Cos., parent of the T.J. Maxx and Marshalls stores, reported an 8% increase in
fiscal first-quarter profits to $209.2 million, or 49 cents a share, from $193.8
million or 43 cents, a year ago, thanks to increased shopping traffic and some
cost cutting. Sales edged up 1% to $4.35 billion from $4.3 billion. TJX also now
plans to open 80 to 85 stores this year, about 20 more than previously planned.
However,
TJX guided analysts to adjust their second-quarter earnings projections to
reflect a 10% decline on the low end and a penny increase at the high end.
Prior years first
quarter results included a $.02 benefit from FIN 48 tax adjustments. Excluding
last years tax benefit, first quarter diluted earnings per share increased 17%
over the adjusted 42 cents a share for the prior year.
Carol Meyrowitz,
president and chief executive officer of The TJX Companies, Inc., stated, “We
are pleased with our first quarter results, which were the strongest in our
history and achieved despite the economic downturn. Customer traffic increased
significantly across virtually all of our divisions, as customers responded to
our extreme values on ever-fresh assortments of great fashions and great
brands. Our strategies of planning comparable store sales conservatively,
running our business with lean inventories, and aggressively managing expenses
drove strong bottom-line results. While we are pleased with our above-plan
start to the year, we remain cautious in our near-term outlook and are
maintaining our conservative approach, as the economic environment remains
uncertain. At the same time, however, we are taking advantage of this
environment to attract new customers, open new vendor doors, and take advantage
of real estate opportunities. Additionally, we are encouraged by the strong
performance of our younger and newer concepts. A.J. Wright in the
and HomeSense in the
continue to outperform our expectations despite widespread consumer weakness,
which speaks to the strength of our value proposition and gives us confidence
in our long-term vision to grow TJX as a global, off-price value retailer.”
Sales by Business Segment
The companys comparable store sales and net sales by division, in the
first quarter, were as follows:
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Comparable Store Sales |
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In Canada: |
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In Europe: |
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Combination of T.J. Maxx and Marshalls. *Sales in Canada |
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Impact of Foreign Currency Exchange Rates
In addition to its
Changes in foreign exchange rates affect the translation of the sales and
earnings of these businesses into U.S. dollars for financial reporting
purposes. These effects can be material if rates change significantly versus
prior year, as they did during the first quarter of Fiscal 2010.
Additionally, the company
routinely enters into inventory-related hedging instruments to mitigate the
impact of foreign exchange on merchandise margins when the companys
international divisions purchase goods from
purposes, there is a mark-to-market adjustment on the hedging instruments at
the end of each quarter. While these adjustments occur every quarter, they are
of much greater magnitude when there is significant volatility in currency
exchange rates.
A table detailing the
impact of foreign currency on TJX pretax earnings and margins, as well as on
the segment profit and segment profit margins of the companys T.K. Maxx and
Winners businesses, is on the companys website, www.tjx.com.
In the first quarter of
Fiscal 2010, the movement in foreign currency exchange rates had a six
percentage-point negative impact on consolidated net sales. As previously
announced, the company began reporting comparable store sales on a constant
currency basis only (which assumes currency exchange rates remained unchanged
from the prior year) at the beginning of the Fiscal 2010 year, which it
believes more closely reflects its operating performance and is consistent with
the reporting practices of other multi-national retailers.
Items Impacting Comparability
The prior years first
quarter results included a $.02 per share benefit from FIN 48 tax adjustments.
Excluding this tax benefit, Fiscal 2010 first quarter diluted earnings per
share of $.49 increased 17% over the adjusted $.42 for the prior years first
quarter.
Foreign currency rates
and one-time costs related to the companys cost reduction initiatives also
impacted the comparability of its results. Overall, the combined impact of
foreign currency translation as well as mark-to-market adjustments on the companys
inventory-related hedges reduced Fiscal 2010 first quarter earnings per share
by $.04, compared to a $.01 reduction to the prior years earnings per share.
One-time costs related to the companys cost reduction initiatives reduced the
current years first quarter earnings per share by $.01.
Margins
For the first quarter of
Fiscal 2010, the companys consolidated pretax profit margin from continuing
operations was 7.8%, up 0.9 percentage points over the prior year. This
improvement was due to strong merchandise margins and expense control. The
gross profit margin for the Fiscal 2010 first quarter was 24.8%, up 90 basis points
above the prior year primarily due to strong merchandise margins. Selling,
general and administrative costs as a percent of sales were 16.9%, flat to the
prior year, despite one-time expenses related to the companys cost reduction
initiatives.
Inventory
Total inventories as of
May 2, 2009, were $2.8 billion compared with $2.9 billion at the end of the
prior years first quarter. Consolidated inventories on a per-store basis,
including the warehouses, at May 2, 2009, were down 4% versus being down 2% at
the end of the first quarter 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 position it very well entering the second quarter to continue to buy
close to need and flow fresh merchandise assortments to its stores.
Share Repurchases
During the first quarter,
the company spent a total of $43 million in repurchases of TJX stock, retiring
1.6 million shares. The company also completed its previously announced debt
offering, raising $374.3 million to redeem its zero coupon convertible
subordinated notes. Prior to their redemption as of May 5, 2009, substantially
all of these notes were converted into 15.1 million shares of TJX stock by the
note holders. The company expects to use the proceeds from its debt offering to
repurchase all or a portion of these shares. This share repurchase is
incremental to its previously announced plan to repurchase approximately $250
million of TJX stock. As a result, the company now expects to repurchase
approximately $625 million of TJX stock in Fiscal 2010. The company may adjust
the amount of this spending up or down depending on the economic environment.
Second Quarter Fiscal 2010 Outlook
For the second quarter of
Fiscal 2010, the company expects earnings per share in the range of $.43 to
$.49 compared with $.48 in earnings per share from continuing operations in the
prior year. This range is based upon estimated consolidated comparable store
sales growth of approximately flat to minus 2%, which reflects the companys expectations
that the economic and retail environments will continue to be challenging.
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