 | $ | 13,877.7 | |||
The TJX Companies, Inc. and Consolidated Subsidiaries |
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Thirty-Nine Weeks Ended |
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November 3, 2018 |
October 28, 2017 |
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CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 2,218.3 | $ | 1,730.7 | ||||
Depreciation and amortization | 601.2 | 532.4 | ||||||
Pension settlement charge | 36.1 | — | ||||||
Deferred income tax (benefit) provision | (15.6 | ) | 35.8 | |||||
Share-based compensation | 77.4 | 77.2 | ||||||
Decrease (increase) in accounts receivable and other assets | 26.9 | (138.7 | ) | |||||
(Increase) in merchandise inventories | (1,442.6 | ) | (1,042.7 | ) | ||||
Increase in accounts payable | 902.5 | 733.3 | ||||||
Increase (decrease) in accrued expenses and other liabilities | 64.4 | (3.8 | ) | |||||
Other | 9.2 | 5.2 | ||||||
Net cash provided by operating activities | 2,477.8 | 1,929.4 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Property additions | (873.0 | ) | (827.5 | ) | ||||
Purchases of investments | (157.2 | ) | (630.1 | ) | ||||
Sales and maturities of investments | 634.3 | 658.2 | ||||||
Other | 26.7 | — | ||||||
Net cash (used in) investing activities | (369.2 | ) | (799.4 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Payments for repurchase of common stock | (1,591.4 | ) | (1,239.0 | ) | ||||
Proceeds from issuance of common stock | 239.6 | 89.2 | ||||||
Cash dividends paid | (682.3 | ) | (566.9 | ) | ||||
Other | (21.5 | ) | (19.1 | ) | ||||
Net cash (used in) financing activities | (2,055.6 | ) | (1,735.8 | ) | ||||
Effect of exchange rate changes on cash | (99.7 | ) | 40.2 | |||||
Net (decrease) in cash and cash equivalents | (46.7 | ) | (565.6 | ) | ||||
Cash and cash equivalents at beginning of year | 2,758.5 | 2,929.8 | ||||||
Cash and cash equivalents at end of period | $ | 2,711.8 | $ | 2,364.2 | ||||
The TJX Companies, Inc. and Consolidated Subsidiaries |
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Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||
November 3, 2018 |
October 28, 2017 |
November 3, 2018 |
October 28, 2017 |
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Net sales: | |||||||||||||||
In the United States: | |||||||||||||||
Marmaxx | $ | 5,973,476 | $ | 5,298,479 | $ | 17,202,115 | $ | 15,550,253 | |||||||
HomeGoods | 1,463,892 | 1,228,768 | 4,060,569 | 3,506,435 | |||||||||||
TJX Canada | 1,036,884 | 983,236 | 2,828,456 | 2,554,033 | |||||||||||
TJX International | 1,351,507 | 1,251,737 | 3,754,454 | 3,293,223 | |||||||||||
Total net sales | $ | 9,825,759 | $ | 8,762,220 | $ | 27,845,594 | $ | 24,903,944 | |||||||
Segment profit: | |||||||||||||||
In the United States: | |||||||||||||||
Marmaxx | $ | 762,911 | $ | 666,092 | $ | 2,343,682 | $ | 2,100,138 | |||||||
HomeGoods | 166,090 | 163,835 | 455,540 | 457,272 | |||||||||||
TJX Canada | 182,170 | 206,472 | 446,089 | 392,581 | |||||||||||
TJX International | 102,432 | 87,066 | 191,949 | 132,893 | |||||||||||
Total segment profit | 1,213,603 | 1,123,465 | 3,437,260 | 3,082,884 | |||||||||||
General corporate expense | 127,775 | 95,484 | 396,140 | 311,177 | |||||||||||
Pension settlement charge | 36,122 | — | 36,122 | — | |||||||||||
Interest expense, net | 3,188 | 7,981 | 10,365 | 27,499 | |||||||||||
Income before provision for income taxes | $ | 1,046,518 | $ | 1,020,000 | $ | 2,994,633 | $ | 2,744,208 | |||||||
The TJX Companies, Inc. and Consolidated Subsidiaries | ||
Notes to Consolidated Condensed Statements | ||
1. | On September 17, 2018, TJX announced that its Board of Directors approved a two-for-one stock split of the Company's common stock in the form of a stock dividend, payable November 6, 2018 to the shareholders of record at the close of business on October 30, 2018. The split was subject to shareholder approval of an increase in the number of authorized shares which was approved at a special shareholder meeting on October 22, 2018. The stock split increased common stock issued and outstanding by 617 million shares. All historical per share amounts and references to common stock activity, as well as basic and diluted earnings per share amounts, have been adjusted to reflect the two-for-one stock split. | |
2. | During the third quarter ended November 3, 2018, TJX repurchased and retired 11.4 million shares of its common stock at a cost of $0.6 billion on a "trade date" basis. During the nine months ended November 3, 2018, TJX repurchased and retired 34.0 million shares of its common stock at a cost of $1.6 billion, on a "trade date" basis. In February 2018, the Company announced that the Board of Directors had approved a new stock repurchase program that authorizes the repurchase of up to an additional $3.0 billion of TJX common stock from time to time. TJX records the repurchase of its stock on a cash basis, and the amounts reflected in the financial statements may vary from the above amounts due to the timing of settlement of repurchases. | |
3. | During the third quarter the Company purchased a group annuity contract pursuant to which the pension benefit obligations for certain U.S. retirees and beneficiaries under the Company's pension plan were transferred to an insurer in exchange for $207 million in pension plan assets. As a result of this transaction, the pension plan's total liability has been remeasured, resulting in a non-cash settlement charge to the Company that reduced third quarter fiscal 2019 pretax income by $36.1 million and earnings per share by $0.02. | |
4. | During the fourth quarter ended February 3, 2018, the Company recorded a $99.3 million impairment charge, primarily goodwill, related to Sierra Trading Post. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20181120005368/en/
Source:
The TJX Companies, Inc.
Debra McConnell
Global Communications
(508)
390-2323