TJX
Earnings call · Jul 2025 (Q2 FY26)

TJX COMPANIES INC /DE/ Q2 FY26 earnings call TJX

Aug 20, 2025 Source

Executive summary

The TJX Companies, Inc. Q2 FY26 — Strong Sales and Profitability Exceed Expectations

The TJX Companies delivered an outstanding second quarter, driven by strong comparable sales and robust profit margins, leading to an upward revision of full-year guidance. The company's flexible off-price model, effective tariff mitigation, and strong customer value perception are key to its consistent performance and market share gains, despite some expense timing shifts impacting the third quarter outlook.

Highlights

5

  • Consolidated comparable sales increased 4% in Q2 FY26, exceeding internal plans and showing strength across all divisions.

  • Diluted earnings per share rose 15% to $1.10 in Q2 FY26, significantly above expectations.

  • Pretax profit margin reached 11.4% in Q2 FY26, up 50 basis points year-over-year and 90 basis points above the high end of the company's plan.

  • Customer transactions increased at every division in Q2 FY26, highlighting the strong appeal of the company's value proposition.

  • Merchandise margin remained flat in Q2 FY26 despite higher tariff costs, attributed to effective mitigation strategies.

Concerns

4

  • SG&A expenses in Q2 FY26 benefited from the timing of certain costs, with some expected to reverse in Q3 FY26.

  • Net interest income negatively impacted Q2 FY26 pretax profit margin by 10 basis points year-over-year.

  • Full-year FY26 diluted EPS guidance includes a negative 1% impact from unfavorable foreign exchange rates.

  • Q3 FY26 pretax profit margin is projected to decline by 20 to 30 basis points year-over-year, partly due to the aforementioned expense timing reversal.

Guidance & targets

CategoryTargetConfidence
Full-year FY26 overall comparable sales growth
3%
high materiality
High
Full-year FY26 consolidated sales
$59.3 billion to $59.6 billion
high materiality
High
Full-year FY26 pretax profit margin
11.4% to 11.5%
high materiality
High
Full-year FY26 gross margin
30.5% to 30.6%
medium materiality
High
Full-year FY26 SG&A
19.4%
medium materiality
High
Full-year FY26 net interest income
~$108 million
low materiality
High
Full-year FY26 tax rate
24.5%
low materiality
High
Full-year FY26 weighted average share count
~1.13 billion shares
low materiality
High
Full-year FY26 diluted EPS
$4.52 to $4.57
high materiality
High
Q3 FY26 overall comparable sales growth
2% to 3%
high materiality
High
Q3 FY26 consolidated sales
$14.7 billion to $14.8 billion
medium materiality
High
Q3 FY26 pretax profit
12% to 12.1%
high materiality
High
Q3 FY26 gross margin
31.6% to 31.7%
medium materiality
High
Q3 FY26 SG&A
19.8%
medium materiality
High
Q3 FY26 net interest income
~$25 million
low materiality
High
Q3 FY26 tax rate
24.7%
low materiality
High
Q3 FY26 weighted average share count
~1.13 billion shares
low materiality
High
Q3 FY26 diluted EPS
$1.17 to $1.19
high materiality
High
Q4 FY26 overall comparable sales growth
2% to 3%
high materiality
High
Q4 FY26 pretax profit margin
11.7% to 11.8%
high materiality
High
Q4 FY26 diluted EPS
$1.33 to $1.36
high materiality
High
Tariff impact
offset incremental tariff pressure
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Marmaxx
Comp sales grew a strong 3%, driven by a combination of higher average basket and increased customer transactions. Strength was seen across all income demographics. Sierra stores and U.S. e-commerce sites also saw strong sales results. Segment profit margin was up 10 basis points versus last year.
Customer transactions: increasedAverage basket: higher
—3%—14.2%
HomeGoods
Comp sales grew a very strong 5%, with strength at both HomeGoods and HomeSense banners. Segment profit margin grew 10%, up 90 basis points versus last year. The eclectic assortment of home fashions is resonating with customers.
—5%—10%
TJX Canada
Comp sales increased an outstanding 9%. Segment profit margin on a constant currency basis grew to a very strong 16%, up 100 basis points versus last year. Retail banners (Winners, Marshalls, HomeSense) have extremely high brand awareness and customer loyalty.
—9%—16%
TJX International
Comp sales increased a very strong 5%. Sales strength was seen in Europe and outstanding sales in Australia. Segment profit margin on a constant currency basis grew to 5.2%, up 80 basis points versus last year.
—5%—5.2%

Operational metrics

Consolidated comparable sales growth
4% YoY
Q2 FY26

Exceeded expectations and was strong across all divisions.

Customer transactions
up
Q2 FY26

Drove the overall comp sales increase and is an excellent indicator of the strength of the value proposition.

Pretax profit margin
11.4% up 50 bps YoY
Q2 FY26

Well above plan, due to lower-than-expected tariff costs, expense leverage on above-plan sales, and timing of certain expenses, partially offset by higher incentive compensation accruals and charitable contributions.

Gross margin change
30 bps increase YoY
Q2 FY26

Primarily due to favorable hedges.

Merchandise margin
flat YoY
Q2 FY26

The company was pleased with its mitigation strategies that offset tariff pressure.

SG&A change
-30 bps decrease YoY
Q2 FY26

Primarily due to operational efficiencies and a benefit from the timing of certain expenses, some of which are expected to reverse in Q3.

Net interest income impact on pretax profit margin
-10 bps YoY
Q2 FY26

Negatively impacted pretax profit margin.

