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Category: Stock Market and TJX Companies (TJX)
Date: 20 August 2020 TJX Stock Price: $54.36 We take a look at the 1st quarter 2021 earnings report of TJX companies, off-price apparel and home fashions retailer. The group's revenue declined by -31.8% compared to the same quarter of the previous year and they reported a loss of -$214.2 million. This while other retailers such as Walmart, Home Depot, Target are all reporting record sales and profits.
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It was so great to welcome back our Associates and loyal customers around the world this quarter. I am incredibly proud of the monumental effort of our Associates worldwide to reopen more than 4,500 stores in 9 countries, multiple distribution and fulfillment centers, and our e-commerce sites"
About TJX Companies
The TJX Companies, Inc. is the leading off-price apparel and home fashions retailer in the U.S. and worldwide. We believe that our retail business model is one of the most flexible in the world and that we have one of the widest demographic reaches in retail, both of which have enabled us to achieve successful, profitable growth, through many types of economic and retail cycles across different geographies. In our history as a Company, our annual comparable store sales have declined only once, and we have delivered solid earnings growth and strong financial returns. We are one of the few large U.S. retailers of apparel and home fashions to have expanded successfully internationally. We operate stores in nine countries across three continents, and we continue to believe we have exciting growth opportunities both in the U.S. and internationally. Our strong operations have consistently generated large amounts of cash annually, which has allowed us to invest in the growth of the business, while simultaneously returning value to shareholders
Overview of TJX's 2nd quarter 2021 earnings report
The data refers to the latest quarter unless specified otherwise
- Net sales: $6.67 billion (down from $9.781 billion for the same quarter of the previous year)
- Total revenues decreased by -31.8% over the last 12 months
- Cost of sales: $5.174 billion (down from $7.026 billion for the same quarter of the previous year)
- Cost of sales decreased by -26.4% over the last 12 months
- Net loss: -$214.2 million (down from $758.9 million for the same quarter of the previous year)
- Diluted loss per share: -$0.18 (down from $0.62 for the same quarter of the previous year)
- PE ratio of TJX Companies: A PE ratio cannot be calculated on a loss making firm
- Dividend declared: Dividend paid by TJX companies have been suspended
- Dividend yield of TJX Companies: ----
- Diluted shares in issue: 1.198 billion (down -2.4% from 1.228 million for the same quarter of the previous year)
- Cash and cash equivalents: $6.62 billion
- Cash and equivalents per share: $5.52
- Cash and equivalents makes up 10.2% of TJX Companies' market capital
- Cash and equivalents makes up 24.9% of TJX Companies' total assets
- Accounts receivable: $847.9 million
- Accounts receivable makes up 3.2% of TJX Companies' total assets
- Merchandise inventories: $3.774 billion
- Merchandise inventories makes up 14.2% of TJX Companies' total assets
- Stockholders in TJX Companies: $4.660 billion
- Stockholders equity per share: $3.88
- TJX Companies is trading at 14 times its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at
- To put this in perspective the average price to book value of firms in the S&P 500 is at 3.7.
TJX Companies' management commentary on their 2nd quarter 2020 earnings
FRAMINGHAM, Mass.--(BUSINESS WIRE)--Aug. 19, 2020-- The TJX Companies, Inc. (NYSE: TJX), the leading off-price apparel and home fashions retailer in the U.S. and worldwide, today announced sales and operating results for the second quarter ended August 1, 2020. Net sales for the second quarter of Fiscal 2021 were $6.7 billion. Overall open-only comp store sales (defined below) were down 3% versus last year. Net loss for the second quarter was ($214) million and loss per share was ($.18). The Company’s second quarter results were negatively impacted by the temporary closure of its stores for nearly one third of the quarter due to the impact of the COVID-19 global pandemic. Further, the Company’s net loss per share includes tax expense, which was primarily driven by a tax-loss carryback benefit recorded in the first quarter and reversed in the second quarter due to better than expected results.
For the first half of Fiscal 2021, net sales were $11.1 billion. Net loss was ($1.1) billion and loss per share was ($.92). The Company’s first half Fiscal 2021 results were negatively impacted by the temporary closure of its stores for approximately 40% of the first half of the year due to the pandemic.
CEO and President Comments
Ernie Herrman, Chief Executive Officer and President of The TJX Companies, Inc., stated, “It was so great to welcome back our Associates and loyal customers around the world this quarter. I am incredibly proud of the monumental effort of our Associates worldwide to reopen more than 4,500 stores in 9 countries, multiple distribution and fulfillment centers, and our e-commerce sites. Across our organization, our Associates worked tirelessly to help us operate safely in the current environment and bring our customers the excellent values we are known for. When we reopened, customer response to our values was beyond what we could have imagined.”
