01—Abstract
Summary
Summary of the 10-K filed April 4, 2018. Cited figures are marked; the original filing is the authoritative source.
TJX Companies reported a strong fiscal 2018 (53 weeks ended February 3, 2018), with net sales up 8% to $35.9 billiona and diluted EPS up 17% to $4.04 from $3.46.
Comparable sales rose 2% on a 52-week basis, driven by customer traffic across all four segments. Results were helped by a $0.17b net benefit from the 2017 Tax Act (after reinvestment) and a $0.11 benefit from the 53rd week, partially offset by a $0.10 impairment charge on Sierra Trading Post. Pre-tax margin slipped 0.4 points to 10.8%, and SG&A deleveraged to 17.8% of sales on wage increases and incremental Tax Act investments, while the cost of sales ratio was roughly flat at 71.1%.
Growth came mainly from new stores, with the store base rising 7% to 4,070 and selling square footage up 4%. HomeGoods (up 16%) and TJX Canada (up 15%) were the standout growth engines, while Marmaxx (up 5%, comps +1%) and TJX International (up 11%, comps +2%, segment margin down to 5.1%) lagged on profitability. Management plans roughly 3,000 stores in fiscal 2019 growth targets of about 6,100 long-term potential, and expects to spend about $1.4 billionc in capex.
Capital returns remain a major focus. TJX repurchased 22.3 million shares for $1.7 billiond and paid $764 million in dividends, while operating cash flow was $3.0 billion. The board authorized a new $3.0 billion buyback, with $2.5 to $3.0 billion planned for fiscal 2019, and the quarterly dividend is planned to rise to $0.39 (a 25% increase).
The balance sheet is strong, with $2.8 billion in cash and only $2.2 billion in long-term debt. Key risks include the STP write-down, rising freight and labor costs, currency swings, and pending class-action wage-and-hour and compare-at pricing lawsuits.
02—Key points
Key Highlights
- Net sales rose 8% to $35.9B; comparable sales grew 2% on a 52-week basis, driven by customer traffic across all four segments.
- Diluted EPS rose 17% to $4.04 (from $3.46), including a $0.17 net Tax Act benefit and $0.11 from the 53rd week, offset by a $0.10 STP impairment.
- Pre-tax margin fell 0.4 points to 10.8%, with SG&A rising to 17.8% of sales on wage increases and incremental Tax Act investments.
- HomeGoods (+16%) and TJX Canada (+15%) led growth, while TJX International segment margin fell to 5.1% and Marmaxx segment margin fell to 13.3%.
- Store base grew 7% to 4,070; management plans roughly 290 net new stores in fiscal 2019 and about $1.4B in capex.
- Shareholder returns: $1.7B in buybacks, $764M in dividends, and a new $3.0B repurchase authorization; the quarterly dividend is planned to rise to $0.39.
- Strong balance sheet with $2.8B in cash versus $2.2B of long-term debt; operating cash flow was $3.0B.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, TJX Companies Inc kept $0.07.
- Revenue$35.86B100.0%
- Cost of revenue−$25.50B71.1%
- Gross profit$10.36B28.9%
- Operating costs−$5.96B16.6%
- Operating income$4.40B12.3%
- Interest, other & tax−$1.80B5.0%
- Net income$2.61B7.3%
Where FY2018 revenue went
$35.86B- Cost of revenue: $25.50B, 71% of revenue
- SG&A: $6.38B, 18% of revenue
- Net income: $2.61B, 7.3% of revenue
- Interest, other & tax: $1.80B, 5.0% of revenue
Kept 7.3% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed April 4, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $35.86B$33.18B | +8.1% |
| Cost of Revenue | $25.50B$23.57B | +8.2% |
| Gross Profit | $10.36B$9.62B | +7.7% |
| SG&A Expenses | $6.38B$5.77B | +10.5% |
| Operating Income | $4.40B$4.26B | +3.4% |
| Interest Expense | $69.24M$69.22M | 0.0% |
| Net Income | $2.61B$2.30B | +13.5% |
| EPS (Basic) | $2.05$1.75 | +17.1% |
| EPS (Diluted) | $2.02$1.73 | +16.8% |
| Shares Outstanding (Basic) | 1.27B1.31B | −2.9% |
| Shares Outstanding (Diluted) | 1.29B1.33B | −2.8% |
05—Questions
Frequently Asked Questions
How much did the 2017 Tax Act and the 53rd week affect fiscal 2018 earnings?
The 2017 Tax Act produced a net benefit of $0.17 per diluted share after the incremental employee and charitable investments TJX made with part of the savings. The 53rd week added about $0.11 per share. Excluding these items, underlying earnings growth would have been noticeably lower than the reported 17%.
Why did profitability decline in some segments despite strong sales growth?
Marmaxx margins fell to 13.3% due to the STP impairment, higher store payroll from wage increases, and higher distribution costs. TJX International margins fell to 5.1% from new distribution center costs, higher store payroll, and weak comps. Both segments absorbed cost pressures that outpaced merchandise margin gains.
What are the main risks flagged in the filing?
Key risks include failure to execute the opportunistic buying and inventory strategy, rising labor and benefit costs (including multiemployer pension exposure), cyber and data security threats, currency and tariff exposure on imported goods, rising freight and fuel costs, and pending putative class actions over wage-and-hour claims and compare-at pricing. The company also notes ongoing uncertainty in Tax Act interpretation.
How is TJX returning capital to shareholders and what does it plan for fiscal 2019?
In fiscal 2018 TJX spent $1.7B on buybacks (22.3M shares) and $764M on dividends. The board approved a new $3.0B repurchase program, and management plans $2.5B to $3.0B of buybacks in fiscal 2019. The quarterly dividend is planned to rise to $0.39, a 25% increase over fiscal 2018.
06—Continue