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, versus $.95 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 $.01 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 $.01 per share related to the recent hurricanes (detailed below); exit costs and operating losses of approximately $.015 per share associated with the Company's e-commerce business, and; costs of $.01 per share associated with the resignation agreement between TJX and its former CEO.
Ben Cammarata, Chairman and Acting Chief Executive Officer of The TJX Companies, Inc., stated, "We were disappointed with our sales and earnings results in the third quarter, particularly with the performance of women's sportswear across all divisions. While business was hurt by unseasonably warm weather across much of the U.S., Canada and the U.K., we believe that there are areas of our off-price buying strategies in which better execution would benefit us. That said, we maintained healthy merchandise margins during the quarter, through disciplined inventory management, and expenses were well controlled. As we enter the holiday selling season, we remain focused on profitably growing sales across all of our businesses."
Sales by Business Segment
The Company's comparable store sales and net sales by division, in the third quarter, were as follows:
Third Quarter Third Quarter
Comparable Store Sales Net Sales
($ in millions)
---------------------------------- -----------------------
FY2006 FY2005 FY2006 FY2005
----------- ----------------- ---------------- ----------- -----------
Marmaxx(a) 0% +2% $2,728 $2,672
----------- ----------------- ---------------- ----------- -----------
Winners/ +4%(US$) +10%(US$) $398 $351
HomeSense -4%(C$) +4%(C$)
----------- ----------------- ---------------- ----------- -----------
T.K. Maxx -5%(US$) +15%(US$) $385 $336
-4%(GBP) +4%(GBP)
----------- ----------------- ---------------- ----------- -----------
HomeGoods +1% -1% $292 $249
----------- ----------------- ---------------- ----------- -----------
A.J. Wright +2% +3% $159 $129
----------- ----------------- ---------------- ----------- -----------
Bob's NA NA $80 $81
Stores
----------- ----------------- ---------------- ----------- -----------
----------- ----------------- ---------------- ----------- -----------
TJX 0% +4% $4,042 $3,817
----------- ----------------- ---------------- ----------- -----------
(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 $.01, 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 to $.43 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
------------------ ----------- --------- ----------- ----------
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
------------------ ----------- --------- ----------- ----------
About The TJX Companies, Inc.
The TJX Companies, Inc. is the leading off-price retailer of apparel and home fashions in the U.S. and worldwide. The Company operates 795 T.J. Maxx, 718 Marshalls, 244 HomeGoods, and 152 A.J. Wright stores, as well as 36 Bob's Stores, in the United States. In Canada, the Company operates 172 Winners and 57 HomeSense stores, and in Europe, 197 T.K. Maxx stores. TJX's press releases and financial information are also available on the Internet at www.tjx.com.
Third Quarter Fiscal 2006 Earnings Conference Call
At 11:00 a.m. ET today, Ben Cammarata, Chairman and Acting CEO of TJX, and Carol Meyrowitz, President of TJX, will hold a conference call with stock analysts to discuss third quarter results, operations and business trends for the Company and its divisions. A real-time webcast of the call will be available at www.tjx.com. A replay of the call will also be available at www.tjx.com or by dialing (888) 667-5780 through Tuesday, November 22, 2005.
November 2005 Sales Recording
Additionally, the Company expects to release its November 2005 sales on Thursday, December 1, 2005, at approximately 8:15 a.m. ET. Concurrent with that press release, a recorded message with more detailed information regarding TJX's November sales results, operations and business trends will be available via the Internet at www.tjx.com, or by calling (703) 736-7248 through Thursday, December 8, 2005.
Archived versions of the Company's recorded messages and conference calls are available at www.tjx.com after they are no longer available by telephone.
Forward-looking Statements
SAFE HARBOR STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Various statements made in this release are forward-looking and involve a number of risks and uncertainties. All statements that address activities, events or developments that we intend, expect or believe may occur in the future, including projections of earnings per share and same store sales, are forward-looking statements. The following are some of the factors that could cause actual results to differ materially from the forward-looking statements: our ability to continue successful expansion of our store base; risks of expansion; our ability to successfully implement our opportunistic inventory strategies and to effectively manage our inventories; consumer confidence, demand, spending habits and buying preferences; effects of unseasonable weather; competitive factors; factors affecting availability of store and distribution center locations on suitable terms; factors affecting our recruitment and employment of associates; factors affecting expenses; success of our acquisition and divestiture activities; our ability to successfully implement technologies and systems and protect data; our ability to continue to generate adequate cash flows; general economic conditions, including gasoline prices; potential disruptions due to wars, natural disasters and other events beyond our control; changes in currency and exchange rates; import risks; adverse outcomes for any significant litigation; changes in laws and regulations and accounting rules and principles; effectiveness of internal controls; and other factors that may be described in our filings with the Securities and Exchange Commission. We do not undertake to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied in such statements will not be realized.
