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TJX Companies Q2 net sales up 6 percent, raises FY16 guidance

By Prachi Singh

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The TJX Companies’ net sales for the second quarter of fiscal 2016 increased 6 percent to 7.4 billion dollars and consolidated comparable store sales increased 6 percent over last year's 3 percent increase. Net income for the second quarter was 549 million dollars and diluted earnings per share were 0.80 dollars, a 7 percent increase over the prior year's adjusted 0.75 dollar, which excluded a 0.02 dollar per share debt extinguishment charge from reported earnings per share of 0.73 dollar.

For the first half of fiscal 2016, net sales were 14.2 billion dollars, a 6 percent increase over last year. Consolidated comparable store sales for the first half increased 5 percent and net income was 1 billion dollars. Diluted earnings per share were 1.49 dollars, an 8 percent increase over the prior year's adjusted 1.38 dollars, which excluded a 0.01 dollar per share debt extinguishment charge from reported earnings per share of 1.37 dollars. During the second quarter, the company increased its store count by a net of 20 stores.

Commenting on the results, Carol Meyrowitz, Chairman and Chief Executive Officer of The TJX Companies, “We are extremely pleased that our momentum continued in the second quarter. Our 6 percent consolidated comparable store sales growth and 7 percent adjusted EPS growth significantly exceeded our expectations. It was great to see that comp sales were entirely driven by customer traffic - our fifth consecutive quarter of sequential traffic improvement - and that we had strong sales across all of our divisions. The third quarter is off to a solid start and we are raising our full year comp sales and earnings per share guidance.”

For the second quarter, the company's consolidated pretax profit margin was 12 percent, a 0.3 percentage point decrease compared with the prior year's adjusted 12.3 percent margin. Gross profit margin was 29.1 percent, up 0.5 percentage points versus the prior year, primarily due to buying and occupancy leverage on the 6 percent comp growth.

For the third quarter, the company expects diluted earnings per share to be in the range of 0.80 to 0.82 dollars compared to 0.85 dollars last year. This guidance reflects an assumption that the combination of foreign currency, transactional foreign exchange, the company's wage initiative, incremental investments to support growth, and pension costs would have a 13 percent negative impact on EPS growth. The company expects the foreign currency impact to third quarter EPS growth to be significantly greater than originally planned due to the continued decline of the Canadian Dollar. This EPS outlook is based upon estimated consolidated comparable store sales growth of 2 percent to 3 percent.

The company is raising its full year earnings per share guidance. For the fiscal year ending January 30, 2016, the company now expects diluted earnings per share to be in the range of 3.24 dollars to 3.28 dollars versus 3.15 dollars in fiscal 2015. Excluding a 0.01 dollar debt extinguishment charge in fiscal 2015, this guidance would represent a 3 percent to 4 percent increase over the adjusted 3.16 dollars in fiscal 2015. This EPS outlook is now based upon a raised estimate of consolidated comparable store sales growth of 3 percent to 4 percent.

TJX Companies