Mr. Hermann continued, “For the quarter, we were very pleased that both our top and bottom lines well exceeded our internal plans, despite our stores only being open for a little more than two thirds of the second quarter, and that our merchandise margin was excellent. Further, we saw especially strong sales at our HomeGoods and Homesense chains, as well as the home departments within our other chains, across geographies. Specifically, HomeGoods delivered double-digit, open-only comp store sales increases each month of the quarter. As to the future, we are confident that when more customers are comfortable with in-store shopping, we will be in a great position to continue gaining market share as we have for many years. We have been a trusted, value leader for more than 40 years, and we see a long runway of successful growth ahead for TJX.”
Business Update
More than 4,500 of the Company’s worldwide stores, and each of its online shopping websites, are now reopened. Globally, the Company has put in place practices to help protect the health and well-being of its Associates and customers, including social distancing protocols, access to personal protective equipment, enhanced cleaning efforts, and occupancy limits. Further, the Company has mandated that shoppers wear face coverings in its stores throughout the U.S. and Canada. In Europe and Australia, the Company is following regional governmental face covering requirements. The Company is very pleased with customer feedback it has received related to the new health and safety protocols in its stores.
The Company experienced very strong initial sales across all of its retail banners and countries upon reopening, some of which was due to pent-up consumer demand. Following the early wave of stronger than anticipated demand, the Company’s traffic and sales moderated as it moved through the second quarter and into the third quarter. The Company believes that this was due to a number of COVID-19-related factors, including the impact on consumer behavior and demand, and lighter inventories in its stores than it planned. The Company was not able to optimize the inventory flow back to its stores, particularly in Canada, due to supply chain and logistics challenges at both the Company and at some of its third-party affiliates as businesses ramped back up. The Company has put strategies in place to mitigate some of these inventory delays.
For the first half of Fiscal 2021, net sales were $11.1 billion. Net loss was ($1.1) billion and loss per share was ($.92). The Company’s first half Fiscal 2021 results were negatively impacted by the temporary closure of its stores for approximately 40% of the first half of the year due to the pandemic.
CEO and President Comments
Ernie Herrman, Chief Executive Officer and President of The TJX Companies, Inc., stated, “It was so great to welcome back our Associates and loyal customers around the world this quarter. I am incredibly proud of the monumental effort of our Associates worldwide to reopen more than 4,500 stores in 9 countries, multiple distribution and fulfillment centers, and our e-commerce sites. Across our organization, our Associates worked tirelessly to help us operate safely in the current environment and bring our customers the excellent values we are known for. When we reopened, customer response to our values was beyond what we could have imagined.”
Mr. Hermann continued, “For the quarter, we were very pleased that both our top and bottom lines well exceeded our internal plans, despite our stores only being open for a little more than two thirds of the second quarter, and that our merchandise margin was excellent. Further, we saw especially strong sales at our HomeGoods and Homesense chains, as well as the home departments within our other chains, across geographies. Specifically, HomeGoods delivered double-digit, open-only comp store sales increases each month of the quarter. As to the future, we are confident that when more customers are comfortable with in-store shopping, we will be in a great position to continue gaining market share as we have for many years. We have been a trusted, value leader for more than 40 years, and we see a long runway of successful growth ahead for TJX.”
Business Update
More than 4,500 of the Company’s worldwide stores, and each of its online shopping websites, are now reopened. Globally, the Company has put in place practices to help protect the health and well-being of its Associates and customers, including social distancing protocols, access to personal protective equipment, enhanced cleaning efforts, and occupancy limits. Further, the Company has mandated that shoppers wear face coverings in its stores throughout the U.S. and Canada. In Europe and Australia, the Company is following regional governmental face covering requirements. The Company is very pleased with customer feedback it has received related to the new health and safety protocols in its stores.
The Company experienced very strong initial sales across all of its retail banners and countries upon reopening, some of which was due to pent-up consumer demand. Following the early wave of stronger than anticipated demand, the Company’s traffic and sales moderated as it moved through the second quarter and into the third quarter. The Company believes that this was due to a number of COVID-19-related factors, including the impact on consumer behavior and demand, and lighter inventories in its stores than it planned. The Company was not able to optimize the inventory flow back to its stores, particularly in Canada, due to supply chain and logistics challenges at both the Company and at some of its third-party affiliates as businesses ramped back up. The Company has put strategies in place to mitigate some of these inventory delays.
