The TJX Companies, Inc. (TJX)

F3Q2011 Earnings Conference Call

November 16, 2010 11:00 am ET

Executives

Carol Meyrowitz – President and CEO

Sherry Lang – SVP, Global Communications

Jeff Naylor – Senior EVP, Chief Financial and Administrative Officer

Ernie Herrman – Senior EVP and Group President

Analysts

Adrianne Shapira – Goldman Sachs

Paul Lejuez - Nomura Holdings, Inc.

Brian Tunick – JPMorgan

Evren Kopelman – Wells Fargo Securities

Jeff Stein – Soleil-Stein Research LLC

Laura Champine – Cowen and Company

Kimberly Greenberger – Citi

Richard Jaffe – Stifel Nicolaus

Daniel Hofkin – William Blair & Co.

Todd Slater - Lazard Capital Markets

David Glick – [ph]

Howard Tubin - RBC Capital Markets

Mami Shapiro – The Retail Tracker

Dana Telsey – Telsey Advisory Group

John Morris – [ph]

Presentation

Operator

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Ladies and gentlemen. Thank you for standing by. Welcome to The TJX Companies' third quarter fiscal 2011 financial results conference call. At this time, all participants are in a listen-only mode and later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference call is being recorded, Tuesday, November 16, 2010.

I would like to turn the conference call over to Ms. Carol Meyrowitz, President and CEO for The TJX Companies, Inc. Please go ahead, ma'am.

Carol Meyrowitz

Thank you, Elan and good morning, everyone. And before we get started, Sherry has a few comments.

Sherry Lang

Good morning. The forward-looking statements we make today about the company's results and plans are subject to risks and uncertainties that could cause the actual results and the implementation of the company's plans to vary materially. These risks are discussed in the company's SEC filings, including without limitation, the Form 10-K filed March 30, 2010.

Further, these comments and the Q&A that follows are copyrighted today by The TJX Companies. Any recording, retransmission, rebroadcast, reproduction or other use of the same for profit or otherwise without prior consent of TJX is prohibited and a violation of the United States copyright and other laws.

Additionally, while we have approved the publishing of a transcript of this call by a third party, we take no responsibility for inaccuracies that may appear in that transcript. Please note that the financial results and expectations we discuss today are on a continuing operations basis.

Also, we have detailed the impact of foreign exchange on our consolidated results and our international divisions in today's press release and the Investor Information section of our website, www.tjx.com. As a reminder, the comparable store sales numbers that we talk about today are on a constant currency basis.

With respect to the non-GAAP measures we discuss today, reconciliations to GAAP measures are included in today's press release and posted on our website, www.tjx.com in the Investor Information section.

Thank you and now I’ll turn it over to Carol.

Carol Meyrowitz

Thanks, Sherry and good morning, again and joining me on the call today with Sherry are Jeff Naylor and Ernie Herrman.

Let me begin by saying that I'm very pleased with our 14% EPS growth in third quarter on top of 40% EPS growth last year. We drove this growth on a 1% comp increase over 7% increase last year demonstrating the power of our business model to deliver sustainable margins even at a lower level of comp. Our customer traffic was up over huge increases last year and we achieved these results despite average tickets still being slightly down. We continue to run the business with lower levels of inventory, which is driving faster inventory turns and stronger merchandise margin. We are very confident that this is sustainable. Further, we delivered these strong results despite unfavorable warm weather in September and October. We entered the fourth quarter with very lean inventories and even more open to buys for the quarter than we had at this time last year. This set us up extremely well to buy into the exciting opportunities we are currently seeing from great brands and fashions in the marketplace. I'll keep my comments brief today starting with the recap of our third quarter performance.

First, I want to spend a moment on why we believe in the sustainability of our margin and how our supply chain improvements play into that. Next, although we are not going to get specific until our year-end call in February when we have finalized our plans, I will share with you some of our thinking about growth for next year. We continue to look for 5 to 6% square footage growth but currently plan to get there a little differently. I'll wrap up with our outlook and opportunities for the holidays and the fourth quarter.

Before I continue let me turn the call over to Jeff to recap the numbers for the third quarter.

Jeff Naylor

Yes, thanks Carol. Good morning, everybody. Let me recap the third quarter results. Net sales reached $5.5 billion, that's a 5% increase over last year. Third quarter consolidated comp stores sales were up 1% on top of last year's strong 7% increase and as Carol mentioned the increase was driven by growth in the number of transactions with the average ticket slightly down.

Diluted EPS for the quarter was $0.92. That compares with last year's $0.81 per share and again, that's a 14% increase on top of last year's 40% EPS growth. Foreign currency rates negatively impacted our year-over-year EPS comparisons by two pennies. However, EPS comparisons were favorably impacted by a lower tax rate and reduced interest expense which, together essentially offset the foreign exchange impact so all those items in aggregate were neutral to the overall consolidated performance.

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