The TJX Companies, Inc., reported sales for the 13-week fourth quarter ended Jan 30, 2010 were $5.9 billion, a 10% increase over the 14-week prior-year period.
Consolidated comparable store sales increased 12% over the prior year
on a 13-week comparable basis.
Net income from continuing operations
was $395 million, and diluted earnings per share from continuing
operations were $.94 compared with $.58 in the prior year. A number of
items impact comparability of earnings per share. Excluding the items
detailed under “Items Impacting Comparability” (see below), adjusted
diluted earnings per share from continuing operations for the fourth
quarter increased 104% over the adjusted $.46 in the prior year.
Net sales for the 52-week fiscal year were $20.3 billion, a 7% increase over the 53-week fiscal period last year. Consolidated comparable store sales increased 6% on a 52-week comparable basis. Net income from continuing operations for the 52-week fiscal year was $1.2 billion, and diluted earnings per share from continuing operations were $2.84 compared with $2.08 last year. A number of items impact the comparability of earnings per share. Excluding the items detailed under “Items Impacting Comparability”,adjusted diluted earnings per share from continuing operations for the fiscal year increased 48% over the adjusted $1.92 in the prior year.
Carol Meyrowitz, President and Chief Executive Officer of The TJX Companies, Inc., stated, “In 2009, one of the worst economic periods that the U.S., Canada, and Europe have seen, TJX generated superior earnings growth, with every division delivering top- and bottom-line results well above plan. Sales growth was driven by a large increase in transactions as we attracted new customers from all income levels with our compelling values. We aggressively managed our inventories which, combined with cost reduction programs, helped fuel strong increases in profitability. Additionally, we took advantage of opportunities the environment presented, opening more new stores than planned and thousands of new vendor doors. We enter 2010 very confident in our future, with a continued focus on driving sales and reducing inventory levels and costs. We believe value will remain key for consumers and are making significant investments in our stores to enhance the shopping experience for our customers. Our core businesses and growth vehicles are performing well, and we have enormous store growth potential. We begin a new year with tremendous momentum and great confidence in our ability to continue to grow our business profitably in the future.”
Increased Investment in Growth and Planned Increase in Cash Distribution to Shareholders
The Company also announced today its plans to increase its investment in growth and its distribution of excess cash to shareholders. For Fiscal 2011, the Company expects to increase its capital spending with a budget of approximately $750 million. Further, for Fiscal 2011, the Company expects to repurchase $900 million to $1 billion of TJX stock. With approximately $795 million remaining at year end under the Company’s existing $1 billion stock repurchase program, authorized in September 2009, the Company’s Board of Directors has approved a new stock repurchase program that authorizes the repurchase of up to an additional $1 billion of TJX common stock from time to time. This new program would represent approximately 6% of the Company’s outstanding shares at current prices. The new stock repurchase program marks the 11th program approved by the Board since 1997. Over this period, the Company has spent $7.5 billion on the repurchase of TJX stock, buying back 393 million shares. In Fiscal 2010, the Company spent a total of $950 million to repurchase TJX stock, retiring 27 million shares. During the fourth quarter, the Company spent a total of $409 million in repurchases of TJX stock, retiring 10.9 million shares.
The Company also intends to increase its regular quarterly dividend on its common stock to $.15 per share, effective with the dividend to be declared in April and payable in June. This increase is subject to the approval of the Company’s Board of Directors and would represent a 25% increase in the current per share amount and mark the 14th consecutive year that the Company has raised the dividend.
Meyrowitz commented, “Our operations generate an enormous amount of cash and we are carefully balancing the deployment of that cash between investments in the growth of our business and distributions to our shareholders. Our plans to increase capital spending in 2010 will allow us to accelerate annual square footage growth from 3% in 2009 to 5% in 2010, as well as make significant investments to enhance our stores and provide infrastructure for future growth. Simultaneously, we plan to increase the level of distribution of excess cash to our shareholders through our share repurchase and dividend programs. The new stock repurchase authorization and expected dividend increase underscore our confidence in our ability to continue to deliver significant growth in sales, earnings and cash flow as well as our commitment to distributing excess cash to shareholders while investing in the growth of our businesses and maintaining financial flexibility.”
