While fashion brands have reported mixed results for the fourth quarter so far and are tiptoeing into 2023, off-price giant The TJX Cos. Inc. is striding into the new year and eyeing market share gains.
Despite an unexpected shrink charge in the fourth quarter, the company seems to be settling naturally into the realities of the fashion market today, attracting shoppers who are wary of the economy and able to scoop up loads of excess goods in the retail marketplace.
Net profits for the quarter rose 10.4 percent to $1 billion, or 89 cents a diluted share, from $940 million, or 78 cents, a year earlier.
However, merchandise margins did disappoint, decreasing slightly due to “an unplanned 0.6 percentage point shrink charge,” referring to the catchall accounting category that reflects the impact of shoplifting and other instances in which inventory goes astray. TJX had expected shrink to provide a 0.5 percentage point benefit to pretax profit margins and is now planning shrink to be flat.
Sales for the three months ended Jan. 28 increased 4.8 percent to $14.5 billion from $13.9 billion.
While earnings were on-target with what analysts projected, sales came in about $400 million better than projections.
The Marmaxx division, which includes the T.J. Maxx, Marshalls and Sierra stores and websites, saw comparable sales rise 7 percent, with strength in both apparel and accessories. The HomeGoods business, on the other hand, comped down 7 percent with tougher comparisons from a year ago.
Ernie Herrman, chief executive officer and president of TJX, told analysts on a conference call that the “freshness” of the retailer’s merchandise mix was setting it apart.
“The first quarter is off to a strong start,” Herrman said. “We are excited about our plans to drive sales and customer traffic, and are laser-focused on initiatives to drive profitability this year and beyond. Availability of quality-branded merchandise is phenomenal. We are in a great position to take advantage of the opportunities we are seeing in the marketplace.
“Further, we are convinced our commitment to value and our treasure-hunt shopping experience will continue to serve us well in this environment,” the CEO said. “Importantly, we continue to see many opportunities to capture market share and improve profitability over both the short and long term.”
Disruptions in the supply chain during the pandemic — and overly hopeful buying on the part of many retailers — has led to something of a bonanza of excess inventory that the off-pricer can choose from.
TJX has more than 1,200 buyers who buy from about 21,000 vendors.
“Our ability to buy goods across good, better and best categories gives us tremendous flexibility in the vendor marketplace,” Herrman said.
For the full year, TJX’s net profits increased 6.5 percent to $3.5 billion, or $2.97 a share, as sales rose 2.9 percent to $49.9 billion.
This year, the company expects its comparable-store sales to be up 2 to 3 percent with earnings per share of $3.39 to $3.51.
TJX has 4,835 stores across nine countries and Herrman said the company could open another 1,400 doors in its current markets.
“I am very confident in our plans to grow TJX into an increasingly profitable $60 billion-plus revenue company over the long term,” he said.
Investors also see potential in TJX — and analysts agree the company will continue to take share — but much of that has already been built into Wall Street’s assumptions. Shares of the company slipped 1 percent to $78 in midday trading on Wednesday.