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Inflation Hits TJX Profits in Q2 as Consumers Pull Back Spending

TJX Companies posted lower sales in the second quarter of 2023 and cut its full-year forecast as high gas prices and spiking inflation impacted consumer buying habits.

In the second quarter of 2023, the Framingham, Mass.-based off-price retailer reported net sales of $11.8 billion, a decrease of 2% versus the same period last year. U.S. comp-store sales also decreased in the quarter by 5% versus a 21% increase in U.S. open-only comp-store sales the same time last year.

“U.S. comp sales for the second quarter came in lighter than we expected as we believe historically high inflation impacted consumer discretionary spending,” TJX CEO Ernie Herrman said on Wednesday.

According to Herrman, that overall apparel business in the Marmaxx group — which includes the TJ Maxx and Marshalls retail brands — was slightly positive every month of the quarter. This was offset, however, by softness in the company’s home categories at its HomeGoods division.

As for inventory, the company has a total of $7.1 billion worth of goods on-hand, compared with $5.1 billion at the end of the second quarter of fiscal 2022. According to Herrman, the company is “comfortable” with its inventory levels and is eager to take advantage of the off-price buying opportunities it is seeing in the marketplace, as many full-price retailers are struggling to off-load over-bought items.

Pressed further by analysts on the company’s earnings call on Wednesday, Herrman said that the company is aiming to buy 4 million units in HomeGoods over the next few weeks, which will be shipped to stores in September.

At Marmaxx, Herrman mentioned that there is much “excitement” for fourth quarter as the retailer aims to curate the “optimal mix” for holiday. “I’m very happy about what I’m starting to see: significant open-to-buy, significant availability across price points,” the CEO said on the call. “I think we’re going to have a mix that has even more brands and some new vendors that we didn’t even have last year in some of our hottest categories.”

Looking ahead, the company updated its expectation for diluted earnings per share to $2.87 to $2.95 and adjusted diluted EPS to $3.05 to $3.13 for full-year fiscal 2023, versus its previous guidance for diluted EPS of $2.94 to $3.01 and adjusted diluted EPS of $3.13 to $3.20. TJX also now expects U.S. comps to decrease 2% to 3%, versus its previous guidance of an increase of 1% to 2%.

“As we enter the second half of the year, we see the flexibility of our business and our value proposition as key advantages in the current retail landscape,” Herrman added. “We attract a wide range of customers, which we believe is a key advantage in today’s environment. Long-term, we remain very confident in our plans to capture market share and improve the profitability profile of TJX.”

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