TJX Cos. profits slip; HomeGoods stays strong

Don Hogsett, August 25, 2003

With cool, rainy weather putting a cap on sales, and with margins thinning out under markdown pressure, second-quarter profits at off-price retail group The TJX Companies slipped by 4.9 percent, to $123.3 million from $129.6 million last year.

Helped by continued rapid expansion, most notably among its smaller formats, and continued strength at its HomeGoods unit, sales climbed higher by 7.4 percent, to $3.0 billion from $2.8 billion. But with unseasonably wet weather acting as a damper, same-store sales were flat.

A source of strength for the company during the second quarter was its fledgling HomeGoods format, where profits more than tripled during the period, jumping up by 221.8 percent, to $6.1 million from $1.9 million a year ago. HomeGoods sales climbed by 23.1 percent, to $193.0 million from $156.8 million during the same period last year.

In the company's core Marmaxx business, sales improved by 4.3 percent, to $2.3 billion from $2.2 billion. But with margins under markdown pressure, profits were stunted, tumbling by 9.3 percent, to $191.8 million from $211.4 million.

Acting as a drag on the bottom line, average gross margin thinned substantially, by 120 basis points, or 1.2 percentage points, to 23.6 percent from 24.8 percent a year ago. Tripped up by narrowed margins, operating profits slipped by 3.9 percent, to $208.3 million from $216.8 million.

Looking ahead to the second half, Edmond English, president and ceo, said, "The Marmaxx business has significant opportunities in year-over -year comparisons. Our younger divisions are firing on all cylinders, taking an increasingly important role in our results. Our new stores across the board continue to outperform our goals, and we are on track to grow our store base by 10 percent this year."

The TJX Companies Inc.

Qtr. 7/26 (x000) 2003 2002 % change
Sales $3,046,184 $2,765,089 10.2
Oper. income (EBIT) 208,308 216,825 -3.9
Net income 123,262 129,627 -4.9
Per share (diluted) 0.24 0.24 0.0
Average gross margin 23.6% 24.8%
SG&A expenses 16.8% 17.0%
Six months
Sales 5,834,889 5,430,776 7.4
Oper. income (EBIT) 400,492 460,666 -13.1
Net income 236,793 276,730 -14.4
Per share (diluted) 0.46 0.51 -9.8
Average gross margin 23.9% 25.1%
SG&A expenses 17.0% 16.6%

Second quarter segment results

Marmaxx $2,301,463 $2,206,050 4.3
Winners/HomeSense 245,794 185,000 32.9
T.K. Maxx 209,921 157,524 33.3
HomeGoods 192,975 156,781 23.1
A.J. Wright 96,031 59,734 60.8
Marmaxx 191,800 211,379 -9.3
Winners/HomeSense 18,138 16,270 11.5
T.K. Maxx 8,184 6,814 20.1
HomeGoods 6,114 1,900 221.8
A.J. Wright 1,839 (3,066)

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