TJX Is Outdoing Even Its Own Expectations

By Sam Lewis

Discount retailer significantly raises third-quarter earnings outlook thanks to tax benefit

TJ Maxx, Marshalls, and HomeGoods’ parent company, TJX, has looked into its crystal ball and likes what it sees. The company raised its third-quarter earnings guidance to 84 or 85 cents per share. The previous guidance was forecast to be 69 to 72 cents per share.

The earnings per share figure includes a tax benefit of 11 cents. This comes due to state and foreign tax reserves, along with allowances that were not figured into previous reports. In last year’s third-quarter, the company earned 62 cents per share. If the tax benefit were taken away, the company still expects increased earnings, forecasting 73 or 74 cents per share, which marks an 18 or 19 percent increase over 2012. Even with the exclusion, the company’s forecast still beats Wall Street’s expectations of 72 cents per share for the quarter.

Full-year earnings per share are predicted to grow substantially. TJX forecasts earnings of $2.89 to $2.93 for the year, crushing 2012’s full-year earnings of $2.55 per share. The company is confident its annual earnings per share will grow 10 to 13 percent annually over the next three years. This claim is supported by the company expanding sales at existing locations, as well as adding square footage to its total retail space.

Comparable store sales for TJX are also expected to grow. The company predicts it will grow by 4 percent, outdoing the 2 percent it forecast in August. “TJX now believes that its Marmaxx division (T.J. Maxx and Marshalls) can grow to substantially more stores in the U.S. than it had previously estimated. Marmaxx has seen successful growth in both major cities and rural areas over the last several years, which has given the company the confidence to increase its growth estimates,” says the company’s press release. Despite beating its own expectations, TJX will most likely fall short of last year’s third-quarter same store sales growth of 7 percent. The full earnings report for the company will be released by the company on Nov 19.

The company, which appeals to budget-minded consumers, has reported steady growth in recent years. This comes contrary to the economic trends of many apparel retailers still struggling with lowered traffic, thanks in part to a slowly recovering economy. TJX hosts its investor day on Tuesday, Oct 22 at its Framingham, MA headquarters. Here it will discuss increased opportunities for stores in its current markets, primarily for TJ Maxx and Marshalls.