TJX's Q1 EPS Down Slightly: Is FY26 Profit Target Still in Reach?

The TJX Companies, Inc. TJX is leaning on disciplined execution after reporting a modest 1-cent year-over-year decline in first-quarter fiscal 2026 earnings to 92 cents, but ahead of internal expectations. Despite the minor decline, the company maintained its full-year fiscal 2026 EPS guidance of $4.34 to $4.43, implying 2-4% growth over the prior year’s $4.26. The central question: Can TJX bridge the year-over-year gap and still hit its profit target?

The fiscal first quarter EPS softness stemmed from a 50-basis-point (bps) gross margin contraction, caused by unfavorable inventory hedge adjustments. Additionally, SG&A expenses rose 20 bps, impacted by higher wage and payroll costs. Interest income also weighed slightly, trimming 20 bps from pre-tax margin due to lower cash balances and interest rates.

Management maintains that much of the margin pressure is front-loaded. Mitigation efforts, including expense controls, productivity initiatives and sourcing flexibility, are expected to gain traction in the second half. Moreover, some unfavorable hedging impacts are forecasted to reverse in future quarters as inventory is recognized at previously locked-in exchange rates.

While the first quarter’s year-over-year EPS decline indicates some near-term pressures, TJX’s decision to maintain its full-year guidance indicates management’s expectation of a recovery through the year. The outcome will depend on the effectiveness of planned mitigation efforts and the broader operating environment. If those factors evolve unfavorably, achieving the fiscal 2026 EPS target may prove more challenging.

How Are BURL & DG Managing EPS Stability Compared With TJX?

While The TJX Companies reported a modest EPS decline, Burlington Stores BURL relied on cost discipline and operational planning to deliver earnings growth in the face of external pressures. In the first quarter of fiscal 2025, the company reported adjusted EPS of $1.67, an 18% increase over the prior year, even as comparable store sales remained flat. Management pointed to favorable timing of merchandise receipts between the fiscal first and second quarters, as well as early cost-saving initiatives, as key contributors to the performance. Despite rising supply-chain and asset-protection costs, Burlington Stores maintained its full-year adjusted earnings guidance of $8.70 to $9.30.

Dollar General DG focused on inventory control and margin improvement to support earnings growth amid cost headwinds. In the first quarter of fiscal 2025, the company reported EPS of $1.78, a 7.9% increase over the prior year. Lower shrink and stronger inventory markups contributed to gross margin expansion, while operational challenges persisted on the expense side. Dollar General did flag higher SG&A, including incentive compensation, as a headwind for the fiscal second quarter. Still, Dollar General raised the lower end of its full-year EPS guidance to a range of $5.20 to $5.80, despite tariff-related uncertainties.

TJX’s Price Performance, Valuation and Estimates

Shares of The TJX Companies have lost 3.9% in the past month compared with the industry’s decline of 4.5%.

From a valuation standpoint, TJX trades at a forward price-to-earnings ratio of 26.52X, down from the industry’s average of 32.3X.

The Zacks Consensus Estimate for The TJX Companies’ current fiscal-year sales and earnings per share implies year-over-year growth of 4.4% and 4.7%, respectively. 

TJX currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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