The TJX Companies, Inc. Reports Above-Plan Q2 FY17 Results with 4% Comp Sales Growth and 5% Increase in Earnings Per Share; Raises Full Year Guidance

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 second quarter ended July 30, 2016.
Net sales for the second quarter of Fiscal 2017 increased 7% to $7.9
billion and consolidated comparable store sales increased 4% over last
year’s 6% increase. Net income for the second quarter was $562 million
and diluted earnings per share were $.84, a 5% increase over the prior
year’s $.80.

For the first half of Fiscal 2017, net sales were $15.4 billion, an 8%
increase over last year. Consolidated comparable store sales for the
first half of Fiscal 2017 increased 6%. Net income for the first half of
Fiscal 2017 was $1.1 billion. Diluted earnings per share were $1.60, a
7% increase over the prior year’s $1.49.

Ernie Herrman, Chief Executive Officer and President of The TJX
Companies, Inc., stated, “It was terrific to see our strong customer
traffic and comps continue in the second quarter. Our consolidated
comparable store sales increase of 4%, over 6% growth last year, and our
earnings per share increase of 5% both exceeded our expectations.
Further, we are extremely pleased that our comp store sales growth was
almost entirely driven by customer traffic. We are convinced that we are
gaining consumer market share as our excellent values on a compelling
selection of brands and fashions are drawing customers to our retail
brands around the world. We also are very pleased that our apparel,
including accessories, and home businesses both performed well. Further,
we saw a strong merchandise margin increase. We believe our robust
sales, customer traffic and merchandise margins all speak to the
strength of our off-price retail model. With our above-plan second
quarter results, we are raising our guidance for full year comp sales to
increase 3% to 4% and earnings per share to be in the range of $3.39 to
$3.43. The third quarter is off to a solid start, and we see plentiful
opportunities for our business in the second half of the year and
beyond. We remain laser focused on achieving our goals for 2016 and are
passionate about surpassing them. We continue on the road to becoming a
$40 billion-plus company!”

Sales by Business Segment

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

 
  Second Quarter   Second Quarter
Comparable Store Sales1,2   Net Sales ($ in millions)3,4
    FY2017   FY2016   FY2017   FY2016
                 

Marmaxx (U.S.)5,6

  +4%   +4%   $5,099   $4,806
HomeGoods (U.S.)   +5%   +9%   $987   $895
TJX Canada   +9%   +12%   $757   $699
TJX International (Europe & Australia)7   +2%   +5%   $1,040   $963
                 
TJX   +4%   +6%   $7,882   $7,364

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 second
quarter of Fiscal 2017. The overall net impact of foreign currency
exchange rates had a $.03 positive impact on second quarter Fiscal 2017
earnings per share, compared with a $.02 positive impact last year.

For the first six months of Fiscal 2017, the movement in foreign
currency exchange rates had a two percentage point negative impact on
consolidated net sales growth. The overall net impact of foreign
currency exchange rates had a $.02 negative impact on earnings per share
in the first six months of Fiscal 2017, compared with a $.01 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.”

Margins

For the second quarter of Fiscal 2017, the Company’s consolidated pretax
profit margin was 11.6%, a 0.4 percentage point decrease compared with
the prior year.

Gross profit margin for the second quarter of Fiscal 2017 was 29.4%, up
0.3 percentage points versus the prior year, primarily due to a strong
increase in merchandise margins and gains related to the Company’s
inventory hedges.

Selling, general and administrative costs as a percent of sales were
17.7%, up 0.8 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 July 30, 2016, were $3.9 billion, compared with
$3.7 billion at the end of the second quarter last year. Consolidated
inventories on a per-store basis as of July 30, 2016, including the
distribution centers, but excluding inventory in transit and the
Company’s e-commerce businesses, were down 2% on a reported basis (flat
on a constant currency basis). The Company enters the third quarter in
an excellent inventory position to take advantage of the plentiful
buying opportunities it sees in the marketplace and ship fresh, branded
assortments throughout the fall and holiday seasons.

Shareholder Distributions

During the second quarter, the Company repurchased a total of $400
million of TJX stock, retiring 5.2 million shares. For the first half of
Fiscal 2017, the Company spent a total of $775 million in repurchases of
TJX stock, retiring 10.2 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.