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
========== ==========
Diluted earnings per share:
Net income $ .36 $ .40
Cash dividends declared per share $ .06 $ .045
Weighted average shares for diluted
earnings per share computation
(See Note 1) 483,020,770 506,919,926
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
FINANCIAL SUMMARY
(Unaudited)
(Dollars In Thousands Except Per Share Amounts)
Thirty-Nine Weeks Ended
-------------------------
October 29, October 30,
2005 2004
----------- -----------
Net sales $11,341,608 $10,584,374
Cost of sales, including buying and
occupancy costs 8,647,969 8,004,658
Selling, general and administrative
expenses 1,947,014 1,764,212
Interest expense, net 24,072 20,710
----------- -----------
Income before provision for income taxes 722,553 794,794
Provision for income taxes 278,905 307,585
----------- -----------
Net income $ 443,648 $ 487,209
=========== ===========
Diluted earnings per share:
Net income $ .91 $ .95
Cash dividends declared per share $ .18 $ .135
Weighted average shares for diluted
earnings per share computation
(See Note 1) 491,647,820 514,968,366
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED BALANCE SHEETS
(Unaudited)
(In Millions)
October 29, October 30,
2005 2004
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 201.0 $ 143.4
Accounts receivable and other current
assets 401.7 338.5
Merchandise inventories (See Note 2) 2,913.5 2,777.4
-------- --------
Total current assets 3,516.2 3,259.3
-------- --------
Property and capital leases, net of
depreciation 1,988.8 1,739.0
Other assets 117.7 111.9
Goodwill and tradename, net of amortization 183.5 183.6
-------- --------
TOTAL ASSETS $5,806.2 $5,293.8
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 449.7 $ -
Current installments of long-term debt - 100.0
Accounts payable (See Note 2) 1,473.8 1,570.0
Accrued expenses and other current
liabilities 1,083.3 921.7
-------- --------
Total current liabilities 3,006.8 2,591.7
-------- --------
Other long-term liabilities 537.8 403.6
Non-current deferred income taxes, net 154.2 176.3
Long-term debt 576.0 571.7
Shareholders' equity 1,531.4 1,550.5
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $5,806.2 $5,293.8
======== ========
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Millions)
Thirty-Nine Weeks Ended
------------------------
October 29, October 30,
2005 2004
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 443.6 $ 487.2
Depreciation and amortization 232.9 205.1
Deferred income tax provision (4.3) 54.6
(Increase) in accounts receivable and other
current assets (143.4) (75.5)
(Increase) in merchandise inventories (See
Note 2) (562.7) (814.5)
Increase in accounts payable (See Note 2) 198.9 598.7
Increase in accrued expenses and other
liabilities 298.4 201.1
Other, net 43.2 37.9
------ ------
Net cash provided by operating activities 506.6 694.6
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (401.5) (286.4)
Other .5 .5
------ ------
Net cash (used in) investing activities (401.0) (285.9)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings of short-term debt 449.7 -
Principal payments on long-term debt (100.0) (5.0)
Payments for repurchase of common stock (517.3) (490.9)
Cash dividends paid (77.8) (61.7)
Other 31.6 47.4
------ ------
Net cash (used in) financing activities (213.8) (510.2)
------ ------
Effect of exchange rate changes on cash 2.0 (1.5)
------ ------
Net (decrease) in cash and cash equivalents (106.2) (103.0)
Cash and cash equivalents at beginning of
year 307.2 246.4
------ ------
Cash and cash equivalents at end of period $ 201.0 $ 143.4
====== ======
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
SELECTED INFORMATION BY MAJOR BUSINESS SEGMENT
(Unaudited)
(In Thousands)
Thirteen Weeks Ended
-----------------------
October 29, October 30,
Net sales: 2005 2004
----------- -----------
Marmaxx $2,727,759 $2,671,889
Winners and HomeSense 398,081 351,347
T.K. Maxx 385,069 335,828
HomeGoods 292,315 248,738
A.J. Wright 158,582 128,688
Bob's Stores 80,106 80,860
---------- ----------
$4,041,912 $3,817,350
========== ==========
Segment profit or (loss):
Marmaxx $ 251,104 $ 284,329
Winners and HomeSense 52,237 39,002
T.K. Maxx 22,679 29,828
HomeGoods 8,053 11,753
A.J. Wright (2,466) (5,773)
Bob's Stores (6,736) (2,392)
