Financial Roundup: Foot Traffic Drives TJX While Conversions Fuel Coach

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TJX

TJX continues to defy the retail apocalypse, luring shoppers and boosting sales with its treasure hunt format, while Coach, Inc., is reinvigorating its consumer base by controlling its distribution and developing product that speaks to them.

TJX

In a Nutshell: The TJX Companies continues to surge forward with its off-price models. While other retailers lament lackluster foot traffic, TJX credits shopper volume with driving growth with consumers returning to its off-mall locations multiple times a week looking for value and newness. The retailer remains committed to physical stores, with plans to open 260 more this year across banners as a way to satisfy shoppers’ needs for entertaining experiences and instant gratification.

The company will open its first HomeSense store in the U.S. this week as a complementary format to its successful HomeGoods concept.

TJX expects diluted earnings per share for the third quarter to be in the range of 98 cents to $1.00 compared to 83 cents in the prior year period. For the full year guidance, TJX expects diluted earnings per share to be between $3.89 and $3.93, up from $3.46 last year.

Sales: Net sales for the second quarter, ended July 29th, were up 6 percent to $8.4 billion with consolidated store sales up 3 percent over the same period last year, boosted by increases across all four divisions with HomeGoods and TJX Canada seeing the biggest gains.

Marmaxx, which includes Marshall’s and TJ Maxx, reported net sales of $5.3 billion, up from $5.1 billion in FY 2017. HomeGoods increased from $987 million to $1.2 billion in the quarter.

Earnings: Net income for TJX reached $553 million and diluted earnings per share were 85 cents versus 84 cents during the same quarter last year.

CEO’s Take: “Our second quarter performance demonstrates the strengths, consistency and flexibility of our off-price business model. We were particularly pleased with both our apparel and home categories. Our outstanding values and eclectic merchandise mix continue to resonate with consumers and drive shoppers to our stores. We are convinced we’ve been gaining consumers and growing market share at each of our four major divisions. The customer is clearly telling us that brick-and-mortar retail continues to be an essential part of the shopping experience, certainly when it’s executed right with the right value,” Ernie Herrman, CEO and president.

Coach

In a Nutshell: Coach continues to reap the rewards from its total brand overhaul, and it’s move toward becoming a multi-brand business, which extends the company’s reach to new products, consumers and geographical locations. In addition to achieving a double-digit increase in net income, the Coach brand generated positive comp store sales in North America throughout the year. Stuart Weitzman continued to grow, showing traction in the company’s budding accessories sales. Finally, the company sees promise in Kate Spade, which has been a part of the brand portfolio for just a few weeks.

Looking ahead to fiscal 2018, Coach expects revenue to increase by 30 percent to $5.8 to $5.9 billion with low single digit organic growth and the addition of Kate Spade adding more than $1.2 billion in revenue. Operating income growth is expected to increase by 22 percent to 25 percent driven by the same two factors plus the synergies between the companies to the tune of $30 to $35 million. The company’s outlook for earnings per diluted share is in the range of $2.35 to $2.40, up 10 to 12 percent for the year.

Sales: Net sales for Coach, Inc. totaled $1.13 billion for the fourth quarter, ended July 1st, compared to $1.15 billion the prior year, which included an extra week. Excluding the extra week, net sales increased 6 percent.

Net sales for the Coach brand increased 5 percent (excluding the additional week) to $1.05 billion for the quarter. North American sales were up 4 percent to $586 million with department store sales down 40 percent at a POS. International sales hit $442, up 6 percent in dollars, lead by strong European results.

Net sales for Stuart Weitzman were up 15 percent to $88 million, adjusting for the extra week in 2016. Gross profit hit $49 million with gross margin up to 56.2% over 54.8% in the prior year. The brand posted an operating loss of $2 million and operating margin was a negative 1.8% versus 2.2% in the same period last year.

Earnings: Coach, Inc. reported net income of $152 million with earnings per diluted share of 53 cents. This compared to $82 million with earnings per diluted share of 29 cents in the same quarter of 2016.

CEO’s Take: “Today, after the successful integration of Stuart Weitzman and the acquisition of Kate Spade, we are at an exciting and pivotal moment in our journey. In an unpredictable environment, we are evolving to drive our long-term success by reinventing ourselves, moving from a single-brand, specialty retailer, to a true house of emotional, desirable brands built on our unique values. We are transforming into an entirely different, truly multi-brand company, creating a more agile organization and infrastructure to support a new corporate structure, while making certain each brand has the resources in place to innovate and drive its distinct personality,” said Victor Luis, CEO, Coach, Inc.

 

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