Why TJX Opened In The Red Today

Why TJX Opened In The Red Today

The TJX Companies, Inc. (TJX) opened lower today and is down over 6% as of 1:40PM EDT, after the company missed consensus estimates for the first quarter of its 2015 fiscal year (1QFY15; ended May 3, 2014). The pessimism aggravated as the company lowered its full-year guidance.

Dismal Performance in 1QFY15

The largest off-price retailer in the US reported disappointing results for the quarter. Although revenues for the period surged 5% to $6.49 billion, they fell shy of analysts’ estimates of $6.6 billion. This was primarily due to weather disruptions, and weak performance in core product categories. “Sales were not as strong as we would have liked, predominantly in our apparel business,” admitted CEO Carol Meyrowitz.

Comparable sales, which discount the impact of new store openings, saw a nominal growth of 1%, missing consensus estimate of 2.4%.

Among its four business segments, the steepest growth was observed in the TJX Europe division, of 24%, as sales went up. This was primarily due to the addition of 23 new stores in the last twelve months. Sales for HomeGoods jumped almost 10% in the quarter, followed by a 2.4% sales growth in the Marmaxx segment. Marmaxx – which comprises sales from domestic operations in T.J. Maxx stores, Marshalls stores, and the online Sierra Trading Post business – is the largest segment by revenues, making up two-thirds of the company's total revenues. The only segment that recorded a decline in revenues was TJX Canada, whose sales fell 6%.

The Framingham, Massachusetts-based company’s income edged up 0.3% over the previous year to $454 million or 64 cents a share. Analysts had expected earnings of 67 cents per share from the discount retailer. The company also missed its own earnings estimates of 65-66 cents.

Guidance Revised Down

Following disappointing first-quarter performance, the apparel and home furnishing retailer lowered the upper range of its expected EPS by two cents. The company now expects its earnings for the whole of FY15 in the range of $3.05-3.17 per share, compared to the previously announced EPS guidance of $3.05-3.19. TJX’s forecast is based on projected comparable sales growth of 1-2%. On the other hand, analysts were expecting EPS of $3.19, with comparable sales growth of 2.5%.

For the ongoing quarter, the company expects earnings of 70-74 cents, with 2-3% comparable sales growth. Analysts had estimated earnings of 74 cents, falling in the higher range of the company's guidance, with comparable sales growth of 2.2%.

Stock Repurchases

The management announced it repurchased six million shares from the market at a cost of $360 million. $3 billion in share repurchases has been approved by the company. In the current year, TJX plans to retire shares worth $1.6-1.7 billion from the market. The company has a strategic priority of returning excessive cash to its shareholders in the form dividends and share buybacks. In the last four years, the retailer has spent over $1 billion in share buybacks.

TJX is currently trading at $54.5 per share, marking a decline of 7% to yesterday’s closing price. Including today’s decline, the stock is up 6% overall in the last twelve months. Followed by negative sentiments pertaining to TJX’s dismal results, the stock price of its closest competitor, Ross Stores, Inc. (ROST), is also down 3% today. Ross Stores will announce its first-quarter earnings on Thursday.

What is your take on TJX’s earnings release? Let us know in the comments’ section below, and our analyst will join in as soon as possible.

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