The TJX Companies, Inc. TJX came up with yet another quarter of drab results with its second-quarter fiscal 2021 numbers. Both top and bottom lines deteriorated year over year and lagged the Zacks Consensus Estimate. Results were marred by temporary store closures in one-third of the quarter due to COVID-19. Nonetheless, the company has reopened more than 4,500 stores globally and all its online shopping sites.
Quarterly Details
The company reported a loss of 18 cents per share, wider than the Zacks Consensus Estimate of a loss of 8 cents. The quarterly loss compares unfavorably with earnings of 62 cents reported in the year-ago period.
The TJX Companies, Inc. Price, Consensus and EPS Surprise
The TJX Companies, Inc. price-consensus-eps-surprise-chart | The TJX Companies, Inc. Quote
Net sales slumped 31.8% year over year to $6,667.6 million and lagged the Zacks Consensus Estimate of $7,005.4 million.
Management stated that owing to temporary store closures amid the pandemic, the comp store sales definition was not applicable in the quarter under review. Thus, to offer a performance indicator for the stores as they reopen, TJX Companies has come up with a temporary new sales measure — open-only comp store sales. This includes stores that were initially classified as comp stores (in the beginning of fiscal 2021), with sales reporting done for the number of days these stores were open in the quarter under review.
Markedly, open-only comp store sales for the company fell 3% year over year. The metric declined 6%, 18% and 1% at the Marmaxx (U.S.), TJX Canada and TJX International divisions, respectively, whereas the same was up 20% in the HomeGoods (U.S.) segment.
Other Financial Updates
The company, which shares space with Costco COST ended the quarter with cash and cash equivalents of $6,620.4 million, long-term debt of $5,445.3 million and total shareholders’ equity of $4,660.6 million.
Management generated $3.4 billion of operating cash flow during the second quarter, while it paid the $1 billion, which was drawn under the revolving credit facilities in March. Also, the company boosted the borrowing capacity under its credit facilities with another facility of $500 million in the third-quarter beginning, making $1.5 billion available for the company. Dividend payments are not anticipated in the third quarter and the share buyback plan has been suspended.
Total inventories as of Aug 1, 2020, were $3.7 billion, down from $5.1 billion in the year-ago period. The company is focused on keeping inventory levels in line with its sales plans and has elevated its buying considerably since July beginning to facilitate inventory flow. The company is also concentrating its inventory purchases on categories that are witnessing higher demand since store reopening.
Store & More Updates
During the second quarter, the company opened 12 new stores in the reported quarter, taking the total count to 4,557.
TJX Companies has reopened more than 4,500 stores worldwide along with each of its online shopping sites. The company has implemented actions to ensure safety and well-being of its workers as well as customers. These include social-distancing norms, access to PPE and better cleaning and sanitization, among other efforts. Notably, the company saw robust initial sales at all its retail banners and countries when it reopened stores. After an initial demand spike, sales and traffic moderated as the second quarter progressed and also in the third quarter. This could be accountable to consumer behavior and lighter-than-planned store inventories. In Canada, the company’s inventory flow was hurt by supply-chain hurdles and logistics-related headwinds. Nonetheless, the company has undertaken strategies to cut down on inventory delays.
Outlook
Management remains impressed with its merchandise margins in the second quarter. Further, the company’s HomeGoods and Homesense chains saw robust sales. Also, home departments in other company chains did well. The company expects to keep gaining market share again when more customers restart shopping in stores.
In the third quarter of fiscal 2021, management expects to see overall open-only comp store sales decline of 10-20%. This goes in tandem with the sales trends witnessed since mid-July through August (to date). The outlook also reflects the uncertainty surrounding consumer behavior, traffic and demand amid the pandemic, including a sluggish back-to-school selling season. Management did not offer any guidance for fiscal 2021.
The Zacks Rank #4 (Sell) stock has lost 10% in the past six months against the industry’s rise of 2.9%.
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