(Reuters) - TJX Cos Inc’s (TJX.N) holiday-quarter earnings forecast fell largely below analysts’ estimates on Tuesday, as the off-price retailer faces rising freight and labor costs, sending its shares down as much as 7 percent.
Several retailers have warned that a shortage of truck drivers, new driver regulations and higher fuel prices would make moving freight much costlier this year. Wages are also rising in a tightening U.S. labor market.
TJX said it expects the rising transportation and wage costs to cut next year’s profit by about 4 percent.
“Unfortunately, the environment is not playing into our plans to have us picking up next year on our (earnings per share),” Chief Executive Officer Ernie Herrman said on a conference call with analysts.
Unlike other brick-and-mortar retailers, which have closed stores and invested in e-commerce as shoppers move online, TJX has largely depended on deep in-store discounts to drive traffic.
The retailer expects higher costs during the current quarter to hurt profits by 5 percent, resulting in earnings of 66 cents to 67 cents per share. Analysts on average were expecting 71 cents, according to IBES data from Refinitiv.
The tepid forecasts overshadowed TJX’s better-than-expected third-quarter sales. The company reported a 7 percent rise in comparable-store sales in the quarter ended Nov. 3, above the 4.1 percent Wall Street had estimated.
The company’s treasure-hunt format, which encourages shoppers to hunt for deals across a swath of products and brands in stores, helped drive its 17th consecutive quarter of traffic growth.
Comparable-store sales in the company’s biggest unit, Marmaxx, rose 9 percent, marking the best growth in at least two years.
Net income surged 18.8 percent to $762.3 million, or 61 cents per share, from a year earlier.
The company’s net sales climbed 12.2 percent to $9.83 billion, beating analysts’ expectations of $9.49 billion.
TJX’s smaller rival Ross Stores Inc’s (ROST.O) fourth-quarter forecast for same-store sales on Tuesday was also below analysts’ estimates.
TJX’s shares, which touched a five-month low of $45.56, were down 3.7 percent at $47.17 in late afternoon trading. As of Monday, the stock had risen nearly 28 percent this year.
Reporting by Soundarya J in Bengaluru; Editing by Shinjini Ganguli