Off-price is On Track at TJX

James Mammarella, November 26, 2007

Off-price retailer The TJX Cos.'s third-quarter results formed strong evidence that it's a good time to be an opportunistic merchandiser: Net income of $249 million translated into diluted earnings per share of $0.54, a 13% boost over the same period one year ago.

Sales rose 6% to $4.7 billion; comps rose 3%. Comps also gained 3% for the first nine months, with total sales up 7% to $13.2 billion year-to-date. Results are for continuing operations.

TJX president and ceo Carol Meyrowitz allowed herself to enjoy this observation: "The 13% increase in earnings per share from continuing operations was achieved on top of a very strong 50% increase last year, clearly demonstrating our ability to deliver sustained earnings growth, even in difficult environments and against tough comparisons."

Meyrowitz added, "We enter the fourth quarter with very clean, fresh inventories, and significantly more liquidity than at this time last year."

Home furnishings are an apparent success story at TJX.While home was soft at TJMaxx/Marshall's, the company is reworking the mix and is testing a new home prototype that will roll out next year, said Meyrowitz.

The 287-store HomeGoods chain, on the other hand, "continues to buck the trend of softness in the home industry," she said. It is also outpacing the big Marmaxx (T.J. Maxx and Marshalls) division, which has 1,628 stores. Comp sales at Marmaxx fell 1% for the quarter, while HomeGoods comps climbed 4%.

And while the Marmaxx unit generated $309 million in profit, down 1% from last year, the story at HomeGoods was a 42% leap in profit, to $25 million. Sales at HomeGoods rose more than 10%, to $372 million, while Marmaxx sales edged up 2%, to $3 billion.

The other energetic driver at TJX is international operations. The Canadian division, consisting of 190 Winners and 71 HomeSense units, scored 15% comps (U.S. — the Canadian$ uptick was 5%), while the U.K.-based T.K. Maxx, with 225 stores, registered a 13% gain in comps (U.S. — the gain in pounds was 6%).

The company noted that through the first nine months of the fiscal year it has taken a total of $130 million in after-tax charges for costs related to the "Computer Intrusion" that resulted in millions of at-risk consumer identities. That is equivalent to about 1% of sales, year-to-date.

TJX Segment Sales Performance

Third quarter comparable store sales Third quarter net sales ($ in millions)
FY2008 FY2007 FY2008 FY2007
Source: TJX Cos.
Marmaxx (TJMaxx & Marshalls) -1%. +5%. $3,009 $2,947
Canada (Winners & HomeSense) +15%. (US$) +11%. (US$) $559 $477
+5%. (C$) +5%. (C$)
U.K. (T.K. Maxx) +13%. (US$) +17%. (US$) $568 $481
+6%. (GBP) +11%. (GBP)
HomeGoods +4%. +5%. $372 $336
A.J. Wright 0%. +4%. $151 $148
Bob's Stores -2%. +2%. $79 $83
TJX Corporate Total +3%. +6%. $4,737 $4,473

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