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.