TJ Maxx 2015 Annual Report Download - page 41

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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 years ended January 30, 2016 (fiscal
2016), January 31, 2015 (fiscal 2015) and February 1, 2014 (fiscal 2014).
OVERVIEW
We are the leading off-price apparel and home fashions retailer in the U.S. and worldwide. We sell a rapidly
changing assortment of apparel, home fashions and other merchandise at prices generally 20% to 60% below
department and specialty store regular prices on comparable merchandise, every day. We operate over 3,600
stores through our four main segments: in the U.S., Marmaxx (which operates T.J. Maxx, Marshalls and
tjmaxx.com) and HomeGoods; TJX Canada (which operates Winners, HomeSense and Marshalls in Canada);
and TJX International, formerly TJX Europe (which operates T.K. Maxx, HomeSense and tkmaxx.com in Europe,
and Trade Secret in Australia). In the U.S. we also operate Sierra Trading Post (STP), a leading off-price Internet
retailer with a small number of stores. The results of STP are reported in our Marmaxx segment.
Fiscal 2016 was another successful year for TJX as we posted strong gains in net sales and solid earnings
per share growth on top of strong increases in both fiscal 2015 and fiscal 2014. We continued to generate strong
cash flows, allowing us to return value to our shareholders through cash dividends and share repurchases, while
continuing to reinvest in our business by adding new stores and remodeling existing ones, and while continuing
to strengthen our infrastructure in support of our continuing growth. In fiscal 2016, we implemented the first
phase of an initiative to raise wages for our U.S. full- and part-time hourly store associates. The second phase of
additional wage increases will occur in fiscal 2017.
Highlights of our financial performance for fiscal 2016 include the following:
— Same store sales increased 5% in fiscal 2016 over an increase of 2% in fiscal 2015 and an increase of 3%
in fiscal 2014. The fiscal 2016 increase was driven by an increase in customer traffic. We also had a
strong increase in units sold which was offset by a reduction in the average ticket.
— Net sales increased to $30.9 billion for fiscal 2016, up 6% over the same period last year. Net sales
increased to $29.1 billion for fiscal 2015, up 6% over the prior year. At January 30, 2016, the number of
stores in operation increased 6% and selling square footage increased 5% over the end of fiscal 2015.
— Earnings per share for fiscal 2016 were $3.33 per diluted share compared to $3.15 per diluted share in
fiscal 2015. Fiscal 2015 earnings per share includes a charge of $0.01 from a loss on early extinguishment
of debt.
— Our fiscal 2016 pre-tax margin (the ratio of pre-tax income to net sales) was 11.8%, a 0.4 percentage
point decrease compared to our fiscal 2015 pre-tax margin. The loss on early extinguishment of debt
reduced pre-tax margin by 0.1 percentage point in fiscal 2015.
— Our cost of sales ratio for fiscal 2016 was 71.2%, a 0.3 percentage point decrease compared to the fiscal
2015 ratio. This improvement was driven by buying and occupancy expense leverage on strong same
store sales growth as well as an increase in merchandise margin.
— Our selling, general and administrative expense ratio for fiscal 2016 increased 0.7 percentage points to
16.8% from 16.1% in fiscal 2015. This increase is primarily due to higher store payroll costs due to our
wage initiative and the impact of handling a large increase in units sold.
— Our consolidated average per store inventories, including inventory on hand at our distribution centers
(which excludes inventory in transit) and excluding our e-commerce businesses, were up 5% (up 6% on a
constant currency basis) at the end of fiscal 2016 as compared to the prior year.
— During fiscal 2016, we repurchased 26.5 million shares of our common stock for $1.8 billion. Earnings per
share reflect the benefit of the stock repurchase program. In January 2016, our Board of Directors
authorized our 17th stock repurchase program for an additional $2.0 billion.
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