TJX 1Q15 Earnings Call Notes

Customer traffic drove comp

comp was almost entirely driven by customer traffic and we had a strong increase in units sold. We were also pleased to see a strong increase in our merchandise margins.

Home has been strong

home continued its excellent performance. We have many merchandise and marketing initiatives planned to continue driving sales and traffic as we focus on both our existing customers and reaching new ones

Could grow to 5.5k locations

opportunity to grow to 5,475 stores long-term with just our existing chains in our existing countries and the Netherlands. This would be more than 2,000 additional stores or almost 60% growth over our current base.

3k potential in US

In North America, we continue to see tremendous opportunities for store growth. We see the long-term potential to add over 1,500 new stores on top of our nearly 3,000 stores today. This does not even include the potential of rolling out Sierra Trading Post as the fourth U.S. chain.

Don’t want online sales to cannibalize brick and mortar

As you’ve heard me say before, our approach is to grow smart so that online sales are incremental, not at the expense of our brick-and-mortar business. Eventually, we plan to roll out e-commerce for all of our retail plans. Our goal is to be there for the customer whenever and wherever they want to shop us.

lots of extra inventory from ports

“We’ve had, Courtney, plenty of availability of exciting brands and buys. It’s hard to pinpoint necessarily whether it was due to the port or not. We have to believe that some of it was. So overall, we would say that the market has had a lot of exciting deals for us to take advantage of.”

The availability could also be because the environment is not so strong…

“the availability of goods in the market has been significant. Some of that could be a ramification of business around the environment not being as strong. I would say secondly, we’ve just kind of gone with the playbook, like Carol said, like we normally do. We’ve had good liquidity, good open to buy, and you have a lot of availability.”

Outrageous value

“I honestly think we have outrageous value and that’s what I’m the most excited about.”

March was strongest, but we were strong everywhere

“s far as the February, March, April, obviously, March being the strongest, which was typical. But again, we were strong across all areas in the country, all geographies and all three months were pretty strong.’

We’re not seeing any impact from weaker tourism

“we’re not seeing any impact in tourism. In terms of across the board, our sales, our comps are pretty consistent. So we don’t believe we’re being hit by that at all.’

TJ Maxx 4Q14 Earnings Call Notes

Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below are some of the most important quotes about the economy and industry trends from the transcripts that I read this week. Full notes can be found here.

Happy with 4q

Let me begin by saying that we had a terrific fourth quarter. Earnings per share increased 15%, well exceeding our expectations. Consolidated comp sales grew 4% over last year’s 3% increase, also above our plan. We’re extremely pleased to see the comp almost entirely driven by customer traffic. We also like the sequential improvement in comps and traffic we saw at all divisions from the third quarter.

Home goods doing great

HomeGoods delivered another outstanding quarter. Comps were up 11% and segment profit margin increased 120 basis points. We are thrilled of HomeGoods’ consistently strong results and could not be more excited about this division’s prospect for the future.

Raising home goods location target

At HomeGoods, we’re raising our estimates for its long-term growth store to approximately 1,000 stores. This is double the current base and 175 more stores than our prior estimate.

Increasing wages

irst, we were pleased to announce an important initiative on wages this morning detailed on our press release. These actions are part of our strategy to continue attracting and retaining top talent in order to deliver a great shopping experience for our customers and will allow us to remain competitive on wages.

More conservative on eps Will be affected by fx

we feel great about the business and there is no change to how we are planning our underlying business. Again, our assumptions for comp sales and merchandise margin increases remain consistent with prior years. However, we are planning earnings per share more conservatively this year to reflect the impact of the following factors.

First, the most significant factor is currency exchange rates, which we expect to negatively impact fiscal ’16 EPS growth by approximately 5% overall. Let me break this down.

Investing in associates another 4% impact

In addition to currency, we are assuming that our investments in our associates as well as other incremental investments and pension costs would have a combined negative impact of about 4% to fiscal ’16 EPS growth. We are planning fiscal ’16 prudently to reflect all of these factors. At the same time, we remain very focused on controlling cost and we’ll work very hard to exceed our plans.

Port chaos is our friend

First of all, in terms of the port, I can tell you as you know, chaos does tend to be our friend. I hate to say it. But we are seeing some things. Our pack-always are already up and we’re not planning the business any different, but we are assuming that there’ll probably be an increase in pack-aways and there’ll probably be some pretty incredible deal. Ernie, do you —

Greater market opportunities because of the ports

I think in the near-term some probably greater market opportunities for the current season than we normally would have had because of the ports.

