The TJX Companies, Inc. saw net sales from continuing operations for the first quarter increase 6% to $4.1 billion, while consolidated comparable store sales increased 2% over last year. Income from continuing operations for the first quarter was $162 million, and diluted earnings per share from continuing operations were 34 cents. First quarter earnings include an after-tax charge of $12 million, or 3 cents per share with respect to the previously announced unauthorized computer intrusion(s). Excluding this item, adjusted diluted earnings per share from continuing operations for the first quarter were 37 cents versus 34 cents for the prior year, a 9% increase, and in line with the company's plan.
Carol Meyrowitz, president and CEO of The TJX Companies, Inc., stated, “Our first quarter earnings results from continuing operations were squarely within our expectations. We achieved these results despite comparable store sales that were slightly below plan, which we attribute to the unseasonably cold and wet weather in many U.S. regions during March and early April. Our first quarter results highlight the power of our off-price model in that, through solidly executing our off-price fundamentals and by leveraging expenses, we achieved our bottom-line goals despite falling just short of our sales target. Business trends were strong as we exited the quarter, and we are positioned extremely well to take advantage of the abundant off-price buying opportunities in spring apparel and other categories currently in the marketplace. Further, we have many merchandise initiatives underway to drive sales as we move forward.”
Sales by Business Segment
The company's comparable store sales and net sales by division, in the first quarter, were as follows:
First Quarter First Quarter
Comparable Store Net Sales ($ in
Sales millions)
-------------------- ---------------
FY2008 FY2007 FY2008 FY2007
--------------------------------- ---------- --------- ------- -------
Marmaxx(a) 0% +1% $2,729 $2,647
--------------------------------- ---- ----- --- ----- ------- -------
Winners/HomeSense +2% (US$) +8% (US$) $395 $369
+3% (C$) +1% (C$)
--------------------------------- ---- ----- --- ----- ------- -------
T.K. Maxx +21% (US$) -3% (US$) $443 $349
+8% (GBP) +5% (GBP)
--------------------------------- ---- ----- --- ----- ------- -------
HomeGoods +3% +3% $333 $306
--------------------------------- ---- ----- --- ----- ------- -------
A.J. Wright +1% +3% $144 $137
--------------------------------- ---- ----- --- ----- ------- -------
Bob's Stores -1% +2% $64 $63
--------------------------------- ---- ----- --- ----- ------- -------
--------------------------------- ---- ----- --- ----- ------- -------
TJX +2% +1% $4,108 $3,871
--------------------------------- ---- ----- --- ----- ------- -------
(a)Combination of T.J. Maxx and Marshalls
Impact of Computer Intrusion Charges
On January 17, 2007, TJX announced that it had suffered an unauthorized intrusion(s) into portions of its computer systems that process and store information related to customer transactions. In the first quarter of fiscal 2008, the company recorded an after-tax charge of approximately $12 million, or 3 cents per share, for costs incurred during the first quarter, which includes costs incurred to investigate and contain the intrusion, enhance computer security and systems, and communicate with customers, as well as technical, legal, and other fees.
In the second quarter, the company expects to continue to incur these types of costs related to the intrusion(s), which the company estimates will total 2 cents to 3 cents per share. Beyond these costs, TJX does not yet have enough information to reasonably estimate the losses it may incur arising from this intrusion, including exposure to payment card companies and banks, exposure in various legal proceedings that are pending or may arise, and related fees and expenses, and other potential liabilities and other costs and expenses. The company will record known losses when they become both probable and reasonably estimable.
Margins
During the first quarter of fiscal 2008, the company's consolidated pretax profit margin from continuing operations was 6.4%. Excluding the intrusion charge, the consolidated pretax profit margin from continuing operations was 6.9%, a 0.2 percentage point improvement over the prior year. The gross profit margin from continuing operations for the fiscal 2008 first quarter was 24.1%, down 0.4 percentage points versus the prior year primarily due to the impact of slightly higher markdowns on merchandise margins. Selling, general and administrative costs as a percent of sales was 17.3%, a 0.4 percentage point improvement over the prior year primarily due to the company's cost containment focus.
Inventory
Total inventories as of April 28, 2007, were $2.8 billion compared with $2.6 billion at the same time in the prior year. Consolidated inventories on a per-store basis, including the warehouses, at April 28, 2007, were up 7% versus being down 7% at the same time last year. 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. The company remains very comfortable with its inventory levels and the liquidity within its inventories, which gives it the ability to take advantage of the plentiful buying opportunities in the marketplace.
Share Repurchases
On March 28, 2007, the company announced that it had entered into a plan to repurchase shares of its common stock pursuant to 10b5-1 of the Securities Exchange Act of 1934, as amended. The company's share buyback activity had been temporarily suspended since December 2006 as a result of the discovery of the above-mentioned computer intrusion(s). Under this 10b5-1plan, the company resumed its share repurchase activity at the end of the first quarter, spending $6 million in repurchases of TJX stock. The company continues to expect to repurchase up to $900 million of TJX stock during fiscal 2008, significantly more than the $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 first quarter, as the net income/(loss) from discontinued operations was immaterial.