Pension Payout Offer

The Company recently offered eligible, former TJX Associates who have
not yet commenced their pension benefit an opportunity to receive a
voluntary lump sum payout of their vested pension benefit. The Company
anticipates that the potential impact of this pension payout offer,
primarily a non-cash settlement charge, could negatively impact Fiscal
2017 earnings per share by approximately $.03 to $.05, but may be higher
or lower depending on participation rates and other factors. The
potential impact of this pension payout offer is not included in the
Company’s third quarter or Fiscal 2017 outlook below.

Third Quarter and Full Year Fiscal 2017 Outlook

For the third quarter of Fiscal 2017, the Company expects diluted
earnings per share to be in the range of $.83 to $.85 compared to $.86
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 3% negative impact on EPS growth. This EPS outlook is
based upon estimated consolidated comparable store sales growth of 2% to
3%.

The Company is raising its full year guidance to reflect its strong
second quarter results. For the fiscal year ending January 28, 2017, the
Company now expects diluted earnings per share to be in the range of
$3.39 to $3.43, which would represent a 2% to 3% increase over $3.33 in
Fiscal 2016. 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 3% negative impact on EPS growth. This EPS outlook is
now based upon a raised estimate of consolidated comparable store sales
growth of 3% to 4%.

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

Stores by Concept

During the second quarter ended July 30, 2016, the Company increased its
store count by 14 stores to a total of 3,675 stores. The Company
increased square footage by 5% over the same period last year.

 
  Store Locations   Gross Square Feet*
Second Quarter Second Quarter
  (in millions)
    Beginning   End   Beginning   End
In the U.S.:                
T.J. Maxx   1,163   1,165   33.1   33.1
Marshalls   1,010   1,013   30.5   30.5
HomeGoods   534   538   13.2   13.3
Sierra Trading Post   8   9   0.2   0.2
In Canada:                
Winners   250   250   7.0   7.0
HomeSense   104   104   2.4   2.4
Marshalls   45   45   1.3   1.3
In Europe:                
T.K. Maxx   471   473   14.2   14.3
HomeSense   41   43   0.8   0.9
In Australia:                
Trade Secret   35   35   0.8   0.8
                 
TJX   3,661   3,675   103.6   103.9

*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 July 30, 2016, the end of
the Company’s second quarter, the Company operated a total of 3,675
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 1,165 T.J. Maxx, 1,013 Marshalls,
538 HomeGoods and 9 Sierra Trading Post stores, as well as tjmaxx.com
and sierratradingpost.com
in the United States; 250 Winners, 104 HomeSense, and 45 Marshalls
stores in Canada; 473 T.K. Maxx and 43 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 Second 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 second 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,
August 23, 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   26 Weeks Ended
July 30,
2016
  August 1,
2015
  July 30,
2016
  August 1,
2015
 
Net sales $ 7,882,053 $ 7,363,731 $ 15,424,409 $ 14,229,368
 
Cost of sales, including buying and occupancy costs 5,562,961 5,219,191 10,935,104 10,139,432
Selling, general and administrative expenses 1,393,248 1,247,538 2,728,298 2,416,195
 
Interest expense, net   11,262   10,808   21,456   22,432
 
Income before provision for income taxes 914,582 886,194 1,739,551 1,651,309
Provision for income taxes   352,408   336,859   669,031   627,373
 
Net income $ 562,174 $ 549,335 $ 1,070,520 $ 1,023,936
 
Diluted earnings per share $ 0.84 $ 0.80 $ 1.60 $ 1.49
 
Cash dividends declared per share $ 0.26 $ 0.21 $ 0.52 $ 0.42
 
Weighted average common shares – diluted 666,606 685,322 668,754 688,579
 
The TJX Companies, Inc. and Consolidated Subsidiaries
Condensed Balance Sheets
(Unaudited)
(In Millions)
 
 

July 30,
2016

 

 

August 1,
2015

 
ASSETS
Current assets:
Cash and cash equivalents $ 1,803.6 $ 1,910.8
Short-term investments 421.2 327.5
Accounts receivable and other current assets 715.3 680.7
Merchandise inventories   3,870.6   3,749.6
 
Total current assets   6,810.7   6,668.6
 
Property, net of depreciation 4,263.4 3,996.0
Non-current deferred income taxes, net 6.9 19.1
Other assets 244.9 208.3
Goodwill and tradename, net of amortization   344.8   308.5
 
TOTAL ASSETS $ 11,670.7 $ 11,200.5
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 2,258.3 $ 2,259.0
Accrued expenses and other current liabilities   2,055.9   1,901.9
 
