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Home businesses shine to the Maxx

Brent Felgner -- Home Textiles Today, March 3, 2003

Framingham, MA — TJX Companies' HomeGoods chain has largely flown under the radar since its 1992 launch, but that low profile is becoming harder to maintain as it consistently blasts past its targets.

In the meantime, TJX's home fashions business — through HomeGoods, TJMaxx and Marshall's superstores and tiny Canadian HomeSense operation — continues to be a shining star as the firm struggles to keep its sales and profits at acceptable levels.

The home operations fared far better than the rest of the chain's apparel-driven business, which saw fourth quarter profits slip on essentially flat comparable store sales. (See financial report, page 23.)

HomeGoods, which has been one of TJX's fastest growing divisions, last year opened 30 new stores, bringing its total to 142 units. It will continue rolling out new stores in both the freestanding and superstores formats this year, with 37 new units slated for this year, the company said.

"They really hit a home run this year," said Ted English, president and ceo, during the company's analysts' call last week. "The division far exceeded its sales and profit goals for the year while, at the same time, growing its store count by 27 percent."

At HomeGoods, comparable stores sales were up 6 percent last year on a 7 percent rise the prior year, the company reported, with total sales increasing 39 percent to $705 million. Segment profit increased nine times, to $32 million with increases in profit margins.

English credited the chain's merchandising, inventory management, store operations and distribution. He said superstores — which combine HomeGoods with either T.J. Maxx or Marshalls — performed "extremely well and remain a great growth vehicle for both Marmaxx and HomeGoods."

The Canadian version, HomeSense, will add eight stores this year, increasing its 15-store base by more than half, English said. The company more than doubled the chain's size last year, opening eight stores on a base of seven units.

"This concept continues to take hold with Canadian shoppers," English reported.

Perhaps as important, however, HomeGoods has benefited from seasoning and inventory management.

Referring to HomeGoods and T.K. Maxx, the company's U.K. business, English said: "Both businesses had inventory management issues over the last couple of years — HomeGoods, because of an undercapacity in distribution, and T.K. Maxx, just reacting to its growth more aggressively than it needed to. They've both got that very much better under control. They're both buying merchandise closer to need, they're flowing goods to the stores better than they've ever done and the customer is responding to it."

However, English emphasized that continued growth will be "prudent," in large part governed by careful attention to real estate availability and opportunities.

"On top of that, you've got a seasoning of the merchandising staffs," he explained. "They were fairly young businesses. Now we have a management team and merchandising team that are that much wiser and that much longer in their jobs. And we're seeing the benefits of that."

That seasoning, he said, was an important factor in driving both new store performance and comp-store performance.

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