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Will TJX Companies’ Fiscal 1Q17 Sales Rise on Strong Traffic?

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Fiscal 1Q17 analyst estimates

Leading off-price retailer TJX Companies (TJX) is scheduled to announce its results for the first quarter of fiscal 2017 on May 17. The first quarter of fiscal 2017 ended on April 30, 2016. Analysts expect TJX Companies’ 1Q17 sales to grow by 6.2% on a year-over-year basis to $7.3 billion.

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Recap of previous performance

TJX Companies exceeded analysts’ sales estimates in all four quarters of fiscal 2016 ended January 30, 2016. TJX Companies’ sales grew by 6.4% in fiscal 2016, higher than the sales growth rate of 6% in fiscal 2015. The company attributed the higher sales in fiscal 2016 to a 4% contribution from new stores and a 5% same-store sales growth. The fiscal 2016 sales growth was adversely impacted by a 3% negative impact of currency headwinds.

The same-store sales growth in fiscal 2016 was driven by higher customer traffic. TJX Companies experienced a strong increase in the units sold in fiscal 2016. However, this was offset by a reduction in the average ticket. TJX Companies constitutes 1.8% of the iShares U.S. Consumer Services ETF (IYC).

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Strength of off-price business model

TJX Companies’ performance in fiscal 2016 proved the strength of the off-price business model even in an uncertain retail environment. Off-price retailers sell their merchandise at about a 20%–80% discount compared to department stores, which helps generate strong customer traffic. In the fiscal year ended January 30, 2016, off-price retailers Ross Stores (ROST) and Burlington Stores (BURL) reported sales growth of 8.1% and 5.8%, respectively.

Department stores Macy’s (M), Kohl’s (KSS), and Nordstrom (JWN) reported sales growth of -3.7%, 1%, and 6.9%, respectively, in the comparable fiscal year. Note that upscale department store Nordstrom also operates off-price Rack Stores.

A look at the company’s guidance

Based on the guidance issued in February 2016, TJX Companies expects 1Q17 sales to be in the $7.2 billion to $7.3 billion range. This guidance assumes a 1% adverse impact of currency headwinds. The company expects 1Q17 same-store sales in the 2% to 3% range.

TJX Companies expects its full-year fiscal 2017 sales to grow by 4% to 5% over the prior year. The full-year same-store sales are expected to increase by 1% to 2%.

We will discuss the company’s margins in the next part of this series.

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