But like Carol said, there is always some dynamic going on out there. This time, it’s the ports. So next time, it will be something else. So yes, this does create additional opportunities to your question and availability.

Staying liquid in anticipation

Okay. I was just going to say, I can tell you we’re staying extremely liquid in the anticipation.

Surgical about adding buyers to gain leverage

So we’re always leveraging. We don’t add at the rate of our top line growth. We are flexible based on opportunities and trends. If we look at categories that are trending, we tend to look to buyers to cover that. But again, we’re very surgical.

Buyers are the lifeblood of the organization

But it is the lifeblood organization for this company. So we are very proactive as we’ve talked before in our training of that organization. And it’s not just about the numbers, it’s about the quality of the merchants that we put in place. So I guess that’s one reason we feel like we’re pretty efficient with that group.

Pension expense up because of low interest rates lower mortality rates

Yes. So on the pension cost, similar to we’re in that low interest rate environment and the pension get at one point in the year you have the interest rate gets set. It was at in the historically low rate from a pension cost. It moves, so it’s already moved up, but you have to set it up, you have to set it that one time.

Also, mortality tables as you’ve probably read with other retailers and asset [ph], have been reset. So it’s probably more — the majority is due to the interest rates. And there is this portion due to the mortality tables.

Not assuming forex will impact further

bviously, we have never had that kind of impact in the history of our business. So we do not think that that will be a negative factor going forward. At least, we’re not assuming.

Everyone is a competitor.

international, we are the first out there. There’s no other off prices out there. And we have built a very strong foundation and we’re going to continue doing that and expanding. And we spent a lot of time going to a new country. And we spent two to three years really analyzing it to understand what the right mix is. We learned that a long time ago.

So we look at everybody as a competitor. And as far as we’re concerned, we just want to give great value every day and do what we do best and keep doing it better. And that’s how we’ll get a bigger piece of the pie.

Raising wages to stay ahead of the curve

Again, I keep coming back to we’re on this mission to really improve and be the best brand out there. And the customer experience, every year that our customer surveys come back that they love the in-store experience which is really our associates who are driving that, we think it’s absolutely imperative that we keep pace and that we have the best talent.

We have very low turnover. We definitely employ a choice. But as everything else, we want to be ahead of it. We want to keep the best of the best and we want to be able to bring the best of the best in. So whether it’s our stores, whether it’s our merchants, whether it’s home office, that’s our goal. So we’re doing what we think is best for our associates and our customers.

TJX 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

August and September were pretty damn strong, October was weak November bounced back

“August and September for Marmaxx were pretty damn strong. October, when we saw that extreme warm weather, we got hit pretty hard. It came back very strong opening November. And Europe, again we’re seeing Europe turn as soon as November’s weather start to get a little bit cooler across the board and more consistent. So we’re feeling pretty good about our start.”

You’re always going to have some weather impact throughout the year

“we know last year that we ran into December, we had pretty strong comps and January was very dismal. So we think there’s certainly an opportunity there. But I think in the aggregate year-over-year by time you finish the year, there’s going to be some impact. But I don’t look at it by month; I look at it by how is the year.”

Doing a little more social media

“In the United States and Marmaxx, we’re doing a little bit more social media. So we’re changing it up a bit.”

We’re excited about home goods

“I don’t think there’s anybody that does business the way HomeGoods does. And I think they are so global in their sourcing and so unique, their turns are just insane. And it’s a brand that everybody loves and I think it’s got a long runway…I just think it’s an amazing group that executes very well, and we have created an extremely exciting brand. So we all love it. And that’s all we hear. I have to stop telling l people I can’t put a HomeGoods near their house.”

Retailer Inventory Comparison

There have been a few comments on retail/apparel earnings calls suggesting that retailers are currently managing their inventories relatively tightly.  Fossil, for instance, said this:

What we discovered or what we experienced in the second quarter was that both with department stores and some of our boutiques, they were really focusing on managing their inventories tightly. And relative to our expectations, we saw some compression on sales because they were reducing their inventory level.”

TJX echoed that sentiment on its call yesterday

we are very clean in the stores. In fact, our inventory, well, it’s been lean off season and, given the second quarter with sales picking up, our clearance levels are very under control. No real liabilities there.”

If this is true, it’s a good sign for retail that inventories are under control.  Lean inventories are not only more efficient from a working capital standpoint, but also could help signal that the highly promotional environment that retailers have been complaining about is about to let up. If retailers are more conservative with their inventories, they don’t have to take as many markdowns to clear it.

