The TJX Companies, Inc. Reports Q3FY17 Results with Comp Sales up a Strong 5% Over Last Year’s 5% Increase

  • Net sales increased a strong 7% to $8.3 billion over last year’s 5%
    increase
  • GAAP diluted EPS of $.83 compared with $.86 in the prior year
  • Adjusted diluted EPS of $.91, which excludes the negative impact of
    $.08 from a debt extinguishment charge and a pension settlement
    charge, compared with $.86 in the prior year
  • The Company now estimates Fiscal 2017 diluted GAAP EPS of $3.39 to
    $3.41 and adjusted EPS of $3.46 to $3.48 (which excludes the debt
    extinguishment and pension settlement charges), versus prior guidance
    of $3.39 to $3.43, reflecting the Company’s strong third quarter
    results
  • The Company expects Fiscal 2017 comparable store sales growth of
    approximately 4%
  • Returned $570 million to shareholders in the third quarter through
    share repurchases and dividends

FRAMINGHAM, Mass.–(BUSINESS WIRE)–The TJX Companies, Inc. (NYSE: TJX), the leading off-price retailer of
apparel and home fashions in the U.S. and worldwide, today announced
sales and earnings results for the third quarter ended October 29, 2016.
Net sales for the third quarter of Fiscal 2017 increased a strong 7% to
$8.3 billion, and over a 5% increase last year. Consolidated comparable
store sales increased a strong 5% over last year’s 5% increase. Net
income for the third quarter was $550 million and diluted earnings per
share were $.83. Excluding the impact of a debt extinguishment charge
and pension settlement charge (described below), which combined reduced
earnings per share by $.08, adjusted diluted earnings per share were
$.91. This compares to diluted earnings per share of $.86 in the prior
year.

For the first nine months of Fiscal 2017, net sales were $23.7 billion,
a strong 8% increase over last year’s 6% increase. Consolidated
comparable store sales increased a strong 5% over last year’s 5%
increase. Net income for the first nine months of Fiscal 2017 was $1.6
billion and diluted earnings per share were $2.43. Excluding the impact
of the third quarter debt extinguishment charge and pension settlement
charge (described below), which combined reduced earnings per share by
$.08, adjusted diluted earnings per share were $2.51. This compares to
diluted earnings per share of $2.35 in the prior year.

Ernie Herrman, Chief Executive Officer and President of The TJX
Companies, Inc., stated, “We are extremely pleased that our strong
momentum in customer traffic and sales continued in the third quarter.
Our consolidated comparable store sales increase of 5%, over 5% growth
last year, our net sales increase of 7%, over last year’s 5% increase,
and our earnings per share all significantly exceeded our expectations.
Again this quarter, our comp store sales growth was primarily driven by
customer traffic. We are convinced that we are gaining consumer market
share across all of our divisions! Further, our merchandise margin was
up strongly. We have numerous initiatives underway to drive customers to
our stores this holiday selling season and keep them coming back. We
will be offering consumers eclectic gift selections from around the
world, all at exciting values, and shipping fresh assortments to our
stores right through December and beyond. We remain laser focused on
achieving our goals for 2016 and are passionate about surpassing them.
We are on our way to becoming a $40 billion-plus company!”

Sales by Business Segment

The Company’s comparable store sales and net sales by division, in the
third quarter, were as follows:

       
Third Quarter Third Quarter
Comparable Store Sales1,2   Net Sales ($ in millions)3,4
        FY2017   FY2016   FY2017   FY2016
                     
Marmaxx (U.S.)5,6       +5%   +3%   $5,253   $4,927
HomeGoods (U.S.)       +6%   +6%   $1,078   $960
TJX Canada       +8%   +10%   $855   $754
TJX International (Europe & Australia)7       0%   +7%   $1,105   $1,114
                     

TJX

      +5%   +5%   $8,292   $7,753

1Comparable store sales outside the U.S. calculated on a
constant currency basis, which removes the effect of changes in currency
exchange rates. 2Comparable store sales exclude Sierra
Trading Post, tjmaxx.com, tkmaxx.com and Trade Secret sales. 3Net
sales in Canada, Europe and Australia include the impact of foreign
currency exchange rates. See below. 4Figures may not foot due
to rounding. 5Combination of T.J. Maxx and Marshalls. 6Net
sales include Sierra Trading Post. 7FY2017 net sales include
Trade Secret.

