Is off-price out of gas?

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Is off-price out of gas?

By Gina Acosta - 11/14/2017

The TJX Companies blamed hurricanes and warm weather for flat same-store sales in the third quarter, but the retailer's HomeGoods unit was a bright spot.

For the third quarter ended Oct. 28, net sales at TJX increased 6% to $8.8 billion and same store sales were flat compared to last year’s 5% increase. It was the first time since 2009 that TJX failed to post an increase in comps.

TJX and other off-price retailers have been able to avoid comp declines in part due to offering a "treasure hunt" incentive for shoppers, as well as appealing to increasingly budget-conscious consumers with low prices. But shoppers defecting to e-commerce may be finally making a dent in off-price retail traffic.

“Certainly, the hurricanes had a negative impact during the quarter," said Ernie Herrman, Chief Executive Officer and President of The TJX Companies, Inc.. "Additionally, we believe that warmer temperatures in the U.S. during the quarter dampened demand for apparel at our Marmaxx division. While sales were not as strong as we would have liked, we were pleased that sales trends at Marmaxx improved as the weather turned more seasonable. Further, customer traffic, or transactions, were strong and up at every major division. Importantly, our consolidated merchandise margin increased, which we believe speaks to the flexibility of our off-price business model. Overall, our organization sharply executed our off-price fundamentals of opportunistic buying, lean inventory discipline, and being strategic and targeted in the flow of merchandise to our stores, which helped drive margins."

TJX reported a profit of $641 million, or $1 a share, up from $549.8 million, or 83 cents, a year earlier. Revenue rose 7% to $8.76 billion.

In terms of sales by business segment, HomeGoods sales rose 3% and TJ Maxx and Marshalls sales slid 1%. Same-store sales rose 4% at stores in Canada and 1% at stores in Europe and Australia.

During the third quarter, the company increased its store count by 139 stores to a total of 4,052 stores. The company increased square footage by 5% over the same period last year.

“Looking ahead, the fourth quarter is off to a strong start and we see numerous opportunities for the holiday selling season across our retail banners. We have excellent inventory liquidity to capitalize on the plentiful opportunities we are seeing for quality, branded merchandise in the marketplace. We will be offering consumers eclectic gift selections from around the world, at compelling, off-price values, and shipping fresh assortments to our stores and online throughout December and beyond. We have many initiatives underway to drive sales and traffic and are excited about our marketing campaigns. We are confident that we will achieve our goals for 2017 and as always, we will strive to surpass them. We have enormous confidence in the continued, successful growth of TJX,” Herrman said.

For the fourth quarter, TJX forecast earnings of $1.25 to $1.27 per share and adjusted earnings of $1.14 to $1.16 per share. The outlook is based upon estimated consolidated comparable store sales growth of 1 percent to 2 percent. 

For fiscal 2018, TJX maintained the high end of its earnings per share guidance range. The company now expects earnings in a range of $3.91 to $3.93 per share and adjusted earnings of $3.80 to $3.82 per share. This outlook is based upon estimated consolidated comparable store sales growth of 1 percent to 2 percent. Earlier, the company forecast full-year earnings of $3.89 to $3.93 per share and adjusted earnings of $3.78 to $3.82 per share.

TJX operates 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 1,219 TJ Maxx, 1,057 Marshalls, 660 HomeGoods, 26 Sierra Trading Post, and 3 Homesense stores, as well as tjmaxx.com and sierratradingpost.com in the United States; 265 Winners, 117 HomeSense, and 72 Marshalls stores in Canada; 540 TK Maxx and 55 Homesense stores, as well as tkmaxx.com, in Europe; and 38 TK Maxx stores in Australia.