If retailers are running their ships more tightly it’s not really showing up in financial statements quite yet though.  Below is a chart of a few important retailers’ days of inventory on hand (365/COGS/Inventory) since 2000.  If anything it looks like retail inventories have been trending slightly higher as of late.  For what it’s worth, the Census Bureau’s data shows that retailers’ inventory to sales ratio is above its recession low, but below where it was at the beginning of the year.

WMT AMZN TGT Inventory

M TJX KSS Inventory

Source: Factset

TJX 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

14% earnings growth on 3% comp sales growth

“Adjusted earnings per share increased 14% which was above our expectations and over an 18% increase last year. Consolidated comp store sales grew 3% at the high end of our plans and over 4% increase last year.”

Home Goods comps 5-8%

“HomeGoods delivered another outstanding quarter. Comps were up 5% over 8% growth last year and segment profit margin was up 40 basis points. We’re even more excited about HomeGoods’ excellent new store performance in its new markets as we believe this bodes well for the continued growth of this division. We are thrilled about our prospects for HomeGoods. To support its future growth, we are planning to open a new distribution center for HomeGoods in the back half of this year.”

Spending more money on television

“we are increasing our total marketing spend in TV impressions and our commercials will be on TV even more weeks than last year.”

Potential of 5150 stores

“With over 3,200 stores today, we see the potential to grow to 5,150 stores long term with our existing chains in our existing countries alone”

Taking a deliberate e-commerce approach

“Our next pillar is e-commerce expansion. While it’s still early, we are very pleased with our e-commerce businesses and see online as a growth vehicle to the future. Some investors have asked why we’re not moving faster online. To be clear, we are taking a deliberate approach to growing e-commerce to ensure that online growth is incremental to our successful brick-and-mortar business.”

We are a sourcing machine

“A major way we are leveraging our business globally is our sourcing universe. We see ourselves as a global sourcing machine. We have built a world-class buying organization over nearly four decades that is 900 people strong, and we plan to keep growing it. We source merchandise from a universe of more than 16,000 vendors in over 75 countries.”

Also very flexible

“Next, we are one of the most flexible retailers in the world. Our flexible store formats and nimbleness allow us to react to changing market trends and consumer’s taste. We serve an extremely wide demographic reach which we believe is one of the broadest in retail. We attract shoppers with extremely large range of household income”

Running lean inventories

“we are very clean in the stores. In fact, our inventory, well, it’s been lean off season and, given the second quarter with sales picking up, our clearance levels are very under control. No real liabilities there.”

Ya it’s promotional, but we stay flexible

“Michael, I think the environment, I would say, like in the second quarter it felt a little more promotional, I think, than last year. And I think the business environment is a little mixed out there, so we react. Our model fortunately is we’re buying so close and that we’re reacting to whatever the environment is.

Certainly, the market continues to have plentiful availability. And I guess, at the end of the day, that’s our biggest hedge against all of that situation. So we’re always watching the environment. It does seem like it could get that way. We’re about to enter a third quarter where I would guess that would be typical to last year, because it’s the beginning of the fall season. So tough to predict, tough to predict, but our model allows us to flex it quick and whatever happens there”

There’s no limit to the number of goods that we can take

“I can say it 100 times and I will say it again. We could be $40 billion, we could be $50 billion, and there is more goods than we could ever take. Every day, we’re having that conversation. The availability is vast and the quality of it is terrific, and we don’t see that changing in the back half at all.”

Difficult weather in Q1 created opportunities

“I think also when the weather was difficult in the first quarter, that created additional opportunities in the market. So, the good thing is our merchants up there kept their liquidity which is always – Carol was talking earlier about how difficult it is to hold back sometimes. There’s so much goods out there. But in Canada, we did do a good job. The team, I thought, did a great, great job of taking advantage of market opportunities going to the second quarter.’

There aren’t a lot of e-commerce businesses making money

” I don’t – there aren’t a lot of e-commerce businesses out there that are making a ton of money and I think we’re very happy with Sierra. We are learning. We do want to make money with our e-com business. But more importantly, I keep coming back to we want to balance, pushing the customer to brick-and-mortar and back. So we have a lot of plans. It’s early gains. It’s early now. I can say it a million times, it’s 1% – a little bit more than 1% but we feel very good about some of our stores going forward, and we’ll keep learning. But we’re going to do it carefully.”