TJX Companies Earnings: Increased Costs Strain Margins as Profit Drops

S&P 500 (NYSE:SPY) component TJX Companies Inc. (NYSE:TJX) reported its results for the first quarter. The TJX Companies, Inc. is an off-price apparel and home fashions retailer in the United States and worldwide.

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TJX Companies Earnings Cheat Sheet for the First Quarter

Results: Net income for the department store fell to $266 million (67 cents/share) vs. $331.4 million (80 cents/share) a year earlier. A decline of 19.8% from the year earlier quarter.

Revenue: Rose 4.1% to $5.22 billion YoY.

Actual vs. Wall St. Expectations: TJX reported adjusted net income of of 78 cents/share. By that measure, the company fell short of mean estimate of 80 cents/share. Estimates ranged from 79 cents per share to 83 cents per share.

Quoting Management: Carol Meyrowitz, Chief Executive Officer of The TJX Companies, Inc., stated, “I am pleased that we delivered strong sales results in the face of our most challenging year-over-year comparisons of any quarter this year. These results demonstrate the consistency of our off-price business model. Our consolidated comparable store sales increased 2% and our adjusted earnings per share were in line with our expectations, on top of a 9% comparable store sales increase and 63% earnings per share increase last year. Customer traffic continues to be up over significant prior-year increases, which reinforces to us that value remains top-of-mind for consumers regardless of the economic environment. Further, we were particularly pleased with our overall sales results, given the unfavorable weather in many U.S. and Canadian regions. Sales trends picked up as we exited the quarter, May is off to a strong start, and earnings comparisons ease as we move through the balance of the year. We remain extremely confident in our ability to profitably grow our business. Our inventory position is extremely liquid and we are excited about the quantity and quality of branded merchandise that we are seeing in the marketplace.”

Key Stats:

From the fourth quarter of the last fiscal year, the company’s current liabilities fell to $3.1 million from $3.13 billion.

Gross margin shrunk 0.6 percentage point to 26.7%. The contraction appeared to be driven by rising costs as the figure rose 4.9% from the year earlier quarter while revenue rose 4.1%.

Revenue has risen the past four quarters. Revenue increased 6.6% to $6.33 billion in fourth quarter of the last fiscal year. The figure rose 5.4% in third quarter of the last fiscal year from the year earlier and climbed 6.8% in second quarter of the last fiscal year from the year-ago quarter.

The company has now seen net income fall in each of the last two quarters. In the fourth quarter of the last fiscal year, net income fell 15.3% from the year earlier quarter.

Competitors to Watch: Gordmans Stores, Inc. (NASDAQ:GMAN), Citi Trends, Inc. (NASDAQ:CTRN), Stein Mart, Inc. (NASDAQ:SMRT), Syms Corp. (NASDAQ:SYMS), Wal-Mart Stores, Inc. (NYSE:WMT), Ross Stores, Inc. (NASDAQ:ROST), Fred’s, Inc. (NASDAQ:FRED), Target Corporation (NYSE:TGT), Macy’s, Inc. (NYSE:M), and Dillard’s, Inc. (NYSE:DDS).

Stock Performance: Shares of TJX are down 3.3% from the previous close of $54.31.

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