TJX Companies (TJX) Q4 Earnings, Sales Grow Y/Y, Stock Gains

The TJX Companies, Inc. (NYSE:TJX) reported fourth-quarter fiscal 2018 results, wherein both earnings and revenues improved year over year, largely driven by solid customer traffic. Notably, shares of the company were up about 8% during the pre-market trading session.

Moreover, this Zacks Rank #2 (Buy) stock has gained 9% in a year, while the industry rallied 24.7% in the same time-frame.

Quarterly Details

The company’s earnings of $1.19 per share jumped about 15.5% year over year and came ahead of management’s guidance range. However, the bottom line came below the Zacks Consensus Estimate of $1.28. Notably, currency translations had a 1-cent positive impact on earnings per share, which also benefited from the recent tax reforms.

Net sales advanced nearly 15.8% year over year to $10,960.7 million, surpassing Zacks Consensus Estimate of $10,789 million. Sales continued to be backed by improved traffic. Also, currency translations benefited consolidated net sales growth by roughly 2%.

Solid traffic also drove TJX Companies' consolidated comparable store sales (comps) that grew 4%, in comparison with the 3% rise witnessed in the year-ago period. Notably, all major segments posted higher comps, courtesy of consumers’ favorable response to the company’s brands and impressive merchandise assortments at reasonable prices.

Segment-wise, comps rose 3% each in HomeGoods, Marmaxx and TJX International segments. Comps at TJX Canada jumped 7%.

Gross margin climbed 0.1 percentage point to 29.4%. Excluding the impact of an additional week, adjusted gross margin contracted 0.4 percentage points to 27.9%.

Adjusted SG&A expenses (as a percentage of sales) went down by 0.3 percentage points to 16.4%. TJX Companies' consolidated pre-tax profit margin (on an adjusted basis) slipped 0.1 percentage point to 11.5%.

Other Financial Updates

The company ended the quarter with cash and cash equivalents of $2,758.5 million, long-term debt of $2,230.6 million and total shareholders’ equity of $5,148.3 million. Cash flow from operations for the fiscal was $3,025.6 million. Consolidated inventories on a per-store basis (including distribution centers and excluding e-commerce and inventory in transit) increased 6% (up 4% on a constant currency basis) year over year. The company remains well-placed to exploit new opportunities in the new fiscal, with a fresh spring assortment.

Also, the company’s results received benefits from tax reforms during the fourth quarter and fiscal 2018. Management expects to continue reaping benefits from the same in fiscal 2019, and plans to utlize the cash benefits in offering one-time bonuses, augmenting shareholder value and making charitable contributions among others.

During the quarter, the company repurchased 5.4 million shares for $405 million, while it repurchased 22.3 million shares for $1.7 billion during fiscal 2018. For fiscal 2019, the company announced plans to repurchase shares worth approximately $2.5-$3.0 billion. The company had nearly $1.1 billion remaining under its buyback plan as of the end of fiscal 2018, and management announced a new repurchase plan authorizing share buybacks up to an additional $3 billion from time to time.

Further, management plans to announce a 25% dividend hike in April, taking its quarterly dividend to 39 cents per share. The raised dividend, payable in June 2018, will mark TJX Companies’ 22nd straight year of dividend hike.

During fiscal 2018, the company opened 258 stores, taking its total store count to 4,070 stores as of Feb 3, 2018.

Guidance

Management remains optimistic about fiscal 2019, and remains focused on implementing its constant sales driving efforts to attract traffic. The company’s top line is likely to gain from its solid merchandise assortment and solid brands. Also, tax reforms are likely to benefit the company in the fiscal.

For fiscal 2019, TJX Companies projects adjusted earnings per share in the range of $4.00-$4.08, representing a 4%-6% increase from the year-ago period earnings. Including benefits from tax-reforms, earnings are anticipated to grow 17%-20% to $4.73-$4.83 per share. However, wage increases are expected to negatively impact earnings growth by 2%. Further comps are expected to grow 1-2% for fiscal 2019.

For first-quarter fiscal 2019, the company expects adjusted in the range of 85-87 cents per share, compared with 82 cents recorded in the year-ago period. Including benefits from tax reforms, earnings are expected to come in a range of $1.00-$1.02 per share. Wage increases are expected to hurt bottom line growth by 2%. The company expects consolidated comps growth of 1%-2% in the firstquarter.

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