The TJX Cos. Inc. on Wednesday reported a decline in fourth-quarter profits but finished the period ahead of Wall Street’s expectations.
This story first appeared in the February 26, 2009 issue of WWD. Subscribe Today.
Net income at the Framingham, Mass.-based off-pricer fell 16.8 percent in the three months ended Jan. 31 to $250.7 million, or 58 cents a diluted share, from $301.1 million, or 66 cents, last year. Sales in the three months declined less than 1 percent to $5.38 billion from $5.39 billion in the year-ago period. Eliminating currency translation and an extra week of selling last year, same-store sales declined 2 percent with the Marmaxx unit, including T.J. Maxx and Marshalls, down 3 percent.
Taking away a 3-cent-a-share benefit from the reduction in its reserve related to a 2007 computer breach, earnings per share came to 55 cents, 4 cents above analysts’ consensus estimates of 51 cents provided by Yahoo Finance.
Company shares jumped $1.58 or 7.3 percent, to close at $23.12.
“Value is where you want to be in this economy,” president and chief executive officer Carol Meyrowitz said on a conference call. “In 2008, our comp sales were at the high end of the retail industry and our customer traffic remained healthy. We believe that our momentum will continue.”
Meyrowitz said the company could be positioned to gain share in a shrinking retail sector, citing data that recent bankruptcies and store closures will translate to 1,200 closed stores and a $10 billion market share opportunity.
“Our plans for 2009 assume a deep recession for most of the year, and we have taken a very conservative approach,” she said. “The three main planks of our approach are planning comp sales very conservatively, running with historically lean inventory and taking out at least $150 million from our cost structure.”
Citigroup retail analyst Kimberly Greenberger said investors were likely attracted to the off-pricer’s ability to control expenses.
“The market was very surprised — pleasantly so — by the amount of cost cuts TJX was able to show,” Greenberger said. Selling, general and administrative expenses decreased 1 percent in the quarter to $839.5 million.
Greenberger said the company’s business model allows it to flex inventory more quickly than other retailers and withstand challenges better, which makes it appealing to investors.
The company said it anticipates EPS in the range of 32 to 38 cents in the first quarter and expects the first half of fiscal 2010 to be more challenging than the second.
TJX said it would not issue full-year guidance, joining a growing list of retailers that have suspended providing long-term outlooks in the face of the recession.
For the 12 months, TJX profits rose 14.1 percent to $880.6 million, or $2 a share, from $771.8 million, or $1.66 a share, in 2008. Sales in the year rose 3.6 percent to $19 billion from $18.34 billion a year ago.