TJX Companies Inc Q2 2024 Earnings Conference Call Insights

Key highlights from TJX Companies Inc (TJX) Q2 2024 Earnings Concall

Management Update:

• [00:06:01] TJX’s average ticket was down due to merchandise mix, but the impact of the lower ticket on sales was largely offset by an increase in units.

• [00:27:58] JX expects to continue to face headwinds from incremental wage costs and supply chain investments

Q&A Highlights:

• [00:29:26] Matthew Boss at JPMorgan asked about the strong start to 3Q, the trends in traffic and demand, and the improved bottom line full year outlook. Ernie Herrman CEO said that TJX is experiencing strong sales momentum across all categories and brands, with Marmaxx and HomeGoods leading the way. The company is increasing its back half and full year guidance due to increased confidence in top line sales, in line AUR and merchandise margin, and continued opportunities to take price in certain areas.

• [00:33:29] Lorraine Hutchinson with Bank of America enquired if like-for-like price increases are working and if TJX is seeing any signs of a trade-down customer. Ernie Herrman CEO answered that TJX is seeing positive results from its like-for-like pricing strategy, and it is difficult to measure trade-down customers, but the company believes it is capturing market share from other retailers.

• [00:36:26] Brooke Roach of Goldman Sachs asked how TJX plans to improve profit beyond freight recapture opportunities and contextualizes the key drivers of future profit improvement. Ernie Herrman CEO said that TJX is not giving long-term guidance, but the company believes that sales and market share gains will help drive future margin improvements.

• [00:38:18] Mark Altschwager at Baird asked about the factors that could contribute to a nice acceleration in 4Q beyond the benefit from the extra week and cycling the shrink accrual. John Klinger CFO replied that TJX is confident in its ability to drive top-line growth and is working to control costs, including shrink and freight.

• [00:39:25] Mark Altschwager of Baird asked how to think about the contribution from HomeGoods versus Marmaxx and a normalized comp algorithm moving forward. Ernie Herrman CEO said TJX is optimistic about the HomeGoods business and believes it will continue to improve in the back half of the year. The company also expects home to be a key traffic and sales driver in the long term.

• [00:41:25] Marni Shapiro with The Retail Tracker enquired if the strong marketing has changed the frequency of shoppers visiting the stores and if they are shopping across different store concepts more than usual. Ernie Herrman CEO said that TJX is attracting more new customers to their brands, especially younger customers such as Gen Z and millennial shoppers. TJX is purposely targeting these demographics for future growth and have been successful in attracting them, even compared to its competition.

• [00:44:37] Alex Straton at Morgan Stanley asked about the key drivers behind the company’s increased optimism in the back half of the year. John Klinger CFO answered that TJX is increasing its full-year EPS guidance by $0.10, from $3.30 to $3.40, due to strong sales and traffic in 3Q, as well as the continued benefits of its freight initiatives.

• [00:45:50] Robert Drbul from Guggenheim enquired whether there has been a major shift in the good-better-best mix of apparel and accessories that is helping TJX’s sales. Ernie Herrman CEO said TJX has not seen a major shift in the good-better-best mix of apparel and accessories, but the company is still working to improve the balance of the mix in certain categories.

• [00:49:28] Dana Telsey of Telsey Advisory asked if TJX has benefited from Bed Bath & Beyond’s store closures and if there is a difference in performance between suburban and urban stores. John Klinger CFO said that TJX has been acquiring closed stores from other retailers and sees opportunity in the home goods market. The company believes it has gained market share from Bed Bath & Beyond and other online home retailers.

• [00:52:40] Corey Tarlowe at Jefferies asked whether TJX expects the AUR to moderate throughout the rest of the year or to inflect positively in 4Q. Ernie Herrman CEO answered that TJX expects the AUR to moderate in the back half of the year, but the company cannot be certain of the exact impact due to factors such as consumer demand and buyer decisions.

• [00:56:15] Adrienne Yih of Barclays enquired how TJX’s buying strategy is different from last year and how it is putting the company in an advantageous position for the holiday season. John Klinger CFO answered that TJX is planning to pull back on buying inventory up front and will focus more on buying end-of-season closeouts in the next 6-12 months.