The TJX Companies, Inc. reported a 7% net sales for the first quarter to $3.9 billion on a consolidated comparable store sales increase of 1% over last year. Net income was $164 million, and diluted earnings per share were 34 cents, a 21% increase over 28 cents per share in the prior year. Results for the first quarter were negatively impacted by a previously announced one-time pretax charge of $7 million, or a penny per share, related to a workforce reduction.
Ben Cammarata, Chairman and Acting Chief Executive Officer of The TJX Companies, Inc., stated, “Our first quarter earnings per share exceeded our expectations, despite our top line coming in just slightly below our plan. Through buying more of our merchandise opportunistically and close to need, we achieved stronger-than-expected merchandise margins. These strong merchandise margins, combined with below-plan expenses, resulted in significant improvement in our pretax margins and bottom line. Moving into the second quarter, we have significantly more liquidity in our inventory position than at this time last year, which puts us in an excellent position to take advantage of the abundant off-price opportunities available towards the end of the season.”
Sales by Business Segment
The company's comparable store sales and net sales by division, in the first quarter, were as follows:
First Quarter First Quarter
Comparable Store Net Sales
Sales ($ in millions)
------------------- -----------------------
FY2007 FY2006 FY2007 FY2006
-------------------------- --------- --------- ----------- -----------
Marmaxx(a) +1% +3% $2,647 $2,564
-------------------------- --- ----- --- ----- ----------- -----------
Winners/HomeSense +8% (US$) +7% (US$) $369 $313
+1% (C$) -1% (C$)
-------------------------- --- ----- --- ----- ----------- -----------
T.K. Maxx -3% (US$) +2% (US$) $349 $318
+5% (GBP) -1% (GBP)
-------------------------- --- ----- --- ----- ----------- -----------
HomeGoods +3% 0% $306 $259
-------------------------- --- ----- --- ----- ----------- -----------
A.J. Wright +3% +1% $162 $139
-------------------------- --- ----- --- ----- ----------- -----------
Bob's Stores +2% NA $63 $59
-------------------------- --- ----- --- ----- ----------- -----------
-------------------------- --- ----- --- ----- ----------- -----------
TJX +1% +3% $3,896 $3,652
-------------------------- --- ----- --- ----- ----------- -----------
(a) Combination of T.J. Maxx and Marshalls
Margins
During the first quarter of Fiscal 2007, the company's pretax profit margin increased to 6.7% from 6.0% last year. The gross profit margin increased 0.9 percentage points to 24.5%, primarily due to improved merchandise margins. The SG&A ratio to sales increased by 0.2 percentage points to 17.7%, due to one-time costs related to the workforce reduction (see below). Excluding this charge, the SG&A ratio was flat to last year, with the deleveraging impact of the 1% comparable store sales increase offset by effective cost management.
One-Time Charge Related to Workforce Reduction
The company's first quarter Fiscal 2007 results were negatively impacted by a $7 million, or a penny per share, one-time pretax charge related to the reduction in workforce at its corporate and divisional offices announced earlier this year. This one-time charge consisted primarily of severance and outplacement services. The company eliminated a total of approximately 250 positions (100 of which were unfilled), which represented about 6% of its headquarters staff and, at that time, also announced that 12 of its most senior executives had agreed to 10% salary reductions. In total, the company expects these actions will result in a cost reduction of approximately $18 million on an annualized basis. For fiscal 2007, the company anticipates a net benefit to pretax income of approximately $8 million, which reflects $15 million in partial year savings from the cost reductions, partially offset by the $7 million, one-time charge recorded in the first quarter.
Stock Option Expense
As previously announced, in the fourth quarter of Fiscal 2006, the company early-adopted the Statement of Financial Accounting Standards (SFAS) No. 123R related to accounting for stock based compensation and also adjusted prior period financial statements to reflect the impact of stock option expense. Consequently, the attached consolidated financial statements and business segment results include the impact of stock option expense for both current and prior periods.
Inventory
Total inventories as of April 29, 2006, were $2.6 billion compared with $2.5 billion at the same time last year and, on a per-store basis, including the warehouses, were down 7% from the prior year. At the Marmaxx division, per-store inventories, including the warehouses, were down 9% from last year's levels. Including merchandise on order, Marmaxx's total inventory commitment was also down on a per-store basis.
Share Repurchases
During the quarter, the company spent a total of $177 million in repurchases of TJX stock, retiring 7.2 million shares. It remains the company's plan to repurchase a total of $650 million of TJX stock in Fiscal 2007.
Second Quarter and Fiscal 2007 Outlook
For the second quarter of Fiscal 2007, the company expects earnings per share in the range of 24 cents to 26 cents, an increase of 4% – 13% over 23 cents per share in the prior year. This forecast is based on various assumptions, including estimated consolidated comparable store sales growth of approximately 3%.
For the fiscal year ended January 27, 2007, the company continues to expect earnings per share in the range of $1.42 to $1.46 as compared to $1.41 in the prior year. Prior year earnings per share include a net benefit of 12 cents per share from one-time items (non-recurring tax items, partially offset by certain third quarter events, detailed in the company's Fiscal 2006 Form 10-K). Excluding these items, the company expects current year earnings per share to be up 10% to 13% over the pro forma $1.29 earnings per share earned in Fiscal 2006. This is based on various assumptions, including consolidated comparable store sales growth in the 2% to 3% range.
Stores by Concept
During the first quarter, the company added a total of 33 stores. TJX increased square footage by 8% over the same period last year.
Store Locations Gross Square Feet
First Quarter First Quarter
(in millions)
------------------- -------------------
Beginning End Beginning End
------------------------------ ------------ ------ ------------ ------
T.J. Maxx 799 805 23.8 24.0
------------------------------ ------------ ------ ------------ ------
Marshalls 715 725 22.7 23.1
------------------------------ ------------ ------ ------------ ------
Winners 174 178 5.2 5.3
------------------------------ ------------ ------ ------------ ------
HomeSense 58 60 1.4 1.5
------------------------------ ------------ ------ ------------ ------
HomeGoods 251 254 6.2 6.3
------------------------------ ------------ ------ ------------ ------
T.K. Maxx 197 201 5.9 6.0
------------------------------ ------------ ------ ------------ ------
A.J. Wright 152 156 3.9 4.0
------------------------------ ------------ ------ ------------ ------
Bob's Stores 35 35 1.6 1.6
------------------------------ ------------ ------ ------------ ------
------------------------------ ------------ ------ ------------ ------
TJX 2,381 2,414 70.6 71.7
------------------------------ ------------ ------ ------------ ------
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
FINANCIAL SUMMARY
(Unaudited)
(Dollars In Thousands Except Per Share Amounts)
13 Weeks Ended
------------------------
April 29, April 30,
2006 2005
---------- ----------
Net sales $3,896,483 $3,651,830
Cost of sales, including buying and
occupancy costs 2,942,783 2,788,769
Selling, general and administrative
expenses 689,545 637,245
Interest expense, net 3,759 6,036
---------- ----------
Income before provision for income taxes 260,396 219,780
Provision for income taxes 96,587 84,199
---------- ----------
Net income $ 163,809 $ 135,581
========== ==========
Diluted earnings per share:
Net income $ .34 $ .28
Cash dividends declared per share $ .07 $ .06
Weighted average shares for diluted
earnings per share computation 484,947,472 497,114,568
