TJX Companies’ international business
Outside the United States, TJX Companies (TJX) operates off-price stores in Canada, Europe, and Australia. TJX Companies entered the Australian market with the October 2015 acquisition of Trade Secret, an off-price retailer. TJX reports its business outside the United States under the TJX Canada and TJX International segments. Both segments generated strong sales growth in fiscal 1Q17, which ended on April 30, 2016.
TJX Canada delivers strong results
As of April 30, 2016, TJX Companies operates 250 Winners stores, 104 HomeSense stores, and 45 Marshalls stores in Canada. The TJX Canada segment delivered sales growth of 10.5% in fiscal 1Q17 and impressive same-store sales growth of 14%. The segment’s profit increased by 27.2% in fiscal 1Q17. However, the segment’s profit margin was adversely affected by currency headwinds. Excluding the impact of currency headwinds, the segment’s adjusted profit margin increased by 190 basis points due to strong buying and occupancy leverage.
The TJX International segment, which includes the company’s European and Australian stores, delivered sales growth of 12.8% in fiscal 1Q17. The segment’s same-store sales increased by 4% during the quarter. The segment’s profit declined by 45.6% in fiscal 1Q17 due to the impact of currency headwinds and the integration of Trade Secret in Australia into the company’s business. As of April 30, 2016, TJX Companies operates 471 T.K. Maxx stores and 41 HomeSense stores in Europe. The company operates 35 Trade Secret stores in Australia.
TJX Companies’ off-price rivals Ross Stores (ROST) and Burlington Stores (BURL) lack an international presence. In February 2016, high-end department store Nordstrom (JWN) announced that it will open its first off-price Nordstrom Rack store in Toronto, Ontario, in 2018. The First Trust Consumer Discretionary AlphaDEX Fund (FXD) has 1.1% exposure to TJX Companies.
Expectations for fiscal 2017
In fiscal 2017, TJX Companies expects TJX Canada to deliver same-store sales growth of 6%. The company expects the segment’s adjusted profit margin, excluding currency headwinds, to be in the range of 12.9%–13.1% in fiscal 2017.
Same-store sales of the TJX International segment are expected to grow by 2%–3% in fiscal 2017, and the segment’s adjusted profit margin, excluding foreign currency, is expected to be in the range of 5.6%–5.8%.
We’ll discuss the company’s margins in the next part of this series.