Impact of Foreign Currency Exchange Rates

Changes in foreign currency exchange rates affect the translation of
sales and earnings of the Company’s international businesses into U.S.
dollars for financial reporting purposes. In addition, ordinary course,
inventory-related hedging instruments are marked to market at the end of
each quarter. Changes in currency exchange rates can have a material
effect on the magnitude of these translations and adjustments when there
is significant volatility in currency exchange rates.

The movement in foreign currency exchange rates had a two percentage
point negative impact on consolidated net sales growth in the third
quarter of Fiscal 2017. The overall net impact of foreign currency
exchange rates had a $.01 negative impact on third quarter Fiscal 2017
earnings per share, compared with a $.01 negative impact last year.

For the first nine months of Fiscal 2017, the movement in foreign
currency exchange rates had a one percentage point negative impact on
consolidated net sales growth. The overall net impact of foreign
currency exchange rates had a $.03 negative impact on earnings per share
in the first nine months of Fiscal 2017, compared with a $.02 negative
impact last year.

A table detailing the impact of foreign currency on TJX pretax earnings
and margins, as well as those of its international businesses, can be
found in the Investor Information section of the Company’s website, tjx.com.

The foreign currency exchange rate impact to earnings per share does not
include the impact currency exchange rates have on various transactions,
which we refer to as “transactional foreign exchange.”

Debt Extinguishment Charge

On September 7, 2016, TJX issued $1.0 billion of 2.25% 10-year notes.
The Company used a portion of the proceeds to redeem its $375 million
6.95% notes on October 12, 2016, prior to their scheduled maturity of
April 15, 2019. The charge for the early extinguishment of this debt
reduced third quarter Fiscal 2017 pretax income by $52 million.

Pension Settlement Charge

The Company recently offered eligible, former TJX Associates who had not
yet commenced their pension benefit, an opportunity to receive a
voluntary lump sum payout of their vested pension benefit. The payment
and settlement of pension benefits, paid from pension plan assets, to
participants who accepted this offer resulted in a non-cash settlement
charge to the Company that reduced third quarter Fiscal 2017 pretax
income by $31 million.

Margins

For the third quarter of Fiscal 2017, the Company’s consolidated pretax
profit margin was 10.7%. The debt extinguishment charge and pension
settlement charge (described above), reduced consolidated pretax profit
margin by 1.0 percentage points. Excluding these charges, adjusted
pretax profit margin was 11.7%, a 0.4 percentage point decrease compared
with the prior year.

Gross profit margin for the third quarter of Fiscal 2017 was 29.5%, up
0.5 percentage points versus the prior year, primarily due to a strong
increase in merchandise margin and gains related to the Company’s
inventory hedges.

Selling, general and administrative costs as a percent of sales were
17.6%, up 0.9 percentage points versus the prior year’s ratio, primarily
due to wage increases and investments to support growth, as the Company
had anticipated.

Inventory

Total inventories as of October 29, 2016, were $4.4 billion, compared
with $4.4 billion at the end of the third quarter last year.
Consolidated inventories on a per-store basis as of October 29, 2016,
including the distribution centers, but excluding inventory in transit
and the Company’s e-commerce businesses, were down 5% on a reported
basis (down 2% on a constant currency basis). The Company enters the
fourth quarter in an excellent inventory position to take advantage of
the plentiful buying opportunities it sees in the marketplace and ship
ever-changing gift assortments to its stores throughout the holiday
season.

Shareholder Distributions

During the third quarter, the Company paid out $170 million in
shareholder dividends and repurchased a total of $400 million of TJX
stock, retiring 5.2 million shares. For the first nine months of Fiscal
2017, the Company paid out $482 million in shareholder dividends and
spent a total of $1.2 billion in repurchases of TJX stock, retiring 15.4
million shares. The Company continues to expect to repurchase
approximately $1.5 to $2.0 billion of TJX stock in Fiscal 2017. The
Company may adjust this amount up or down depending on various factors.

