TJX Companies’ Fiscal 1Q17 Sales Defy Retail Uncertainty



Fiscal 1Q17 sales beat estimates

TJX Companies (TJX) delivered sales of $7.5 billion in the first quarter of fiscal 2017, which ended on April 30, 2016. The off-price retailer’s fiscal 1Q17 sales exceeded analysts’ consensus estimate of $7.3 billion. TJX Companies proved the strength of its off-price model in the first quarter, in which major department stores delivered weak sales, citing a challenging retail environment and tepid consumer spending. The company reported its fiscal 1Q17 results on May 17.

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Sales growth drivers

TJX Companies’ sales in fiscal 1Q17 increased by 9.9% on a year-over-year basis, driven by strong consumer traffic. The company’s fiscal 1Q17 sales growth rate was higher than growth of 7.9% in fiscal 4Q16 and 5.8% in fiscal 1Q16.

The company’s fiscal 1Q17 same-store sales increased by 7%, marking the 29th consecutive quarter of same-store sales growth. The company saw a strong rise in the number of units sold in fiscal 1Q17. However, the average ticket declined in the quarter. The iShares U.S. Consumer Services ETF (IYC) has 1.8% exposure to TJX Companies.

Comparison with department stores

TJX Companies’ impressive sales growth in fiscal 1Q17 was in stark contrast to the performance of major department stores. Macy’s (M), Kohl’s (KSS), and Dillard’s (DDS) reported declines of 7.4%, 3.7%, and 4.6%, respectively, in their sales in the first quarter, which ended April 30, 2016. High-end department store Nordstrom (JWN), which also operates the off-price Rack stores, reported weaker-than-expected sales growth of 1.1% in its comparable quarter.

Off-price retailers like TJX Companies and Ross Stores (ROST) sell their merchandise at deep discounts compared to similar merchandise sold by department stores. The value deals offered by off-price retailers on attractive merchandise continue to bring in more traffic to their stores.

Sales outlook raised

Following a strong performance in fiscal 1Q17, TJX Companies raised its sales guidance for fiscal 2017, which ends on January 28, 2017. The company now expects its fiscal 2017 same-store sales growth to be in the range of 2%–3%. This compares to the company’s previous guidance of same-store sales growth of 1%–2%.

We’ll discuss TJX Companies’ fiscal 1Q17 earnings in the next part of this series.


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