The TJX Companies, Inc. (TJX) Earnings

Management highlights

### Core Q2 Performance & Business Diversification - Overall Q2 results exceeded the high end of management's plans, with comp growth driven by higher average basket and increased customer transactions, and home categories outperforming apparel categories. Above-plan profits were driven by operational expense efficiencies, higher merchandise margin from tariff favorability, and expense leverage on stronger sales. - Marmaxx underperformed expectations in Q2 due to self-inflicted execution issues related to merchandise mix (having the right goods in the right stores at the right time). Management reported visible improvement in Marmaxx sales at the start of Q3 and expects further improvement by the 2026 holiday selling season. Near-Term Second Half Priorities - Leverage strong brand recognition and value proposition to resonate with consumers across all age and income brackets, as demand for value remains strong in the current consumer environment. - Expand product initiatives, including growing the year-round gifting destination strategy to drive more frequent customer store visits. - Capitalize on widespread merchandise availability across categories and brands, leveraging TJX's team of 1,400+ buyers to curate attractive assortments. - Execute integrated multi-channel marketing campaigns focused on digital and social media to reinforce value leadership, attract new customers, and retain existing customers ahead of the holiday season. Long-Term Growth Strategy & Core Strengths - Raised the company's long-term total store target by 500 stores to 7,500 total stores within existing markets, driven by 300 additional stores for Marmaxx/Marshalls and 200 additional stores for HomeGoods. Accelerate annual net store growth to 4% starting next fiscal year, from the prior 3% target. - Key competitive advantages include: a trusted global value brand reputation; a global sourcing network with 21,000 annual vendors and strong long-term vendor relationships; broad demographic appeal across all income and age groups; flexible operational models for buying, store formats, and supply chain; and deep specialized off-price retail talent with a strong customer-focused culture. - The company expects significant remaining runway to capture additional market share globally across all divisions.

Guidance

- Third quarter fiscal 27: Expects overall comp sales growth of 2% to 3%, consolidated sales of $15.6 billion to $15.8 billion (up 3% to 5% year-over-year), adjusted pretax profit margin of 12.3% to 12.4% (down 30-40 basis points year-over-year), and adjusted diluted earnings per share of $1.30 to $1.32 (up 2% to 3% year-over-year). - Full year fiscal 27: Maintained expected overall comp sales growth of 3% to 4% (consistent with prior guidance), with consolidated sales expected to reach $63.4 billion to $63.8 billion (up 5% to 6% year-over-year). Management raised full year guidance: adjusted pretax profit margin is now expected to be 12% to 12.1% (up 30-40 basis points from prior guidance, and up 30-40 basis points year-over-year), and adjusted diluted earnings per share is raised to $5.15 to $5.20 (up 9% to 10% year-over-year, from the prior lower range). - Fourth quarter fiscal 27: Expects comp sales growth of 2% to 3%, adjusted pretax profit margin of 11.9% to 12% (down 20-30 basis points year-over-year), and adjusted diluted earnings per share of $1.44 to $1.47 (up 1% to 3% year-over-year).

Segment performance

Overall consolidated comparable sales increased 4% year-over-year, exceeding management plans. Adjusted pretax profit margin was 11.9% (up 50 basis points), adjusted gross margin was 31.4% (up 70 basis points), and adjusted diluted earnings per share were $1.22 (up 11% year-over-year). - Marmaxx: Comp sales increased 1% year-over-year, with growth entirely driven by a higher average basket partially offset by a small decrease in customer transactions. Adjusted segment profit margin was 14.2%, flat year-over-year. Marmaxx contributes the largest share of TJX's overall revenue, accounting for roughly 50-55% of total consolidated revenue. - Sierra: Comp sales increased in the 6-7% range year-over-year, consistent with other non-Marmaxx divisions, and the chain continues its U.S. expansion with new brands added to its e-commerce platform. No separate segment profit margin was disclosed. - HomeGoods: Delivered a 7% comp sales increase, driven by both higher average basket and increased customer transactions. Adjusted segment profit margin was 12.4%, up 240 basis points year-over-year. HomeGoods contributes approximately 15-20% of total consolidated revenue. - TJX Canada: Comp sales increased 6% year-over-year, driven primarily by higher customer transactions. On a constant currency basis, adjusted segment profit margin was 16.3%, up 30 basis points year-over-year. TJX Canada contributes approximately 10-15% of total consolidated revenue. - TJX International: Comp sales increased 7% year-over-year, driven primarily by higher customer transactions, with strong performance across Europe and Australia. On a constant currency basis, adjusted segment profit margin was 7.3%, up 210 basis points year-over-year. TJX International contributes approximately 15-20% of total consolidated revenue. End-of-quarter inventory was up 7% year-over-year, with per-store inventory up 2%.

