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TJX Companies’ Fiscal 4Q16 Sales and the Role of Consumer Traffic

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4Q15 sales beat estimates

Leading off-price retailer TJX Companies (TJX) delivered strong sales in fiscal 4Q16, which ended January 30, 2016. TJX Companies reported sales of ~$9 billion in 4Q16, exceeding the consensus Wall Street analyst estimate of $8.7 billion. The company’s shares surged by 2.1% on February 24, the day the company announced its 4Q16 results.

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Strong sales growth

TJX Companies’ sales in 4Q16 increased by an impressive 8% compared to the fourth quarter of the previous fiscal year. The company’s same-store sales increased by 6% in 4Q16 compared to a 4% same-store sales growth in 4Q15. Same-store sales growth is a key metric for retailers because it measures the rise in sales of existing stores over a certain period, excluding the impact of stores opened or closed during that period. TJX Companies attributed its strong sales growth to higher consumer traffic.

In fiscal 2016, the company’s sales grew by 6.4% to $30.9 billion. The company’s same-store sales grew by 5% in fiscal 2016, a marked improvement from its same-store sales growth of 2% in fiscal 2015.

Superior performance compared to department stores

TJX Companies proved the strength of its off-price model in a quarter wherein department stores have been delivering dismal sales performances, citing reasons like unfavorable weather. Upscale department store Nordstrom (JWN), which also operates off-price Rack stores, reported a 3.7% rise in its sales in the fourth quarter, which ended January 30, 2016. Sales of Macy’s (M) declined by 5.3% in the comparable fourth quarter. Peers in the off-price retail space Ross Stores (ROST) and Burlington Stores (BURL) are scheduled to announce their fourth quarter results on March 1 and March 3, respectively.

TJX Companies offers merchandise that is generally priced at a 20%–60% discount to the prices offered by department and specialty stores. The company’s bargain deals have resonated with customers even during uncertain economic conditions. The fourth quarter of fiscal 2016 marked the 28th consecutive quarter of overall same-store sales growth for TJX Companies. The VanEck Vectors Retail ETF (RTH) has a 4.8% exposure to TJX.

In this series on TJX Companies’ 4Q16 results, we’ll discuss the company’s profitability, segment performance, stock price movement, and outlook.

Let’s begin with an analysis of TJX’s 4Q16 earnings.

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