TJX Companies (NYSE: TJX) lifted its full-year outlook. The off-price retailer raised both adjusted EPS and pretax margin guidance after a second quarter that cleared its own internal targets. It also announced a faster store growth plan, targeting 4% annual openings starting in FY28, and boosted its long-term global store count goal by 500 to 7,500 locations.
Q2 consolidated comparable sales climbed 4%, beating the company's plan. Reported revenue hit $15.18 billion, a 5% increase from $14.40 billion a year prior. Adjusted diluted EPS of $1.22 topped the $1.19 consensus estimate and rose 11% year-over-year. Adjusted pretax profit margin widened 50 basis points to 11.9%, powered by merchandise margin gains that lifted adjusted gross margin 70 bps to 31.4%.
The comp sales headline grabs attention, but the composition tells the real story. Marmaxx, TJX's largest U.S. division and its revenue engine at roughly 60% of sales, managed only 1% comp growth, falling short of internal goals. The rest of the portfolio carried the quarter: HomeGoods (+7%), TJX Canada (+6%), and TJX International (+7%). That divergence is a red flag. When the core division posts a 1% comp while the rest of the business runs at 6-7%, it points to either a category-specific issue or an execution problem. Management noted an early Q3 improvement at Marmaxx, making it the key metric to watch.
Gross margin improvement was straightforward. Adjusted gross margin moved up 70 bps to 31.4% thanks to stronger merchandise margin. This was partly offset by higher store wage and payroll costs, which nudged adjusted SG&A up 20 bps to 19.7% of sales. This wage pressure is structural, not temporary. TJX is putting more money into store labor, and that expense line will keep climbing. The core question is whether merchandise margin can keep pace.
The full-year guidance hike is modest but important. TJX now projects a FY27 adjusted pretax profit margin of 12.0-12.1%, up from prior guidance, and adjusted EPS of $5.15-$5.20. The implied Q3 adjusted EPS range of $1.30-$1.32 already sits above consensus, a reflection of management's comment on a strong start to the quarter. Even with a Q2 that ran ahead of plan, the company kept its full-year comp guidance at 3-4%, suggesting it sees enough demand to hold the line on the top end.
Strategically, the store growth announcement is the main event. TJX will accelerate new store openings to 4% annual growth beginning in FY28, up from the current rate. It also raised its long-term global store target to 7,500 from 7,000. This is a clear vote of confidence in the off-price model's market potential, especially internationally, where TJX International delivered 10% constant-currency sales growth. The company finished Q2 with 5,285 stores, so the new target implies a 40% increase in locations over time.
Capital allocation remains aggressive. In Q2, TJX returned $1.3 billion to shareholders: $798 million in buybacks and $529 million in dividends. The full-year buyback plan of $2.75-$3.0 billion stands, and the quarter ended with $6.0 billion in cash. The buyback pace is consistent with past years, but the cash balance provides ample flexibility for both store expansion and shareholder returns.
A one-time tariff refund complicates year-over-year comparisons. TJX received $331 million in IEEPA tariff refunds during Q2, resulting in a $219 million pretax benefit after accruing $112 million in related incentive compensation. More refunds are expected in Q3, but management warned the amount, timing, and likelihood of further recovery are uncertain. Adjusted figures exclude these items, and forward guidance incorporates an expected $0.06 net benefit in Q3. Focus on the adjusted numbers; the GAAP line will stay noisy for another quarter or two.
Key items to watch: Marmaxx comps in Q3, the path of store wage costs against merchandise margin, and whether the 4% store growth represents a permanent new level or a one-year bump. TJX is executing well. But the margin story now hinges on merchandise margins staying strong enough to absorb rising labor costs.