TJX Q1 2026: Gross Margins Slip, Tariff Headwinds to Pressure Q2
- Flexible buying strategy: Management emphasized their ability to adjust buying—shifting to more close-to-market orders—and leverage effective vendor negotiations to mitigate tariff headwinds, ensuring solid inventory availability and value for shoppers.
- Diverse and strong customer base: The company continues to drive robust transaction growth and attracts shoppers across all income demographics, underscoring its resilient and widely appealing value proposition.
- Effective cost mitigation tactics: Through initiatives including expense controls, productivity improvements, and strategic hedging practices that offset early-quarter headwinds, management projects margin stability and improvement in the latter half of the year.
- Tariff Pressure and Margin Compression: The company noted that Q2 is expected to be significantly impacted by tariffs—resulting in headwinds on pretax margins and gross margins due to goods purchased before tariff adjustments and unfavorable mark-to-market hedge losses. This creates uncertainty regarding whether mitigation efforts can fully offset such cost pressures. ** **
- Supply Chain and Inventory Risks: There are concerns over potential delays and reduced availability in certain categories if vendors, experiencing uncertainty, reduce shipments. This could force the company to adjust retail strategies and may negatively affect comp sales and margin performance. ** **
- Reliance on Mitigation Strategies Under Uncertain Conditions: The company is depending on flexible buying practices, adaptive pricing, and strong vendor relationships to counteract rising input costs and tariff pressures. However, if these strategies do not perform as planned, it could result in lower profitability and market share pressures. ** **
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue (Net Sales) | +5% (from $12,479M to $13,111M) | Total Revenue grew by 5% YoY in Q1 FY2026 driven by increased customer transactions and consistent comparable store sales growth across divisions, building on the growth seen in Q1 FY2025. This expansion was supported by strategic initiatives such as store count and square footage increases, which bolstered overall sales performance. |
HomeGoods Revenue | +8% (from $2,079M to $2,254M) | HomeGoods Revenue rose by 8% YoY in Q1 FY2026, reflecting improved comparable store sales—up from prior periods—and successful store expansion. The continued strength in customer transactions adds to the momentum seen in previous periods where HomeGoods had demonstrated robust sales growth. |
TJX International Revenue | +8% (from $1,537M to $1,661M) | TJX International Revenue increased by 8% YoY in Q1 FY2026, building on the prior year’s growth where factors such as a 4% comparable sales increase and additional non-comp sales had driven gains. Enhanced performance in customer transactions together with favorable, though neutral, foreign exchange impacts during Q1 has contributed to this sustained improvement. |
United States Revenue | +5% (from $9,829M to $10,306M) | United States Revenue grew marginally by 5% YoY in Q1 FY2026, maintaining the longstanding strength of the U.S. market. The steady performance is attributed to continued increases in customer transactions and strategic expansion, which reflect similar trends in previous periods where U.S.-based comparable sales drove consistent revenue figures. |
Net Income | -3% (from $1,070M to $1,036M) | Net Income declined by approximately 3% YoY in Q1 FY2026 primarily due to higher SG&A expenses (rising from 19.2% to 19.4% of sales) and a drop in gross profit margin (from 30.0% to 29.5%) caused by negative mark-to-market adjustments on inventory hedges. These factors offset revenue gains that had characterized previous periods. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Overall Comp Sales (%) | FY 2026 | 2% to 3% | 2% to 3% | no change |
Consolidated Sales ($USD) | FY 2026 | $58.1 billion to $58.6 billion | $58.1 to $58.6 | no change |
Pretax Profit Margin (%) | FY 2026 | 11.3% to 11.4% | 11.3% to 11.4% | no change |
Gross Margin (%) | FY 2026 | 30.4% to 30.5% | 30.4% to 30.5% | no change |
SG&A (%) | FY 2026 | 19.3% | 19.3% | no change |
Net Interest Income | FY 2026 | $98 million | $98 | no change |
Tax Rate (%) | FY 2026 | 25.1% | 25.1% | no change |
Weighted Average Share Count | FY 2026 | Approximately 1.13 billion shares | 1.13 billion | no change |
Diluted EPS ($USD) | FY 2026 | $4.34 to $4.43 | $4.34 to $4.43 | no change |
Overall Comp Sales (%) | Q2 2026 | no prior guidance | 2% to 3% | no prior guidance |
Consolidated Sales ($USD) | Q2 2026 | no prior guidance | $13.9 to $14 | no prior guidance |
Pretax Profit Margin (%) | Q2 2026 | no prior guidance | 10.4% to 10.5% | no prior guidance |
Gross Margin (%) | Q2 2026 | no prior guidance | 30% | no prior guidance |
SG&A (%) | Q2 2026 | no prior guidance | 19.7% | no prior guidance |
Net Interest Income | Q2 2026 | no prior guidance | $24 | no prior guidance |
