TJX Misses Sales Estimates
Comparable sales increased by just 2 percent in the second quarter ended
Aug. 3, the weakest pace of growth in more than a year.
Bargain hunters appear to have found some better deals.
The TJX Cos. Inc., the owner of T. J. Maxx chains and Marshalls, is starting to feel pressure from the likes of Nordstrom Inc. and Macy’s Inc., both of whom have been beefing up their discount offerings.
According to its latest set of earnings, the Framingham, Mass.-based off-price retailer’s “treasure hunt” shopping experience strategy continued to entice customers through its doors, but didn’t do the trick when it came to actually making more purchases.
Comparable sales, which excludes new store openings, increased by just 2 percent in the second quarter ended Aug. 3. This was the weakest pace of growth in more than a year and came despite higher footfall.
Sales missed analysts’ expectations at every division, with the exception of international. Marmaxx, its biggest division, saw sales edge up 2 percent, while at HomeGoods, its second largest, they were flat.
As a result, TJX Cos.’ net sales, at $9.8 billion, were below Wall Street’s average consensus for $9.9 billion based on FactSet data, sending its share price down slightly.
Net income, meanwhile, was $759 million, and diluted earnings per share were 62 cents, up 7 percent versus the prior year’s 58 cents.
“While their business remains stronger than the majority of our universe, we wouldn’t call this a ‘good’ quarter by TJX standards, and in fact this might be the weakest quarter we’ve seen in 24 months,” Ike Boruchow, a senior analyst at Wells Fargo, wrote in a note to clients.
“HomeGoods generated [its] slowest comp since the recession as the result of execution issues in certain categories [requiring necessary markdowns to clear stale inventory], leading to the
12th consecutive quarter of segment profitability erosion,” he added.
Nevertheless, Ernie Herrman, chief executive officer and president of TJX Cos., remained positive.
“Looking ahead, the third quarter is off to a solid start. We are laser focused on executing our business model and have many initiatives planned to keep driving sales and traffic in the second half of the year,” he told analysts during a call following the release of the second-quarter results. “We are convinced that we remain in a great position to capture market share around the world for many years to come.”
For the third quarter, it is penciling EPS to be in the range of 63 cents to 65 cents. Wall Street had forecast 68 cents.
For the year as a whole, the company continues to expect diluted EPS to be in the range of $2.56 to $2.61. Again, this was below expectations of $2.62.