Total current liabilities   4,314.2   4,160.9
 
Other long-term liabilities 929.0 888.2
Non-current deferred income taxes, net 360.2 261.3
Long-term debt 1,615.9 1,614.1
 
Shareholders’ equity   4,451.4   4,276.0
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 11,670.7 $ 11,200.5
 
The TJX Companies, Inc. and Consolidated Subsidiaries
Condensed Statements of Cash Flows
(Unaudited)
(In Millions)
 
  26 Weeks Ended

July 30,
2016

 

August 1,
2015

 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,070.5 $ 1,023.9
Depreciation and amortization 324.8 298.5
Deferred income tax provision 47.1 (14.9 )
Share-based compensation 50.0 43.8
(Increase) in accounts receivable and other assets (92.5 ) (109.1 )
(Increase) in merchandise inventories (190.9 ) (525.3 )
Increase in accounts payable 62.2 249.6
(Decrease) in accrued expenses and other liabilities (37.6 ) (15.5 )
Other   (75.0 )   (22.4 )
 
Net cash provided by operating activities   1,158.6     928.6  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (508.4 ) (404.9 )
Purchases of investments (380.3 ) (225.6 )
Sales and maturities of investments 323.5 159.7
Other   (2.3 )    
Net cash (used in) investing activities   (567.5 )   (470.8 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments for repurchase of common stock (756.2 ) (851.1 )
Proceeds from issuance of common stock 90.0 48.0
Cash dividends paid (311.5 ) (262.9 )
Other   49.8     34.0  
Net cash (used in) financing activities   (927.9 )   (1,032.0 )
 
Effect of exchange rate changes on cash   45.0     (8.8 )
 
Net (decrease) in cash and cash equivalents (291.8 ) (583.0 )
Cash and cash equivalents at beginning of year   2,095.4     2,493.8  
 
Cash and cash equivalents at end of period $ 1,803.6   $ 1,910.8  
 
The TJX Companies, Inc. and Consolidated Subsidiaries
Selected Information by Major Business Segment
(Unaudited)
(In Thousands)
 
  13 Weeks Ended   26 Weeks Ended
July 30,
2016
  August 1,
2015
July 30,
2016
  August 1,
2015
Net sales:
In the United States:
Marmaxx $ 5,098,998 $ 4,805,883 $ 9,964,373 $ 9,301,293
HomeGoods 986,663 895,378 1,997,099 1,775,571
TJX Canada 756,781 699,347 1,442,358 1,319,559
TJX International   1,039,611   963,123   2,020,579   1,832,945
Total net sales $ 7,882,053 $ 7,363,731 $ 15,424,409 $ 14,229,368
 
Segment profit:
In the United States:
Marmaxx $ 742,289 $ 715,546 $ 1,451,146 $ 1,367,849
HomeGoods 128,047 112,135 266,257 233,434
TJX Canada 121,979 119,681 179,451 164,853
TJX International   42,879   50,874   57,226   77,229
Total segment profit 1,035,194 998,236 1,954,080 1,843,365
 
General corporate expense 109,350 101,234 193,073 169,624
 
Interest expense, net   11,262   10,808   21,456   22,432
Income before provision for income taxes $ 914,582 $ 886,194 $ 1,739,551 $ 1,651,309

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

1. During the second quarter ended July 30, 2016, TJX repurchased 5.2
million shares of its common stock at a cost of $400.0 million. For the
six months ended July 30, 2016, TJX repurchased 10.2 million shares of
its common stock at a cost of $775.0 million. On January 29, 2016, the
Company’s Board of Directors approved an additional $2 billion stock
repurchase program. 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 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 with our operations in Europe
and we have therefore changed the name of the TJX Europe segment to TJX
International. The TJX International segment includes the Company’s
international retail operations outside of North America.

3. On August 8, 2016 TJX amended its qualified pension plan and began
notifying eligible terminated vested participants of an opportunity to
receive a lump sum payout of their vested pension benefit. TJX is
offering the voluntary lump sum payout option in an effort to reduce its
future pension obligations and associated administrative costs. The
payment will be made from pension plan assets but TJX may incur a
non-cash settlement charge. TJX estimates the impact of the pension
payout offer could negatively impact fiscal 2017 earnings per share by
approximately $.03 to $.05 per share but may be higher or lower
depending on participation rates and other factors.

Contacts

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