Financial Update
The Company ended the second quarter in a strong liquidity position with $6.6 billion of cash. During the second quarter, the Company generated $3.4 billion of operating cash flow and paid off the $1.0 billion it drew down from its revolving credit facilities in March 2020. At the beginning of the third quarter, the Company also increased its borrowing capacity under revolving credit facilities with a new $500 million facility, making a total of $1.5 billion available to the Company. The Company is in a strong financial position and will continue to be prudent with its expenses, capital spending, and shareholder distributions due to the current environment. The Company does not expect to declare a dividend in the third quarter of Fiscal 2021 and has suspended its share buyback program.
Open-Only Comp Store Sales
Due to the temporary closing of all its stores as a result of the COVID-19 global pandemic, the Company’s definition of comp store sales is not applicable this quarter. In order to provide a performance indicator for its stores as they reopen, the Company is temporarily reporting a new sales measure: open-only comp store sales. Open-only comp store sales includes stores initially classified as comp stores at the beginning of Fiscal 2021, and reports the sales increase or decrease of these stores for the days the stores were open in the current period against sales for the same days in the prior year.
Q2 FY21 Inventory
Total inventories as of August 1, 2020, were $3.7 billion, compared with $5.1 billion at the end of the second quarter last year. The year-over-year decline in balance sheet inventory was due to a combination of factors. These included lower planned store inventory levels in the second quarter primarily to promote social distancing for Associates and customers, stronger than expected sales as stores reopened, and supply chain and logistics challenges at the Company and some of its third-party affiliates as operations ramped up. Overall product availability in the marketplace remains excellent. The Company is currently committed to inventory that is in-line with its sales plans, and has significantly increased its buying since the middle of July to support inventory flow. Further, the Company is flexing its buying towards the categories that have had the strongest demand upon reopening.
Outlook
For the third quarter, the Company is planning overall open-only comp store sales to decrease in the range of 10% to 20%. This is in-line with the sales trends it has seen since the middle of July and through August month-to-date. The Company’s wide sales plan range reflects the uncertainty of the current environment and the difficulty in forecasting the impact of the global pandemic on consumer behavior, demand and traffic, in addition to the anticipated slower back-to-school selling season. Due to this uncertainty, the Company does not believe it is currently able to provide meaningful further guidance and is not providing a financial outlook for Fiscal 2021 at this time.
The Company ended the second quarter in a strong liquidity position with $6.6 billion of cash. During the second quarter, the Company generated $3.4 billion of operating cash flow and paid off the $1.0 billion it drew down from its revolving credit facilities in March 2020. At the beginning of the third quarter, the Company also increased its borrowing capacity under revolving credit facilities with a new $500 million facility, making a total of $1.5 billion available to the Company. The Company is in a strong financial position and will continue to be prudent with its expenses, capital spending, and shareholder distributions due to the current environment. The Company does not expect to declare a dividend in the third quarter of Fiscal 2021 and has suspended its share buyback program.
Open-Only Comp Store Sales
Due to the temporary closing of all its stores as a result of the COVID-19 global pandemic, the Company’s definition of comp store sales is not applicable this quarter. In order to provide a performance indicator for its stores as they reopen, the Company is temporarily reporting a new sales measure: open-only comp store sales. Open-only comp store sales includes stores initially classified as comp stores at the beginning of Fiscal 2021, and reports the sales increase or decrease of these stores for the days the stores were open in the current period against sales for the same days in the prior year.
Q2 FY21 Inventory
Total inventories as of August 1, 2020, were $3.7 billion, compared with $5.1 billion at the end of the second quarter last year. The year-over-year decline in balance sheet inventory was due to a combination of factors. These included lower planned store inventory levels in the second quarter primarily to promote social distancing for Associates and customers, stronger than expected sales as stores reopened, and supply chain and logistics challenges at the Company and some of its third-party affiliates as operations ramped up. Overall product availability in the marketplace remains excellent. The Company is currently committed to inventory that is in-line with its sales plans, and has significantly increased its buying since the middle of July to support inventory flow. Further, the Company is flexing its buying towards the categories that have had the strongest demand upon reopening.
Outlook
For the third quarter, the Company is planning overall open-only comp store sales to decrease in the range of 10% to 20%. This is in-line with the sales trends it has seen since the middle of July and through August month-to-date. The Company’s wide sales plan range reflects the uncertainty of the current environment and the difficulty in forecasting the impact of the global pandemic on consumer behavior, demand and traffic, in addition to the anticipated slower back-to-school selling season. Due to this uncertainty, the Company does not believe it is currently able to provide meaningful further guidance and is not providing a financial outlook for Fiscal 2021 at this time.
TJX Companies (NYSE: TJX) stock price history
The image below, obtained from Google shows the stock price history of TJX companies (NYSE: TJX) for the last 5 years and it's been a very good time for TJX stockholders over the last 5 years. 5 years ago the stock was trading at around $35.80 and its currently trading at $54.36. That's a strong return of 58.1% provided to TJX stockholders over the last 5 years.
