NEW YORK — Weakness at the Marmaxx unit helped push TJX Cos. Inc. fourth quarter profits into decline, though 2003 marked improvement overall for the nation’s largest off-pricer.
This story first appeared in the February 27, 2003 issue of WWD. Subscribe Today.
Net income for the quarter slid 0.7 percent to $154.3 million, or 29 cents a diluted share, from $155.3 million, or 28 cents a year ago.
Wall Street was looking for the Framingham, Mass.-based firm’s profits to rise a penny more to 30 cents a share. Investors traded shares of the firm down 4 cents, or 0.3 percent, to close at $16.05 on the New York Stock Exchange Wednesday.
Sales for the 13 weeks ended January 25 increased 9.2 percent to $3.51 billion from $3.21 billion a year ago. Comparable-store sales were flat.
On its quarterly conference call, TJX faced what’s becoming the question du jour this earnings season: How much has price deflation pressured sales? Target Corp. last week reported it had taken price reductions of more than $1 billion in its discount stores last year — an amount sufficient to pump up its comparable-store increase from the actual mark of 2.2 percent to a more robust 5.2 percent increase. Federated Department Stores had no answer when the question was put to it this week. TJX president and chief executive Edmond English described deflation as “a concern,” but one being held at bay for now.
“What we try to do is to keep moving up the mix and so our average ticket hasn’t gone down as much as you might have expected,” he told analysts on the firm’s conference call Wednesday. “What we try to do is to replace a moderate item with a better item at the same price.
“The fact that the buyers can buy as close as they can to need and we have so much liquidity and so much open-to-buy, enables them to react to the market and buy the merchandise at a level where they can sell it at the same great value and not give up margin. And that’s the trick to buying close to the need.”
The Marmaxx division, which includes Marshalls and T.J. Maxx, saw operating profits, pressured by increases in insurance and benefit costs, fall 15.8 percent to $208 million for the quarter while sales inched up 4.1 percent to $2.7 billion. The division’s comps were off 1 percent.
“Although we had higher expectations for Marmaxx in 2002, inventories were very well managed, which enabled us to respond quickly to opportunities in the marketplace and changes in the competitive landscape,” said English in a statement. “Thus, merchandising margins at Marmaxx continued to hold strong, pointing to the fundamental strength of this business.”
Operating profits at the firm’s Winners Canadian stores rose 42.3 percent to $26.6 million on a 19.7 percent uptick in sales to $235.7 million. In the U.K. and Ireland, the T.K. Maxx division drove its income up 323.2 percent to $27.8 million on a 32.4 percent rise in sales to $247.3 million.
A.J. Wright, the firm’s smallest division, fared the worst with losses more than doubling to $1.7 million on a 69.6 percent increase in sales to $101.3 million.