TJX Companies see 4 percent dip

Don Hogsett, August 30, 2004

Losing ground in the second quarter, hampered by thinning margins, rising costs and a loss at its fledgling HomeGoods operation, second quarter profits at The TJX Companies slipped 4.1 percent, to $118.2 million from $123.3 million last year.

Overall sales at the diversified off-price retailer rose 12.1 percent, to $3.4 billion from $3 billion during the same period a year ago, while same-store sales edged up 3 percent.

Putting modest pressure on the bottom line was a small $626,000 loss at the HomeGoods unit, as the business skidded from a year-before profit of $6.1 million. HomeGoods sales, driven by continued rapid expansion, increased 15.1 percent, to $222.1 million from $193 million last year. But same-store sales slipped 1 percent.

Weighing in on the HomeGoods business, Edmond English, president and CEO, said, "bottom-line results were below last year and our expectations. HomeGoods' second quarter results were impacted by lighter-than-optimal summer, seasonal inventories, which had been in high demand early in the season. That said, we continue to be bullish about this unique concept, which offers great values on a rapidly changing assortment of home fashions. At HomeGoods, we now expect to add 34 stores, which includes both the freestanding and superstore format and represents a 17 percent increase in selling square footage."

Adding extra pressure to the bottom line, average gross margin thinned 60 basis points, or six-tenths of a percentage point, to 23 percent from 23.6 percent a year ago. At the same time, operating costs rose slightly, 20 basis points, or two-tenths of a percentage point, to 17 percent of sales from 16.8 percent the preceding year.

Second quarter segment results

Segment 2004 2003 % change
Sales $2,442,162 $2,301,463 6.1
Operating profit 202,582 191,800 5.6
Winners and HomeSense
Sales 292,566 245,794 19.0
Operating profit 21,101 18,138 16.3
Sales 222,079 192,975 15.1
Operating profit (626) 6,114

The TJX Companies

Qtr. 7/31 (x000) 2004 2003 % chg
Sales $3,414,287 $3,046,184 12.1
Oper. Income (EBIT) 200,329 208,308 -3.8
Net income 118,242 123,262 -4.1
Per share (diluted) 0.24 0.24
Average gross margin 23.0% 23.6%
SG&A expenses 17.0% 16.8%
Six months 2004 2003 % chg
Sales 6,767,024 5,834,889 16.0
Oper. Income (EBIT) 481,246 400,492 20.2
Net income 286,354 236,793 20.9
Per share (DILUTED) 0.57 0.46 23.9
Average gross margin 23.9% 23.9%
SG&A expenses 16.8% 17.0%

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