01—Abstract
Summary
Summary of the 10-K filed March 31, 2015. Cited figures are marked; the original filing is the authoritative source.
TJX Companies delivered another solid fiscal 2015 (year ended January 31, 2015), with net sales rising 6% to $29.1 billiona and diluted EPS up 7% to $3.15.
Growth was driven by 4% from new stores and 2% from same store sales, with same store sales increases coming from both a higher average transaction and modestly higher customer traffic. Pre-tax margin edged up 0.1 point to 12.2%, supported by a 0.2-point decline in SG&A to 16.1% of sales, partly offset by a higher effective tax rate of 37.6% (versus 35.6% in fiscal 2014, which benefited from roughly $80 millionb of one-time tax items). Net income reached $2.2 billion, up 4%.
Cash generation was strong, with operating cash flow of $3.0 billionc against $0.9 billion of capital expenditures, leaving free cash flow of roughly $2.1 billion that funded $1.7 billion of share repurchases and $466 million of dividends. The segment picture is mixed. HomeGoods was the standout, with net sales up 14% and same store sales up 7%, and segment margin expanding to 13.6%.
Marmaxx, the largest segment, grew sales 4% but same store sales rose only 1%, leaving segment margin flat at 14.6%. TJX Europe grew sales 13% and expanded segment margin to 8.2%, while TJX Canada was flat in U.S. dollar terms because currency translation cut growth by about 7 points, and its segment margin fell to 13.6%. Management flagged a significant headwind for fiscal 2016: the strengthening U.S. dollar is expected to weigh on results to a much greater extent than historically experienced, and TJX is also raising U.S. hourly store associate wages to at least $9.00d per hour starting June 2015.
The balance sheet remains conservative in operating terms but has become more levered. Long-term debt rose to $1.62 billion after issuing $750 million of 2.75% notes and redeeming $400 million of 4.20% notes, and total debt as a percentage of total capitalization increased to 27.6% from 23.2%.
Cash and equivalents reached $2.5 billion. Management plans $1.8 to $1.9 billion of repurchases in fiscal 2016, a new $2.0 billion authorization was approved in February 2015, and the quarterly dividend is planned to rise to $0.21 per share, a 20% increase.
02—Key points
Key Highlights
- Net sales rose 6% to $29.1 billion, with 4 points from new stores and 2 points from same store sales, which grew 2% overall.
- Diluted EPS increased to $3.15 from $2.94, with net income up 4% to $2.2 billion; the 37.6% effective tax rate was higher than fiscal 2014's 35.6%, which included about $80 million of one-time benefits.
- HomeGoods was the strongest segment, with sales up 14%, same store sales up 7%, and segment margin expanding to 13.6% from 12.9%.
- Marmaxx, the largest segment at $18.7 billion in sales, grew 4% but same store sales rose only 1%, with segment margin flat at 14.6%.
- Strong free cash flow of about $2.1 billion (operating cash flow of $3.0 billion less $0.9 billion of capex) funded $1.7 billion of buybacks and $466 million of dividends.
- Management warned that the strong U.S. dollar will weigh on fiscal 2016 results more than historically, and U.S. store wages will rise to at least $9.00 per hour from June 2015.
- Long-term debt increased to $1.62 billion, and total debt to total capitalization rose to 27.6% from 23.2%, while the company planned a 20% dividend increase to $0.84 annually for fiscal 2016.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2015filed March 31, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $29.08B$27.42B | +6.0% |
| SG&A Expenses | $4.70B$4.47B | +5.1% |
| Operating Income | $3.93B$3.68B | +6.8% |
| Interest Expense | $64.78M$57.08M | +13.5% |
| Net Income | $2.22B$2.14B | +3.6% |
| EPS (Basic) | $1.60$1.50 | +6.7% |
| EPS (Diluted) | $1.57$1.47 | +7.1% |
| Shares Outstanding (Basic) | 1.39B1.43B | −2.9% |
| Shares Outstanding (Diluted) | 1.41B1.45B | −3.1% |
05—Questions
Frequently Asked Questions
How did TJX perform financially in fiscal 2015?
TJX grew net sales 6% to $29.1 billion and diluted EPS 7% to $3.15. Pre-tax margin rose slightly to 12.2%, and net income reached $2.2 billion. Results were supported by store expansion and a 2% increase in same store sales.
Which segments drove growth, and which lagged?
HomeGoods led with 14% sales growth and 7% same store sales growth. TJX Europe grew sales 13% and improved its margin to 8.2%. Marmaxx, the largest segment, grew only 4% with same store sales up 1%, and TJX Canada was flat in U.S. dollars because currency translation reduced growth by about 7 points.
What are the main risks flagged for fiscal 2016?
The company expects the stronger U.S. dollar to hurt results much more than in past years, particularly in Canada, where the cost of U.S.-dollar merchandise is rising. Higher U.S. store wages (minimum $9.00 per hour from June 2015) and continued pressure from the expansion into new countries, such as Austria, are also cost factors to watch.
How is TJX returning capital to shareholders?
In fiscal 2015 TJX repurchased 27.7 million shares for $1.7 billion and paid $466 million in dividends. For fiscal 2016 it plans $1.8 to $1.9 billion of buybacks, has a new $2.0 billion authorization approved in February 2015, and expects a quarterly dividend of $0.21 per share, up from $0.175.
Has TJX's balance sheet become more leveraged?
Yes, modestly. Long-term debt rose to $1.62 billion after a $750 million 2.75% note issuance used partly to redeem $400 million of 4.20% notes. Total debt as a share of total capitalization increased to 27.6% from 23.2%, though the company still held $2.5 billion in cash and equivalents and two undrawn $500 million revolving credit facilities.
06—Continue