TJ Maxx 2006 Annual Report Download - page 40

one-time items that affect the comparability of reported results. The chart below shows the effect of these items on
income from continuing operations and diluted earnings per share (“EPS”) for fiscal 2006 and fiscal 2005.
Dollars In Millions Except Per Share Amounts $’s EPS $’s EPS $’s EPS
Fiscal 2007 Fiscal 2006 Fiscal 2005
Income from continuing operations, as reported $777 $1.63 $690 $ 1.41 $610 $1.21
Charges and one-time items:
Correction to deferred tax liability --(22) (0.04) - -
Repatriation income tax benefit --(47) (0.10) - -
Third quarter events
*
--12 0.02 - -
Cumulative lease accounting charge --- - 19 0.04
Income from continuing operations, as adjusted $777 $1.63 $633 $ 1.29 $629 $1.25
* The third quarter events for fiscal 2006 include executive resignation agreements of $0.01 per share, e-commerce exit costs and operating
losses of $0.01 per share, and hurricane related costs including the estimated impact of lost sales of $0.01 per share, partially offset by a gain
from a VISA/MasterCard antitrust litigation settlement of ($0.01) per share.
We believe this presentation reflects our results on a more comparable basis, and is useful in understanding the
underlying trends in our business.
— During the first quarter of fiscal 2007, as part of cost containment initiatives, we eliminated approximately 250
positions (including 100 open positions) and twelve of our senior executives agreed to 10% base salary reductions.
These actions resulted in an estimated annualized savings of approximately $18 million. We incurred a first
quarter pre-tax charge in connection with the workforce reduction of $7 million.
— Our pre-tax margin (the ratio of pre-tax income to net sales) improved from 6.3% in fiscal 2006 to 7.2% in fiscal
2007 primarily due to improved merchandise margins and expense leverage from our cost containment initiatives.
These improvements were partially offset by a planned increase in marketing expenses and the costs incurred in
connection with the Computer Intrusion.
— 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 2007, we repurchased 22 million of our shares at a
cost of $557 million, which favorably affected our earnings per share. In January 2007, our Board of Directors
approved a new stock repurchase program that authorizes the repurchase of up to $1 billion of TJX common stock
from time to time, which is in addition to the $436 million which remained in the existing plan at fiscal 2007 year
end. As a result of the discovery and investigation of the Computer Intrusion in December 2006, we temporarily
suspended our share repurchase activity.
— Average per store inventories, including inventory on hand at our distribution centers, were up 7% at the end of
fiscal 2007 as compared to the prior year end when average per store inventories were down 11%. The increased
inventories at fiscal 2007 year end were primarily due to a higher in-stock position on spring transitional goods
and an increase in the average unit retail price (“average ticket”). The decline at the prior year end was largely due
to lower levels of inventory in our distribution centers.
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 from
continuing operations unless otherwise indicated. All prior periods have been adjusted to reclassify the operating
results of the A.J. Wright store closings to discontinued operations. See Note C to our consolidated financial statements.
Net sales: Net sales for fiscal 2007 totaled $17.4 billion, a 9% increase over net sales of $16.0 billion in fiscal 2006.
Net sales for fiscal 2006 increased 7% over net sales of $14.9 billion for fiscal 2005.
The 9% increase in net sales for fiscal 2007 includes a 5% increase attributable to new stores and a 4% increase in
same store sales. The 7% increase in net sales for fiscal 2006 over fiscal 2005 reflects 5% from new stores and 2% from
same store sales.
New stores are a major source of sales growth. Our consolidated store count increased by 4% in fiscal 2007 and 7%
in fiscal 2006 over the respective prior year periods, and our selling square footage increased by 4% in fiscal 2007 and 8%
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