TJ Maxx 2009 Annual Report Download - page 38

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The discussion that follows relates to our 52-week fiscal year ended January 30, 2010 (fiscal 2010), the 53-week
fiscal year ended January 31, 2009 (fiscal 2009) and the 52-week fiscal year ended January 26, 2008 (fiscal 2008). Like
most retailers we have a 53-week fiscal period every five to six years. This extra week of sales volume, which also provides
a lift to pre-tax margins due to the flow of certain monthly and annual expenses, impacts comparisons to other fiscal
periods.
RESULTS OF OPERATIONS
We entered fiscal 2010 faced with the challenges of a worldwide recession and established a three-pronged strategy
for managing through the challenging economic times: conservatively plan same store sales, allowing better flow-through
to the bottom line if we exceed plans; run with very lean inventories and buy closer to need than in the past, increasing
inventory turns and protecting gross margins; and focus on cost-cutting measures and controlling expenses.
Implementing this strategy has proven successful, and we posted results significantly above our expectations and
ahead of last year on a consolidated basis and for each of our businesses. Customer traffic increased as the year progressed,
driving sales. Additionally, we took advantage of opportunities the environment presented, opening more new stores
than planned and adding many new vendors. We are confident in our ability to continue to grow both sales and earnings
in fiscal 2011, driving market share with our value proposition and continuing the marketing, inventory management
and cost reduction strategies that were successful in fiscal 2010.
Highlights of our financial performance for fiscal 2010 include the following:
— Same store sales for fiscal 2010 increased 6% over the prior year. Same store sales growth was driven by significant
increasesincustomertraffic,asweattractednewcustomersacrossvariousincomelevels,andstrongperformance
by all of our businesses.
— Net sales increased 7% to $20.3 billion for fiscal 2010. Stores in operation and selling square footage were both
up 3% at the end of fiscal 2010 compared to last fiscal year end. Increases in consolidated same store sales and
sales growth from our new stores were partially offset by foreign currency exchange rates, which negatively
impacted sales growth by 2 percentage points. Unlike many other retailers, we had a 53
rd
week in fiscal 2009,
which benefited fiscal 2009 sales but negatively impacted the fiscal 2010 comparison by approximately
1 percentage point.
— Our fiscal 2010 pre-tax margin (the ratio of pre-tax income to net sales) was 9.6% compared to 7.6% for fiscal
2009. The improvement in fiscal 2010 was primarily driven by increased merchandise margins, which were
achieved as a result of managing the business with substantially lower levels of inventory. The comparison of pre-
tax margins for fiscal 2010 to fiscal 2009 was adversely impacted by the 53
rd
week in the fiscal 2009 calendar and
a favorable adjustment to the Provision for Computer Intrusion related costs in fiscal 2009. Combined, these two
items benefited the fiscal 2009 pre-tax margin by approximately 0.4 percentage points.
— Our cost of sales ratio for fiscal 2010 decreased 2.1 percentage points, primarily due to improved merchandise
margins and leverage of buying and occupancy costs on strong same store sales, partially offset by the benefit to
fiscal 2009’s cost of sales ratio due to the 53
rd
week included in fiscal 2009. The selling, general and
administrative expense ratio for fiscal 2010 decreased by 0.1 percentage points, with the benefit of cost
reduction programs and expense leverage on strong same store sales in fiscal 2010, partially offset by a
0.5 percentage point increase due to performance-based incentive compensation.
— Income from continuing operations was $1.2 billion, or $2.84 per diluted share, for fiscal 2010 compared to
$914.9 million, or $2.08 per diluted share, for fiscal 2009. Fiscal 2009 diluted earnings per share from
continuing operations benefited by $0.16 per share from a number of items, which affected the year-over-year
comparison; the 53
rd
week added $0.09 per share, the credit to the Provision for Computer Intrusion related
costs added $0.04 per share and a tax related adjustment added $0.03 per share.
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