01—Abstract
Summary
Summary of the 10-K filed April 1, 2014. Cited figures are marked; the original filing is the authoritative source.
TJX Companies (fiscal 2014, ended February 1, 2014) delivered solid results in its 10-K filed April 1, 2014.
Net sales rose 6% to $27.4 billiona, same store sales grew 3%, and diluted EPS increased 15% to $2.94. Pre-tax margin improved to 12.1% from 11.9%, and net income reached $2.1 billion. Part of the EPS gain came from roughly $0.11 per share of third-quarter tax benefits, and the prior 53-week year had added about $0.08, so underlying growth was more moderate than the headline figures suggest.
The cost of sales ratio improved only slightly, to 71.5%b, while SG&A fell to 16.3% of sales. Growth was led by new stores, with about 4% of sales growth from new stores, 3% from same store sales, and 1% from Sierra Trading Post. The balance sheet and capital return stand out.
Operating cash flow was $2.59 billionc, down from $3.05 billion, mainly on working capital timing and a $104 million reduction in tax reserves. TJX repurchased 27.0 million shares for $1.5 billion, issued $500 million of 2.5% ten-year notes, and raised its planned fiscal 2015 quarterly dividend to $0.175 from $0.145. It also authorized a new $2.0 billion buyback.
Total debt as a share of capitalization rose to 23.2% from 17.4%, and long-term debt reached $1.27 billiond. Inventory per store was down 8%, which supports the lean-inventory off-price model. Looking ahead, management plans about 75 net new Marmaxx stores, 35 HomeGoods stores, 20 Canadian stores, and 40 European stores in fiscal 2015, with capital expenditures of about $975 million.
Risks flagged in the filing include the Canadian dollar's depreciation against the U.S. dollar, which affects merchandise costs for TJX Canada, weather effects on sales, a 2006 data breach with ongoing FTC oversight, and class action wage-and-hour lawsuits. Investors should watch whether sales growth can keep pace with store expansion and whether margin gains persist without tax benefits.
02—Key points
Key Highlights
- Net sales rose 6% to $27.4 billion, with same store sales up 3% after a 7% gain in fiscal 2013.
- Diluted EPS was $2.94, up 15%, but included about $0.11 per share of one-time third-quarter tax benefits.
- Pre-tax margin improved to 12.1% from 11.9%, and cost of sales improved to 71.5% of sales.
- Returned capital through $1.5 billion of share repurchases (27.0 million shares) and $394 million of dividends; announced a new $2.0 billion buyback.
- Quarterly dividend planned to rise to $0.175 per share in fiscal 2015, implying about a 21% annual increase.
- Operating cash flow fell to $2.59 billion from $3.05 billion, and total debt as a share of capitalization rose to 23.2% after a $500 million bond issue.
- Plans about 3,000+ net new stores in fiscal 2015 (to roughly 3,391 year-end store count, from 3,219), with capex of about $975 million.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed April 1, 2014Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $27.42B$25.88B | +6.0% |
| SG&A Expenses | $4.47B$4.25B | +5.1% |
| Operating Income | $3.68B$3.44B | +6.9% |
| Interest Expense | $57.08M$48.58M | +17.5% |
| Net Income | $2.14B$1.91B | +12.1% |
| EPS (Basic) | $1.50$1.30 | +15.4% |
| EPS (Diluted) | $1.47$1.27 | +15.3% |
| Shares Outstanding (Basic) | 1.43B1.47B | −2.7% |
| Shares Outstanding (Diluted) | 1.45B1.50B | −2.8% |
05—Questions
Frequently Asked Questions
How did TJX perform in fiscal 2014?
TJX reported net sales of $27.4 billion, up 6%, and diluted EPS of $2.94, up 15%. Same store sales grew 3%. Growth came from new stores and Sierra Trading Post, and about $0.11 of EPS came from one-time tax benefits, so underlying earnings growth was smaller than the headline figure.
Which segments drove results?
Marmaxx, the U.S. T.J. Maxx and Marshalls business, is the largest, with $17.9 billion in sales and a 14.6% segment margin. HomeGoods grew fastest, with 13% sales growth, 7% same store sales growth, and a 12.9% margin. TJX Europe grew sales 10% with a margin of 7.6%. TJX Canada was weaker, with flat same store sales and a 14.1% margin, reduced by currency translation and weather.
What are the main risks to the investment case?
The filing highlights currency exposure, especially the weaker Canadian dollar, which raises the cost of U.S.-dollar merchandise for TJX Canada. It also notes weather sensitivity, dependence on opportunistic buying, lease obligations, a 2006 computer intrusion with FTC oversight, and class action wage-and-hour lawsuits. Rising leverage from the new notes and buybacks also adds some financial risk.
What is management's outlook and capital allocation plan?
For fiscal 2015, TJX plans roughly 75 net new Marmaxx stores, 35 HomeGoods stores, 20 Canadian stores, and 40 European stores, with capex of about $975 million. It plans $1.6 to $1.7 billion in buybacks and a $0.70 annual dividend, funded mainly from internal cash flow, and has a $2.0 billion authorization in place.
06—Continue