Target, TJX Q2 Earnings Top Estimates

(RTTNews) - Retailers Target Corp. (TGT) and TJX Cos. Inc. (TJX) reported Wednesday profits for the second quarter that topped analysts' estimates. Profit soared more than four-fold at Target, reflecting improved gross margins, despite a 4.9 percent drop in revenues. Profit at TJX grew from last year, driven by improved gross margins and revenue growth.

Target slashed its guidance for the full-year 2023, while TJX raised its outlook for the full-year 2024.

In Wednesday's trading session on the NYSE, Target shares are up $7.42 or 5.94 percent to trade at $132.47 and TJX shares were also up $2.73 or 3.18 percent to trade at $88.50.

Discount retailer Target reported that its first-quarter net earnings soared to $835 million or $1.80 per share from $183 million or $0.39 per share in the year-ago quarter as the company recovered from last year's inventory actions.

On average, 28 analysts polled by Thomson Reuters expected the company to report earnings of $1.38 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenue for the quarter declined 4.9 percent to $24.77 billion from $26.04 billion in the same quarter last year, reflecting a total sales decline of 4.9 percent to $24.38 billion, partially offset by a 1.3 percent increase in other revenue. Analysts expected revenues of $25.16 billion for the quarter.

Total comparable sales decreased 5.4 percent in the quarter, as comparable store sales declined 4.3 percent and comparable digital sales declined 10.5 percent.

Gross margin improved 550 basis points to 27.0 percent, reflecting lower markdowns and other inventory-related costs, lower freight costs, retail price increases, and lower supply chain and digital fulfillment costs.

Looking ahead to the third quarter, the company projects earnings and adjusted earnings in a range of $1.20 to $1.60 per share on comparable sales in a wide range around a mid-single digit decline. The Street is looking for earnings of $1.82 per share for the quarter.

For fiscal 2023, the company now projects earnings and adjusted earnings in a range of $7.00 to $8.00 per share on comparable sales in a wide range around a mid-single digit decline. Analysts expect earnings of $7.78 per share for the year.

Previously, the company expected earnings and adjusted earnings in a range of $7.75 to $8.75 per share on comparable sales in a wide range from a low-single digit decline to a low-single digit increase.

Meanwhile, off-price retailer TJX reported that net income for the second quarter grew to $989 million or $0.85 per share from $810 million or $0.69 per share in the prior-year quarter. Analysts expected earnings of $0.77 per share for the quarter.

Net sales for the quarter increased 7.8 percent to $12.76 billion from $11.84 billion in the same quarter last year, and topped analysts' consensus revenue estimate of $12.45 billion. Overall comp store sales increased 6 percent, driven by an increase in customer traffic.

Comp store sales at Marmaxx increased 8 percent, entirely driven by customer traffic and strong sales in its apparel and home businesses, and Marmaxx sales also grew 9 percent to $7.90 billion.

Comp store sales at HomeGoods grew 4 percent and HomeGoods sales also increased 8 percent to $2.01 billion.

TJX Canada sales decreased 2 percent to $1.22 billion, while TJX International (Europe & Australia) sales improved 8 percent to $1.62 billion from last year.

Gross profit margin improved 260 basis points to 30.2 percent, driven by a higher merchandise margin due to a significant benefit from lower freight costs.

Looking ahead to the third quarter, the company expects earnings in a range of $0.95 to $0.98 per share on overall comparable store sales growth of 3 to 4 percent. Analysts expect earnings of $0.96 per share for the quarter.

For fiscal 2024, the company now projects earnings in a range of $3.66 to $3.72 per share and adjusted earnings in range of $3.56 to $3.62 per share on comp sales growth of 3 to 4 percent.

Previously, the company expected earnings in the range of $3.49 to $3.58 per share and adjusted earnings in the range of $3.39 to $3.48 per share on comp sales growth of 2 to 3 percent.

The Street is looking for earnings of $3.59 per share for the year.

Based on the third quarter and full-year Fiscal 2024 outlook, the company expects fourth-quarter earnings in a range of $1.10 to $1.13 per share and adjusted earnings in a range of $1.00 to $1.03 per share on comp sales growth of 3 to 4 percent.

The company also said it remains committed to returning cash to its shareholders while continuing to invest in the business to support the near- and long-term growth.

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