As TJX Posts Quarterly Beat, We're Looking to the Call and These Retailers for More Clues
Let's go through the numbers, what we want to hear on the conference call and why these other companies must also be taken into consideration.
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Our shares of TJX Companies TJX are moving higher this morning following the company’s consensus-topping quarterly results and its lifted bottom-line guidance for the current fiscal year. In addition to providing more color on the quarter, TJX management typically provides revenue guidance during the corresponding earnings call, which will be at 11 a.m. ET. We’ll run through the numbers below, but TJX should be looked at in the context of other retailers also reporting. These include Estee Lauder EL, James Hardie JHX. We'll discuss both below.
TJX’s Quarter by the Numbers
TJX reported earnings per share of $1.10, nicely ahead of the $1.01 consensus and up from the $0.96 achieved in the year-ago quarter. The upside surprise was driven by the combination of stronger-than-expected revenue of $14.40 billion, up 6.9% year over year, and margin improvement. Propelling the top-line performance in the quarter, comp sales rose 4%, faster than the 2%-3% guidance for the quarter and a quicker pace than the 3% posted for the previous quarter. We see this report as confirming out views on consumer and spending behavior. By segment, quarterly comp sales were as follows: Marmaxx US +3%, HomeGoods US +5%, TJX Canada +9%, TJX Intl +5%.
The bottom-line guidance calls for EPS of $1.17-$1.19 vs. the $1.22 market consensus. We’ll want to dig into that during the conference call, but for now, the market is overlooking that modest shortfall, given the lifted full-year bottom line forecast to $4.52-$4.57 from $4.34-$4.44 and the $4.49 market consensus. Alongside that revision, management also lifted its full-year comp guidance to +3% from +2-3% prior guidance, but with the benefit of hindsight, we would not be surprised to learn that guidance is conservative.
Exiting the quarter, TJX’s total inventories stood at $7.4 billion vs. $7.1 billion entering it and the $6.5 billion at the end of the July 2024 quarter. Since beginning our TJX position on July 1, we’ve discussed other retail closures that were potential merchandise opportunities for TJX as we head into the holiday shopping season. We’ll look for some additional color on the earnings call, including what that inventory level may say about management’s comp sales outlook being conservative.
As we take stock of the earnings call, we’ll review our TJX price target, which we recently raised to $140.
James Hardie
Last night, building products company James Hardie came up rather short compared to market expectations for its latest quarter and revised its full-year expectations lower. This adds to our view yesterday about the housing market, and it also reaffirms that the consumer remains selective when it comes to spending. Per the company:
Homeowners are deferring large-ticket remodeling projects like re-siding, and affordability remains the key impediment to improvement in single-family new construction, where, more recently, homebuilders are moderating their demand expectations and slowing starts to align their home inventory with a decelerating pace of traffic and sales.
Estee Lauder
Estee Lauder delivered a mixed quarter, which included an 8% revenue drop year over year and cut its EPS outlook for the coming year to $1.87-$2.07, well below the $2.22 the market was looking for. Revenue declines over the quarter were reported in all product categories, save for Fragrance, which was flat year over year. From a geographic basis, revenue declines were reported in all three reporting segments, with the Americas down 3%. In discussing the low single-digit decline in North America, management shared the following:
Ongoing retail softness for some brands as well as pressures from subdued consumer confidence and sentiment in the second half of fiscal 2025, which led to elevated levels of inventory and destocking at certain retailers, along with the timing of shipments compared to the prior year.
We’ll look for more perspective on the consumer during Estee’s earnings call this morning, as well as quarterly results tonight and tomorrow from Coty COTY, Walmart WMT, and Ross Stores ROST.
At the time of publication, the Pro Portfolio was long TJX.
