The TJX Companies, Inc. announced net sales for the third quarter were $4.0 billion, a 6% increase over last year's $3.8 billion. Consolidated comparable store sales were flat for the quarter versus last year. Net income was $171 million and diluted earnings per share were 36 cents, compared with 40 cents per share in the prior year.
For the first nine months of fiscal 2006, net sales were $11.3 billion, a 7% increase over last year, and year-to-date consolidated comparable store sales increased 1% over the prior year. Net income was $444 million and diluted earnings per share were 91 cents, versus 95 cents per share in the prior year.
Results for the third quarter and year-to-date periods include a one-time gain of approximately $9 million pre-tax, or a penny per share, from the company's portion of the recent Visa/Mastercard antitrust litigation settlement. Additionally, results for both periods reflect the negative impact of one-time items previously disclosed: approximately 1 penny per share related to the recent hurricanes (detailed below); exit costs and operating losses of approximately 1.5 cents per share associated with the Company's e-commerce business, and; costs of 1 cent per share associated with the resignation agreement between TJX and its former CEO.
Ben Cammarata, chairman and acting CEOfficer of The TJX Companies, Inc., stated, “We were disappointed with our sales and earnings results in the third quarter, particularly with the performance of women's sportswear across all divisions. While business was hurt by unseasonably warm weather across much of the U.S., Canada and the U.K., we believe that there are areas of our off-price buying strategies in which better execution would benefit us. That said, we maintained healthy merchandise margins during the quarter, through disciplined inventory management, and expenses were well controlled. As we enter the holiday selling season, we remain focused on profitably growing sales across all of our businesses.”
Sales by Business Segment
The company's comparable store sales and net sales by division, in the third quarter, were as follows:
Third Quarter Third Quarter
Comparable Store Sales Net Sales
($ in millions)
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FY2006 FY2005 FY2006 FY2005
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Marmaxx(a) 0% +2% $2,728 $2,672
----------- ----------------- ---------------- ----------- -----------
Winners/ +4%(US$) +10%(US$) $398 $351
HomeSense -4%(C$) +4%(C$)
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T.K. Maxx -5%(US$) +15%(US$) $385 $336
-4%(GBP) +4%(GBP)
----------- ----------------- ---------------- ----------- -----------
HomeGoods +1% -1% $292 $249
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A.J. Wright +2% +3% $159 $129
----------- ----------------- ---------------- ----------- -----------
Bob's NA NA $80 $81
Stores
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----------- ----------------- ---------------- ----------- -----------
TJX 0% +4% $4,042 $3,817
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(a) Combination of T.J. Maxx and Marshalls
Margins
During the third quarter, the company's gross margin rate was 24.2% of sales and the selling, general and administrative expenses rate was 17.0%. Both of these rates were unfavorable compared with last year, due to the de-levering effect of flat comparable store sales, combined with the negative impact of the one-time items mentioned above. However, despite softer comparable store sales, merchandise margins in the third quarter were up slightly over last year. Additionally, selling, general and administrative expenses on a dollar basis were favorable to the company's plan. The company's pre-tax income was 6.9% of sales, down compared to the third quarter of last year.
Inventory
Total inventories as of October 29, 2005, were $2.9 billion compared with $2.8 billion at the same time last year. Consolidated inventories, on a per-store basis, including the warehouses, were down 6% from the prior year. At the Marmaxx division, average per store inventories, including the warehouses, were essentially in line with last year's levels. Including merchandise on order, Marmaxx's total inventory commitment was down on a per-store basis.
Share Repurchases
During the third quarter, the company spent a total of $125 million, retiring 5.8 million shares of TJX stock. Year-to-date, the company has spent a total of $515 million in repurchases of TJX stock and has retired a total of 22.2 million shares. As previously announced, during the third quarter, the company's Board of Directors approved a new stock repurchase program that authorizes the repurchase of up to $1 billion of TJX common stock from time to time. At current prices, this would represent approximately 10% of the company's outstanding common shares. It remains the company's plan to repurchase a total of $600 million of TJX stock in fiscal 2006.
Impact of Hurricanes Katrina, Rita and Wilma
The company's third quarter results were negatively impacted by Hurricanes Katrina, Rita and Wilma. Combined, these hurricanes negatively impacted earnings per share by approximately 1 penny, including lost sales, the self-insured portion of property damage, and costs incurred to assist the company's employees. As a result of the hurricanes, a total of 130 stores were closed for various periods of time during the third quarter.
2005 Outlook
For the fourth quarter, the company continues to expect earnings per share in the range of 41 cents to 43 cemts with a comparable store sales increase of 1% to 2% both on a consolidated basis and at Marmaxx. Based on its fourth quarter guidance, the company now expects earnings per share for the full fiscal 2006 year to be in the range of $1.32 to $1.34. This estimate does not reflect the impact of expensing stock options, which the company is required to implement in the first quarter of fiscal 2007.
Stores by Concept
During the quarter, the company netted a total of 89 stores. Year-to-date, the company has netted 147 stores. As of the end of the quarter, the company had increased square footage by 9% over the same period, last year.
Store Locations Square Feet
Third Quarter Third Quarter
(in millions)
--------------------- ----------------------
Beginning End Beginning End
------------------ ----------- --------- ----------- ----------
T.J. Maxx 777 795 23.1 23.7
------------------ ----------- --------- ----------- ----------
Marshalls 700 718 22.0 22.7
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Winners 167 172 4.9 5.1
------------------ ----------- --------- ----------- ----------
HomeSense 47 57 1.1 1.4
------------------ ----------- --------- ----------- ----------
HomeGoods 230 244 5.7 6.1
------------------ ----------- --------- ----------- ----------
T.K. Maxx 184 197 5.3 5.9
------------------ ----------- --------- ----------- ----------
A.J. Wright 143 152 3.7 3.9
------------------ ----------- --------- ----------- ----------
Bob's Stores 34 36 1.5 1.6
------------------ ----------- --------- ----------- ----------
------------------ ----------- --------- ----------- ----------
TJX 2,282 2,371 67.4 70.3
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THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
FINANCIAL SUMMARY
(Unaudited)
(Dollars In Thousands Except Per Share Amounts)
Thirteen Weeks Ended
-------------------------
October 29, October 30,
2005 2004
----------- -----------
Net sales $4,041,912 $3,817,350
Cost of sales, including buying and
occupancy costs 3,065,064 2,857,105
Selling, general and administrative
expenses 687,385 625,987
Interest expense, net 10,119 7,134
---------- ----------
Income before provision for income taxes 279,344 327,124
Provision for income taxes 108,181 126,269
---------- ----------
Net income $ 171,163 $ 200,855
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Diluted earnings per share:
Net income $ .36 $ .40
Cash dividends declared per share $ .06 $ .045
