Off-price giant shines in Q2; sees plenty of room for store growth

TJX Companies showed strong momentum in the second quarter, fueled by strong traffic across all its brands.



The off-pricer retailer on Tuesday reported earnings, sales and same-store sales that topped analysts' expectations.



Total sales rose 6% to $8.36 billion, beating analysts' estimates of $8.29 billion, in the quarter ended July 29. Same-store sales rose 3% for the quarter. By brand, same-store rose 7% at Home Goods and TJX Canada; 2% at Marmaxx (TJ Maxx and Marshalls); and 1% at TJX International.



TJX's strong showing comes as the chain gets ready to debut another home concept, HomeSense, in the U.S. The first location opens Aug. 17, in Framingham, Mass. The company has said that HomeSense will complement its existing — and still growing — HomeGoods brand.



Neil Saunders, managing director of GlobalData, commented that TJX's decision to open a new U.S. seems "particularly sound."



“This will allow the company to better take advantage of the strong growth in home retail and to grow its presence in categories, like furniture and larger furnishing items, which are a relatively weak part of HomeGoods proposition," Saunders said. “Given that these categories are not ones in which many other off-price retailers operate, we believe that HomeSense can make some substantial market share gains over a short period.”



On the chain's quarterly call, CEO Ernie Herrman said that, long term, TJX has the potential to open up to 5,600 stores under its current banners, which is 1,700 more locations than it currently has.



"We continue to see store openings as an attractive investment and a very good use of capital," he said.



TJX's net income in the quarter slipped 1.6% to $552.6 million, or 85 cents per share, amid increased expenses, compared with $562.2 million, 84 cents per share, in the year ago period. Excluding one-time items, the retailer earned 85 cents per share, edging past analysts' estimates by one cent.



“I am very pleased with our strong second quarter results," stated Herrman. "Customer traffic was up and was the primary driver of our comp store sales growth at every division and overall merchandise margin was up, which we see as excellent indicators of the fundamental strength, consistency and flexibility of our business. In addition, we are confident that we are gaining market share at each of our four major divisions."



The company raised its forecast for adjusted earnings to $3.78 to $3.82 per share, from $3.71 to $3.78 for the year ending January 2018. Analysts on average were expecting $3.89 per share.



"Looking ahead, we see exciting opportunities for our business in the second half of the year," said Hermann. "We believe we are set up extremely well to take advantage of the abundant buying opportunities in the marketplace. We have great liquidity in our inventories and we continue to grow our global sourcing universe of over 18,000 vendors, as we constantly open new vendor relationships and strengthen our existing ones."



During the second quarter, the company increased its store count by 51 stores to a total of 3,913 locations.