Off-price giant shines in Q2; sees plenty of room for store growth
TJX Companies showed strong momentum in the second quarter, fueled by strong traffic across all its brands.
The off-pricer retailer on Tuesday reported earnings, sales and same-store sales that topped analysts' expectations.
Total sales rose 6% to $8.36 billion, beating analysts' estimates of $8.29 billion, in the quarter ended July 29. Same-store sales rose 3% for the quarter. By brand, same-store rose 7% at Home Goods and TJX Canada; 2% at Marmaxx (TJ Maxx and Marshalls); and 1% at TJX International.
TJX's strong showing comes as the chain gets ready to debut another home concept, HomeSense, in the U.S. The first location opens Aug. 17, in Framingham, Mass. The company has said that HomeSense will complement its existing — and still growing — HomeGoods brand.
Neil Saunders, managing director of GlobalData, commented that TJX's decision to open a new U.S. seems "particularly sound."
“This will allow the company to better take advantage of the strong growth in home retail and to grow its presence in categories, like furniture and larger furnishing items, which are a relatively weak part of HomeGoods proposition," Saunders said. “Given that these categories are not ones in which many other off-price retailers operate, we believe that HomeSense can make some substantial market share gains over a short period.”
On the chain's quarterly call, CEO Ernie Herrman said that, long term, TJX has the potential to open up to 5,600 stores under its current banners, which is 1,700 more locations than it currently has.
"We continue to see store openings as an attractive investment and a very good use of capital," he said.
TJX's net income in the quarter slipped 1.6% to $552.6 million, or 85 cents per share, amid increased expenses, compared with $562.2 million, 84 cents per share, in the year ago period. Excluding one-time items, the retailer earned 85 cents per share, edging past analysts' estimates by one cent.
“I am very pleased with our strong second quarter results," stated Herrman. "Customer traffic was up and was the primary driver of our comp store sales growth at every division and overall merchandise margin was up, which we see as excellent indicators of the fundamental strength, consistency and flexibility of our business. In addition, we are confident that we are gaining market share at each of our four major divisions."
The company raised its forecast for adjusted earnings to $3.78 to $3.82 per share, from $3.71 to $3.78 for the year ending January 2018. Analysts on average were expecting $3.89 per share.
"Looking ahead, we see exciting opportunities for our business in the second half of the year," said Hermann. "We believe we are set up extremely well to take advantage of the abundant buying opportunities in the marketplace. We have great liquidity in our inventories and we continue to grow our global sourcing universe of over 18,000 vendors, as we constantly open new vendor relationships and strengthen our existing ones."
During the second quarter, the company increased its store count by 51 stores to a total of 3,913 locations.
Moody’s: Amazon to ‘kick start’ its grocery business with purchase of Whole Foods Market
Moody's Investor Services is feeling positive about Amazon's plans to acquire Whole Foods Market.
The ratings agency assigned the deal a Baa1 rating and revised Amazon’s credit outlook to positive from stable, reported Marketwatch. The report also said that Amazon is planning to issue up to $16 million in debt to fund the online giant's acquisition of Whole Foods.
The move “reflects our view that despite the increase in debt, the Whole Foods acquisition is an immediate credit positive for the company on a variety of fronts,” Moody’s VP Charlie O’Shea wrote in a note. “Whole Foods provides Amazon with greater scale and a crucial brick-and-mortar presence in a segment where it has been trying to grow, and the almost 500 existing Whole Foods locations can be utilized to expand food delivery, as well as provide pickup points for online orders of any type.”
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Discounter names new food and beverage VPs
Target is bringing on talent from Walmart and General Mills to accelerate its food and beverage strategy.
Mark Kenny will join Target as VP divisional, meat and fresh prepared food where he will oversee the meat, seafood, deli, bakery and prepared food categories. Kenny joins Target from Walmart, where he most recently was the senior director of private brands, deli and bakery.
Liz Nordlie will join Target as VP, product design and development for food and beverage. She will oversee the brand direction and product vision for owned brand food and beverage categories. With 27 years of brand building experience across 30 food and beverage businesses, Nordlie will lead and strengthen efforts underway with Target’s owned brand portfolio.
Nordlie joins Target from General Mills, where she spent 20 years in general management roles, building brands across cereal, snacks, meals, yogurt and baking core businesses, as well as natural and organics. Most recently, Nordlie was the president of General Mills baking division.
Nordlie and Kenny will join Target later this month.
“We have been making positive progress with our assortment, presentation and operations in food and beverage this year," said Mark Tritton, executive VP and chief merchandising officer, Target. "With Jeff Burt’s leadership, and the investment we’re making to bring on two new seasoned executives, combined with our already talented team, I’m confident we’ll be able to go even further, faster, delivering both an experience and assortment that’s uniquely Target."