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TJX reaps benefit of tax reform; it hikes dividend, will repatriate $1B in 2019

Tax reform in the U.S. dominated earnings for The TJX Cos. Inc. on Feb. 28 as the company disclosed a 17-cent EPS benefit from recent tax legislation. It also led the company to significantly increase its dividend, roll out a one-time bonus to employees globally and announce plans to repatriate $1 billion from its Canadian operations in fiscal 2019.

Adjusted EPS for the fiscal fourth quarter ended Jan. 31 totaled $1.19. The S&P Capital IQ consensus mean estimate for fourth-quarter normalized EPS was $1.27.

The adjusted EPS figure excluded a 17-cent net benefit related to tax reform legislation as well as an 11-cent benefit from an extra week in the fiscal fourth quarter compared with the year-ago period. Adjusted EPS also excluded a 10-cent goodwill impairment charge related to Sierra Trading Post, compared with a charge of $1.03 in the year-ago period.

TJX noted that the estimated fair value of Sierra Trading Post fell below the carrying value due to a decrease in projected revenue growth rates. The company is transitioning Sierra Trading Post to an off-price model and noted that it saw improvement in the top line of that business in the second half of fiscal 2018.

Including these special items, GAAP net income for the quarter totaled $877 million, or $1.37 on a per-share basis.

Net sales for the quarter rose 16% year over year to $10.96 billion, while comparable sales gained 4% year over year.

For the fiscal year ended Jan. 31, adjusted EPS totaled $3.85. The S&P Capital IQ consensus mean estimate for fiscal 2018 normalized EPS was $3.93. Unadjusted net income totaled $2.61 billion for the fiscal year.

Net sales for the fiscal year totaled $35.86 billion, up 8% year over year, while comparable sales rose 2%.

TJX established fiscal first-quarter guidance for adjusted EPS of 85 cents to 87 cents. For fiscal 2019, TJX said it expects adjusted EPS between $4.00 and $4.08, excluding expected per-share benefit of 73 cents to 75 cents related to U.S. tax legislation. It expects consolidated comparable sales to rise 1% to 2% for the year.

As a result of the benefit to the company from recent tax legislation, TJX will pay global eligible associates a one-time discretionary bonus, institute paid parental leave for its eligible U.S. associates and enhance vacation benefits for certain U.S. positions.

TJX said it planned a "significant increase" in shareholder distributions in fiscal 2016 through its programs to repurchase dividends and shares. It increased its quarterly common stock dividend by 25% to 39 cents per share. The dividend will be declared in April and payable in June. TJX plans to repurchase $2.5 billion to $3 billion of its stock during fiscal 2019, with its board approving a new $3 billion stock repurchase program — equivalent to 6% of the company's outstanding shares at current prices.

The company also said it expects to repatriate $1 billion in cash from its TJX Canada division in fiscal 2019.