Tax Rate (%) | Q2 2026 | no prior guidance | 24% | no prior guidance |
Weighted Average Share Count | Q2 2026 | no prior guidance | 1.13 billion | no prior guidance |
Diluted EPS ($USD) | Q2 2026 | no prior guidance | $0.97 to $1 | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Consolidated Sales | Q1 2026 | $12.8B–$12.9B | $13.111B | Beat |
Pretax Profit Margin | Q1 2026 | 10%–10.1% | 10.27% ([1,346 ÷ 13,111]) | Beat |
Gross Margin | Q1 2026 | 29.8%–29.9% | 29.48% ([3,865 ÷ 13,111]) | Missed |
SG&A | Q1 2026 | 20% | 19.45% ([2,549 ÷ 13,111]) | Beat |
Net Interest Income | Q1 2026 | $27M | $30M (from “(30.00) Interest (Income) Expense, Net”) | Beat |
Tax Rate | Q1 2026 | 23.2% | 23.0% ([310 ÷ 1,346]) | Beat |
Weighted Average Shares | Q1 2026 | ~1.13B | 1.132B | Met |
Diluted EPS | Q1 2026 | $0.87–$0.89 | $0.92 | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Flexible Buying and Adaptive Pricing Strategies | Q4 2025 and Q2 2025 calls emphasized a flexible business model and adaptive pricing approaches ( , ), while Q3 2025 did not explicitly cover these strategies. | Q1 2026 reemphasized an opportunistic, flexible buying approach and dynamic pricing tactics—with added details on leveraging excellent marketplace deals, global vendor relationships, and adjusting prices to protect the value gap ( ). | Consistently emphasized with enhanced detail and integration into broader inventory and tariff management efforts. |
Tariff Pressure and Mitigation Efforts | Q4 2025 and Q3 2025 mentioned tariff impacts and mitigation through flexible buying; however, Q2 2025 did not discuss this topic ( , , ). | Q1 2026 provided a detailed discussion of tariff pressures—highlighting their impact on gross margins, the strategy of adjusting ticket prices, diversifying sourcing, and leveraging the buying process to offset these pressures ( ). | Recurring topic now addressed with increased focus and granular mitigation strategies. |
Supply Chain Disruptions and Inventory Management Risks | Q4 2025 referenced robust inventory availability and positive merchandise flow ( ); Q3 2025 detailed inventory flow and freight headwinds ( ); Q2 2025 noted proactive inventory management and improved flow ( ). | Q1 2026 discussed strong inventory levels despite shipment delays, with flexible strategies to shift focus as needed and detailed references to freight cost components ( ). | Consistent focus with additional emphasis on flexibility and resilience amid operational challenges. |
Cost Mitigation and Margin Management | Q4 2025 and Q3 2025 addressed strategic buying, shrink management, and expense initiatives ( ); Q2 2025 covered freight cost adjustments, better buying practices, and a steady margin framework ( ). | Q1 2026 reiterated several cost mitigation measures including better buying strategies, effective expense initiatives, pricing flexibility, and control over SG&A—all in the context of slightly lower gross margins and tariff impacts ( ). | Ongoing focus with nuanced tactics aimed at balancing macro pressures and cost efficiencies. |
Customer Growth and Shifting Demographic Trends | Q4 2025 highlighted strong transaction growth and increased traction among the 18–34 age group ( ); Q3 2025 noted growth in younger customers and broad appeal ( ); Q2 2025 emphasized wide-ranging demographic appeal and effective marketing across segments ( ). | Q1 2026 reported robust customer transactions driven by strong foot traffic and a consistent appeal across demographic bands—with a slight lean toward lower-income shoppers ( ). | Stable and positive sentiment with minor demographic shifts, reflecting sustained broad market appeal. |
Domestic and International Expansion Strategies | Q4 2025 provided detailed plans for substantial store additions and remodels ( ); Q3 2025 celebrated domestic milestones and international joint ventures ( ); Q2 2025 highlighted reaching store milestones and new market entries via joint ventures and investments ( ). | Q1 2026 underscored continued expansion domestically (e.g., within Marmaxx and HomeGoods) and internationally (noting successes in Canada, Europe, and emerging joint ventures) ( ). | Consistent strategic expansion with steady execution and balanced domestic/international focus. |
Freight and Logistical Cost Volatility | Q4 2025 cited lower ocean freight rates contributing to margin improvements ( ); Q3 2025 anticipated a modest freight headwind for Q4 ( ); Q2 2025 recognized the benefit of lower freight costs in the quarter while forecasting rising ocean freight expenses ( ). | Q1 2026 noted that ocean freight remains a relatively small part of total freight cost and, thanks to strong provider relationships, costs have remained stable as reflected in their forecast ( ). | Recurring topic managed with steady performance and a stable outlook despite anticipated volatility. |