Sales by Business Segment
The Company’s comparable store sales and net sales by division for Fiscal 2010 were as follows:
Full Year Full Year
Comparable Store Sales* Net Sales ($ in millions)**
FY2010 FY2009 FY2010 FY2009
(52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks)
In the U.S.:
Marmaxx+ +7% 0% $13,271 $12,362
HomeGoods +9% -3% $1,794 $1,578
A.J. Wright +9% +4% $780 $678
Outside the U.S.:
TJX Canada +2% +3% $2,168 $2,139
TJX Europe +5% +4% $2,275 $2,242
TJX +6% +1% $20,288 $19,000
Fourth Quarter Fourth Quarter
Comparable Store Sales* Net Sales ($ in millions)**
FY2010 FY2009 FY2010 FY2009
(13 Weeks) (13 Weeks) (13 Weeks) (14 Weeks)
In the U.S.:
Marmaxx+ +13% -3% $3,807 $3,544
HomeGoods +16% -7% $538 $482
A.J. Wright +8% -2% $221 $199
Outside the U.S.:
TJX Canada +7% -1% $637 $535
TJX Europe +6% +3% $740 $619
TJX +12% -2% $5,942 $5,380
In addition to its U.S. businesses, the Company operates stores in Canada, the U.K., Ireland, Germany, and Poland. 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 impacts can be material if rates change significantly versus prior year, as they did during Fiscal 2010.
Additionally, the Company routinely enters into inventory-related hedging instruments to mitigate the impact of foreign exchange on merchandise margins when the Company’s international businesses purchase goods from U.S. sources. For accounting 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.
The movement in foreign currency exchange rates had a 2 percentage-point negative impact on consolidated net sales in Fiscal 2010 and a positive impact on net sales of 3 percentage points in the fourth quarter of Fiscal 2010.
Items Impacting Comparability
Certain items that impact the comparability of full year and fourth quarter to prior year are detailed in the tables below.
Full Year
FY2010 FY2009
(52 Weeks) (53 Weeks)
EPS from continuing operations (reported basis) $2.84 $2.08
Adjusted for non-operating items:
FIN 48 Tax Adjustment – (.03)
Computer Intrusion Provision – (.04)
Impact of extra week in fiscal calendar – (.09)
Adjusted EPS from continuing operations $2.84 $1.92
Excluding the above items impacting comparability, Fiscal 2010 diluted earnings per share of $2.84 increased 48% over the adjusted $1.92 per share last year. Foreign currency exchange rates also impacted the comparability of full year earnings per share. The overall net impact of foreign currency exchange rates reduced Fiscal 2010 earnings per share by $.01, compared with a $.01 per share benefit last year.
Fourth Quarter
FY2010 FY2009
(13 Weeks) (14 Weeks)
EPS from continuing operations (reported basis) $.94 $.58
Adjusted for non-operating items:
Computer Intrusion Provision – (.03)
Impact of extra week in fiscal calendar – (.09)
Adjusted EPS from continuing operations $.94 $.46
Excluding the above items impacting comparability, fourth quarter Fiscal 2010 diluted earnings per share of $.94 increased 104% over the adjusted $.46 per share last year. Additionally, the overall net impact of foreign currency exchange rates on fourth quarter Fiscal 2010 earnings per share was a $.03 per share benefit, compared to a negative $.04 per share impact in the prior year.
A table detailing the impact of foreign currency on TJX pretax earnings and margins, as well as those of its international businesses, is on the Company’s website, www.tjx.com. In Fiscal 2010, foreign currency impacted the year-over-year growth in segment profit and segment profit margins at the Company’s TJX Europe and TJX Canada businesses. The Company encourages investors to refer to its website for details on the differences between results in U.S. dollars and local currency for these businesses.
