The TJX Companies, Inc. reported a 6% increase in net sales from continuing operations for the third quarter to $4.7 billion, while consolidated comparable store sales increased 3%. Net income from continuing operations for the third quarter was $249 million and diluted earnings per share from continuing operations were 54 cents, a 13% increase over last years 48 cents.
For the first nine months of fiscal 2008, net sales from continuing operations were $13.2 billion, a 7% increase over last year, and consolidated comparable store sales increased 3% over the prior year. Net income from continuing operations was $471 million and diluted earnings per share from continuing operations were $1.00, compared to $1.12 in the prior year period. These year-to-date, fiscal 2008 earnings results reflect after-tax charges of $130 million, or 28 cents per share, related to the previously reported unauthorized computer intrusion(s). Excluding these charges, adjusted diluted earnings per share from continuing operations for the first nine months of fiscal 2008 were $1.28, a 14% increase over $1.12 for the prior year.
Carol Meyrowitz, president and CEO of The TJX Companies, Inc., stated, “I am very pleased with our third quarter performance. The 13% increase in earnings per share from continuing operations was achieved on top of a very strong 50% increase last year, clearly demonstrating our ability to deliver sustained earnings growth, even in difficult environments and against tough comparisons. These results were achieved through solid execution of the off-price model, specifically our disciplined management of inventories and open-to-buy, as well as our continued focus on cost reduction. While sales were slightly below plan, we believe this was mostly due to unseasonably warm weather through the majority of September and October. Importantly, as the weather cooled towards the end of the quarter, we saw a strong surge in sales and demand for cold weather apparel. We enter the fourth quarter with very clean, fresh inventories, and significantly more liquidity than at this time last year, which positions us well to take advantage of a market full of buying opportunities and flow great gift product throughout the holiday selling season.”
Sales by Business Segment
The companys comparable store sales and net sales from continuing operations by division, in the third quarter, were as follows:
| Third Quarter | Third Quarter | |||||||||||
| Comparable Store Sales | Net Sales ($ in millions) | |||||||||||
| FY2008 | FY2007 | FY2008 | FY2007 | |||||||||
Marmaxx(a) | -1% | +5% | $3,009 | $2,947 | ||||||||
| Winners/HomeSense | +15% | (US$) | +11% | (US$) | $559 | $477 | ||||||
| +5% | (C$) | +5% | (C$) | |||||||||
| T.K. Maxx | +13% | (US$) | +17% | (US$) | $568 | $481 | ||||||
| +6% | (GBP) | +11% | (GBP) | |||||||||
| HomeGoods | +4% | +5% | $372 | $336 | ||||||||
| A.J. Wright | 0% | +4% | $151 | $148 | ||||||||
| Bobs Stores | -2% | +2% | $79 | $83 | ||||||||
| TJX | +3% | +6% | $4,737 | $4,473 | ||||||||
(a)Combination of T.J. Maxx and Marshalls | ||||||||||||
Margins
During the third quarter of fiscal 2008, the companys consolidated pretax profit margin from continuing operations was 8.5%, a 0.1 percentage point improvement over last years strong performance. The gross profit margin from continuing operations for the fiscal 2008 third quarter was 25.2%, down 0.2 percentage points. The gross profit margin benefited from a 0.2 percentage point improvement in merchandise margins, which was more than offset by a mark-to-market adjustment on inventory-related foreign currency hedges (which will reverse in the fourth quarter). Selling, general and administrative costs as a percent of sales were 16.7%, a 0.2 percentage point improvement due to the companys continued focus on cost containment, partially offset by a planned increase in marketing expense.
Inventory
Total inventories as of October 27, 2007, were $3.4 billion compared with $3.2 billion at the same time in the prior year. Consolidated inventories on a per-store basis, including the warehouses, at October 27, 2007, were down 1% versus being up 5% at the same time last year. Excluding the impact of foreign currency, inventories were down 3% on a per-store basis. At the Marmaxx division, the total inventory commitment, including the warehouses, stores and merchandise on order, was down versus last year on a per-store basis.
Share Repurchases
During the third quarter, the company spent a total of $300 million to repurchase TJX stock, retiring 10.3 million shares. Year to date, the company has spent a total of $650 million to repurchase TJX stock, retiring 22.7 million shares. The company continues to expect to repurchase $900 million of TJX stock during fiscal 2008, as compared to $557 million of TJX stock that the company repurchased during fiscal 2007.
Discontinued Operations
The company reports results from continuing operations, which exclude the results of operations from 34 discontinued A.J. Wright stores. These stores were closed during the fourth quarter of fiscal 2007 in order to reposition this business. Discontinued operations did not impact earnings per share during the third quarter, as the net income/(loss) from discontinued operations was immaterial.
Fourth Quarter and Fiscal 2008 Outlook
The company has raised its expectation for fourth quarter fiscal 2008 earnings per share from continuing operations to 58 cents to 60 cents, which represents a 14% to 18% increase over 51 cents per share in the prior year. The increase in guidance primarily reflects the benefit of favorable foreign exchange rates. The fiscal 2007 fourth quarter results included a penny per share charge related to the unauthorized computer intrusion(s). Excluding this charge, the companys estimated range for fiscal 2008 fourth quarter earnings per share from continuing operations represents a 12% to 15% increase over prior years adjusted 52 cents. This outlook is based upon estimated consolidated comparable store sales growth of 4%, of which approximately 2% is due to the impact of foreign currency exchange rates.
For the fiscal year ending January 26, 2008, the company now expects earnings per share from continuing operations in the range of $1.58 to $1.60. Excluding charges incurred in the first and second quarters of fiscal 2008 related to the unauthorized computer intrusion(s) of 28 cents per share, the company expects fiscal 2008 earnings per share from continuing operations in the range of $1.86 to $1.88, which represents a 14% to 15% increase over the $1.63 per share from continuing operations in fiscal 2007. This outlook is based upon estimated consolidated comparable store sales growth of 4% for the full year.
Stores by Concept
During the third quarter, the company added a total of 69 stores. TJX increased square footage by 4% over the same period last year.
| Store Locations | Gross Square Feet | |||||||
| Third Quarter | Third Quarter | |||||||
| (in millions) | ||||||||
| Beginning | End | Beginning | End | |||||
| T.J. Maxx | 830 | 851 | 25.0 | 25.7 | ||||
| Marshalls | 764 | 777 | 24.4 | 25.0 | ||||
| Winners | 185 | 190 | 5.4 | 5.5 | ||||
| HomeSense | 70 | 71 | 1.7 | 1.7 | ||||
| HomeGoods | 273 | 287 | 6.7 | 7.1 | ||||
| T.K. Maxx | 212 | 225 | 6.6 | 7.0 | ||||
| A.J. Wright | 128 | 130 | 3.3 | 3.3 | ||||
| Bobs Stores | 34 | 34 | 1.5 | 1.5 | ||||
| TJX | 2,496 | 2,56 | ||||||