Fourth Quarter and Full Year Fiscal 2017 Outlook

For the fourth quarter of Fiscal 2017, the Company expects diluted
earnings per share to be in the range of $.96 to $.98 compared to $.99
last year. This guidance reflects an assumption that wage increases will
negatively impact EPS growth by 3%. The Company also expects the
combination of foreign currency and transactional foreign exchange will
have an additional 6% negative impact on EPS growth. This EPS outlook is
based upon estimated consolidated comparable store sales growth of 1% to
2% over last year’s strong 6% increase.

The Company now estimates Fiscal 2017 GAAP diluted earnings per share of
$3.39 to $3.41 and adjusted earnings per share of $3.46 to $3.48, versus
prior guidance of $3.39 to $3.43, reflecting the Company’s strong third
quarter results. The adjusted EPS range excludes the impact of the third
quarter debt extinguishment and pension settlement charges (described
above). The EPS outlook is based upon estimated consolidated comparable
store sales growth of 4%.

The Company’s earnings guidance for the fourth quarter and full year
Fiscal 2017 assumes that currency exchange rates will remain unchanged
from the levels at the beginning of the fourth quarter.

Stores by Concept

During the third quarter ended October 29, 2016, the Company increased
its store count by 110 stores to a total of 3,785 stores. The Company
increased square footage by 4% over the same period last year.

      Store Locations   Gross Square Feet*
Third Quarter Third Quarter
  (in millions)
        Beginning   End   Beginning   End
In the U.S.:                    
T.J. Maxx       1,165   1,179   33.1   33.4
Marshalls       1,013   1,027   30.5   30.8
HomeGoods       538   568   13.3   13.9
Sierra Trading Post       9   11   0.2   0.3
In Canada:                    
Winners       250   255   7.0   7.2
HomeSense       104   106   2.4   2.5
Marshalls       45   57   1.3   1.7
In Europe:                    
T.K. Maxx       473   503   14.3   15.0
HomeSense       43   44   0.9   0.9
In Australia:                    
Trade Secret       35   35   0.8   0.8
                     
TJX       3,675   3,785   103.9   106.3

*Square feet figures may not foot due to rounding.

About The TJX Companies, Inc.

The TJX Companies, Inc. is the leading off-price retailer of apparel and
home fashions in the U.S. and worldwide. As of October 29, 2016, the end
of the Company’s third quarter, the Company operated a total of 3,785
stores in nine countries, the United States, Canada, the United Kingdom,
Ireland, Germany, Poland, Austria, the Netherlands, and Australia, and
three e-commerce sites. These include 1,179 T.J. Maxx, 1,027 Marshalls,
568 HomeGoods and 11 Sierra Trading Post stores, as well as tjmaxx.com
and sierratradingpost.com
in the United States; 255 Winners, 106 HomeSense, and 57 Marshalls
stores in Canada; 503 T.K. Maxx and 44 HomeSense stores, as well as tkmaxx.com,
in Europe; and 35 Trade Secret stores in Australia. TJX’s press releases
and financial information are also available at tjx.com.

Fiscal 2017 Third Quarter Earnings Conference
Call

At 11:00 a.m. ET today, Ernie Herrman, Chief Executive Officer and
President of TJX, will hold a conference call with stock analysts to
discuss the Company’s third quarter Fiscal 2017 results, operations and
business trends. A real-time webcast of the call will be available to
the public at tjx.com. A replay of the
call will also be available by dialing (866) 367-5577 through Tuesday,
November 22, 2016, or at tjx.com.

Important Information at Website

Archived versions of the Company’s conference calls are available in the
Investor Information section of tjx.com
after they are no longer available by telephone as are reconciliations
of non-GAAP financial measures to GAAP financial measures and other
financial information. The Company routinely posts information that may
be important to investors in the Investor Information section at tjx.com.
The Company encourages investors to consult that section of its website
regularly.

