TJX Profit Margins Widen as Marmaxx Comp Growth Stalls
TJX Companies posted a 24% jump in diluted earnings to $1.36 a share in the second quarter, aided by a one-time $331 million tariff refund even as comparable sales growth slowed to 4% from 6% in the prior quarter.
TJX Companies (TJX), the off-price retailer that operates T.J. Maxx, Marshalls and HomeGoods, reported diluted earnings of $1.36 a share for its fiscal second quarter, up 24% from $1.10 a year earlier, as profit margins expanded even while sales growth cooled.
The results were boosted by a disclosure that had not appeared in any prior release: TJX received $331 million in tariff refunds under the International Emergency Economic Powers Act during the quarter, generating a net pretax benefit of $219 million after the company set aside $112 million in additional year-end compensation accruals. Stripped of that item, adjusted earnings per share rose a more modest 11%. Pretax profit margin still expanded 1.9 points year over year to 13.3%, an acceleration from the 1.7-point expansion posted in the first quarter, while the adjusted margin gain was 0.5 points. Gross margin rose 2.7 points to 33.4% on higher merchandise margin, versus a 0.7-point adjusted gain to 31.4%. Those gains came alongside rising labor costs: SG&A expense climbed 0.8 points to 20.3% of sales, driven by incremental store wage and payroll costs that the company had not flagged in its first-quarter release.
Sales growth told a different story. Net sales rose 5% to $15.2 billion, down from 9% growth in the first quarter and continuing a slowdown from the 9% and 7% prints of the prior two quarters. Consolidated comparable sales grew 4%, decelerating from 6% in the first quarter, though the pace matched the year-earlier second quarter. The deceleration concentrated in Marmaxx, the T.J. Maxx and Marshalls division and the company's largest, where comps rose just 1%, below the company's own expectations and down sharply from 6% in the first quarter and 3% in the year-earlier period. HomeGoods, TJX Canada and TJX International each posted comp growth of 6% to 7%, leaving Marmaxx as the outlier drag on the consolidated figure.
HomeGoods segment profit margin nearly doubled to 17.6% from levels implied by segment profit of $441 million, up from $228 million a year earlier, with 5.2 points of that margin reflecting the tariff-refund benefit; adjusted segment margin was 12.4%. TJX International, which delivered the fastest comp growth alongside HomeGoods at 7%, remained the lowest-margin division at 6.4%, or 7.3% adjusted for the tariff impact, consistent with its position in prior quarters.
Management raised full-year guidance for the second consecutive quarter, lifting the pretax margin outlook to a range of 12.3% to 12.4% from 11.9% to 12.0% in the first quarter, and diluted EPS guidance to $5.31-$5.36 from $5.08-$5.15. But the company's guidance for the current quarter points toward further deceleration: it expects comparable sales growth of 2% to 3% in the third quarter, below both the 4% delivered in the second quarter and the 6% posted in the first.
Inventory grew to $7.9 billion in August from $7.4 billion a year earlier, with per-store inventory up 2% on a reported basis and 3% in constant currency, which the company characterized as positioning to capture available merchandise rather than a sign of softening demand. TJX also stepped up capital returns to $1.3 billion in the quarter from $1.1 billion in each of the prior two quarters, bringing first-half buybacks and dividends to $2.4 billion against a full fiscal 2026 total of $4.3 billion.
The company also disclosed a new long-term structural target: it plans to accelerate store growth to 4% annually starting in fiscal 2028 and raised its global store target by 500 locations to 7,500, a commitment that extends its expansion plans beyond the near-term sales deceleration flagged in its third-quarter comp guidance.