01—Abstract
Summary
Summary of the 10-K filed March 27, 2012. Cited figures are marked; the original filing is the authoritative source.
TJX Companies (TJX), the largest off-price apparel and home fashions retailer in the U.S. and worldwide, reported a record fiscal 2012 (year ended January 28, 2012).
Net sales rose 6% to $23.2 billiona, same store sales increased 4%, and diluted EPS from continuing operations reached $1.93, up 17% from $1.65. Excluding costs tied to the A.J. Wright consolidation, adjusted diluted EPS was $1.99, up 14% from an adjusted $1.75.
Income from continuing operations grew 12% to $1.5 billionb, and the pre-tax margin improved to 10.4% (10.7% adjusted). Growth came mainly from the U.S. businesses: Marmaxx and HomeGoods posted strong same store sales and segment margin gains, while TJX Canada and TJX Europe were weaker, with Europe's segment margin falling to 2.4% amid aggressive markdowns and execution problems. Capital allocation was shareholder-friendly.
TJX repurchased 49.7 million shares for $1.4 billionc, paid $275 million in dividends, and the board authorized a new $2 billion buyback. Management planned a 21% dividend increase to $0.115 per quarter and expects fiscal 2013 repurchases of $1.2 to $1.3 billion. The company also completed a two-for-one stock split in February 2012 and invested $803 million in capital expenditures, with $875 to $900 million planned for fiscal 2013.
Operating cash flow was $1.9 billiond, and the company ended the year with $1.5 billion in cash and no drawn revolver balances. Key risks for investors include execution in opportunistic buying, the pace of international growth (especially Europe and Canada), currency and commodity exposure, and ongoing wage-and-hour class actions in the U.S. The A.J.
Wright exit added roughly $49 million of segment losses in fiscal 2012, and general corporate expense rose to $228 million from $169 million, reflecting investments in systems, e-commerce and talent. Management expects a higher effective tax rate of 38.5% in fiscal 2013.
02—Key points
Key Highlights
- Net sales of $23.2 billion, up 6%, with same store sales up 4% on top of 4% and 6% gains in the prior two years
- Diluted EPS from continuing operations of $1.93 (up 17%); adjusted EPS of $1.99 (up 14%) excluding A.J. Wright consolidation costs
- Marmaxx segment profit rose to $2.07 billion (13.5% margin), and HomeGoods margin expanded to 10.4% on 6% same store sales growth
- TJX Europe segment margin fell to 2.4% from 3.0% on aggressive markdowns, while TJX Canada same store sales declined 1%
- Repurchased 49.7 million shares for $1.4 billion and approved a new $2 billion buyback program; quarterly dividend to rise to $0.115 (21% increase)
- Store base reached 2,905 at fiscal year-end, with a plan to reach 3,055 by fiscal 2013 and a long-term potential of 4,220 to 4,455 stores
- Completed the A.J. Wright consolidation (90 stores converted, 72 closed) and executed a two-for-one stock split in February 2012
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed March 27, 2012Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $23.19B$21.94B | +5.7% |
| SG&A Expenses | $3.89B$3.71B | +4.9% |
| Operating Income | -$16.61M$10.30M | −261.3% |
| Interest Expense | $49.28M$49.01M | +0.5% |
| Net Income | $1.50B$1.34B | +11.4% |
| EPS (Basic) | $0.98$0.84 | +17.3% |
| EPS (Diluted) | $0.96$0.82 | +17.0% |
| Shares Outstanding (Basic) | 1.52B1.60B | −4.9% |
| Shares Outstanding (Diluted) | 1.55B1.63B | −4.8% |
05—Questions
Frequently Asked Questions
How did TJX perform financially in fiscal 2012?
TJX reported a record year. Net sales grew 6% to $23.2 billion, income from continuing operations rose 12% to $1.5 billion, and diluted EPS reached $1.93, up 17%. Adjusted for A.J. Wright consolidation costs, EPS was $1.99. The pre-tax margin widened to 10.4% from 9.9%, driven by better buying and occupancy cost leverage.
Which parts of the business drove growth and which lagged?
The U.S. businesses led growth. Marmaxx (T.J. Maxx and Marshalls) generated $15.4 billion in sales and $2.07 billion in segment profit, and HomeGoods grew sales 15%. TJX Canada was weaker, with same store sales down 1% due to execution issues in women's and children's categories. TJX Europe grew sales 16% but its segment profit fell to $68.7 million amid markdowns and office and technology write-offs, though the fourth quarter showed a recovery.
What is TJX's capital return policy and outlook?
In fiscal 2012 TJX returned capital through $1.4 billion in buybacks and $275 million in dividends. A new $2 billion repurchase authorization was approved, and management expects to repurchase $1.2 to $1.3 billion of stock in fiscal 2013. The quarterly dividend is planned to increase to $0.115, which equates to $0.46 annually. Both plans are subject to board approval and market conditions.
What are the main risks highlighted in the filing?
Key risks include the execution of opportunistic buying and inventory management, competition, the success of expansion into new markets and e-commerce, foreign currency and commodity cost fluctuations (including cotton and oil), data security after a prior computer intrusion, and wage-and-hour class actions. The filing also flags reliance on vendors for product safety compliance and the effect of seasonality, weather, and tax audits on results.
Does the A.J. Wright exit affect future results?
The consolidation is largely complete. A.J. Wright produced a segment loss of $49.3 million in fiscal 2012 and $130.0 million in fiscal 2011, including closing costs. About $33 million of lease and closing costs were added to the reserve for former operations, which stood at $45.4 million at year end. Management said the move lets it focus resources on fewer, larger businesses with higher returns, so its impact on fiscal 2013 results should be smaller.
06—Continue