On May 21, TJX Companies (NYSE:TJX) reported weaker-than-expected results for the first quarter of fiscal 2021. Store closures amid the COVID-19 outbreak hurt the company’s results for the first quarter, which ended on May 2. Still, the stock rose 6.8% on Thursday. Investors liked the positive update from TJX CEO Ernie Herrman. The company has seen very strong sales in the stores that have reopened.
TJX Companies announced its results before the markets opened on Thursday. Meanwhile, Ross Stores (NASDAQ:ROST) reported its results for the first quarter of fiscal 2020 (ended May 2) after the markets closed on Thursday. Ross Stores also missed analysts’ expectations due to the COVID-19 crisis.
TJX Companies and Ross Stores’ Q1 performance
TJX Companies closed its stores and its online businesses on March 19. The company’s February comparable sales grew 5% due to strong customer traffic. However, COVID-19 related closures had a significant impact on the business. TJX Companies’ first-quarter net sales declined 52.5% YoY (year-over-year) to $4.41 billion.
The company reported a net loss per share of $0.74 in the first quarter of fiscal 2021 compared to an EPS of $0.57 in the first quarter of fiscal 2020. Analysts expected net sales of $4.97 billion and a loss per share of $0.18.
Meanwhile, Ross Stores’ first-quarter sales fell 51.5% YoY to $1.84 billion. The results were lower than Wall Street’s forecast of $2.04 billion. The company temporarily closed its Ross Dress for Less and DD’s Discounts stores starting on March 20. The company slipped into a net loss per share of $0.87 in the first quarter of fiscal 2020 compared to an EPS of $1.15 in the first quarter of fiscal 2019. Notably, this was the company’s first quarterly loss in over 30 years. Analysts expected the company to post an EPS of $0.03.
Stores start to reopen
TJX Companies started reopening its stores on May 2. So far, the company has reopened 1,600 stores. In total, the company has over 4,500 stores. Meanwhile, the company opened 16 new stores in the first quarter. TJX Companies operates stores in the US under the T.J. Maxx, Marshalls, HomeGoods, Sierra, and Homesense brands. The company also operates stores in Canada, Europe, and Australia.
Ross Stores is reopening its stores in a phased manner. Since May 14, the company has reopened 700 of its over 1,800 locations. In the first quarter, the company opened 20 new Ross Dress for Less stores and seven DD’s Discounts stores. Neither of the companies provided any guidance for the second quarter or for the fiscal year. There’s a lack of visibility about store reopenings and consumer demand due to COVID-19.
Will the situation improve
TJX Companies and Ross Stores already suspended their share repurchase program and reduced their capital expenditures. TJX Companies has reduced its fiscal capital expenditure to $400 million–$600 million from the prior planned budget of $1.4 billion. The company will open fewer new stores than planned earlier and will also delay its spending on IT and distribution center. Ross Stores estimates a capital expenditure of $420 million compared to the initial forecast of $730 million.
Unlike department stores like Macy’s (NYSE:M), off-price retailers TJX Companies and Ross Stores have performed consistently even during tough economic conditions. However, COVID-19 resulted in unprecedented challenges.
Several analysts think that TJX Companies and Ross Stores are well-positioned to bounce back after the COVID-19 pandemic fades. They could benefit due to their low-cost business models and attractive discount deals. Customers will prefer to look for value deals at off-price stores amid challenging macro conditions.
TJX Companies and Ross Stores can also gain from other retailers’ plight in the current market by making opportunistic purchases. They can buy merchandise from clothing retailers and department stores, which will probably sell their inventory at huge discounts.
Meanwhile, Ross Stores suspended its quarterly dividend payment. TJX didn’t declare a dividend for the fiscal first quarter. The company doesn’t expect to declare a dividend for the fiscal second quarter either. Notably, both companies have enough liquidity.
As of May 21, TJX Companies and Ross Stores stocks were down 11.1% and 16.8%, respectively.