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TJX Reports Q2 Results And Optimistic Outlook

Management of TJX Companies
is very optimistic and their enthusiasm for the rest of the year and next year was infectious. The abundance of merchandise available to TJX buyers will lead to some special offerings.

The company reported second quarter diluted earnings per share for 2022 of $0.69 compared to last year’s second quarter of $0.64. While net sales dropped to $11.8 Billion from $12.1 Billion, management indicated that margins improved in the quarter and that it looked for further improvement in the rest of the year. At the same time, it was indicated that transportation costs, port delays and overall supply chain expenses were still at a high point, but there was hope that these costs were abating and that management was working on reduction of expenses.

For the full year the company is increasing the outlook for profit margins. The company now expects pretax profit margins to be 9.3% to 9.5% compared to previous guidance for pretax margins of 9.2% to 9.4%. Earnings per share for fiscal 2022 has been updated from $2.87 to $2.95 to $2.94 to $3.01

Management expects to add 1,000 stores to the 4,736 now in operation, in the next five years and expects to meet and beat pre-tax margin of 10.6%, a historical high. There are several factors that give management confidence to project the near-term goal:

1. Abundance of good, better and best merchandise that will be sold off-price

2. Reduction of supply chain costs and new writen contracts that will strengthen the relationship with shippers

3. Strengthen buying relationships and control buying costs. There are now 1,200 buyers who look for value merchandise throughout the world

4. The stores are flexible – the merchandise can be shown in larger spaces as customer demands requires it.

5. While there have been price rises, management sees opportunities for margin improvements.

6. Management controls timing of shipments to stores from distribution centers – thus assuring that shelves are aways filled with fresh wanted merchandise.

Ernie Herrman, CEO and President of TJX Companies said: “I am very pleased that our pretax profit margin exceeded our plan and earnings per share were at the high end of our guidance. I believe our strong profitability speaks to the strength and flexibility of our off-price business model sharp execution of our teams, and expense discipline.”

POSTSCRIPT: While the company is not immune to macro factors such as a slow-down of consumer spending, I see the likelihood of a strong second half since the company is signaling that many famous brands may be available at off-price. I believe the company will exceed expectations both in sales and earnings.