There's something almost defiant about TJX's latest earnings report. While the retail world obsesses over e-commerce and digital transformation, the parent company of T.J. Maxx and HomeGoods is doubling down on physical stores. The company announced Wednesday it's raising its long-term global store target to 7,500 locations, up from its previous goal, and plans to grow its store base by about 4% annually starting in fiscal 2028.
That's a bold bet on brick-and-mortar, but the market didn't seem entirely convinced. Shares of TJX Companies (TJX) traded down 2.82% at $146.60 Wednesday afternoon, even after the off-price retailer posted second-quarter fiscal 2027 results that beat Wall Street estimates.
Net sales rose 5% year over year to $15.18 billion, just edging past the $15.17 billion analyst estimate. Adjusted diluted earnings climbed 11% to $1.22 per share, beating the $1.19 consensus. GAAP diluted earnings jumped 24% to $1.36 per share from $1.10 a year earlier. Comparable sales rose 4%, which the company said was above its plan.
So why the sell-off? The culprit is guidance. For the third quarter, TJX expects comparable sales growth of 2% to 3% and adjusted pretax margin of 12.3% to 12.4%. It sees adjusted earnings of $1.30 to $1.32 per share, which misses the $1.34 analyst estimate at both the midpoint and the top end of the range. Investors, as they often do, focused on that softer near-term outlook rather than the solid quarter behind them.
Margins And Segment Performance
Digging into the numbers, the quarter had plenty of bright spots. Pretax margin expanded 1.9 percentage points to 13.3%. Adjusted pretax margin increased 0.5 percentage points to 11.9%, while adjusted gross margin rose 0.7 percentage points to 31.4%, helped by a higher merchandise margin.
Breaking it down by segment, Marmaxx, the company's largest division, saw sales rise 3% to $9.11 billion, with comparable sales up 1%. Adjusted segment margin was 14.2%. HomeGoods was a standout, with sales up 10% to $2.51 billion and comparable sales climbing 7%. Its adjusted segment margin was 12.4%.
TJX Canada also performed well, with sales up 6% to $1.47 billion and comparable sales up 6%. Adjusted segment margin was 16.3%. International sales increased 11% to $2.09 billion, with comparable sales up 7%, though adjusted segment margin was a thinner 7.3%.
Stores, Inventory And Cash
TJX added 23 stores during the quarter, bringing its total to 5,285. Square footage increased 0.4% sequentially. Inventory totaled $7.9 billion, up from $7.4 billion a year earlier. Inventory per store increased 2% on a reported basis and 3% at constant currency.
Foreign exchange was a slight drag on sales growth, reducing it by 1 percentage point, but it added 1 cent to diluted earnings per share. Operating cash flow totaled $2.2 billion, and cash stood at $6 billion. The company returned $1.3 billion to shareholders through $798 million of share repurchases and $529 million of dividends. Current long-term debt totaled $1 billion, while long-term debt stood at $1.87 billion.
Tariff Refunds And Q3 Outlook
One notable item in the quarter: TJX received $331 million in IEEPA tariff refunds and recorded $112 million in related compensation accruals. These items resulted in a $219 million pretax benefit and added 14 cents to diluted earnings per share.
For the third quarter, the company expects comparable sales growth of 2% to 3% and adjusted pretax margin of 12.3% to 12.4%. Adjusted earnings are expected to be $1.30 to $1.32 per share, missing the $1.34 analyst estimate.
TJX Raises Full-Year GAAP Earnings Outlook
Looking to the full year, TJX raised its fiscal 2027 GAAP earnings guidance to $5.31 to $5.36 per share from $5.08 to $5.15. The new range is above the $5.21 analyst estimate. However, adjusted earnings guidance of $5.15 to $5.20 per share misses the $5.22 analyst estimate.
The company also raised its adjusted pretax margin outlook to 12% to 12.1% and maintained comparable sales growth guidance of 3% to 4%.
So, what's the takeaway? TJX is confident enough in its off-price model to keep opening stores in an era when many retailers are shuttering them. The market's immediate reaction was cautious, but the company's long-term vision is clear: more stores, more customers, and more of the treasure-hunt experience that has made it a retail standout.
