TJX Q2 Earnings Beat Estimates on Sales Growth and Margin Gains

Management said the availability of branded, quality merchandise remained outstanding, giving TJX the flexibility to flow fresh assortments into stores and online. The retailer also has several initiatives in place to drive traffic and sales through the fall and holiday shopping periods.

The third quarter started strongly, with improvement at Marmaxx early in the period. This is notable because Marmaxx sales were below the company's expectations in the second quarter, while HomeGoods, TJX Canada and TJX International delivered stronger comparable sales results.

The TJX Companies' Segments Post Broad Growth

Marmaxx generated second-quarter net sales of $9,109 million, up 3% year over year. HomeGoods sales increased 10% to $2,507 million. TJX Canada posted sales of $1,470 million, up 6%, while TJX International sales rose 11% to $2,094 million. On a constant-currency basis, sales increased 8% in Canada and 10% internationally.

Comparable sales jumped 1% at Marmaxx, 7% at HomeGoods, 6% in TJX Canada and 7% at TJX International. Adjusted segment profit margins were 14.2% for Marmaxx, 12.4% for HomeGoods, 16.3% for TJX Canada and 7.3% for TJX International.

TJX's Adjusted Margins Benefit From Merchandise Gains

Adjusted pretax profit margin expanded 0.5 percentage points year over year to 11.9%. Adjusted gross profit margin increased 0.7 percentage points to 31.4%, driven by a rise in merchandise margin.

Adjusted selling, general and administrative costs represented 19.7% of sales, up 0.2 percentage points from a year earlier, primarily due to incremental store wage and payroll costs. Net interest income had a neutral year-over-year impact on pretax margin. The adjusted measures exclude the effects of IEEPA tariff refunds and related incremental compensation expense accruals. The adjustment removed a $219 million net pretax benefit from tariff refunds after the related compensation accruals.

The TJX Companies' Inventory and Cash Position Stay Solid

Total inventories were $7,862 million at quarter-end compared with $7,372 million a year earlier. Consolidated inventory per store increased 2% on a reported basis and 3% on a constant-currency basis, including distribution centers but excluding inventory in transit and e-commerce sites.

TJX generated $2,200 million of operating cash flow during the quarter and ended the period with $6,004 million in cash. Long-term debt was $1,871 million, and shareholders' equity totaled $10,651 million. The company spent $798 million on share repurchases and paid $529 million in dividends. It continues to expect fiscal 2027 repurchases of roughly $2,750 million to $3,000 million. Approximately $2,700 million remained available under the current repurchase program at quarter-end.

TJX's Adjusted Outlook Moves Higher

For the third quarter of fiscal 2027, management expects comparable sales growth of 2% to 3%. Adjusted pretax profit margin is projected between 12.3% and 12.4%, while adjusted earnings are forecasted at $1.30 to $1.32 per share.

For fiscal 2027, TJX continues to expect comparable sales growth of 3% to 4%. The company increased its adjusted pretax profit margin outlook to 12% to 12.1% and raised adjusted earnings guidance to $5.15 to $5.20 per share.

The TJX Companies' Store Expansion Plan Accelerates

TJX added 23 stores during the second quarter, ending the period with 5,285 locations. Total square footage increased 0.4% from the prior quarter to 137.9 million square feet, reflecting continued expansion across the company's existing retail banners.

Beginning in fiscal 2028, the retailer plans to accelerate store opening growth to 4%. TJX also increased its long-term global store target by 500 locations to 7,500 stores across its existing banners in current countries.

Shares of the Zacks Rank #3 (Hold) company have dipped 1.8% year to date against the industry’s growth of 11.6%.

Better-Ranked Stocks to Consider

Dollar General Corporation DG is one of the largest discount retailers in the United States, selling low-priced merchandise, typically $10 or less. The company currently has a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

The Zacks Consensus Estimate for Dollar General’s current financial-year sales and EPS is expected to rise 3.9% and 7.6%, respectively, from the year-ago reported figures. DG delivered a trailing four-quarter earnings surprise of around 21%, on average.

Target Corporation TGT, a mass retailer offering general merchandise and groceries, currently carries a Zacks Rank #2. TGT delivered a trailing four-quarter earnings surprise of 8.2%, on average.

The Zacks Consensus Estimate for Target’s current fiscal-year sales and earnings calls for growth of 3.9% and 11.4%, respectively, from the year-ago figures.

Dollar Tree, Inc. DLTR is an operator of discount variety stores offering a broad assortment of everyday consumables and discretionary merchandise. The company currently carries a Zacks Rank of 2.

The Zacks Consensus Estimate for Dollar Tree’s current financial-year sales and EPS indicates growth of 6.5% and 21.7%, respectively, from the year-ago reported numbers. DLTR delivered a trailing four-quarter earnings surprise of 32.1%, on average.

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