TJX Cos. on Wednesday said holiday sales were up 13% as shoppers looking for deals flocked to the retailer with discounted prices.
Despite the strong quarter and the end of its fiscal year, the company issued guidance that came in light of Wall Street's expectations as it prepares for tighter comps in the coming year and an uncertain growth trajectory.
Here's how TJX fared in its fiscal fourth quarter compared to what Wall Street anticipated, according to a survey of analysts by LSEG, formerly known as Refinitiv:
- Earnings per share: $1.22 vs. $1.12 expected
- Revenue: $16.41 billion vs. $16.21 billion expected
For the quarter ended Feb. 3, the company reported net income of $1.4 billion, or $1.22 per share, compared with $1.04 billion, or 89 cents per share, a year earlier. Excluding an additional week in the quarter, TJX reported earnings per share of $1.12.
Sales rose to $16.41 billion, up about 13% from $14.52 billion a year earlier. Sales for the prior-year period included one fewer week.
For the current quarter, it expects earnings per share of 84 cents to 86 cents, in light of the high end of Wall Street expectations of 82 cents to 93 cents, according to LSEG. For the full year, it expects earnings per share of $3.94 to $4.02, compared with estimates of $3.88 to $4.40.
TJX stock closed slightly higher. The company's shares are up more than 7% so far this year, as of Wednesday's close.
TJX, which operates TJ Maxx, Marshall's, Sierra and HomeGoods, has become the de facto leader in the off-price space for its ability to offer a wide range of premium brand-name products and attract higher-income shoppers looking for options. more economical. in the face of persistent inflation.
Over the past year, it has raised its sales and profit forecasts numerous times. Ahead of the holiday season, it struck a positive tone as other retailers issued cautious or disappointing forecasts amid slowing demand and an uncertain economy.
During the holidays, consumers focused on finding the best deals and discounts, spending record amounts on Black Friday and Cyber Monday and pulling back when promotions were unavailable. TJX was well positioned during the period because consumers were able to purchase a wide range of gifts and at prices that tend to be lower than the competition.
“We think there are a lot of opportunities in the retail sector,” TJX CEO Ernie Herrman said on the company's conference call Wednesday. “Customers are responding very well to our sales push.”
During the quarter, comparable sales at Marmaxx, which includes TJ Maxx, Marshall's and Sierra stores, rose 5%, better than the 4.6% increase analysts were expecting, according to StreetAccount.
While comparable growth stagnated slightly from the prior quarter, TJX's numbers compare to tough year-ago numbers, so its two-year growth rate has actually accelerated, the analyst said in a note. retailer Neil Saunders, managing director of GlobalData.
In the United States, sales at TJ Maxx and Marshalls grew 11.7%, adding to a 7% increase a year earlier, Saunders said.
“Most of this was driven by consumers who were budgeting to spend less overall or wanted to get more for their money. Fortunately, those who chose to shop at TJ Maxx and Marshalls didn't just focus on price, they also chose the chains for quality and selection,” Saunders said. “This flight to value, which is essentially acting as a recruiting sergeant, was very beneficial for a quarter, which is traditionally expensive for most households.”
As other retailers report weak home furnishings sales amid high interest rates and a sluggish housing market, TJX is bucking the trend at its HomeGoods brand. During the quarter, comparable sales rose 7%, compared with the 4.7% increase analysts were expecting, according to StreetAccount.
The numbers come from slightly simpler comparisons, as comparable sales at HomeGoods fell 7% in the prior-year quarter. But the chain is benefiting from consumers who may not be able to buy a new home because of high interest rates but are eager to spruce up their existing spaces.
HomeGoods could also benefit from the demise of Bed Bath & Beyond stores and win over customers who prefer to shop for home furnishings in a physical retail store rather than online, where the new Bed Bath now resides exclusively, Saunders said.
The company said it sees additional market share opportunity after Macy's recently announced it would close 150 stores.
“With the closure of Macy's stores, there are many overlapping categories that tie together the business we run,” Herrman said.
TJX's supply has been better than usual because many of its suppliers had high inventories during 2022 and 2023 and relied on the off-price retailer to help clear that excess. Now that inventories are leveling out across the industry, Wall Street will be interested to see the state of TJX's supply and whether it can sustain the growth and demand it has seen over the past year.
TJX's guidance appears to reflect that concern. In the coming year, it will face much tougher comparisons, leaving its growth trajectory uncertain. Some analysts suspect its current fiscal year will see more moderate growth as it looks to retain the new customers it acquired rather than continuing to attract new buyers.
In a research note by Jane Hali & Associates, checks of stores in New York, Florida, Texas and California showed “fewer notable brands in luxury, affordable luxury and contemporary.” While inventory levels in the prior quarter remained stable, some stores appeared to have too much inventory and “too much clearance,” according to the note.
At the end of the quarter, total inventories stood at $6 billion, compared to $5.8 billion at the end of fiscal 2023, the company said. Consolidated inventories by store, which include distribution centers and exclude in-transit inventory, TJX e-commerce sites and Sierra stores, increased 1%.
Read the full earnings release here.
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