TJ Maxx 2006 Annual Report Download - page 39

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 1A of this report under the section entitled “Risk Factors.”
The discussion that follows relates to our fiscal years ended January 27, 2007 (fiscal 2007), January 28, 2006 (fiscal
2006) and January 29, 2005 (fiscal 2005).
In November 2006, we decided to close 34 A.J. Wright stores as part of a repositioning of the chain. The following
discussion focuses on our results from continuing operations, which excludes the results of these 34 A.J. Wright stores.
The cost to close these stores was recorded as a discontinued operation in the fourth quarter of fiscal 2007 and the
operating income or loss from these stores is also presented as a discontinued operation for all periods presented. The
closings resulted in an after tax charge of $38 million, or $0.08 per share, in the fourth quarter of fiscal 2007 and is
discussed in more detail in Note C to the consolidated financial statements and below within the A.J. Wright discussion
under “Segment Information.”
During the fourth quarter of fiscal 2007, we discovered that we had suffered an unauthorized intrusion into the
portion of our computer systems that processes and stores information related to customer transactions. We do not
know who took this action, whether there were one or more intruders involved, or whether there was one continuing
intrusion or multiple, separate intrusions (we refer to the intrusion or intrusions collectively as the “Computer
Intrusion”). We have been engaged in an ongoing investigation of the Computer Intrusion and computer security
and incident response experts have been engaged to assist in the investigation. We believe customer data was stolen in
the Computer Intrusion in 2005 and 2006. In the fourth quarter of fiscal 2007, we recorded a pre-tax charge of
approximately $5 million, or $0.01 per share, for costs incurred through the fourth quarter in connection with the
Computer Intrusion, which includes costs incurred to investigate and contain the Computer Intrusion, enhance
computer security and systems, and communicate with customers, as well as technical, legal, and other fees. Beyond this
charge, we do not yet have enough information to reasonably estimate losses we may incur arising from the Computer
Intrusion. Such losses could be material to our results of operations and financial condition. For more information, see
Item 1-Business under the caption “Computer Intrusion,” Note B to the consolidated financial statements and the
discussion below under the caption “Potential liabilities in connection with Computer Intrusion.”
RESULTS OF OPERATIONS
Fiscal 2007 Overview:
— Net sales for fiscal 2007 were $17.4 billion, a 9% increase over fiscal 2006.
— Consolidated same store sales increased 4% in fiscal 2007 over the prior year driven by growth in unit sales and
transactions across the majority of our businesses, as well as particularly strong same store sales growth at our
international divisions. In addition, approximately one percentage point of this increase came from the favorable
effect of currency exchange rates.
— We increased our number of stores by 4% in fiscal 2007, ending the fiscal year with 2,466 stores in operation. Our
selling square footage grew by 4% in fiscal 2007.
— Income from continuing operations for fiscal 2007 was $776.8 million, or $1.63 per diluted share, compared to
$689.8 million, or $1.41 per diluted share, last year. Results for prior years were impacted by certain charges and
25