---------- ----------
324,871 356,747
General corporate expense 35,408 22,489
Interest expense, net 10,119 7,134
---------- ----------
Income before provision for income taxes $ 279,344 $ 327,124
========== ==========
Stores in operation end of period:
T.J. Maxx 795 767
Marshalls 718 695
Winners 172 167
HomeGoods 244 206
T.K. Maxx 197 160
A.J. Wright 152 121
HomeSense 57 39
Bob's Stores 36 33
----- -----
Total 2,371 2,188
===== =====
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
SELECTED INFORMATION BY MAJOR BUSINESS SEGMENT
(Unaudited)
(In Thousands)
Thirty-Nine Weeks Ended
------------------------
October 29, October 30,
Net sales: 2005 2004
----------- -----------
Marmaxx $ 7,828,656 $ 7,535,275
Winners and HomeSense 1,028,020 913,538
T.K. Maxx 1,030,315 874,501
HomeGoods 810,058 697,249
A.J. Wright 445,204 357,796
Bob's Stores 199,355 206,015
----------- -----------
$11,341,608 $10,584,374
=========== ===========
Segment profit or (loss):
Marmaxx $ 730,345 $ 758,825
Winners and HomeSense 85,148 84,496
T.K. Maxx 32,822 41,304
HomeGoods 4,976 16,288
A.J. Wright (7,013) (11,965)
Bob's Stores (22,002) (9,373)
----------- -----------
824,276 879,575
General corporate expense 77,651 64,071
Interest expense, net 24,072 20,710
----------- -----------
Income before provision for income taxes $ 722,553 $ 794,794
=========== ===========
Stores in operation end of period:
T.J. Maxx 795 767
Marshalls 718 695
Winners 172 167
HomeGoods 244 206
T.K. Maxx 197 160
A.J. Wright 152 121
HomeSense 57 39
Bob's Stores 36 33
----- -----
Total 2,371 2,188
===== =====
The TJX Companies, Inc. Notes To Consolidated
and Consolidated Subsidiaries Condensed Financial Statements
1. In our fourth quarter reporting period ended January 29, 2005, we
began to calculate diluted earnings per share in accordance with
EITF Issue No. 04-08, "The Effect of Contingently Convertible Debt
on Diluted Earnings per Share." This accounting pronouncement
impacts the company's treatment for earnings per share purposes,
of its $517.5 million zero coupon convertible subordinated notes
issued in February 2001. These notes are convertible into 16.9
million shares of common stock of TJX if the sale price of our
stock reaches certain levels or other contingencies are met. EITF
Issue No. 04-08 requires that shares associated with contingently
convertible debt be included in diluted earnings per share
computations regardless of whether contingent conversion
conditions have been met. EITF Issue No. 04-08 also requires that
diluted earnings per share for all prior periods be restated to
reflect this change. As a result, diluted earnings per share
reflect the assumed conversion of our convertible subordinated
notes. This change reduces diluted earnings per share by $.01 per
share for the third quarters ended October 29, 2005 and October
30, 2004 and by $.02 and $.03 for the nine months ended October
29, 2005 and October 30, 2004, respectively.
2. Effective with the third quarter ended October 30, 2004, we began
to accrue for inventory purchase obligations at the time the
inventory is shipped rather than when received and accepted by
TJX. As a result, at October 29, 2005 and at October 30, 2004 we
recorded increases of $293 million and $202 million, respectively,
to merchandise inventory on our balance sheet, to reflect this
in-transit inventory, as well as an equal increase to accounts
payable at those dates. Periods prior to October, 2004 have not
been adjusted for this change. This accrual for inventory in
transit affects only the reported levels of inventory and accounts
payable on the balance sheet, and has no impact on our operating
results, cash flows, liquidity or shareholders' equity.
3. During the nine months ended October 29, 2005, TJX repurchased 22.2
million shares of its common stock at a cost of $514.7 million.
During the third quarter ended October 29, 2005, TJX repurchased
5.8 million shares of its common stock, at a cost of $125.0
million. Through October 29, 2005, under its current $1 billion
multi-year stock repurchase program, TJX has repurchased 39.9
million shares of its common stock at a cost of $921.3 million. In
October, 2005, TJX announced that its Board of Directors had
approved a new multi-year program for the repurchase of an
additional $1 billion of TJX common stock.