Rising Wage and Payroll Cost Pressures | Q4 2025 and Q3 2025 acknowledged incremental wage and payroll costs impacting SG&A ( , ); Q2 2025 discussed rising wage pressures along with legislative-driven increases in various geographies ( ). | Q1 2026 continued to point to an increase in SG&A due to incremental wage and payroll costs, aligning with the ongoing upward pressure on labor expenses ( ). | Steady and ongoing challenge with consistent acknowledgment of rising wage pressures. |
Real Estate and Retail Space Availability Challenges | Q4 2025 addressed robust retail space availability and opportunities from large box closures ( ); Q3 2025 touched on relocations and remodels without stressing space availability; Q2 2025 did not emphasize real estate challenges. | Q1 2026 did not mention real estate or retail space availability challenges. | Topic is no longer mentioned, suggesting a diminished focus or resolved concerns in the current period. |
HomeGoods Segment Performance Improvements | Q4 2025 reported milestone achievements (e.g., 1,000th store), robust comp sales growth, and significant margin improvements ( ); Q3 2025 highlighted improved comp sales and a 200 basis point margin increase ( ); Q2 2025 showed modest comp sales gains and margin upturns ( ). | Q1 2026 noted a 4% comp sales growth and improved segment profit margin (up 70 basis points) in HomeGoods, reflecting continued operational strength and effective strategy execution ( ). | Consistent robust performance, with ongoing improvements reinforcing the segment’s strategic importance. |
Regional Economic Headwinds in Key International Markets | Q2 2025 discussed challenges in Canada and execution issues in parts of Europe ( ); Q3 2025 described a stable macro environment in Europe with limited change ( ); Q4 2025 did not emphasize headwinds, focusing instead on strong performance ( ). | Q1 2026 did not include any explicit commentary on regional economic headwinds, with the discussion centered more on overall performance in international markets ( ). | Reduced emphasis in the current period; the topic is less highlighted compared to prior periods where challenges were noted. |
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Margin Guidance
Q: How did margins perform and evolve?
A: Management explained that gross margins were slightly lower in Q1 due to inventory hedge losses and tariff costs, but they expect improvements in Q2 from mitigation efforts, cost initiatives, and timing adjustments that will favor margins in the latter half of the year. -
Pricing Strategy
Q: How will pricing adjust with rising costs?
A: They stressed their flexible buying approach, noting that if competitor prices change, they will adjust accordingly while preserving a significant price gap for customers, ensuring value remains intact despite higher cost inputs. -
Tariff Impact
Q: How are tariffs affecting cost and inventory?
A: Management acknowledged that tariffs are creating headwinds in Q2 for orders placed before tariff changes, but orders placed later will factor in tariffs from the start, with strategies in place to mitigate these impacts through vendor negotiations and hedging adjustments. -
Inventory Availability
Q: Is inventory availability at risk amid delays?
A: Despite vendor concerns about delayed shipments, management confirmed that inventory levels are up thanks to attractive buying opportunities, and their flexible approach lets them pivot across product categories if necessary. -
Sales Trends
Q: How are comp sales performing overall?
A: They reported improving comp sales as weather normalized, with consistent strength across divisions—especially Marmaxx—which helped drive a robust start to Q2. -
Direct Sourcing & Inventory Buying
Q: What percent is direct-sourced and are buying strategies changing?
A: Direct imports remain below 10% of total, and management is deliberately buying closer to market to maintain a balanced, eclectic mix without overcommitting in advance. -
HomeGoods Margin
Q: What is HomeGoods’ margin outlook?
A: The team is optimistic, noting that HomeGoods is on track for margin improvements driven by rising sales and efficient expense management, even as tariffs affect China-sourced products. -
Cost Inputs & Hedging
Q: How do rising inputs affect cost and hedging?
A: Their approach is to adjust retails as needed while the mark-to-market hedge losses seen in Q1 are expected to reverse in later quarters, cushioning the impact of higher input costs. -
Freight Outlook
Q: What are freight cost expectations?
A: Freight rates are forecasted to remain stable, with ocean freight constituting only about 20–25% of overall freight, supported by strong relationships with shipping providers. -
Operational Expense Savings
Q: Can cost initiatives in SG&A boost profitability?
A: Although not detailed by category, management anticipates savings from distribution center and store initiatives that will help support their overall profit margins without compromising service. -
Customer Acquisition Trends
Q: Are trade-downs affecting customer behavior?
A: They observed no significant trade-down effect; transactions continue to be robust across all income segments, reflecting the broad appeal and consistent value proposition of their stores.