10-QPeriod: Q3 FY2018

TJX COMPANIES INC /DE/ Quarterly Report for Q3 Ended Oct 28, 2017

Filed November 28, 2017For Securities:TJX

Summary

TJX Companies reported solid financial results for the third quarter and nine months ended October 28, 2017. Net sales saw an increase of 6% in the quarter to $8.8 billion and 5% for the nine months to $24.9 billion, indicating continued top-line growth across its off-price retail segments. Despite flat same-store sales in the third quarter, which were impacted by hurricanes and warm weather, the company delivered a strong increase in diluted earnings per share (EPS). Diluted EPS rose to $1.00 in the quarter and $2.67 for the nine months, up from $0.83 and $2.43 respectively in the prior year periods. This EPS growth was supported by effective cost management, a favorable tax rate, and significant share repurchases. The company also demonstrated its commitment to returning capital to shareholders by repurchasing $547 million in the third quarter through share buybacks and dividends.

Financial Highlights

48 data points
Beta

Revenue

$8.76B

29.8% Gross Margin

Net Income

$641.44M

7.3% Net Margin

EPS (Diluted)

$0.50

Total Assets

$13.88B

Cash & Equivalents

$2.36B

Free Cash Flow

$505.71M

Financial Statements
Beta
Revenue$8.76B
Cost of Revenue$6.15B
Gross Profit$2.61B
SG&A Expenses$1.58B
Operating Income$1.12B
Net Income$641.44M
EPS (Basic)$0.51
EPS (Diluted)$0.50
Shares Outstanding (Basic)1.27B
Shares Outstanding (Diluted)1.29B

Key Highlights

  • 1Net sales increased 6% to $8.8 billion for the third quarter and 5% to $24.9 billion for the first nine months, demonstrating robust top-line growth.
  • 2Diluted earnings per share (EPS) increased significantly to $1.00 in the third quarter and $2.67 for the nine months, up from $0.83 and $2.43 in the prior year periods, respectively.
  • 3Despite flat consolidated same-store sales in the third quarter, impacted by external factors like hurricanes and warm weather, overall net sales grew due to new store openings and a positive foreign currency impact.
  • 4The company returned $547 million to shareholders in the third quarter via share repurchases and dividends, highlighting a focus on capital allocation.
  • 5Inventory levels decreased by 2% on a reported basis (4% constant currency) at the end of the third quarter compared to the prior year, suggesting effective inventory management.
  • 6The effective income tax rate decreased due to excess tax benefits from share-based payments, positively impacting net income.
  • 7TJX continued to expand its store base, with stores in operation increasing by 7% and selling square footage by 5% compared to the prior year's third quarter.

Frequently Asked Questions

TJX's net sales grew by 6% in the third quarter to $8.8 billion. While same-store sales were flat, impacted by external factors like hurricanes and unseasonably warm weather, the overall sales increase was driven by a 5% contribution from new store sales and a positive impact from foreign currency exchange rates.

TJX effectively managed its profitability. The cost of sales as a percentage of net sales decreased slightly, driven by favorable inventory derivative impacts and improved merchandise margins, though partially offset by higher supply chain and distribution costs. Selling, general, and administrative expenses as a percentage of net sales increased slightly, primarily due to hurricane-related expenses and wage increases. The company also benefited from a lower effective income tax rate due to excess tax benefits from share-based payments.

TJX actively returns capital to shareholders through a combination of share repurchases and dividends. In the third quarter, the company returned $547 million to shareholders. The company has ongoing stock repurchase programs, with approximately $0.5 billion remaining under one program and $1.0 billion authorized under another as of October 28, 2017. These repurchases not only return capital but also benefit EPS by reducing the weighted average number of shares outstanding.

The company noted that the major hurricanes and unseasonably warm weather in parts of the U.S. had a negative impact on third quarter sales, particularly on apparel. These factors also contributed to an increase in selling, general, and administrative expenses due to related cleanup and recovery efforts.