TJ Maxx 2006 Annual Report Download - page 44

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Excluding these charges and one-time items from fiscal 2006, the fiscal 2007 fourth quarter income from
continuing operations of $243 million increased 11% and earnings per share of $0.51 increased 13%. Pre-tax profit
margin was 7.5% in both fiscal 2007 and fiscal 2006. Pre-tax margin improved on the strength of strong same-store sales
at Winners, T.K. Maxx and HomeGoods, resulting in expense leverage across most categories. This improvement in the
pre-tax margin was offset by costs related to the Computer Intrusion (0.1 percentage point), a planned increase in
advertising expense (0.2 percentage points) and an increase in occupancy costs at T.K. Maxx (0.1 percentage point) as
well as the year over year decline in A.J. Wright’s and Bob’s Stores’ segment profit margins.
Discontinued operations and net income:
Our results from continuing operations exclude the results of
operations and the cost of closing 34 A.J. Wright stores. See “Segment Information — A.J. Wright” below and Note C to
the consolidated financial statements for more information. Net income, which includes the impact of discontinued
operations, was $738 million, or $1.55 per share for fiscal 2007, $690 million, or $1.41 per share for fiscal 2006 and
$610 million, or $1.21 per share in fiscal 2005.
Segment information:
The following is a discussion of the operating results of our business segments. We
consider each of our operating divisions to be a segment. We evaluate the performance of our segments based on
“segment profit or loss,” which we define as pre-tax income before general corporate expense and interest. “Segment
profit or loss” as we define the term may not be comparable to similarly titled measures used by other entities. In
addition, this measure of performance should not be considered an alternative to net income or cash flows from
operating activities as an indicator of our performance or as a measure of liquidity. More detailed information about our
segments, including a reconciliation of “segment profit or loss” to “income from continuing operations before provision
for income taxes” can be found in Note O to the consolidated financial statements. Presented below is selected financial
information related to our business segments (U.S. dollars in millions):
Segment profit or loss for fiscal 2005 includes each segment’s share of the cumulative pre-tax charge relating to
lease accounting. See Note A to the consolidated financial statements under the caption “Lease Accounting.”
Marmaxx:
Dollars In Millions 2007 2006 2005
Fiscal Year Ended January
Net sales $11,531.8 $10,956.8 $10,489.5
Segment profit 1,079.3 985.4 982.1
Segment profit as a % of net sales 9.4% 9.0% 9.4%
Percent increase in same store sales 2% 2% 4%
Stores in operation at end of period 1,569 1,514 1,468
Selling square footage at end of period (in thousands) 38,468 36,987 35,544
Marmaxx posted a 2% same store sales increase in fiscal 2007, consistent with the prior year. Both apparel and
home fashions reported same store sales growth in fiscal 2007 with apparel performing slightly better than home
fashions. Same store sales of jewelry and accessories and footwear, combined, as well as misses sportswear and dresses
were above the chain average. Same store sales also benefited from the continued expansion of footwear departments in
Marshalls. During fiscal 2007, we added 134 expanded footwear departments, bringing the total number of expanded
footwear stores to 280. During fiscal 2008, we intend to expand footwear departments in approximately 200 additional
Marshalls stores. The expansion of jewelry and accessory departments at T.J. Maxx was substantially completed during
fiscal 2007, with 686 out of the total 821 stores having expanded departments as of year end. Going forward, we will add
jewelry and accessory expansions to certain new stores and relocated stores, as well as a limited number of existing
stores. Geographically in fiscal 2007, regions that performed above the chain average were the Southwest, Northeast
and Mid-Atlantic.
Segment profit as a percentage of net sales (“segment margin”) increased to 9.4% in fiscal 2007 from 9.0% in fiscal
2006. The increase in the fiscal 2007 segment margin was largely driven by 0.2 percentage point improvement in
merchandise margin, primarily due to lower markdowns, and expense leverage across most categories due to our cost
containment initiatives. Additionally, fiscal 2007 includes the favorable impact on current year casualty insurance and
employee medical costs due to favorable claims experience. These improvements in segment margin were partially
offset by an increase in occupancy costs (0.2 percentage points) and a planned increased in marketing costs (0.1 per-
centage point). As of January 27, 2007, average inventories per store were up 8% compared to a 10% decline at the prior
year end. The increase at fiscal 2007 year end was primarily due to our in-stock position on spring transitional goods and
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