TJX Companies (TJX) Q1 2017 Earnings Call

TJX Companies (TJX) CEO Ernie Herrman highlighted strength in the home category

“Let me first begin by saying that I am very pleased to start the year off with such a strong first quarter. Our momentum continued with consolidated comp sales up a strong 7% which was well above our plan and over our 5% increase last year.  All four of our major divisions delivered strong comps and again this quarter, customer traffic was the driver of our comp increases. We were particularly pleased with the strong performance of apparel including accessories and our home category.”

Overall traffic increased and volume increased but total price decreased 

“We were very pleased that customer traffic was the primary driver of our comp increases at every division. We also saw a strong increase in our units sold again this quarter. As we anticipated, overall average tickets decreased.”

Wage growth is a headwind

“Wage increases continued to be a significant headwind.”

“Wage increases continue to have a significant negative impact to margins.”

Remain opportunistic in terms of purchasing inventory

“During the quarter, we took advantage of some great pack-away deals. We feel very comfortable with our inventory liquidity as we enter the second quarter. We are well positioned to capitalize on buying opportunities in a marketplace with a quality, branded merchandize.”

TJX Companies (TJX) CEO Ernie Herrman highlighted the company’s flexible buying organization as a key competitive advantage

“We see TJX as a global sourcing machine. We have a world-class global buying organization with over 1000 associates located in 11 countries across four continents. We are proud of our strong corporate culture and remain dedicated to training and developing our buyers and next generation of leaders.  Our vendor universe numbers more than 18,000 vendors in 100 plus countries. We take pride in our vendor relationships which we believe are some of the best in retail. With a store base of more than 3600 stores in nine countries, we believe, we are an attractive and increasingly important outlet for vendors.  We buy in many different ways and offer vendors a great deal of flexibility. We are typically willing to purchase less than full assortments of items, styles and sizes and quantities ranging from small to very large. Further, we are straight-forward in our dealings and build mutually beneficial relationships for the long-term.”

Sees the potential to expand their store base significantly

“Long-term, we see the potential for grow to 5600 stores with just our current chains and just our current markets alone. This represents more than 50% store growth or almost 2000 additional stores on top of our current base.”

High loyalty amongst those customers enrolled in the company’s credit card program

“The credit card, we are certainly very pleased with our loyalty programs in North America. The credit card program in the United States that has HomeGoods Marmaxx and Sierra Trading Post as a portion of it. We continue to add a lot of new customers every year as we have for the last couple. Those customers – the one finding that we have are certainly the most loyal, they tend to cross-shop the most as they earn rewards when they purchase in all of the different banners. And again, we still think we have room to grow that and it’s certainly been a portion of the success we’ve had. So, again, opportunity is still there to grow that market share of that spend.”

Trying to be less promotion in pricing of their products

“We are trying to get out of the wild promotional up and down swings, because that is not the way we like to retail goods. We’ve been focused on buying off-price behind the scenes, buying it an off-price methodology, but the retail and the goods right now we would say it’s half way on the journey, because it’s still a little promotional on the website.”