Second Quarter and Fiscal 2008 Outlook
For the second quarter of fiscal 2008, the company expects earnings per share from continuing operations in the range of 29 cents to 32 cents, which includes an estimated 2 cents to 3 cents per share for costs related to the computer intrusion(s). Excluding these costs, the company expects earnings per share from continuing operations in the range of 32 cents to 34 cents which represents a 10% to 17% increase over 29 cents per share in the prior year. This outlook is also based upon estimated consolidated comparable store sales growth of approximately 3% to 4%.
For the fiscal year ending January 26, 2008, the company continues to expect earnings per share from continuing operations excluding costs related to the intrusion(s) in the range of $1.80 to $1.85, which represents a 10% to 13% increase over the adjusted $1.63 per share from continuing operations in fiscal 2007. This range is based upon estimated consolidated comparable store sales growth of approximately 3%. The company is not yet able to estimate fees, costs and expenses related to the intrusion(s) for the third and fourth quarters of fiscal 2008. Actual and estimated intrusion costs for the first half of fiscal 2008 would reduce estimated earnings per share from continuing operations by 5 cents to 6 cents per share.
The company's second quarter and fiscal 2008 outlook do not include any estimates for potential liabilities or losses arising from the computer intrusion(s).
Stores by Concept
During the first quarter, the company added a total of 25 stores. TJX increased square footage by 4% over the same period last year.
Store Locations Gross Square Feet
First Quarter First Quarter
(in millions)
---------------- -----------------
Beginning End Beginning End
----------------------------------- --------- ------ ----------- -----
T.J. Maxx 821 830 24.8 25.0
----------------------------------- --------- ------ ----------- -----
Marshalls 748 763 24.2 24.4
----------------------------------- --------- ------ ----------- -----
Winners 184 185 5.4 5.4
----------------------------------- --------- ------ ----------- -----
HomeSense 68 69 1.6 1.7
----------------------------------- --------- ------ ----------- -----
HomeGoods 270 271 6.7 6.7
----------------------------------- --------- ------ ----------- -----
T.K. Maxx 210 211 6.4 6.4
----------------------------------- --------- ------ ----------- -----
A.J. Wright 129 127 3.3 3.3
----------------------------------- --------- ------ ----------- -----
Bob's Stores 36 35 1.6 1.6
----------------------------------- --------- ------ ----------- -----
----------------------------------- --------- ------ ----------- -----
TJX 2,466 2,491 74.0 74.5
----------------------------------- --------- ------ ----------- -----
The TJX Companies, Inc. and Consolidated Subsidiaries
Financial Summary
(Unaudited)
(Dollars In Thousands Except Per Share Amounts)
Thirteen Weeks Ended
---------------------------
April 28, April 29,
2007 2006
------------- -------------
Net sales $ 4,108,081 $ 3,871,256
Cost of sales, including buying and
occupancy costs 3,117,215 2,922,849
Selling, general and administrative
expenses 709,277 684,166
Costs related to computer intrusion 20,004 -
Interest (income) expense, net (2,076) 3,759
------------- -------------
Income from continuing operations before
provision for income taxes 263,661 260,482
Provision for income taxes 101,553 96,620
------------- -------------
Income from continuing operations 162,108 163,862
Loss from discontinued operations, net of
income taxes - (53)
------------- -------------
Net income $ 162,108 $ 163,809
============= =============
Diluted earnings per share:
Income from continuing operations $ 0.34 $ 0.34
Net income $ 0.34 $ 0.34
Cash dividends declared per share $ 0.09 $ 0.07
Weighted average shares for diluted
earnings per share computation 479,025,606 484,947,472
The TJX Companies, Inc. and Consolidated Subsidiaries
Selected Information by Major Business Segment
(Unaudited)
(In Thousands)
Thirteen Weeks Ended
-----------------------
April 28, April 29,
Net sales: 2007 2006
----------- -----------
Marmaxx $2,729,495 $2,646,702
Winners and HomeSense 394,646 368,810
T.K. Maxx 442,619 349,320
HomeGoods 333,156 305,832
A.J. Wright 144,157 137,254
Bob's Stores 64,008 63,338
----------- -----------
$4,108,081 $3,871,256
=========== ===========
Segment profit or (loss):
Marmaxx $ 272,606 $ 269,519
Winners and HomeSense 26,801 28,086
T.K. Maxx 4,616 (201)
HomeGoods 10,209 8,534
A.J. Wright (3,033) (2,829)
Bob's Stores (6,569) (6,229)
----------- -----------
304,630 296,880
General corporate expense 23,041 32,639
Costs related to computer intrusion 20,004 -
Interest (income) expense, net (2,076) 3,759
----------- -----------
Income from continuing operations
before provision for income taxes $ 263,661 $ 260,482
=========== ===========
