TJ Maxx 2004 Annual Report Download - page 4

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T O OUR FELLOW SHAREHOLDERS: Excellent per-
formance at The Marmaxx Group, the internal combination of
T.J. Maxx and Marshalls, which represents 70% of our revenues
and 86% of profits, drove our solid results in 2004. Diluted
earnings per share grew by 12%* , on a comparable basis, which
was in line with our expectations.We began 2004 with the stated
goal of improving comparable store sales increases, and we are
pleased to have achieved a 5% increase on a consolidated basis,
which was at the high end of our expectations.While results at
our smaller divisions came in below our expectations in 2004,
we believe we have identified the issues affecting them and are
well poised to improve performance at those businesses in the
year ahead. Overall, we grew square footage by 8% in 2004,
adding 162 stores to end the year with a total of 2,224 stores.
RETURNING VALUE TO SHAREHOLDERS:
We achieved an after-tax return on average shareholders’
equity of 41%, while maintaining an excellent financial posi-
tion.Two thousand and four marked the sixth consecutive year
that we have delivered an after-tax return of 40% or higher,
placing us in the top tier of the retail industry.Total sales
increased by 12% to $14.9 billion over the 53-week fiscal
period last year.Net income was $664 million and diluted earn-
ings per share were $1.30, including the impact of a $.04 per
share one-time, non-cash charge related to lease accounting.
On a 52-week comparable basis and without the lease account-
ing charge, this represents a 12%*increase, which was in line
with our expectations.
In 2004, we began the year with a significant cash bal-
ance and generated an additional $1.1 billion from operations.
We reinvested $429 million in our businesses, repurchased
$588 million of TJX stock, and increased our dividend sub-
stantially.We continue to view our significant share repurchase
program as an important method of returning value to share-
holders. Once again, we started the new year of 2005 in an
excellent financial position.
DIVISIONAL PERFORMANCE: The Marmaxx
Group had an outstanding year,posting results that underscore
our continued view of this major division as a growth driver
for TJX.This division topped $10 billion in total sales, reach-
ing $10.5 billion, and segment profit (defined as pre-tax income
before general corporate and net interest expense) surpassed
$1 billion for the first time.
A chief goal for this division in 2004 was to drive com-
parable store sales, and we are delighted that Marmaxx
delivered a 4% comparable store sales increase for the year. Our
major initiative to expand our jewelry/accessories departments
at T.J.Maxx and footwear departments at Marshalls,which further
differentiates these businesses, outperformed our expectations.
With our increased focus, these categories,across both T.J. Maxx
and Marshalls, posted double-digit comparable store sales increases
in 2004.Women’s sportswear was another strong category, as we
benefited from a resurgence of women’s fashion trends during
the year.The Marmaxx organization did a superb job of execut-
ing our merchandising and inventory strategies, flowing fresh
product to our stores at the right time for every season.We are
also pleased with this division’s expense management in 2004.
As we continue to bring newness and freshness into our most
established division, we look forward to continued successful
growth for Marmaxx in 2005 and beyond.
Winners and HomeSense,in Canada, continued to
offer great off-price values on apparel and home fashions.
Winners had a very solid first half of the year, fueled by strong
trends in women’s fashions, followed by a disappointing
second half and finish to 2004. Entering the second half of
2004 with exceptionally high comparable store sales increases,
Winners overcommitted in its buying.When the Canadian
retail environment turned very promotional,Winners took
aggressive markdowns to clear inventory.We have implemented
improvements to both the distribution center network and
planning and allocation area to ensure more effective inven-
tory management.
HomeSense,which we launched in 2001 to bring the
off-price concept to home fashions in Canada,is that country’s
only off-price home fashions chain. HomeSense had a good year
and continued to expand its store base into new markets. In
addition to our HomeSense standalone format, our Canadian
superstores, which combine a Winners and HomeSense, per-
formed exceptionally well in 2004. Our Winners division
continues to be a strong business, with excellent returns on
investment, and we believe we are poised to improve results in
Canada in 2005.
T.K. Maxx,the off-price leader in the U.K. and Ireland,had
a solid year.Total sales surpassed $1 billion for the first time, in
2004,the same year that this division celebrated its 10th anniver-
sary in business.T.K.Maxx delivered admirable results despite the
difficult retail environment that prevailed in the U.K. through-
out the year, with unusually harsh weather during the first half
and one of the most promotional holiday selling seasons in
many years.T.K.Maxx remained extremely disciplined in man-
aging its inventories and expenses, and significantly grew its
segment profit.T.K. Maxx has done an excellent job of capital-
izing upon various types of real estate opportunities, and we
believe that the development of retail centers in city locations,
where our stores are typically most productive,bodes well for our
plans to grow T.K. Maxx in 2005 and beyond.
HomeGoods is another concept that reached the
$1-billion mark in total sales in 2004. However, we were
disappointed with this division’s results for the year.While
there was a general malaise in home fashions in 2004, we
did not execute our merchandising strategies as well as we
could have at this division. In the early part of the year, we
missed certain opportunities in seasonal categories.We also
moved our merchandise mix to be more upscale, a strategy
that had worked very well for us until this year, when we
took that strategy a bit too far against a weak environment
for home fashions. As we begin a new year, we have
addressed these merchandising issues and we are seeing
positive customer response to our more balanced offer-
ings.We have continued confidence in our HomeGoods
concept, which, with its great, off-price values on rapidly
*4% on a GAAP basis, including the $.04 per share lease accounting charge
in FY2005 and the est. $.05 per share benefit of 53rd week in FY2004.