TJ Maxx 2004 Annual Report Download - page 34

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking information and should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in this report. Our actual results could differ materially from the results
contemplated by these forward-looking statements due to various factors, including those discussed in Item 1 of this report under the
section entitled ‘‘Safe Harbor Statements under the Private Securities Litigation Reform Act of 1995.’’
RESULTS OF OPERATIONS
Overview: Our financial performance for the 52-week fiscal year ended January 29, 2005 (fiscal 2005) as compared to our
53-week fiscal year ended January 31, 2004 (fiscal 2004) is summarized below.
— Net sales for fiscal 2005 were $14.9 billion, a 12% increase over the 53-week fiscal period last year.
— Driven by a 4% same store sales increase at Marmaxx, our internal combination of T.J. Maxx and Marshalls, consolidated same
store sales increased 5% in fiscal 2005 over the prior year on a comparable 52-to 52-week basis, with approximately 11/2
percentage points of this increase coming from the favorable effect of currency exchange rates of our Winners and T.K. Maxx
businesses.
— We increased our number of stores by 8% in fiscal 2005 ending the fiscal year with 2,224 stores in operation. Selling square
footage also grew by 8% in fiscal 2005.
—Net income for fiscal 2005 was $664.1 million compared to $658.4 million in the 53-week period last year. Fiscal 2005 net
income reflects the impact of a fourth quarter, one-time, non-cash, after-tax charge of $19.3 million, or $.04 per share,
relating to lease accounting (see Note A to the consolidated financial statements) while fiscal 2004 includes the benefit of the
53rd week, estimated at $24.0 million (after-tax), or $.05 per share. Excluding these items, net income would be $683.4 mil-
lion in fiscal 2005 as compared to $634.4 million in fiscal 2004, an 8% increase. We believe this presentation reflects our results
on a more comparable basis, and is useful in understanding the underlying earnings trends in our business.
—Diluted earnings per share was $1.30 in fiscal 2005 as compared to $1.25 per share in the prior year. Excluding the items noted
above, diluted earnings per share would have been $1.34 in fiscal 2005 compared to $1.20 in fiscal 2004, or an increase of 12%.
We believe this presentation reflects our earnings per share on a more comparable basis, and is useful in understanding the
underlying earnings trends in our business.
— Our reported operating results led to an after-tax return on average shareholders’ equity of 41% for the fiscal year ended
January 29, 2005.
— Our pre-tax margin (the ratio of pre-tax income to net sales) declined from 8.0% in fiscal 2004 to 7.2% in fiscal 2005. The
decline was driven by cost of sales, including buying and occupancy costs, which increased .7% as a percent of sales over last
year, with the cumulative charge for the adjustment of our lease accounting practices amounting to .2% of this increase. In
addition, .2% of the increase was due to the favorable impact of the 53rd week on the prior year’s cost of sales ratio. Selling,
general and administrative costs were up .1% as a percent of sales in fiscal 2005 over the prior year.
— We continued to generate strong cash flows from operations which allowed us to fund our stock repurchase program as well as
our capital investment needs. During fiscal 2005, we repurchased 25.1 million of our shares at a cost of $588 million.
— Average per store inventories, including inventory on hand at our distribution centers were up 1% at the end of fiscal 2005 as
compared to the prior year end period. Our liquid inventory position enhances our ability to take advantage of buying
opportunities in the marketplace.
The following is a summary of the operating results of TJX at the consolidated level. This discussion is followed by an
overview of operating results by segment. All references to earnings per share are diluted earnings per share unless otherwise
indicated and diluted earnings per share for prior periods have been adjusted to reflect the new accounting rules relating to our
contingently convertible debt. See Note A to our consolidated financial statements.
Net sales: Net sales for TJX for our fiscal year ended January 29, 2005 totaled $14.9 billion, an 11.9% increase over sales of
$13.3 billion for the fiscal year ended January 31, 2004. Our reporting period for fiscal 2004 included 53 weeks compared to
52 weeks in both fiscal 2005 and the fiscal year ended January 25, 2003 (fiscal 2003). The 53rd week in fiscal 2004 added incremental
sales of approximately $200 million, as compared to fiscal 2005 and fiscal 2003. The net sales for fiscal 2004 of $13.3 billion
represented an 11.2% increase over sales of $12.0 billion for our fiscal year ended January 25, 2003.
The 12% increase in net sales for fiscal 2005 over fiscal 2004, reflects approximately 6% from new stores, 5% from same store
sales growth and 2% from the acquisition of Bob’s Stores, partially offset by approximately a 1% reduction to the growth rate due to
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