01—Abstract
Summary
Summary of the 10-K filed April 3, 2019. Cited figures are marked; the original filing is the authoritative source.
TJX Companies' fiscal 2019 (52 weeks ended February 2, 2019) was a strong year.
Net sales rose 9% to $39.0 billiona, driven by a 6% comparable-store sales increase that came primarily from higher customer traffic across all four segments. Diluted EPS climbed 20% to $2.43 from $2.02, aided by a net benefit of $0.34 per share from the 2017 Tax Act and roughly 3% from share repurchases. Net income reached $3.06 billion, and the after-tax return on average shareholders' equity was 60.1%.
The effective tax rate fell to 26.7%b from 32.4%, largely because the U.S. federal statutory rate dropped to 21%. Profitability was mixed beneath the headline growth. The pre-tax margin slipped 0.1 point to 10.7%, and the cost of sales ratio rose 0.3 point to 71.4% on higher supply chain and freight costs.
SG&A held flat at 17.8% of sales, with incentive compensation and wage increases offset by leverage on strong comps. HomeGoods' segment margin fell sharply to 11.6% from 13.2%, while Marmaxx improved to 13.5% and TJX International reached 5.4%. Management is investing heavily in growth: it ended the year with 4,306 stores, plans roughly 600 net new stores in fiscal 2020, and expects capital expenditures of about $1.5 billionc.
Capital returns were substantial. TJX repurchased 51.8 million shares for $2.5 billiond on a trade-date basis, ended the year with $3.0 billion in cash, and authorized an additional $1.5 billion buyback in February 2019.
Management guided fiscal 2020 repurchases of $1.75 to $2.25 billion and a dividend of $0.92 per share, up 18%. Key risks flagged in the filing include Brexit uncertainty affecting the European business, tariffs and trade policy, freight and labor cost inflation, and the pending adoption of the new lease standard, which will add roughly $9 billion of operating lease liabilities to the balance sheet.
02—Key points
Key Highlights
- Net sales grew 9% to $39.0 billion, with comparable store sales up 6%, driven primarily by customer traffic growth across all four segments.
- Diluted EPS rose 20% to $2.43 from $2.02; the 2017 Tax Act contributed a $0.34 per share net benefit in fiscal 2019.
- Effective tax rate fell to 26.7% from 32.4%, mainly from the reduction of the U.S. federal statutory rate to 21%.
- Pre-tax margin edged down to 10.7% as cost of sales rose to 71.4% of sales on higher supply chain and freight costs.
- HomeGoods segment margin declined to 11.6% from 13.2%, while Marmaxx improved to 13.5% and TJX International rose to 5.4%.
- Repurchased 51.8 million shares for $2.5 billion and raised the dividend outlook to $0.92 per share for fiscal 2020 (up 18%); a new $1.5 billion buyback was authorized.
- Store base reached 4,306 at fiscal year-end, with plans for roughly 600 net new stores in fiscal 2020 and capex of about $1.5 billion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, TJX Companies Inc kept $0.08.
- Revenue$38.97B100.0%
- Cost of revenue−$27.83B71.4%
- Gross profit$11.14B28.6%
- Operating costs−$6.38B16.4%
- Operating income$4.76B12.2%
- Interest, other & tax−$1.70B4.4%
- Net income$3.06B7.9%
Where FY2019 revenue went
$38.97B- Cost of revenue: $27.83B, 71% of revenue
- SG&A: $6.92B, 18% of revenue
- Net income: $3.06B, 7.9% of revenue
- Interest, other & tax: $1.70B, 4.4% of revenue
Kept 7.9% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed April 3, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $38.97B$35.86B | +8.7% |
| Cost of Revenue | $27.83B$25.50B | +9.1% |
| Gross Profit | $11.14B$10.36B | +7.5% |
| SG&A Expenses | $6.92B$6.38B | +8.6% |
| Operating Income | $4.76B$4.40B | +8.2% |
| Interest Expense | $69.10M$69.24M | −0.2% |
| Net Income | $3.06B$2.61B | +17.3% |
| EPS (Basic) | $2.47$2.05 | +20.5% |
| EPS (Diluted) | $2.43$2.02 | +20.3% |
| Shares Outstanding (Basic) | 1.24B1.27B | −2.6% |
| Shares Outstanding (Diluted) | 1.26B1.29B | −2.6% |
05—Questions
Frequently Asked Questions
What drove TJX's revenue and earnings growth in fiscal 2019?
Net sales increased 9% to $39.0 billion, with comparable store sales up 6% and non-comp sales (mainly new stores) adding 3%. Customer traffic rose at all four segments. Diluted EPS grew 20% to $2.43, helped by the 2017 Tax Act (about $0.34 per share), share repurchases (about 3% of EPS growth), and operating leverage on strong comps, partly offset by freight and supply chain costs.
Did profitability improve or deteriorate?
Mixed. The pre-tax margin dipped 0.1 point to 10.7%, and cost of sales rose 0.3 point to 71.4% of sales, reflecting higher distribution and freight costs. SG&A was flat at 17.8%. Net income rose to $3.06 billion mainly because of higher sales and the lower tax rate. HomeGoods' margin fell 1.6 points, while Marmaxx and TJX Canada were the main contributors to profit growth.
How much cash is TJX returning to shareholders, and what is planned for fiscal 2020?
In fiscal 2019 TJX repurchased $2.4 billion of stock on a cash basis and paid $923 million in dividends. Roughly $1.7 billion remained under existing authorizations at year-end, and the board added $1.5 billion in February 2019. For fiscal 2020, management plans $1.75 to $2.25 billion in buybacks and quarterly dividends of $0.23 per share ($0.92 annually).
What are the main risks highlighted for investors?
Key risks include Brexit, which could disrupt merchandise flows and talent in the European business; tariffs and trade policy, given heavy sourcing from Asia and China; rising freight, wage, and benefit costs; currency volatility affecting translated results and inventory hedges; and possible wage-and-hour and compare-at pricing class actions. The filing also notes the upcoming lease accounting change, which adds about $9 billion of operating lease liabilities, though TJX expects a limited income statement impact.
What growth plans does TJX have for fiscal 2020?
TJX plans to add about 600 net new stores, including roughly 60 Marmaxx stores, 10 Sierra stores, 65 HomeGoods and 15 Homesense stores, 30 stores in Canada, and 50 in TJX International. It expects capital expenditures of about $1.5 billion, with about $900 million for offices and distribution centers, $400 million for store renovations, and $200 million for new stores.
06—Continue