Forward-looking Statement

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995: Various statements made in this release are forward-looking and
involve a number of risks and uncertainties. All statements that address
activities, events or developments that we intend, expect or believe may
occur in the future are forward-looking statements. The following are
some of the factors that could cause actual results to differ materially
from the forward-looking statements: execution of buying strategy and
inventory management; operational and business expansion and management
of large size and scale; customer trends and preferences; various
marketing efforts; competition; personnel recruitment, training and
retention; labor costs and workforce challenges; data security;
information systems and new technology; economic conditions and consumer
spending; adverse or unseasonable weather; serious disruptions or
catastrophic events; disruptions in the second half of the fiscal year;
corporate and retail banner reputation; quality, safety and other issues
with merchandise; expanding international operations; merchandise
importing; commodity availability and pricing; fluctuations in currency
exchange rates; fluctuations in quarterly operating results and market
expectations; mergers, acquisitions, or business investments and
divestitures, closings or business consolidations; compliance with laws,
regulations and orders and changes in laws, regulations and applicable
accounting standards; outcomes of litigation, legal proceedings and
other legal or regulatory matters; tax matters; real estate activities;
cash flow and other factors that may be described in our filings with
the Securities and Exchange Commission. We do not undertake to publicly
update or revise our forward-looking statements even if experience or
future changes make it clear that any projected results expressed or
implied in such statements will not be realized.

       

The TJX Companies, Inc. and Consolidated Subsidiaries

Financial Summary

(Unaudited)

(In Thousands Except Per Share Amounts)

 
13 Weeks Ended   39 Weeks Ended

October 29,

 

October 31,

October 29,

 

October 31,

2016

 

2015

 

2016

 

2015

 
Net sales $ 8,291,688 $ 7,753,495 $ 23,716,097 $ 21,982,863
 
Cost of sales, including buying and occupancy costs 5,843,873 5,506,899 16,778,977 15,646,331
Selling, general and administrative expenses 1,462,574 1,292,401 4,190,872 3,708,596
Loss on early extinguishment of debt 51,773 51,773
Pension settlement charge 31,173 31,173
Interest expense, net   12,462   13,005   33,918   35,437
 
Income before provision for income taxes 889,833 941,190 2,629,384 2,592,499
Provision for income taxes   340,047   353,934   1,009,078   981,307
 
Net income $ 549,786 $ 587,256 $ 1,620,306 $ 1,611,192
 
Diluted earnings per share $ 0.83 $ 0.86 $ 2.43 $ 2.35
 
Cash dividends declared per share $ 0.26 $ 0.21 $ 0.78 $ 0.63
 
Weighted average common shares – diluted 661,721 680,844 666,632 686,072
 
       

The TJX Companies, Inc. and Consolidated Subsidiaries

Condensed Balance Sheets

(Unaudited)

(In Millions)

 

October 29,

October 31,

2016

2015

 
ASSETS
Current assets:
Cash and cash equivalents $ 2,375.5 $ 1,723.3
Short-term investments 450.8 399.7
Accounts receivable and other current assets 731.8 662.3
Merchandise inventories   4,384.2   4,442.0
 
Total current assets   7,942.3   7,227.3
 
Property, net of depreciation 4,318.8 4,067.0
 
Other assets 261.9 223.2
Goodwill and tradename, net of amortization   343.8   342.1
 
TOTAL ASSETS $ 12,866.8 $ 11,859.6
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 2,686.8 $ 2,696.6
Accrued expenses and other current liabilities   2,207.7   2,033.5
 
Total current liabilities   4,894.5   4,730.1
 
Other long-term liabilities 1,101.5 907.1
Non-current deferred income taxes, net 315.9 257.4
Long-term debt 2,226.9 1,614.5
 
Shareholders’ equity   4,328.0   4,350.5
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 12,866.8 $ 11,859.6
 
     

The TJX Companies, Inc. and Consolidated Subsidiaries

Condensed Statements of Cash Flows

(Unaudited)

(In Millions)

 
39 Weeks Ended

October 29,

 

October 31,

2016

2015

 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,620.3 $ 1,611.2
Depreciation and amortization 492.4 453.7
Loss in early extinguishment of debt 51.8
Pension settlement charge 31.2
Deferred income tax provision 52.6 (39.9 )
Share-based compensation 77.4 71.1
(Increase) in accounts receivable and other assets (115.0 ) (104.8 )
(Increase) in merchandise inventories (758.6 ) (1,197.8 )
Increase in accounts payable 525.0 677.2
Increase in accrued expenses and other liabilities 213.9 206.7
Other   (102.7 )   (20.8 )
 