The stock of TJX is trading at closer to its 52 week high of $64.95 than it is to its 52 week low of $32.72 which to us is a clear indication that the short term sentiment and momentum of TJX stock is positive at this point in time.
The stock of TJX is trading at closer to its 52 week high of $64.95 than it is to its 52 week low of $32.72 which to us is a clear indication that the short term sentiment and momentum of TJX stock is positive at this point in time.
TJX companies (TJX) stock vs Stitch Fix (SFIX) stock
The image below shows the stock price performance of TJX companies (TJX) and Stitch Fix (SFIX) over the last 2 years. The summary below shows the stock price returns of these two firms over the last 2 years
While TJX companies current financial results doesn't look great, their stock still managed to just eak out a gain over the last 2 years. This compared to the stock of Stitch Fix which has recorded significant losses over the last 2 years.
- TJX companies (TJX): 0.18%
- Stitch Fix (SFIX): -35.3%
While TJX companies current financial results doesn't look great, their stock still managed to just eak out a gain over the last 2 years. This compared to the stock of Stitch Fix which has recorded significant losses over the last 2 years.
Recent coverage of TJX Companies
The extract below covers the latest regarding TJX Companies as obtained from Fool.com
Nearly all its stores have reopened following COVID-19 shutdowns, but TJX Companies (NYSE:TJX) is still struggling with the impact of the pandemic on its business.
The off-price retailer revealed on Wednesday that sales fell 31% over the months of May, June, and July, mainly thanks to widespread store closures for about one-third of that time. That result represented an improvement over the 50% slump in the prior quarter and surpassed management's expectations. "We were very pleased that both our top and bottom lines well exceeded our internal plans," CEO Ernie Herrman said in a press release
Yet the apparel and home goods specialist noted continuing challenges, including sluggish customer traffic and stressed inventory and supply chains. These issues have persisted into the fiscal third quarter, management said, and will likely keep sales declines in double-digit territory in Q3.
Beyond that, executives say they're confident that TJX Companies can resume its past record of steady market share growth. But visibility is especially low over the next few quarters, given major questions around COVID-19 outbreaks, the back-to-school shopping season, government stimulus legislation, and consumer shopping behavior. As a result, the retailer declined to issue detailed guidance for the third quarter or for the critical holiday shopping season ahead.
Read the full article here
Nearly all its stores have reopened following COVID-19 shutdowns, but TJX Companies (NYSE:TJX) is still struggling with the impact of the pandemic on its business.
The off-price retailer revealed on Wednesday that sales fell 31% over the months of May, June, and July, mainly thanks to widespread store closures for about one-third of that time. That result represented an improvement over the 50% slump in the prior quarter and surpassed management's expectations. "We were very pleased that both our top and bottom lines well exceeded our internal plans," CEO Ernie Herrman said in a press release
Yet the apparel and home goods specialist noted continuing challenges, including sluggish customer traffic and stressed inventory and supply chains. These issues have persisted into the fiscal third quarter, management said, and will likely keep sales declines in double-digit territory in Q3.
Beyond that, executives say they're confident that TJX Companies can resume its past record of steady market share growth. But visibility is especially low over the next few quarters, given major questions around COVID-19 outbreaks, the back-to-school shopping season, government stimulus legislation, and consumer shopping behavior. As a result, the retailer declined to issue detailed guidance for the third quarter or for the critical holiday shopping season ahead.
Read the full article here
TJX Companies (NYSE: TJX) latest stock valuation
So what is TJX Companies stock worth based on their 2nd quarter 2020 earnings report and the fact that the group is currently loss making? Based on their earnings report and the fact that they are currently loss making and no fiscal guidance was provided for 2021 our valuation model provides a target price (full value price) for TJX Companies at $38.20 a stock (down from our last valuation of TJX Companies). We therefore believe the stock of TJX Companies is overvalued
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $38.20, thus a good entry point into TJX Companies would be at $34.40 or below.
We expect the stock of TJX Companies to pull back strongly from current levels in coming weeks and months to levels closer to our target price (full value price). Since the stock of TJX Companies is trading at well above our suggested entry point and target (full value) price we rate the stock of TJX Companies as a sell
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $38.20, thus a good entry point into TJX Companies would be at $34.40 or below.
We expect the stock of TJX Companies to pull back strongly from current levels in coming weeks and months to levels closer to our target price (full value price). Since the stock of TJX Companies is trading at well above our suggested entry point and target (full value) price we rate the stock of TJX Companies as a sell
Next earnings release for TJX Companies
It is expected that TJX Companies will release their 3rd quarter and full fiscal 2021 earnings report in late November 2020