Source: Company reports/Coresight Research

3Q19 Results

The TJX Companies reported fiscal 3Q19 revenues of $9.83 billion, up 12.1% year over year and beating the consensus estimate of $9.5 billion. Performance was driven by strong comparable sales growth of 7% due to increased customer traffic. The company completed a 2-for-1 common stock split in the current quarter, driving down GAAP EPS. EPS adjusted for the 2-for-1 split was $0.54, up 8.0% year over year and inline with the consensus estimate. This figure excludes a $0.09 benefit from the 2017 Tax Cuts and Jobs Act. GAAP EPS was $0.61, compared with $0.50 in the year-ago quarter. Management comments included the following:

• 3Q19 sales and EPS both exceeded its own expectations, driven by increased store traffic.
• Marmaxx, the largest division, delivered a robust 9% comparable store sales increase.
• Customer traffic rose for the 17th consecutive quarter at T.J. Maxx and Marshalls.
• The company also saw strength in its apparel business.
• For the holiday season, the company has planned initiatives such as gifting and marketing campaigns to drive the traffic.

Segment Performance

Marmaxx

• Marmaxx reported sales of $5.97 billion, up 12.7% year over year.
• This segment grew comparable sales by9% year over year, compared to a 7% increase in the previous quarter.
• The company ended the quarter with a total of 2,338 T.J. Maxx and Marshalls stores, an increase of 25 stores from year-ago quarter.

HomeGoods

• HomeGoods sales came in at $1.46 billion, up 19.1% year over year.
• Comparable sales grew 7% year over year, versus 3% growth in the previous quarter.
• The company ended the quarter with a total of 745 HomeGoods stores, an increase of 29 stores from year-ago quarter.

TJX Canada

• TJX Canada grew sales by 5.5% year over year to $1.04 billion.
• Comparable sales climbed5% year over year, compared with a 6% increase in the last quarter.
• The company ended the quarter with a total of 484stores in Canada, including Winners, Homesense and Marshalls, an increase of 15 stores from the year-ago quarter.

TJX International (Europe and Australia)

• TJX International sales grew 8.0% year over year to $1.35 billion.
• Comparable sales were up 3% year over year, versus 4% growth in the previous quarter.
• The company ended the quarter with a total of 678international stores comprised of T.K Maxx and Homesense stores, an increase of 23 stores from the year-ago quarter.

Outlook

For 4Q19, management expects:

• Diluted earnings per share to be $0.66-$0.67 compared to earnings per share of $0.69 in the year-ago quarter.
• Adjusted earnings per share to be in the range of $0.56 to $0.57 compared to adjusted earnings per share of $0.59 in the year-ago quarter, excluding an expected benefit of approximately $.10 per share due to items related to the 2017 Tax Cuts and Jobs Act.
• Combination of incremental freight costs and wage increases to negatively impact EPS growth by approximately 5%.
• Comparable store sales growth of 2-3% on a consolidated basis.

For FY19, management expects:

• Diluted earnings per share to be $2.41-$2.43 compared to earnings per share of $2.02 in the year-ago quarter.
• Adjusted earnings per share to be $2.08-$2.09, an 8% increase over the prior year’s adjusted earnings per share of $1.93, excluding the expected benefit of approximately $.36 per share due to items related to the 2017 Tax Cuts and Jobs Act and a $.02 negative impact from the third quarter pension settlement charge.
• Adjusted EPS guidance of $2.085 at mid-point was slightly higher than the previous guidance of $2.06 at mid-point.

Comparable store sales growth of 5% on a consolidated basis and 6% at Marmaxx.