10-QPeriod: Q3 FY2019

TJX COMPANIES INC /DE/ Quarterly Report for Q3 Ended Nov 3, 2018

Filed December 4, 2018For Securities:TJX

Summary

The TJX Companies, Inc. reported strong financial results for the third quarter and the first nine months of fiscal year 2018, reflecting robust sales growth and improved profitability. Net sales increased by 12% to $9.8 billion for the third quarter and by 12% to $27.8 billion for the nine-month period, driven by a 7% consolidated comparable store sales increase in the quarter, with customer traffic being a key driver. Diluted earnings per share saw a significant improvement, reaching $0.61 for the quarter and $1.75 for the nine months, up from $0.50 and $1.33 respectively in the prior year. The company benefited from a lower effective income tax rate due to the U.S. federal corporate tax rate reduction, which contributed approximately $0.09 per share to the quarter's EPS and $0.26 to the nine-month EPS. While pre-tax margin decreased slightly due to factors like higher freight costs and increased supply chain expenses, overall profitability improved, supported by strong performance across its segments, particularly Marmaxx and TJX International. TJX also continued its commitment to shareholder returns, repurchasing approximately $1.6 billion in stock and paying out $0.7 billion in dividends during the first nine months of the fiscal year.

Financial Statements
Beta

Key Highlights

  • 1Net sales for the third quarter increased 12% to $9.8 billion, driven by a 7% increase in comparable store sales, largely fueled by customer traffic.
  • 2Diluted earnings per share (EPS) rose to $0.61 for the third quarter and $1.75 for the nine months, a significant increase from $0.50 and $1.33 respectively in the prior year.
  • 3The effective income tax rate decreased substantially to 27.2% for the quarter and 25.9% for the nine months, primarily due to the 2017 U.S. Tax Act reducing the federal corporate tax rate.
  • 4The company incurred a non-cash pension settlement charge of $36.1 million in the third quarter related to the annuitization of pension obligations.
  • 5Cost of sales, including buying and occupancy costs, as a percentage of net sales increased slightly, impacted by higher freight and supply chain costs, as well as inventory hedges.
  • 6TJX returned approximately $841 million to shareholders in the third quarter through share repurchases ($0.6 billion) and dividends ($0.2 billion).
  • 7Inventory levels increased year-over-year, with consolidated average per store inventories up 9% on a reported basis, indicating a build-up for anticipated demand.

Frequently Asked Questions

The primary driver of TJX's sales growth in the third quarter was a 7% increase in comparable store sales, which was largely fueled by an increase in customer traffic.

The 2017 Tax Act significantly lowered the U.S. federal corporate tax rate, resulting in a lower effective income tax rate for TJX. This reduction provided a substantial benefit to earnings per share, estimated at approximately $0.09 for the third quarter and $0.26 for the first nine months.

TJX recorded a non-cash pension settlement charge of $36.1 million in the third quarter. This charge resulted from the company annuitizing and transferring current pension obligations for certain U.S. retirees through the purchase of a group annuity contract, which reduced its pension benefit obligations without a direct cash impact.

TJX increased its consolidated average per store inventories by 9% on a reported basis. This build-up in inventory, in conjunction with strong comparable store sales growth driven by customer traffic, suggests the company is positioning itself to meet anticipated demand and manage its product assortment effectively.