TJX credits healthy store traffic for Q4 sales, profit increases

Dive Brief:

TJX Companies Wednesday reported its Q4 net sales increased 8% to $9.0 billion and consolidated comparable store sales grew 6%, up from 4% a year ago. Q4 net income was $666 million and diluted earnings per share were $.99, a 6% increase over the prior year’s $.93.
For TJX's 52-week fiscal year ended January 30, 2016, net sales were $30.9 billion, a 6% increase year over year. Consolidated comparable store sales rose 5% over last year’s 2% increase. Net income for the fiscal year was $2.3 billion. Diluted earnings per share were $3.33, a 5% increase over the prior year’s adjusted $3.16, which excluded a $.01 per share debt extinguishment charge from reported earnings per share of $3.15, according to the company’s report.
TJX credited the results to continued healthy store traffic growth, and noted that its outlook is tempered only somewhat by its plans to increase wages for employees and to expand its number of stores, as well as by the strong dollar.

Dive Insight:

TJX Companies, which runs T.J. Maxx, Marshall’s, and Home Goods stores, appears to be successfully weathering the departure of its longtime CEO, Carol Meyrowitz, whose leadership has been credited for the company's much-imitated success.

Meyrowitz instituted a savvy approach to its relationship with vendors, according to one of the few in-depth reports on the company by Fortune magazine's Beth Kowitt. While the retailer plays hardball when it comes to buying from vendors, for example, it avoids some of the cutthroat practices that have emerged at other companies. Its buyers are among the sharpest in the business, the magazine found, staying on top of trends and moving inventory quickly.

The result has been an enviable level of success in a tough retail environment. Last year, Moody’s Investors Service released a report noting stellar performance by off-price retailers T.J. Maxx, Ross and Burlington, and predicted steady growth of 6% to 8% for them in the next five years—quite above the 4% predicted for the rest of retail. That has launched a slew of would-be rivals, with retailers like Macy’s and even Kohl’s launching off-price stores of their own.

New CEO and president Ernie Herrman, a TJX veteran himself, peppered his statement Wednesday with exclamation points as he promised continued growth and increased dividends.

“We are extremely pleased to end another strong year with terrific fourth quarter results!” Herrman said. “Our fourth quarter 6% comp growth and 6% increase in earnings per share significantly exceeded our expectations. Once again, customer traffic drove our entire consolidated comp increase. It was also the primary driver of our comp increases at every division in the fourth quarter and full year as we continued delivering consumers a differentiated offering at extreme value. We are convinced that we are gaining market share profitably around the world. We were particularly pleased that our overall merchandise margin was up in the fourth quarter while we continued to offer shoppers outstanding values.”

While TJX’s retail efforts are centered—and thriving—in brick and mortar, it has largely eschewed any major effort to boost its e-commerce business. That could become an issue as e-commerce growth continues to outpace physical retail growth, especially in light of Amazon’s new venture into its own lines of apparel and accessories.