The TJX Companies Inc. (TJX, Financial) recently revealed its first quarter results for fiscal 2016 with estimate-beating earnings and revenues. While the company posted 8% year-over-year growth in earnings to 69 cents a share for Q1 2016, the figures also surpassed the consensus estimate of 66 cents a share on the back of strong growth in comparable-store sales, improved margins and higher consumer footfalls during the quarter. Following the results, TJX shares climbed over 4% to $70.92 during the day’s trading.
Comparable-store sales grow across segments
TJX reported 6% year-over-year growth in sales to $6.9 billion, beating the consensus estimate of $6.81 billion by a small margin on the back of higher comparable-store sales during the first quarter of fiscal 2016. Although the discount retailer’s pre-tax profit margin shrank 0.2 percentage points year-over-year to 11.1% of sales, gross margin expanded 0.4 percentage points to 28.3% of sales on the back of higher comparable-store sales as well as higher margins on merchandise.
During the first quarter, TJX saw 5% growth in comparable-store sales compared to the 1% sales growth in the year-ago quarter. While TJX Canada saw maximum year-over-year growth in same-store sales of 11% during the quarter, the company’s Home Goods business saw 9% growth compared to the year-ago quarter. Concurrently, TJX Europe and Marmaxx posted 3% growth in same-store sales each for Q1 2016.
TJX, which competes with other businesses such as Ross Stores Inc. (ROST, Financial), Target Corporation (TGT, Financial) and Kohl’s Corp (KSS, Financial) in the discount department stores sector, repurchased 6.1 million common shares worth $415 million during the first quarter and hiked its dividend by 20 percent. The company also said it expects to buy back common stock worth around $1.8 to $1.9 billion during FY2016.
Outlook for FY2016
Following the results, TJX Companies also issued guidance for the second quarter of fiscal 2016. The company projected earnings in the $0.72 to $0.74 a share range, with comparable-store sales expected to grow by 2% to 3% during the quarter. This compares to the company’s earnings of $0.73 in the year-ago quarter. Further, TJX revised its guidance for the full-fiscal 2016 on the back of the strong Q1 results. The company now expects earnings for FY2016 to be in the range of $3.21 to $3.27 a share, compared to the previous guidance of $3.17 to $3.25 a share. This compares to earnings of $3.15 a share in the previous fiscal. TJX also projected comparable-store sales to grow by 2% to 3% compared to the earlier guidance of 1% to 2%.
Consensus estimates peg the company’s Q2 earnings at $0.76 a share while for the full fiscal; the company is expected to post earnings of $3.26 a share.
Final thoughts
TJX Companies reported upbeat results for Q1 2016 at a time when most retailers are seeing sluggish sales and escalated operating costs. The 5% year-over-year growth in comparable-store sales is a definite plus for the company, with the company logging growth across all regions and segments. Although the company is expected to see relatively marginal growth of 3.10% in earnings for fiscal 2016, experts are looking at an average annual earnings growth rate of over 11% for TJX over the next five years. The TJX stock currently carries a "buy" guidance.
