For Immediate Release
Chicago, IL – August 11, 2010 – Zacks.com Analyst Blog features: TJX Companies Inc. (TJX), Target Corp. (TGT), Kohl's Corp. (KSS) Macy's Inc. (M) and McDonald's Corp. (MCD ).
Here are highlights from Tuesday’s Analyst Blog:
July Sales Up for TJX Companies
The TJX Companies Inc. (TJX) reported same store sales of 2% for the four week period ended July 31, 2010. This affirms the company’s positive comparable store sales growth momentum so far. Sales in the same period upped 6% to $1.5 billion from $1.4 billion in the four-week period ended August 1, 2009 driven by increase in store traffic.
TJX’s consolidated comparable store sales increased 6% for the 26-week period ended July 31, 2010. For the period, TJX recorded sales of $10.1 billion, an 11% increase over the $9.1 billion in the comparable period last year.
July is a clearance month, as it marks the transition from summer to back-to-school. With prudent inventory management in July, TJX is set to enter the second half of 2010 with a leaner inventory. This might have affected its top line but the company affirmed that its margins and earnings will remain unaffected. The company can thus opt for other brands and improve its offerings.
Further, TJX has kept aside a lion’s share of its marketing budget for the second half of the year, which will enable the company to increase its market penetration and help drive customer traffic.
TJX’s July same store sales were in line with Target Corp. (TGT)July same store sales of 2%. However, TJX’s performance could not match same store sales increases of 4.1% at Kohl's Corp. (KSS) and 7.3% at Macy's Inc. (M).
For the second quarter of fiscal 2011, TJX now expects earnings per share to be at or slightly above the high end of its previous range of 70 cents to 73 cents. The range represents a 15% to 20% increase over the previous year. This range includes an estimated 1 cent to 2 cents per share benefit from a reduction in the reserve related to computer intrusions, reflecting insurance recoveries as well as other adjustments, which had not been considered in the prior guidance. The Zacks Consensus Estimate of 72 cents remains in line with the company’s second-quarter guidance.
TJX’s fiscal 2011 EPS guidance remains in the range of $3.24 to $3.33, which translates into an annualized growth of 14% to 17%. The Zacks Consensus estimate for fiscal 2011 is pegged at $3.35, above the company’s guidance, indicating that analysts expect the company to outperform its guidance.
With a wide geographical coverage, transformation of stores, product enhancement and increased awareness programs, TJX continues to attract new and retain more customers, thereby improving customer traffic. Moreover, with leaner inventories and cost-reduction initiatives, the company will outperform the broader market.
McDonald’s July Sales Climb
McDonald's Corp. (MCD ) posted better-than-expected global comparable sales growth of 7% in July, a step up from 4.3% recorded in July 2009, on the heels of strong beverage sales.
The fast-food restaurant operator witnessed an uptrend across its domestic and international markets. Geographically, APMEA (Asia/Pacific, Middle East and Africa) was the major contributor to the growth followed by United States and Europe.
July comparable sales leapt 10.1% in APMEA driven by strong performance in Japan, Australia, China and most other countries. Continued focus on core value menu offerings and variety in breakfast menus remained a source of strength.
Comparable sales in United States surged to 5.7% from 2.6% witnessed in July 2009 buoyed by the recently launched McCafe Real Fruit Smoothies and Frappes along with value-based drinks. The performance of the McCafe beverage line launched last year is ahead of management’s expectation of incremental sales of $125,000 per unit per year. Core products and a value-oriented menu have also boosted the U.S. comparable-store sales.
However, Europe saw a growth of 5.3%, which dropped from 7.2% in July 2009. This decline was due to tough comparison stemming from last year’s lower Value Added Tax (VAT) in France. Growth was predominant in France, the U.K. and Germany. Sustained focus on multiple-tier menus including high-priced premium products, longer operating hours and a restaurant re-imaging program contributed to the performance.
System-wide sales increased 6.8%, or 8.3% in constant currencies in the month under review.
Comparable sales of McDonald’s, the world's largest hamburger chain, are on the rise in recent months. With signs of improvement in the economy, diners are becoming more comfortable with their discretionary spending. Nevertheless, the majority continue to remain prudent and seek value offerings.
We believe McDonald’s impressive global comparable store sales in July positions it on a strong footing for the third quarter. From a margin perspective, beverages are more supportive to margins. Additionally, the recent Euro strength is also expected to pay off in the near future.
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