Bob's Stores, the Connecticut-based chain of retail stores that is now part of the TJX Companies portfolio, saw sales decline 6.2% in the second quarter to $59.8 million from $63.8 million in the year-ago period. The Q2 operating loss for the 34-store division expanded 6.2% to a loss of $8.7 million, compared to an operating loss of $8.2 million in Q2 last year.

The increased loss came despite an increase in merchandise margins as TJX moved to run leaner in the stores and free up more open-to-buy for chase items. Merchandise margins were up 800 basis points versus the year-ago period, leading the gains across all TJX units. While inventory was said to be down in the mid-teens across all the TJX businesses, Bob’s actually saw inventories rise slightly, due primarily to an increased commitment to the footwear category.

TJX management said they see an opportunity to refine the marketing message and the associated ad spend at Bob’s over the next two quarters.

Third quarter revenues are expected to be in the $80 million to $82 million range, about flat to last year’s Q3, and the operating loss is expected to be roughly $3 million, compared to a $2.4 million operating loss last year in a quarter that got a nice boost from the Red Sox run.

Fourth quarter revenues are now seen in the $86 million to $88 million range, a 2% to 4% increase over the $84.5 million in sales generated in the fiscal 2004 fourth quarter. TJX is projecting a flat to $1 million loss on the bottom line for Bob’s in Q4, a substantial improvement to the $7.9 million operating loss posted in fiscal Q4 last year.

For the full year, Bob’s is expected to generate roughly $285 million to $289 million in sales, falling short of the $290 million in revenues last year, while the operating loss is expected to shrink a bit to a loss of $15.3 million, compared to an operating loss of $17.3 million in fiscal 2004.

TJX expects to end the year with four net new stores at the Bob's Stores chain.