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The TJX Companies, Inc. Sees Momentum Continue; Reports 24% Increase In Second Quarter EPS; Raises Full-Year Guidance

The first six months of Fiscal 2012 included first quarter costs associated with the A.J. Wright consolidation, primarily additional lease obligations for store closings and additional operating losses as well as the costs related to the conversion and grand re-opening of certain former A.J. Wright stores to T.J. Maxx, Marshalls and HomeGoods banners.

On a reported basis, diluted earnings per share for the first six months of Fiscal 2013 were $1.11 compared to $.79 last year. On an adjusted basis, excluding the items detailed above, diluted earnings per share for the first six months of Fiscal 2013 represented a 32% increase over last year’s adjusted $.84.

For the first six months of Fiscal 2013, foreign currency exchange rates had a $.01 negative impact on earnings per share, the same as the $.01 per share negative impact during the same period last year.

Margins

For the second quarter of Fiscal 2013, the Company’s consolidated pretax profit margin was 11.5%, up 1.3 percentage points over the prior year. The increase was primarily driven by merchandise margin improvement and expense leverage.

The gross profit margin for the second quarter of Fiscal 2013 was 28.1%, 0.8 percentage points above the prior year. Strong merchandise margin growth as well as buying and occupancy leverage on above-plan sales, partially offset by a negative impact from mark-to-market adjustments on the Company’s inventory-related hedges, drove the favorability.

Selling, general and administrative costs as a percent of sales were 16.5% in the second quarter, a 0.4 percentage point improvement over the prior year’s ratio of 16.9%, primarily driven by expense leverage on above-plan sales growth.

Inventory

Total inventories as of July 28, 2012, were $3.0 billion, compared with $3.4 billion at the end of the second quarter last year. Consolidated inventories on a per-store basis, including the distribution centers, at July 28, 2012, were down 12% (down 11% on a constant currency basis) versus being up 16% at the end of the second quarter last year. Further, the Company’s store inventory turns were faster than the prior year during the quarter. The Company enters the third quarter with excellent inventory levels and is very well positioned to take advantage of the opportunities in the marketplace and continue shipping ever-changing merchandise selections to its stores.

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