The TJX Companies, Inc. (TJX) Earnings

Management highlights

- **Overall First Quarter Performance** * Consolidated comp sales increased 6%, evenly driven by higher average basket size and growing customer transactions, exceeding management expectations. Both apparel and home categories posted strong comp gains. * Pretax profit margin hit 12.0%, up 170 basis points year-over-year; gross margin was 31.3%, up 180 basis points, driven by higher merchandise margins, favorable inventory and fuel hedges, and expense leverage on above-plan sales. * Diluted earnings per share came in at $1.19, up 29% year-over-year, well above internal plans. * Total inventory increased 8% year-over-year, with per-store inventory up 7%, which management views as a positive position to meet demand. * $1.1 billion was returned to shareholders via share buybacks and dividends in the first quarter. - **Core Strategic Initiatives** * **Marketing**: New targeted campaigns and partnerships reinforce TJX's value leadership, with a focus on digital channels to reach younger consumers. Improved marketing mix modeling enables more efficient spending, and management sees significant long-term runway for further marketing improvements to attract new customers and increase repeat visits. * **Merchandising**: A team of over 1,400 buyers source a curated assortment of branded merchandise across good, better, and best price tiers, with inventory allocated based on individual store demographics. Merchandise availability is extremely strong, and TJX adds thousands of new vendors annually, becoming a preferred partner for vendors looking to clear excess inventory. The company's global footprint allows it to introduce brands to new geographies, with larger scale driving increased merchandise access. * **Store Experience and Investment**: Ongoing store remodeling and prototype updates keep locations refreshed to support consistent comp growth. Increased store payroll investments maintain high customer satisfaction and improve checkout speed, leading to strong customer satisfaction scores across all divisions. * **Global Store Growth**: TJX currently operates in 10 countries, with management identifying potential for over 1,700 additional new stores across existing markets. The first store in Spain opened to strong customer demand, with additional locations planned for 2026. The Mexico joint venture with Axo is progressing well, with early results positive. The Middle East Brands 4 Less investment is performing reasonably well despite regional geopolitical instability, with long-term opportunity intact. * **Talent Development**: Management prioritizes ongoing associate training and leadership development to maintain TJX's unmatched off-price retail expertise, building a deep leadership bench for long-term business continuity.

Guidance

- **Second Quarter Fiscal 27 Guidance**: Expects overall comp sales growth of 2% to 3%, consolidated net sales of $15.0 billion to $15.1 billion (up 4% to 5% year-over-year). Pretax profit margin is projected to be 11.4% to 11.5% (flat to up 10 basis points year-over-year), gross margin of 30.9% to 31.0% (up 20 to 30 basis points), and diluted EPS of $1.15 to $1.17 (up 5% to 6% year-over-year). - **Full Year Fiscal 27 Guidance**: Management raised full year guidance after the strong first quarter performance. Now expects overall comp sales growth of 3% to 4% (prior guidance was lower), consolidated net sales of $63.2 billion to $63.7 billion (up 5% to 6% year-over-year, upwardly revised from prior guidance). Pretax profit margin is projected to be 11.9% to 12.0% (up 20 to 30 basis points year-over-year, upwardly revised), gross margin of 31.2% to 31.3% (up 20 to 30 basis points year-over-year, upwardly revised), and diluted EPS of $5.08 to $5.15 (up 7% to 9% year-over-year, upwardly revised from prior guidance). Full year SG&A is expected to remain flat at 19.5% year-over-year. - **Share Buyback Guidance**: Increased full year 27 share buyback guidance to a range of $2.75 billion to $3.0 billion, enabling more opportunistic repurchases at favorable price levels. - The full year guidance does not include the entire first quarter profit beat, as it assumes current elevated fuel prices will remain for the rest of the year; lower fuel prices would create upside to full year profitability.

Segment performance

1. **Marmaxx (includes Sierra stores and US e-commerce)**: Comp sales grew 6%, segment profit margin increased 100 basis points to 14.7%. Comp sales were strong across both apparel and home categories, all regions, and all income demographics. As TJX's largest segment, it is the primary contributor to consolidated revenue, accounting for approximately 55-60% of total company revenue based on segment size. 2. **HomeGoods**: Comp sales increased 9%, with segment profit margin up 270 basis points to 12.9%. Strong comp sales growth was broad-based across all regions and income demographics, and it is the second largest segment, contributing roughly 15-20% of total revenue. 3. **TJX Canada**: Comp sales grew 7%, with segment profit margin on a constant currency basis up 100 basis points to 11.0% across all three Canadian banners. It contributes approximately 10-12% of total consolidated revenue. 4. **TJX International**: Comp sales increased 4%, with strong growth in both Europe and Australia. Segment profit margin on a constant currency basis improved 40 basis points to 4.7%. This segment contributes roughly 15-18% of total consolidated revenue.

Risks & headwinds

- Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from projections, including macroeconomic factors, consumer spending changes, and fuel price volatility. - Geopolitical instability in the Middle East creates uncertainty for the Brands 4 Less joint venture, though performance has been better than expected given the current environment. - Elevated fuel and diesel prices create potential headwinds to profitability for the back half of the fiscal year, which are fully embedded in current guidance. - Incremental store wage and payroll costs are expected to create a 10 basis point headwind to SG&A in the second quarter.

Analyst Q&A

• Q: The first quarter comp growth was driven equally by transactions and average ticket, after several quarters of ticket-led growth. Does this signal consumers are shifting away from higher-priced products or changing behavior due to macro factors? /

  A: Management confirmed there is no change in customer behavior across income groups, ticket tiers, or product categories. Comp performance across departments shows no correlation between average ticket size and comp growth. The balanced split between ticket and transaction growth is not a managed outcome, but an organic result of strong merchandising execution, with consistent strength across all divisions. TJX’s broad value across good, better, and best price points means no shift in purchasing patterns has been observed.

• Q: How does management think about long-term global store growth potential, given recent positive results in new markets like Spain and Mexico? Could the existing 7,000 total store potential target be raised? /

  A: Management confirmed the company is actively re-evaluating the total store growth potential number internally. TJX’s off-price model has succeeded in every new market it has entered, with strong performance in Australia, Mexico, and Spain to date. The company sees additional store growth opportunities in existing markets (including the U.S. and Canada) amid ongoing competitor store closures, and is open to all expansion approaches including greenfield entry, joint ventures, and minority investments in new regions. Management expects to release an updated store potential target in the near future.

• Q: What drove the significant gross margin expansion in the first quarter, and what are the impacts of higher fuel prices on back half profitability? What was the size of the first quarter fuel hedge benefit? /

  A: Gross margin expansion came from three main sources: stronger merchandise margins from better buying, expense leverage from the 6% comp sales beat, and a benefit from existing fuel and inventory hedges. Management did not break out the specific size of the first quarter fuel hedge benefit, but noted that the full year guidance assumes current elevated fuel prices will remain for the rest of the year. If fuel prices decline, the company will see upside to full year profitability, while further price increases would create additional hedge benefit, so current guidance appropriately incorporates current market conditions.

• Q: What is the growth outlook for the Sierra banner, and what is the profile of new customers TJX is acquiring across its divisions? /

  A: Management noted Sierra has outperformed expectations, with strong comp sales growth and increasing average store sales. The banner targets outdoor lifestyle customers, attracts a higher share of male customers than other TJX banners, and has room to grow market awareness and store count. Across all TJX divisions, new customers are disproportionately Gen Z and millennial shoppers, which bodes well for long-term durability. The overall customer base remains balanced across all income groups, with no meaningful shift in the income profile of new versus existing customers, which aligns with TJX's broad value proposition.