10-QPeriod: Q3 FY2020

TJX COMPANIES INC /DE/ Quarterly Report for Q3 Ended Nov 2, 2019

Filed December 3, 2019For Securities:TJX

Summary

TJX Companies reported solid financial results for the third quarter and the first nine months of fiscal 2020, demonstrating continued growth and profitability. Net sales increased by 6% to $10.5 billion for the quarter and 6% to $29.5 billion for the nine-month period, driven by a 4% comparable store sales increase and expansion in store count. Diluted earnings per share also saw a healthy increase, reaching $0.68 for the quarter and $1.86 for the nine months, up from $0.61 and $1.75 respectively in the prior year. The company's pre-tax margin remained stable at 10.7% for the quarter, indicating effective cost management despite some increases in supply chain and SG&A expenses. Key financial activities during the period included a significant investment of $225 million for a 25% stake in Familia, a Russian off-price retailer, signaling a strategic move for international expansion. Furthermore, TJX continued to return capital to shareholders, repurchasing $1.2 billion worth of stock and paying $0.8 billion in dividends for the nine-month period. The adoption of the new lease accounting standard (ASC 842) has impacted the balance sheet, resulting in the recognition of substantial operating lease right-of-use assets and liabilities, which is important for investors to note when evaluating the company's asset base and leverage. The company also highlighted its preparedness for potential impacts of Brexit and ongoing tariff pressures, with strategies in place to mitigate risks.

Financial Statements
Beta

Key Highlights

  • 1Net sales increased by 6% to $10.5 billion in Q3 FY2020 and by 6% to $29.5 billion in the first nine months of FY2020.
  • 2Comparable store sales increased by 4% in Q3 FY2020, driven primarily by customer traffic across all major segments.
  • 3Diluted Earnings Per Share (EPS) rose to $0.68 in Q3 FY2020 from $0.61 in Q3 FY2019, and to $1.86 for the nine months from $1.75 in the prior year.
  • 4TJX invested $225 million for a 25% ownership stake in Familia, a Russian off-price retailer, expanding its international presence.
  • 5The company returned $778 million to shareholders in Q3 FY2020 through share repurchases and dividends. Over the nine months, $1.2 billion was spent on share repurchases and $0.8 billion on dividends.
  • 6Adoption of the new lease accounting standard (ASC 842) resulted in the recognition of approximately $9 billion in operating lease right-of-use assets and liabilities as of February 3, 2019, impacting the balance sheet presentation.
  • 7The company is actively managing potential risks associated with Brexit and tariffs, implementing strategies to mitigate operational and financial impacts.

Frequently Asked Questions

Net sales for the third quarter ended November 2, 2019, increased by 6% to $10.5 billion, compared to $9.8 billion in the prior year. For the first nine months of fiscal 2020, net sales increased by 6% to $29.5 billion from $27.8 billion in the comparable period of fiscal 2019. This growth was supported by a 4% increase in comparable store sales, driven by higher customer traffic.

The adoption of ASC 842 starting February 3, 2019, led to the recognition of approximately $9 billion in operating lease right-of-use assets and corresponding lease liabilities on the Consolidated Balance Sheets. This significantly impacts the balance sheet by increasing both assets and liabilities, reflecting the company's long-term lease obligations for its retail stores and other facilities.

TJX is actively returning capital to shareholders through share repurchases and dividend payments. In the third quarter of fiscal 2020, the company returned $778 million to shareholders. For the first nine months of fiscal 2020, TJX spent $1.2 billion on share repurchases and $0.8 billion on dividend payments, indicating a strong commitment to shareholder returns.

TJX is proactively addressing potential risks. Regarding Brexit, the company has realigned its European supply chain and implemented strategies to mitigate impacts on merchandise flow, talent, and regulatory compliance. For tariffs on goods sourced from China, TJX is monitoring the situation closely and has noted some margin pressure, with ongoing efforts to manage vendor and competitor pricing, consumer demand, and currency fluctuations.