In addition to new management, the company is benefiting from May Co. store closings, acknowledged Ben Cammarata, chairman and acting CEO, during a second-quarter conference call. He cited three major benefits: the availability of hundreds of dollars of merchandise "that won't be bought by department stores;" a slowdown in the advertising and promotion environment; and "certain talent is available that wouldn't have otherwise been around."
The search for talent, especially in the area of merchandising, is "intense," he said, noting it is "a major focus throughout the entire company." Specifically, the search is on for VPs of home goods and the AJ Wright division, both of which were identified as weak areas in an otherwise strong-growth environment.
Overall profits rose 25% in the May-through-July timeframe compared with the same three months of 2005, exceeding both the company's and Wall Street's expectations. Net income was $138 million, up from $110.8 million for the same quarter a year ago. Sales rose to nearly $4 billion, up from nearly $3.7 billion, for a 9% increase over the same quarter of 2005. Comp-store sales rose 4%.
The one sour note was AJ Wright stores, which consists of 156 units in which comp-store sales were up a mere 1% for the quarter, "below plan," Cammarata said. "We continue to work on the right formula for AJ Wright: Its ethnically diverse customer base," which covers a moderate income demographic that he described as "huge," could support "1,000 stores," he suggested.
Across all divisions, "soft home goods continue to be challenging," and "are not doing well," he said. Changes in "top of bed, fashion bedding" and a "towel wall" are being introduced to improve that area. Towel wall is now being tested in 50 stores, and the goal is to get customers "to think of us as a destination" for this type of merchandise.
Geographically, the Northeast and Southwest areas of the US were strongest. The West Coast was in line with the rest of the chain, and Cammarata suggested that area's long summer heat wave may have inhibited performance. "The Midwest continues to trail the chain," he added.
Areas of opportunity include misses sportswear, "which showed great progress" and continues to "tweak the average ticket upwards;" more footwear for Marshalls; and improved home, children's and accessories performance all across the chain. The rollout of jewelry and accessories in TJ Maxx outlets is nearly complete, and 283 stores have expanded footwear, which represents additional "upside potential," he said.
The company currently operates 807 TJ Maxx, 729 Marshalls, 260 HomeGoods, 156 AJ Wright and 36 Bob's stores in the US. In Canada, it has 128 Winners and 61 HomeSense stores, and there are 202 TK Maxx units in Europe.
TJX common stock hit its 52-week high of $27.05 a share, following the conference call on Aug.15 and closed at $26.87 a share for the day. The 52-week low of $19.95 a share occurred on Sept. 29, 2005.
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