TJX Companies Lifts Full-year Outlook As Q2 Results Beat View

(RTTNews) - Off-price retailer TJX Companies, Inc. (TJX) on Tuesday reported a 6 percent increase in profit for the second quarter from last year on higher sales and customer traffic. Both revenue and earnings per share for the quarter beat analysts' expectations.

Looking ahead, the company forecast earnings for the third quarter below the Street estimates, but raised its outlook for fiscal 2016 earnings and comparable store sales growth.

Carol Meyrowitz, CEO of TJX Companies, said, "Our 6% consolidated comparable store sales growth and 7% adjusted EPS growth significantly exceeded our expectations. It was great to see that comp sales were entirely driven by customer traffic - our fifth consecutive quarter of sequential traffic improvement - and that we had strong sales across all of our divisions."

The Framingham, Massachusetts-based company's net income for the second quarter was $549.34 million or $0.80 per share, up from $517.62 million or $0.73 per share in the prior-year quarter.

Excluding a debt extinguishment charge, adjusted earnings for the year-ago quarter were $0.75 per share. On average, 24 analysts polled by Thomson Reuters expected the company to report earnings of $0.76 per share for the latest quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter increased 6 percent to $7.36 billion from $6.92 billion in the same quarter last year and beat analysts' consensus revenue estimate of $7.25 billion.

The company noted that the movement in foreign currency exchange rates had a four percentage point negative impact on consolidated net sales growth in the latest quarter versus the prior year.

Consolidated comparable store sales for the quarter rose 6 percent, compared to an increase of 3 percent in the same period last year.

Gross profit margin for the quarter increased 0.5 percentage points from last year to 29.1 percent, primarily due to buying and occupancy leverage on the 6 percent comparable store sales growth.

Merchandise margins were flat with last year, despite a negative impact from transactional foreign exchange at the company's international divisions and increased supply chain costs

Within the company's U.S. segment, Marmaxx sales for the quarter rose 7 percent from the year-ago period to $4.81 billion, while sales of HomeGoods increased 16 percent to $895.38 million. Comparable store sales increased 4 percent at Marmaxx and rose 9 percent at HomeGoods.

In the International segment, sales in Canada edged up less than 1 percent to $699.35 million, while sales in Europe also increased less than 1 percent to $963.12 million. Comparable store sales increased 12 percent at TJX Canada and rose 5 percent at TJX Europe.

Looking ahead to the third quarter, TJX Companies forecast earnings in a range of $0.80 to $0.82 per share, compared to $0.85 per share in the year-ago period. The earnings outlook is based upon estimated consolidated comparable store sales growth of 2 percent to 3 percent.

The outlook also includes an assumption that the combination of foreign currency, transactional foreign exchange, the company's wage initiative, incremental investments to support growth, and pension costs would have a 13 percent negative impact on earnings per share growth.

Analysts expect the company to earn $0.89 per share for the quarter.

For fiscal 2016, TJX Companies now forecasts earnings in a range of $3.24 to $3.28 per share on comparable store sales growth of 3 percent to 4 percent, up from the prior range of $3.21 to $3.27 per share on consolidated comparable store sales growth of 2 percent to 3 percent.

The Street is currently looking for full-year earnings of $3.30 per share.

The company continues to expect to repurchase about $1.8 billion to $1.9 billion of TJX stock in fiscal 2016.

TJX closed Monday's trading at $71.61. In Tuesday's pre-market activity, the stock is up $2.75 or 3.84 percent to $74.36.