On August 19, The TJX Companies (NYSE:TJX) reported second-quarter results that beat its own plan, even though its largest division could not keep pace with the rest of the business. Consolidated comparable sales rose 4%, adjusted earnings per share climbed 11% to $1.22, and management raised its full-year profit outlook. The catch is that Marmaxx, the TJ Maxx and Marshalls business that generates the bulk of TJX’s revenue, grew comparable sales just 1%. Everything else in the portfolio ran hot enough to cover for it.
Home And Away Carry The Quarter
HomeGoods was the standout, with comparable sales jumping 7% on a higher average basket and more shoppers walking through the door at both the HomeGoods and Homesense banners. Segment profit margin there widened 240 basis points to 12.4%, helped by top-line growth and lower tariff costs. Management pointed to a year-round gifting push at HomeGoods as a way to keep the home category relevant between major holidays. TJX Canada and TJX International were just as strong, posting comparable sales growth of 6% and 7%. International margin expanded 210 basis points to 7.3% on a constant currency basis, and executives described customer response to the company’s second TK Maxx store in Spain in glowing terms.
Behind all of it sits a sourcing network of roughly 21,000 vendors that management says keeps merchandise flowing faster than the company can buy it. That confidence showed up in TJX’s growth plans: the company lifted its long-term store target by 500 locations to 7,500 and said it will accelerate new store openings to a 4% pace starting next year. Shareholders also got $1.3 billion back in the quarter, split between $798 million in buybacks and $529 million in dividends.
Cracks In The Biggest Business
Marmaxx is where the story gets complicated. Comparable sales rose just 1%, entirely from a bigger average basket, while the number of transactions actually slipped. CEO Ernie Herrman was direct about the cause, saying the company “could have executed our store mix better” by not always having the right goods in the right stores at the right time. Segment profit margin held flat at 14.2%, and adjusted SG&A crept up 20 basis points companywide on higher store wage and payroll costs.
Management expects added pressure into the third quarter, pointing to higher fuel rates in the back half that are set to weigh on gross margin. Freight costs carry their own separate strain too, tied to a shrinking pool of new truck drivers entering the industry. Third quarter earnings guidance reflects some of that caution, with adjusted EPS projected at just $1.30 to $1.32, only 2% to 3% growth versus a year earlier. Inventory also grew faster than the store base, up 7% year over year heading into the fall and holiday season, meaning the company is betting heavily that Marmaxx’s self-inflicted problems get fixed before that merchandise needs to move.
Wall Street’s Read On The Stock
Hedge fund ownership of TJX slipped from 83 funds to 80 in the most recent quarter, a modest pullback rather than a stampede. Short interest sits at just 1.79% of the float, which points to very little organized skepticism toward the stock. As of August 26, shares trade at a forward price-to-earnings ratio of 26.81, a multiple that already assumes the kind of steady growth TJX has delivered for years.
Watching For Signs Of Repair
TJX heads into the holidays with three of its four divisions accelerating and a fourth trying to find its footing again. The company has framed the next few months as a test of whether Marmaxx’s merchandise mix issues were truly self-inflicted and fixable, rather than a sign of softening demand. For the growth story to keep working, the 500 additional planned stores and the faster opening pace need buyers to show up consistently across every banner, not just the ones already firing.
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