This is a summary of the third quarter fiscal 2009 earnings call conducted by TJX Companies, Inc. (TJX) on November 11, 2008.
Management:
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Senior VP, Investor and Public Relations: Sherry Lang
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President and CEO: Carol M. Meyrowitz
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Chief Financial Officer: Nirmal K. Tripathy
Key Investor Issues:
- Net income from continuing operations was $254 million, and diluted EPS from continuing operations were $0.58, compared with $0.54 last year.
- Net sales for the third quarter of 2009 increased 2% to $4.8 billion, and consolidated comparable store sales decreased 1% from last year.
- For the first nine months of 2009, net sales were $13.6 billion, a 5% increase over last year, and year-to-date consolidated same-store sales rose 2% over the prior year.
Third Quarter Highlights:
Net sales for the third quarter increased to $4.8 billion, 2% above last year.
Consolidated comp store sales decreased 1% versus last year’s 3% increase on a reported basis. This year’s results include a 2% negative impact of foreign currency exchange rates, which was not contemplated in the company’s plans. Excluding the foreign exchange impact from both years, consolidated comp store sales were up 1% for the third quarter this year versus the 1% increase last year.
Fully diluted earnings per share from continuing operations was $0.58 in the third quarter on a reported basis.
The overall net impact from foreign exchange was a $0.03 per share benefit. Excluding the net impact of FX and the reduction in the computer intrusion reserve, adjusted diluted earnings per share from continuing operations was $0.54.
Overall pre-tax profit margins on a reported basis was 8.8%, excluding the impact of inventory-related hedge adjustments from this year and last year and the intrusion-related reserve reduction, third quarter pre-tax margin declined by just under 1%, primarily due to deleverage from the below-planned comp.
Gross margin on a reported basis was above last year.
While inventory-related hedge adjustments positively impacted gross margins, it is important to note that merchandise margins increased 20 basis points over last year’s very strong margins, excluding fuel cost increases.
SG&A expense was 17.2%, impacted by the deleveraging of the below-planned comp, as well as certain favorable expense items last year that did not recur this year.
In terms of inventories, at the end of the third quarter, consolidated inventories, on a per-store basis, was down 1%, excluding foreign currency exchange.
Consolidated comp sales increased 2% for the nine months over 3% last year, with a neutral foreign exchange impact.
EPS from continuing operations for the first nine months was $1.50. Excluding items, adjusted EPS from continuing operations for the first nine months was $1.43, up 8% over last year’s adjusted $1.32.
At the Marmaxx group, comp sales were flat in the third quarter, which was below plan.
Segment profit was $279.0 million and segment profit was 9.1%, both below prior year and our plan. This was due to deleverage on the comp, a slightly lower average ticket, as well as certain favorable true-up last year.
Merchandise margins held firm to strong margins last year.
While Marmaxx comp sales were below plan, by bringing inventory levels down and focusing on inventory dollars in the right categories, this division held a flat comp in a difficult environment with unseasonably warm weather for a good part of the quarter.
Shoes and accessories continued the strong trends the company has been seeing with shoes comping up 4% and accessories comping up 5% versus strong increases last year. Juniors are starting to show positive results as the company continues to roll out the cube and marginals, which is approximately 330 stores today.
Home fashions continue to comp negatively, but the company has strategically brought down inventories and is seeing higher inventory turn.
