Club holding TJX Companies (TJX) reported solid fiscal fourth-quarter 2023 results Wednesday, as stronger-than-expected sales highlighted robust consumer demand for discounted quality merchandise at stores like TJ Maxx. Total revenue advanced 5% year-over-year, to $14.5 billion, exceeding analysts’ forecasts for $14.01 billion, according to estimates compiled by Refinitiv. U.S. sales of $11.41 billion also surpassed the $11.03 billion predicted by analysts. Adjusted earnings-per-share (EPS) climbed 14.1% on an annual basis, to 89 cents, in line with analysts’ estimates provided by Refinitiv. Bottom line It was an overall decent quarter for the off-price retailer, with total revenue, same-store sales and operating cash flow exceeding expectations. The Marmaxx division — which includes department stores TJ Maxx and Marshalls — was the highlight of the quarter, posting impressive 7% same-store-sales growth year-on-year in the U.S. for its strongest quarter of fiscal 2023. Moreover, the company on Wednesday said it’s “well-positioned to take advantage of the outstanding availability of quality, branded merchandise in the marketplace and flow fresh merchandise to its stores and online this spring.” Though earnings matched consensus estimates, it appears analysts’ forecasts would have been exceeded if not for higher-than-expected “shrink,” or theft at stores. Management initially anticipated a 0.5 percentage point pretax profit margin benefit versus the prior year, but instead realized a 0.6 percentage point shrink charge. The bottom line was also impacted by foreign currency dynamics, which resulted in a 3-cent-per-share headwind. TJX’s earnings guidance for its first quarter of the fiscal year 2024 and for the full fiscal year came up slightly short, in part due to higher-than-expected capital expenditures for new stores, remodeling, and relocations. But revenue guidance exceeded expectations, demonstrating strong consumer demand. Given the strong top-line guidance, the likelihood that management is guiding conservatively on earnings, and its confidence in achieving a 10.6% pretax margin by fiscal year 2025 — 10 basis points ahead of expectations — we are undeterred by the lighter bottom-line outlook. As a result, we reiterate our 1 rating , while raising our price target to $88-per-share, up from $74. Guidance On the full year guide, management is embedding an $800 million benefit due to a 53rd week in fiscal year 2024. On the pretax margin, management expects lower freight costs, better buying and strategic retailing to result in an 80-basis-point to 100-basis-point tailwind that will more than offset the headwinds of “incremental wage and supply chain costs.” The full year outlook also includes an expected pretax margin benefit of about 10 basis points and a diluted earnings benefit of roughly 10 cents per share, due to the 53rd week in fiscal 2024. Excluding this benefit, management expects to realize a pretax margin of 10% to 10.2%…
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