TJ Maxx 2004 Annual Report Download - page 35

fiscal 2005 having one less week than fiscal 2004. Bob’s Stores was acquired on December 24, 2003 and our sales results for fiscal
2004 include Bob’s Stores from the date of acquisition as compared to a full year for fiscal 2005. The 11% increase in net sales for
fiscal 2004 over fiscal 2003 includes approximately 8% from new stores, 1% from same store sales growth, with the balance primarily
due to the 53rd week. Sales growth in both fiscal 2005 and fiscal 2004 were favorably impacted by foreign currency exchange rates.
New stores are our major source of sales growth. Our consolidated store count increased by 7.9% in fiscal 2005 and 10.2% in
fiscal 2004 over the respective prior year period. Our selling square footage increased by 8.2% in fiscal 2005 and 9.6% in fiscal 2004,
in each case over the prior year. Bob’s Stores is excluded from fiscal 2004 store count and selling square footage calculations, as it was
acquired late in fiscal 2004. Our acquisition of Bob’s Stores on December 24, 2003, added 31 units as of the end of fiscal 2004. Net
sales for Bob’s Stores are included in our results from the date of acquisition. We expect to add 161 stores (net of store closings) in the
fiscal year ending January 28, 2006 (fiscal 2006), a 7% projected increase in our consolidated store base, and we expect to increase
our selling square footage base by 8%.
Net sales for fiscal 2005 reflect strong demand for jewelry and accessories, women’s apparel and footwear, partially offset by
weaker demand for men’s apparel and home fashions. The 5% growth in consolidated same store sales for fiscal 2005 over the prior
year was driven by a 4% same store sales increase at Marmaxx. Marmaxx continued its program of expanding certain departments in
its stores and ended the year with 303 T.J. Maxx stores with expanded jewelry/accessories departments and 67 Marshalls stores with
expanded footwear departments. These initiatives were significant factors in Marmaxx achieving a 4% same store sales increase in
fiscal 2005. Consolidated same store sales growth of 1% in fiscal 2004 reflects the impact of unseasonable weather in the first half of
that year. Same store sales growth in both fiscal 2005 and fiscal 2004 benefited by approximately 11/2 percentage points from foreign
currency exchange rates.
We define same store sales to be sales of those stores that have been in operation for all or a portion of two consecutive fiscal
years, or in other words, stores that are starting their third fiscal year of operation. We classify a store as a new store until it meets the
same store criteria. We determine which stores are included in the same store sales calculation at the beginning of a fiscal year and
the classification remains constant throughout that year, unless a store is closed. We calculate same store sales results by comparing the
current and prior year weekly periods that are most closely aligned. Relocated stores and stores that are increased in size are generally
classified in the same way as the original store and we believe that the impact of these stores on the same store percentage is
immaterial. Consolidated and divisional same store sales are calculated in U.S. dollars. We also show divisional same store sales in
local currency for our foreign divisions, because this removes the effect of changes in currency exchange rates, and we believe it is a
more appropriate measure of their operating performance.
The following table sets forth our consolidated operating results as a percentage of net sales:
Fiscal Year Ended January
2005 2004 2003
(53 weeks)
Net sales 100.0% 100.0% 100.0%
Cost of sales, including buying and occupancy costs 76.3 75.6 75.8
Selling, general and administrative expenses 16.3 16.2 16.2
Interest expense, net .2 .2 .2
Income before provision for income taxes 7.2% 8.0% 7.8%
Cost of sales, including buying and occupancy costs: Cost of sales, including buying and occupancy costs, as a percentage of net
sales was 76.3% in fiscal 2005, 75.6% in fiscal 2004 and 75.8% in fiscal 2003. Our consolidated merchandise margin was essentially
flat to the prior year. Throughout fiscal 2005, the Marmaxx division continued to effectively execute our merchandising and
inventory management strategies, maintaining a liquid inventory position and buying close to need, all of which led to improved
merchandise margin at this division. However, this improved merchandise margin at Marmaxx in fiscal 2005 was offset by reduced
merchandise margin at our other divisions, most of which experienced higher markdowns. The increase in this ratio in fiscal 2005
includes a .2% increase due to a $30.7 million non-cash charge ($19.3 million after-tax) to conform our lease accounting practices to
generally accepted accounting principles. See Note A to the consolidated financial statements under the caption ‘‘Lease Account-
ing.’’ This ratio in fiscal 2005, as compared to fiscal 2004, also reflects an increase of approximately .2% due to the absence of the
53rd week in fiscal 2005 as the sales volume from the extra week helped lever certain fixed costs in fiscal 2004. The balance of the
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