TJX Companies Boosts Profit Guidance

Image: TJX’s stock has been on a tear over the past couple years.

By Brian Nelson, CFA

TJX Companies (TJX) reported better-than-expected second quarter fiscal 2025 results August 21 that showed a revenue beat and non-GAAP earnings per share outpacing the consensus estimate. Net sales increased 6% thanks to consolidated comparable store sales increasing 4% as a result of increased customer transactions, which was above the consensus forecast for comps to experience 2.8% growth.

Its second-quarter pre-tax profit margin of 10.9% was 0.5 percentage points ahead of last year’s mark thanks to lower freight costs and stronger sales. Second-quarter diluted earnings per share of $0.96 was up 13% from the same period a year ago. Its comparable store sales growth, pre-tax profit margin, and diluted earnings per share were all above the company’s plan.

Management’s comments were upbeat in the press release:

I am extremely pleased with our second quarter performance. Our comparable store sales increase of 4%, pretax profit margin, and earnings per share all exceeded our plans. Our teams sharply executed on our mission to deliver great value to consumers every day. Our overall comp sales growth was entirely driven by customer transactions, which increased at every division. The performance of Marmaxx, our largest division, was outstanding, with a comp sales increase of 5%. With our strong second quarter results, we are raising our full-year guidance for both pretax profit margin and earnings per share…

…The third quarter is off to a strong start. We see excellent buying opportunities in the marketplace and are strongly positioned to ship fresh and compelling merchandise to our stores and online throughout the fall and holiday selling seasons. We marked a milestone for our Company in the second quarter by opening our 5,000th store! Longer term, we are excited about our potential to capture additional market share in all of our geographies and to continue our global growth, while delivering great value to more consumers around the world and driving the profitability of TJX.

The company experienced strength in same store sales growth across its divisions. Marmaxx, which includes TJ Maxx, Marshalls, and Sierra stores, experienced a 5% comp increase, while HomeGoods, which includes HomeGoods and Homesense stores, showcased a 2% comp number. TJX Canada’s growth comp was 2%, while TJ International (Europe and Australia) experienced a 1% growth comp. Total net sales for TJX Companies were led by Marmaxx, which experienced 7% growth. HomeGoods and TJX International experienced 4% expansion, while TJX Canada grew 2%, all on a reported basis. Total inventories were $6.5 billion, down slightly from a year ago.

For the 26 weeks ended August 3, 2024, cash flow from operations expanded to $2.4 billion from $2.1 billion in the same period last year, while capital spending increased to $982 million from $820 million. Free cash flow so far through the first six months of TJX’s fiscal year totaled $1.4 billion, which handily covered the company’s cash dividends paid of $803 million over the same time period. During the first half of fiscal 2025, TJX returned a total of $1.9 billion to shareholders, with $1.1 billion coming from share buybacks. For all of fiscal year 2025, the company intends to buy back $2-$2.5 billion of TJX stock.

Looking forward, TJX expects consolidated comparable store sales growth to be between 2%-3% in the third quarter. Pre-tax profit margin is expected in the range of 11.8%-11.9% for the quarter, while diluted earnings per share is targeted in the range of $1.06-$1.08. For the full year fiscal 2025, consolidated comparable store sales are expected to be up ~3% (was 2%-3%), and the company raised its pre-tax profit margin to 11.2% and raised its diluted earnings per share outlook to be in the range of $4.09-$4.13 (was $4.03-$4.09). Though we liked the quarter and raised profit guidance, TJX’s shares are not cheap. We’re sticking with our $106 per share fair value estimate at this time. Shares yield 1.3%.

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