10-QPeriod: Q3 FY2014

TJX COMPANIES INC /DE/ Quarterly Report for Q3 Ended Nov 2, 2013

Filed December 3, 2013For Securities:TJX

Summary

TJX Companies Inc. reported strong third-quarter and nine-month results for the period ending November 2, 2013, demonstrating robust sales growth and significant earnings per share expansion. Net sales increased by 9% in the third quarter to $7.0 billion and by 8% year-to-date to $19.6 billion, driven by a 5% increase in same-store sales for the quarter and a 3% increase year-to-date, fueled by higher average ticket prices and increased customer traffic. Diluted earnings per share saw a substantial rise of 39% for the quarter to $0.86 and 24% year-to-date to $2.14, reflecting strong operational execution and benefits from ongoing share repurchase programs. The company also achieved improved pre-tax margins and a better cost of sales ratio due to increased merchandise margins and expense leverage. While consolidated average per store inventories decreased slightly, TJX continued its strategic capital allocation through significant share repurchases, totaling $1.0 billion year-to-date, and announced plans for further repurchases. The company's strong financial performance was broad-based across its segments, with notable same-store sales growth in Marmaxx and HomeGoods in the U.S., and solid net sales increases in TJX Canada and TJX Europe, despite currency headwinds in Canada.

Financial Highlights

47 data points
Beta

Revenue

$6.98B

29.3% Gross Margin

Net Income

$622.65M

8.9% Net Margin

EPS (Diluted)

$0.43

Total Assets

$10.67B

Cash & Equivalents

$2.01B

Free Cash Flow

$559.82M

Financial Statements
Beta
Revenue$6.98B
Gross Profit$2.05B
SG&A Expenses$1.16B
Operating Income$985.04M
Net Income$622.65M
EPS (Basic)$0.44
EPS (Diluted)$0.43
Shares Outstanding (Basic)1.42B
Shares Outstanding (Diluted)1.45B

Key Highlights

  • 1Net sales increased 9% to $7.0 billion for Q3 Fiscal 2014 and 8% to $19.6 billion for the first nine months, driven by comparable store sales growth of 5% (Q3) and 3% (year-to-date).
  • 2Diluted Earnings Per Share (EPS) grew significantly, up 39% to $0.86 in Q3 and up 24% to $2.14 year-to-date.
  • 3Pre-tax margin improved to 12.6% for Q3 and 12.2% year-to-date, reflecting increased merchandise margins and expense leverage.
  • 4Cost of sales ratio improved by 0.5 percentage points for both the quarter and year-to-date periods.
  • 5TJX repurchased $375 million of its common stock in Q3 and $1.0 billion year-to-date, with plans to repurchase $1.4 billion to $1.5 billion in fiscal 2014.
  • 6HomeGoods segment showed particularly strong performance with a 16% increase in net sales and a 10% same-store sales increase in Q3.
  • 7Effective income tax rate decreased to 29.2% in Q3 due to significant tax benefits, primarily from a reduction in reserves for uncertain tax positions.

Frequently Asked Questions

The increase in net sales and earnings per share was driven by a combination of factors including a 5% increase in same-store sales for the third quarter and 3% year-to-date. This growth was fueled by an increase in the average ticket price and higher customer traffic. Additionally, improved merchandise margins and effective expense leverage contributed to stronger profitability. Share repurchases also positively impacted earnings per share.

All segments showed positive performance. In the U.S., Marmaxx saw a 4% increase in same-store sales for the quarter, while HomeGoods delivered a strong 10% same-store sales increase. Internationally, TJX Canada reported a 2% same-store sales increase, and TJX Europe achieved a 5% same-store sales increase in the third quarter, with both segments contributing to overall net sales growth despite currency impacts in Canada.

TJX is actively returning value to shareholders through share repurchases. The company repurchased $375 million in the third quarter and $1.0 billion year-to-date, completing a $2 billion program and initiating a new $1.5 billion program. They plan to repurchase between $1.4 billion and $1.5 billion in fiscal 2014, indicating a strong commitment to share buybacks as a capital allocation strategy.

Yes, the effective income tax rate was significantly lower in the third quarter of fiscal 2014 (29.2%) compared to the prior year (38.3%). This decrease was primarily due to approximately $80 million in tax benefits, mainly from reducing the reserve for uncertain tax positions and reversing a valuation allowance against a foreign net operating loss carryforward. These benefits had a material positive impact on both quarterly and year-to-date reported earnings.