TJX Disappoints Wall Street With Lower-Than-Expected Sales

Despite sales gains and plans to keep growing, Wall Street was expecting more from TJX.

The TJX Cos. might have reported first-quarter sales and profits ahead of last year, but it wasn’t enough to please Wall Street.

Shares of the company, which operates off-price retailers T.J. Maxx, Marshalls and HomeGoods, dropped more than 4 percent to their lowest level in six months, after the company revealed a 3 percent increase in net sales for the quarter, hitting $7.8 billion.

Consolidated comparable-store sales also increased 1 percent and profits rose to $536.3 million, compared with $508.3 million a year ago.

While the results are positive, sales came in below the expectations of Wall Street, which has come to see TJX as one of the few safe bets in retail.

Nevertheless, analysts with J.P. Morgan listed TJX as an “overweight” stock, or a better value than its peers, and said although they “would have liked to see” better comp sales, the 1 percent increase is still in line with prior growth.

TJX president and chief executive officer Ernie Herrman admitted that sales during the quarter “were not as strong as we would have liked” during a call with analysts. He attributed some sluggishness early on to bad weather and said “trends improved as the quarter progressed.”

“Our first-quarter results speak to the flexibility and resiliency of our off-price retail model. Our teams across all divisions did an excellent job taking advantage of the favorable buying environment and managing inventory levels, which helped drive an increase in our merchandise margin,” Herrman said.

The company also ended the quarter with 50 more stores, bringing its total store count to 3,862.

Going forward, Herrman said the second quarter is “off to a solid start” and that the company is in a good liquidity and inventory position “to take advantage of a marketplace that is loaded with quality branded goods.”

As for guidance for the coming quarter, chief financial officer Scott Goldenberg said the company is expecting consolidated sales of $8.2 billion, a 1 percent decline, and earnings to drop slightly to a range of 81 cents to 83 cents from year-ago earnings of 84 cents per share, mainly due to foreign currency exchanges and wage increases.

Herrman also gave some more detail on TJX’s new home store concept announced earlier this year, revealing the name to be HomeSense and that a handful of stores, including two in Ireland, are set to open by late summer.

As for how HomeSense will differentiate itself from TJX’s HomeGoods stores, Herrman would not go into detail on plans for the store, but was adamant that the new chain will “offer consumers a different mix of home fashions…at the same great values.”

Herrman remained confident in the ability of TJX to continue its global expansion, with new stores in Europe and Australia already performing well, and maintained that the company’s long-term plan for a fleet of 5,600 stores.

TJX is set to open another 200 stores this year, in addition to the 50 opened in the first quarter, including the “testing” of bricks-and-mortar units for its Sierra Trading Post brand.

“We have a clear long-term vision and are excited about our future as we continue to grow TJX as the only major international off-price retailer in the world,” Herrman said.

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