Margins
For the full year Fiscal 2010, the Company’s consolidated pretax profit margin from continuing operations was 9.6%, up 2.0 percentage points over the prior year. The increase in pretax profit margin was driven by strong merchandise margins combined with buying and occupancy and selling, general and administrative expense leverage. Year-over-year comparisons were adversely impacted by the 53rd week in last year’s fiscal calendar as well as a prior year reduction to the computer intrusion(s) reserve, which combined, benefited last year’s pretax margins by approximately 0.4 percentage points.
The gross profit margin for Fiscal 2010 was 26.2%, 2.1 percentage points above the prior year primarily due to very strong merchandise margins as well as buying and occupancy expense leverage, partially offset by the benefit to last year’s gross profit margin from the 53rd week. Selling, general and administrative costs as a percent of sales were 16.4%, a 0.1 percentage point improvement over prior year, with the benefits of cost reduction programs and expense leverage partially offset by a 0.5 percentage point increase in the Company’s expenses for performance-based incentive compensation, a broad-based program that goes very deep into the organization. Excluding this increase in performance-based incentive compensation, selling, general and administrative costs as a percent of sales improved 0.6 percentage points compared with prior year.
For the fourth quarter of Fiscal 2010, the Company’s consolidated pretax profit margin from continuing operations was 10.7%, up 3.3 percentage points over the prior year. This increase was driven by very strong merchandise margins and expense leverage, partially offset by the adverse impact of higher performance-based incentive compensation expense. Year-over-year comparisons were adversely impacted by a prior year reduction to the computer intrusion(s) reserve, which benefited last year’s pretax margins by 0.4 percentage points.
The gross profit margin for the fourth quarter was 26.6%, a 4.1 percentage point increase over the prior year. The improvement was driven by very strong merchandise margins combined with buying and occupancy expense leverage. The benefit of the 14th week to last year’s fourth quarter gross profit margin was essentially offset by the negative impact from mark-to-market adjustments on the Company’s inventory-related hedges during the same period.
Selling, general and administrative costs as a percent of sales were 15.8% in the fourth quarter, an increase of 0.3 percentage points over the prior year, with the positive impact of cost reduction initiatives and expense leverage more than offset by higher performance-based incentive compensation expense and contributions to The TJX Foundation, which combined, had an adverse 1.1 percentage point impact. Excluding these last two items, selling, general and administrative costs as a percent of sales improved 0.8 percentage points compared with prior year.
Inventory
Total inventories as of January 30, 2010, were $2.5 billion, compared with $2.6 billion at the end of the prior fiscal year. Consolidated inventories on a per-store basis, including the warehouses, at January 30, 2010, were down 10% versus being down 6% at the prior fiscal year end. At the Marmaxx division, the total inventory commitment, including the warehouses, stores and merchandise on order, was essentially flat on a per-store basis versus last year’s decrease. The Company entered the new year with very clean inventories and is well positioned to take advantage of plentiful buying opportunities in the marketplace.
Full Year and First Quarter Fiscal 2011 Outlook
For the fiscal year ending January 29, 2011, the Company expects diluted earnings per share from continuing operations to be in the range of $3.06 to $3.20, which represents an 8% to 13% increase over the $2.84 in earnings per share from continuing operations in Fiscal 2010. This range is based upon estimated consolidated comparable store sales growth of 1% to 2%. Additionally, the Company is continuing its aggressive cost control initiatives, which it expects will reduce expenses by at least $50 to $75 million in Fiscal 2011 and is reflected in the guidance.
For the first quarter of Fiscal 2011, the Company expects diluted earnings per share from continuing operations in the range of $.60 to $.65, which represents a 22% to 33% increase over $.49 per share last year. This outlook is based upon estimated consolidated comparable store sales growth of 3% to 5%.
The Company’s earnings guidance assumes that currency exchange rates will remain where they are today.
Stores by Concept
During the fiscal year ended January 30, 2010, the Company added a total of 91 stores, net of closings, to end the year with 2,743 stores, and increased square footage by 3% over the same period last year.
