The TJX Companies (TJX)

Q4 2012 Earnings Call

February 22, 2012 11:00 am ET

Executives

Carol M. Meyrowitz - Chief Executive Officer and Director

Sherry Lang - Senior Vice President of Global Communications

Jeffrey Naylor - Chief Administrative Officer, Chief Accounting Officer and Senior Executive Vice President

Ernie Herrman - President

Analysts

Stacy W. Pak - Barclays Capital, Research Division

Rick B. Patel - BofA Merrill Lynch, Research Division

Jeffrey S. Stein - Northcoast Research

Adrianne Shapira - Goldman Sachs Group Inc., Research Division

Kimberly C. Greenberger - Morgan Stanley, Research Division

Paul Lejuez - Nomura Securities Co. Ltd., Research Division

Maren Kasper - Wells Fargo Securities, LLC, Research Division

Jennifer M. Davis - Lazard Capital Markets LLC, Research Division

Daniel Hofkin - William Blair & Company L.L.C., Research Division

Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division

Roxanne Meyer - UBS Investment Bank, Research Division

David Weiner - Deutsche Bank AG, Research Division

Mark K. Montagna - Avondale Partners, LLC, Research Division

Dana Lauren Telsey - Telsey Advisory Group LLC

Jeff Black - Citigroup Inc, Research Division

Presentation

Operator

Compare to:
Previous Statements by TJX
» The TJX Companies, Inc., Jan 2012 Sales/ Trading Statement Call, Feb 02, 2012
» TJX Companies Management Release December 2011 Sales/ Trading Statement (Transcript)
» The TJX Companies' CEO Discusses Q3 2012 Results - Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. Welcome to the TJX Companies Fourth Quarter and Full Fiscal 2012 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, Wednesday, February 22, 2012. I would like to turn the conference call over to Ms. Carol Meyrowitz, Chief Executive Officer of the TJX Companies, Inc. Please go ahead, ma'am.

Carol M. Meyrowitz

Thanks, Candy. And before we get started, Sherry has a few words.

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, 2011.

Further, these comments and the Q&A that follows are copyrighted today by the TJX Companies. Any recording, retransmission, 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 in the Investor Information section of our website, www.tjx.com. Reconciliations of the non-GAAP measures we discuss today to GAAP measures are included in today's press release or otherwise posted on our website, again, www.tjx.com, in the Investor Information section. Thank you.

And now I'll turn it back to Carol.

Carol M. Meyrowitz

Thanks, Sherry, and good morning. Joining Sherry and me on the call are Ernie Herrman, Jeff Naylor and Scott Goldenberg, who as you know was promoted to CFO last month. We are very pleased Scott is taking on a bigger role at TJX, and we'll continue to benefit from the combined leadership of Jeff and Scott. Jeff will be reviewing the financials on our call today, and going forward, Scott will be doing this.

2011 was another great year for TJX. On an adjusted basis, earnings per share increased 14% and our 5-year compound annual EPS growth rate is 20%. Consolidated comps increased 4% on top of 4% and 6% increases in the past 2 years, respectively. We believe that these numbers speak for themselves as for the sustainability and strength of our business model. 2012 is off to a very strong start, and we see ourselves as being at an exciting inflection point with great momentum working in our favor.

Today, we'll be keeping the conversation on this call very strategic. We'll tell you how we are investing and positioning TJX for the next level of growth and why we're so confident in our short- and long-term future, and importantly, why we are investing more aggressively for the future. We expect our investments to start to flatten out in calendar 2013 and are maintaining our model of 10% to 13% annual EPS growth, which assumes a 2% comp increase. We are confident that we will deliver as always and will strive to exceed these goals.

Before I continue, let me turn the call over to Jeff to recap full year and fourth quarter results.

Jeffrey Naylor

Okay. Thanks, Carol. Good morning, everyone. Upfront, let me remind everyone that our 2-for-1 stock split was completed earlier this month, so all of our EPS and share numbers are now on a split-adjusted basis. And as Sherry noted at the top of the call, we will be referring to adjusted numbers in today's remarks, which exclude the impact of the A.J. Wright consolidation in both fiscal '12 and fiscal '11. As well, I'd also include an intrusion-related adjustment that impacted fiscal '11.

So let me now turn to the full year fiscal 2012 results. Our net sales reached $23.2 billion, that's a 6% increase over last year. Consolidated comp store sales were up 4% on top of very strong increases in the past 2 years, as Carol noted earlier. The 4% comp in fiscal 2012 was driven by a balanced increase between ticket and transactions as we continue to grow our customer base. On an adjusted basis, earnings per share were $1.99, a 14% increase on top of the last 2 years increases of 23% and 48%, respectively. Obviously, we're very pleased to sustain such strong EPS growth up against a very difficult comparison. Foreign currency rates added $0.01 to earnings per share this year compared to a $0.01 negative impact in the prior year but had no impact on pretax margin comparisons.

Now in our press release today, we called out the impact of certain fourth quarter items on EPS and pretax margins in both the full year and the fourth quarter period. These fourth quarter items include costs related to the closing of the company's StyleSense stores in Canada, an early retirement program, the closure of a European office facility, a separation agreement and certain write-offs and adjustments at TJX Europe. Those were offset in part by the net benefit of favorable tax adjustments. And normally, we don't go into this level of detail on operations, but these items, which we discussed in prior sales releases and which were significant in the aggregate, were not anticipated in our original guidance. And they're large enough to impact profit flow-through and year-over-year comparison, so we thought we would call them out and talk to them. Combined, these items reduced EPS by $0.02 for both the fourth quarter and the full year and also reduced consolidated pretax profit margins by 20 basis points for fiscal 2012 and by 50 basis points for the fourth quarter. And the majority of this margin impact is in SG&A. So that's a little bit about the fourth quarter items.

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