Risks & headwinds

- Merchandising execution missteps can lead to underperformance relative to plans, as seen in the Marmaxx segment in Q2, even after decades of consistent strong execution from the division. - Rising freight and fuel costs, driven by industry-wide driver shortages and market volatility, are expected to pressure gross margins in the second half of fiscal 27. - Forward-looking results are subject to general macroeconomic and consumer uncertainty, as well as potential unforeseen weather events (such as the projected Super El Nino) that could impact holiday quarter sales and inventory planning. - All forward-looking statements are inherently uncertain, with actual results potentially differing materially from projections due to a range of unforeseen factors, as detailed in TJX's SEC filings.

Analyst Q&A

• Q: How is Marmaxx's sales trending through Q2 and the start of Q3, and why did the company raise its long-term store target? /

  A: All three months of Q2 delivered positive comps for Marmaxx, with slightly stronger growth in May and consistent performance in June and July. All TJX divisions, including Marmaxx, have started Q3 with improved trends, and Marmaxx is already outperforming its Q2 trend. Management raised the store target after seeing sustained upside to new store performance that exceeded expectations for a prolonged period. Opportunities include expansion in rural markets where department stores have closed, placing stores closer to existing high-performing locations, and developing flexible small-format stores for dense urban areas. The 4% annual growth target applies across all divisions, not just a single segment.

• Q: What went wrong at Marmaxx, what steps have been taken to fix it, and when will comps return to a normal 2% to 3% cadence? /

  A: The underperformance was entirely a self-inflicted execution issue related to merchandise mix in a small number of categories, with no connection to competition or broader consumer demand. Management confirmed that comp trends are identical at Marmaxx stores near off-price competitors and stores without nearby competition, confirming the issue was internal. Cross-functional leadership from buying, planning, and executive management has identified the problem areas and already begun correcting the mix. Improvement is already visible in August, and management expects Marmaxx to return to its normal 2% to 3% comp cadence by the fourth quarter.

• Q: What is driving HomeGoods' strong comp and margin expansion, and can high single-digit comp growth continue into the back half, and can margins reach the mid-teens over time? /

  A: HomeGoods' strong performance is driven by consistent, high-level execution across all categories, from seasonal decorative goods to daily replenishable consumable staples that drive repeat traffic. The division also delivers a differentiated, easy shopping experience with unique merchandise that is difficult for competitors to match, and it has benefited from weaker competitive execution in the home retail space overall. Margin expansion is driven by top-line comp growth, operational efficiencies, and lower tariff costs. Management sees significant ongoing growth and margin upside for the division, with multiple avenues for continued market share gains.

• Q: What is the outlook for average ticket growth, and is there any meaningful change to marketing strategy or spend this year? /

  A: Average ticket and unit retail (AUR) growth has been driven primarily by shifts in category mix toward higher-average-retail categories, not broad price increases on like-for-like items. Management expects AUR growth to moderate over the next six months. Marketing spend as a percentage of sales remains consistent with prior years, with additional incremental spend added in strong performance periods. The company has significantly expanded digital and social media marketing, with 1.4 billion total paid video views across major platforms in the first half of the year, and video completion rates that exceed industry benchmarks, demonstrating high customer engagement with TJX content.