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The TJX Companies, Inc. Reports 41% Increase In First Quarter Adjusted EPS; Sees Strong Momentum Continue

The gross profit margin for the first quarter of Fiscal 2013 was 28.2%, 1.3 percentage points above the prior year’s adjusted margin. This increase was largely driven by merchandise margin improvement as well as buying and occupancy cost leverage and the benefit from foreign currency exchange rates mentioned above.

Selling, general and administrative costs as a percent of sales were 16.2% in the first quarter, a 0.9 percentage point improvement over the prior year’s adjusted ratio, primarily driven by expense leverage on the above-plan comparable store sales increase.

Inventory

Total inventories as of April 28, 2012, were $2.9 billion, compared with $3.0 billion at the end of the first quarter of the prior year. Consolidated inventories on a per-store basis, including the distribution centers, at April 28, 2012, were down 7% versus being up 12% at the end of the first quarter last year. Further, the Company’s store inventory turns were faster than the prior year during the quarter. The Company enters the second quarter with great liquidity in its inventory levels and in an excellent position to buy into the opportunities for current fashions and exciting brands that it is seeing in the marketplace.

Shareholder Distributions

During the first quarter, the Company spent a total of $250 million in repurchases of TJX stock, retiring 6.5 million shares. The Company continues to expect to repurchase approximately $1.2 billion to $1.3 billion of TJX stock in Fiscal 2013. The Company may adjust the amount of this spending up or down depending on various factors. Additionally, the Company increased its dividend by 21% in the first quarter, as it continues to balance investments to support the growth of TJX with cash distributions to its shareholders through the dividend and share repurchase programs.

Second Quarter and Full Year Fiscal 2013 Outlook

For the second quarter of Fiscal 2013, the Company expects diluted earnings per share to be in the range of $.47 to $.50, which represents a 4% to 11% increase over $.45 per share last year. It is important to note that this guidance reflects a planned significant year-over-year increase in corporate expenses in the second quarter due to the Company’s growth-related investment spending. This increase is primarily a timing issue, as the Company expects the year-over-year increase to moderate during the second half of the year, with selling, general and administrative expense rates planned to leverage in the back half. The second quarter guidance also reflects an assumed higher tax rate, which is anticipated to adversely impact year-over-year earnings per share growth by approximately $.01. Finally, this outlook is based upon estimated consolidated comparable store sales growth of 2% to 4%.

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