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TJX Looks for Deals and Real Estate

Off-price giant moving aggressively despite tamed Q4 outlook.

The TJX Cos. Inc. reported lower third-quarter profits and reduced full-year projections even as the company said Tuesday it would aggressively pursue merchandise and store locations in the weakened retail climate.

This story first appeared in the November 12, 2008 issue of WWD.  Subscribe Today.

TJX buys excess inventory from vendors and other retailers and sells it at a discount. And just as the company takes advantage of the excess inventory in the industry, Carol Meyrowitz, president and chief executive officer, said TJX would also use its financial might to buy real estate that opens up as other businesses fail.

But the hard times, which have stores across the price spectrum moving to clear goods earlier, are also weighing on the Framingham, Mass.-based firm. Net income for the quarter fell 5.5 percent to $235.8 million from $249.5 million a year ago and earnings per diluted share were flat at 54 cents because of fewer shares outstanding. The discontinued Bob’s Store division, which TJX sold to Versa Capital Management and Crystal Capital in August, recorded aftertax losses of $18.3 million, or 4 cents a share, for the quarter ended Oct. 25.

TJX’s revenues inched up 2.2 percent to $4.76 billion from $4.66 billion.

The off-price retailer cut its earnings guidance for the full year to $2.07 to $2.11 a share from continuing operations. This compared with August projections of $2.30 to $2.35 and year-ago EPS of $1.68.

“We hold our own and do better than most in tough times,” Meyrowitz said on a conference call. “We are one of the most flexible business models in the world and we are seeing the benefits of that flexibility now.”

The off-price model lets TJX turn goods quickly during the holidays.

“Our ability to go in, in the month of December, and buy goods for Christmas puts us at such an incredible advantage and we intend to take this opportunity to be even more aggressive than we have before,” Meyrowitz said. “We are seeing some very nice high-end goods at crazy prices, so we’re pretty excited about it.”

Not all retailers have proved as resilient as TJX Cos., corporate parent to TJ Maxx, Marshalls, HomeGoods, A.J. Wright and nameplates abroad. Circuit City, Mervyns, Steve & Barry’s and Boscov’s are just some of the chains to file for bankruptcy or liquidate this year, and even stronger firms such as J.C. Penney Co. Inc. have scaled back on their plans to open stores.

All of this plus a solid financial footing adds up to a real estate opportunity for TJX.

“We are taking full advantage of the exceptional real estate deals out there,” Meyrowitz said. “There is a great deal of shaking out going on in the retail landscape, which has already occurred and which we expect to continue. TJX is here for the long term and we plan to take full advantage of the opportunities presented to us.”