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Assessing TJX Companies’ Fiscal 1Q18 Results

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Assessing TJX Companies’ Fiscal 1Q18 Results PART 1 OF 6

TJX Companies’ 1Q18 Sales Lagged Analysts’ Estimates

1Q18 sales lagged estimates

Off-price retailer TJX Companies (TJX) disappointed investors when it missed analysts’ sales estimates for fiscal 1Q18, which ended on April 29, 2017. The company announced its results on May 16. Earlier, TJX Companies exceeded analysts’ sales estimates in all of the quarters in fiscal 2016 and fiscal 2017. In fiscal 1Q18, the company delivered sales of $7.8 billion and missed Wall Street analysts’ consensus sales estimate of $7.9 billion.

TJX Companies’ 1Q18 Sales Lagged Analysts&#8217; Estimates

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Sales growth in 1Q18

TJX Companies’ sales grew 3.2% on a year-over-year basis in fiscal 1Q18. However, the growth rate was lower than sales growth of 5.6% and 9.9% in fiscal 4Q17 and fiscal 1Q17, respectively. The company’s sales in fiscal 1Q18 were impacted negatively by unfavorable weather in parts of US and Canada.

TJX Companies’ same-store sales rose 1% in fiscal 1Q18—lower compared to 7% same-store sales growth in fiscal 1Q17.

In general, off-price retailers like TJX Companies and Ross Stores (ROST) have been performing better than department stores. Ross Stores delivered same-store sales growth of 3% in the comparable first quarter.

However, TJX Companies’ lower-than-expected sales in fiscal 1Q18 reflect tough retail conditions and the impact of online retailers like Amazon (AMZN). Department stores Macy’s (M) and Kohl’s (KSS) continued to disappoint in fiscal 1Q17 (which ended on April 29, 2017) by reporting a decline of 5.2% and 2.7%, respectively, in their same-store sales.

Performance of domestic business

TJX Companies’ business in the US includes its Marmaxx and HomeGoods segments. In fiscal 1Q18, the Marmaxx segment’s net sales grew 2.1% to about $5.0 billion. The segment’s same-store sales remained flat due to unfavorable weather in certain US regions.

The HomeGoods segment’s net sales rose 11% to $1.1 billion in fiscal 1Q18. The segment’s same-store sales rose 3% in fiscal 1Q18.

In fiscal 1Q18, the Marmaxx and HomeGoods segments accounted for 63.8% and 14.4%, respectively, of the company’s overall sales.

New store concept

In the fiscal 1Q18 conference call, TJX Companies’ president and CEO, Ernie Herrman, stated that the company would be opening a new home concept in the US called HomeSense. The first HomeSense store is scheduled to open in late summer. Additional stores are scheduled to open in the fall. HomeSense will offer a different mix of home fashion compared to the company’s HomeGoods stores.

We’ll look at the performance of TJX Companies’ international business in the next part of this series.

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