Diluted earnings per share
$1.10 increased 15% YoY
Q2 FY26

Well above expectations.

Balance sheet inventory growth
14% YoY
Q2 FY26

Reflects buying into excellent opportunities for quality branded merchandise.

Inventory per store growth
10% YoY
Q2 FY26

Reflects buying into excellent opportunities for quality branded merchandise.

Capital returned to shareholders
$1B
Q2 FY26

The company continues to reinvest in growth while returning significant cash to shareholders.

Net new stores
>130
Full-year FY26

On track to hit the plan, with optimism for roughly 3% net unit opening over the next couple of years.

Store remodels
~500
Full-year FY26

Planned for this year to ensure a consistent shopping experience across all stores.

Comp sales flow-through to bottom line
10 to 20 bps per 1 point comp
going forward

This is the expected flow-through for every point of comparable sales growth.

Full-year EPS FX impact
-1% vs. previous guidance of -3%
Full-year FY26

Negative impact to EPS growth due to unfavorable foreign exchange.

Industry KPIs

MetricValueDetails
Sg a OPEX ratio19.4% %
Comparable sales4% %
Store count growth>130 stores
Gross margin drivers30 bps bps
Share buyback capital return$1B USD
Inventory position markdown riskup 14% %

Deals & partnerships

Mexico Joint venture for growth potential

The company sees great growth potential with its joint venture in Mexico.

Middle East Investment for growth potential

The company sees great growth potential with its investment in the Middle East.

Risks & headwinds

Higher tariff costs Q2 FY26, Q3 FY26, Q4 FY26, full year FY26

higher tariff costs versus last year

Mitigation:Effective mitigation strategies, buying better, efficient markdown management, diversified sourcing, downplaying highly tariff-driven categories, satellite buying offices. Guidance assumes ability to offset incremental tariff pressure.

Timing of certain SG&A expenses Q3 FY26

SG&A benefited from timing in Q2, some expected to reverse in Q3

Mitigation:Management has factored this into Q3 guidance, which projects SG&A to be 30 bps unfavorable to last year.

Unfavorable foreign exchange rates Full-year FY26

negative 1% impact to full-year EPS growth

Mitigation:The impact is quantified and factored into the updated full-year EPS guidance.

What to watch in Q3 FY26

Merchandise Margin Trajectory

Q3 FY26
Current flat in Q2 FY26 despite higher tariffs
Target continued offset of tariff pressures

Why it matters

Indicates the durability of tariff mitigation strategies and impact on profitability.

Merchandise margin was flat despite higher tariff costs versus last year. Importantly, we are very pleased with our mitigation strategies, which allowed us to offset the tariff pressure we saw in the second quarter.

Q&A highlights

Asked about the drivers of consistent comp performance despite macro volatility, the strong start to Q3, and the outlook for merchandise margins in the back half given tariff impacts.

Ernie attributed comp consistency to the broad customer base, healthy category performance, and flexible business model, noting strong product availability. John stated that FX still negatively impacts Q3, but they are confident in offsetting tariff pressures in the back half.

“I think the flexibility of the business model and at the same time, we're taking advantage, I think, of a marketplace out there where you've had store closures and perhaps less exciting execution across the board in retail brick-and-mortar specifically.”

asked by Matthew Boss · answered by Ernie Herrman

2 min read 6 chapters

Detailed narrative

Strong Q2 Performance and Raised Guidance

TJX delivered strong Q2 FY26 results with consolidated comparable sales up 4% and diluted EPS increasing 15% to $1.10, both exceeding internal plans. This robust performance led to an upward revision of full-year guidance for sales, profit margin, and EPS, reflecting management's confidence in the company's momentum and strategic positioning for the remainder of the year.

Customer Traffic and Value Proposition

Customer transactions increased across all divisions, indicating the continued strength of TJX's value proposition. The company's ability to offer quality branded merchandise at compelling prices resonates with a broad customer base, attracting shoppers across various income demographics. Customer surveys show that TJX's value perception has improved over the last couple of years, reinforcing its market appeal.

Effective Tariff Mitigation Strategies

Despite higher tariff costs year-over-year, merchandise margin remained flat in Q2 FY26, demonstrating the effectiveness of TJX's mitigation strategies. Management highlighted leveraging market opportunities for excess inventory, efficient markdown management, and the flexibility of its buying model to 'buy better' and offset tariff pressures. The company's diverse sourcing capabilities and global buying offices also contribute to navigating tariff challenges.

Strategic Store Growth and Remodels

TJX remains on track to open over 130 net new stores in FY26 and plans nearly 500 remodels. This strategy aims to capitalize on available prime locations, improve shopping environments through relocations, and ensure a consistent, appealing experience across its store fleet. This ongoing investment in physical footprint is expected to drive continued growth and market share capture.

Gifting Destination Strategy

The company is increasingly positioning itself as a year-round gifting destination, expanding beyond holiday seasons to events like Mother's Day and Father's Day. This focus, combined with strategic product sourcing and in-store merchandising, aims to capture market share in gifting categories and drive frequent customer visits. Management noted that TJX brands have become desirable gifting destinations for consumers.

Operational Efficiencies and Talent Depth

Operational efficiencies contributed to a 30 basis point decrease in SG&A in Q2 FY26, although some timing-related benefits are expected to reverse in Q3. The company emphasized the longevity and expertise of its 1,300-plus global buyers and the critical role of planning and allocation teams in balancing merchandise mix and managing markdowns, which are key to consistent performance and margin health.

AI-generated summary of the company's earnings call. Not investment advice.