Net cash provided by operating activities   2,088.3     1,656.6  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (767.2 ) (650.6 )
Purchases of investments (533.8 ) (642.7 )
Sales and maturities of investments 432.0 501.6
Other   (2.3 )   (57.1 )
Net cash (used in) investing activities   (871.3 )   (848.8 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 992.5
Cash payments for extinguishment of debt (426.6 )
Cash payments for repurchase of common stock (1,175.0 ) (1,296.1 )
Proceeds from issuance of common stock 110.9 81.4
Cash dividends paid (481.8 ) (404.1 )
Other   47.3     54.2  
Net cash (used in) financing activities   (932.7 )   (1,564.6 )
 
Effect of exchange rate changes on cash   (4.2 )   (13.7 )
 
Net increase (decrease) in cash and cash equivalents 280.1 (770.5 )
Cash and cash equivalents at beginning of year   2,095.4     2,493.8  
 
Cash and cash equivalents at end of period $ 2,375.5   $ 1,723.3  
 
       

The TJX Companies, Inc. and Consolidated Subsidiaries

Selected Information by Major Business Segment

(Unaudited)

(In Thousands)

 
13 Weeks Ended 39 Weeks Ended

October 29,

 

October 31,

October 29,

 

October 31,

2016

 

2015

 

2016

 

2015

Net sales:
In the United States:
Marmaxx $ 5,252,815 $ 4,926,507 $ 15,217,188 $ 14,227,800
HomeGoods 1,078,373 959,844 3,075,472 2,735,415
TJX Canada 855,473 753,630 2,297,831 2,073,189
TJX International   1,105,027   1,113,514   3,125,606   2,946,459
Total net sales $ 8,291,688 $ 7,753,495 $ 23,716,097 $ 21,982,863
 
Segment profit:
In the United States:
Marmaxx $ 703,092 $ 678,343 $ 2,154,238 $ 2,046,192
HomeGoods 149,739 134,550 415,996 367,984
TJX Canada 142,491 113,152 321,942 278,005
TJX International   87,821   115,290   145,047   192,519
Total segment profit 1,083,143 1,041,335 3,037,223 2,884,700
 
General corporate expense 97,902 87,140 290,975 256,764
 
Loss on early extinguishment of debt 51,773 51,773
Pension settlement charge 31,173 31,173
 
Interest expense, net   12,462   13,005   33,918   35,437
Income before provision for income taxes $ 889,833 $ 941,190 $ 2,629,384 $ 2,592,499
 

The TJX Companies, Inc. and Consolidated Subsidiaries
Notes to
Consolidated Condensed Statements

1. During the third quarter ended October 29, 2016, TJX repurchased 5.2
million shares of its common stock at a cost of $400.0 million. For the
nine months ended October 29, 2016, TJX repurchased 15.4 million shares
of its common stock at a cost of $1.2 billion. TJX records the
repurchase of its stock on a cash basis, and the amounts reflected in
the financial statements may vary from the above amounts due to the
timing of settlement of repurchases.

2. On September 7, 2016 TJX issued $1.0 billion of 2.250% ten year
notes. The Company used a portion of the proceeds to redeem its $375
million 6.950% notes prior to their scheduled maturity of April 15,
2019. On October 12, 2016 the Company completed the redemption of the
6.950% notes pursuant to the terms of the indenture and recorded pre-tax
loss on the early extinguishment of debt of $51.8 million.

In addition, during the third quarter TJX offered eligible, former TJX
Associates, who had not yet commenced receiving their pension benefit,
an opportunity to receive a lump sum payout of their vested pension
benefit. On October 21, 2016 the Company’s pension plan paid $103.7
million from pension plan assets to those who accepted this offer,
thereby reducing its pension benefit obligations. The transaction had no
cash impact on TJX but did result in a non-cash pre-tax pension
settlement charge of $31.2 million.

The company has presented non-GAAP measures in this earnings release
excluding the impact of these two third quarter charges.

3. On October 24, 2015, TJX purchased Trade Secret, an off-price
retailer in Australia. The final purchase price was AUD$83 million (U.S.
$59 million) which was allocated to the fair value of the assets
acquired resulting in goodwill of $25.0 million. The operating results
since the date of acquisition are reported together with the Company’s
operations in Europe in the TJX International segment (formerly the TJX
Europe segement).

Contacts

The TJX Companies, Inc.
Debra McConnell
Global Communications
(508)
390-2323