TJX CEO Discusses F2Q2011 Results - Earnings Call Transcript

TJX CEO Discusses F2Q2011 Results - Earnings Call Transcript
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The TJX Companies, Inc. (TJX)

F2Q2011 Earnings Call Transcript

August 17, 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

Stacy Pak – SP Research, Inc.

Evren Kopelman – Wells Fargo Securities

Jeff Stein – Soleil-Stein Research LLC

Daniel Hofkin – William Blair & Co.

Adrianne Shapira – Goldman Sachs

Jennifer [ph] – Lazard Capital Markets

Brian Tunick – JPMorgan

David Weiner – Deutsche Bank

Marni Shapiro – The Retail Tracker

Rob Simone – Cowen and Company

Dana Telsey – Telsey Advisory Group

Sandra Barker [ph]

Presentation

Operator

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Welcome to The TJX Companies' second quarter fiscal 2011 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference call is being recorded Tuesday, August 17th, 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

Good morning. And before we begin, Sherry has a few comments to make.

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, 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. Please note that the EPS results we discuss that includes the second quarters of fiscal 2011 through fiscal 2008 have been adjusted to exclude an item impacting comparability in those quarters, which is reconciled on our website.

Thank you. And now, I will turn it back to Carol.

Carol Meyrowitz

Thanks, Sherry. Joining me on the call today with Sherry are Jeff Naylor and Ernie Herrman.

Let me begin by saying that we are very pleased with our second quarter performance, as our 20% adjusted EPS was at the high end of our previously raised expectations. We believe it's important to point out that this was achieved on top of successive EPS increases over the prior year, 27% last year, which was on top of 26% the year before and 27% the year before that.

Also noteworthy is that we drove these year-over-year results in both strong and weak retail climate, which points to our consistency and ability to grow the top and bottom lines in various economic environments. This continues to reinforce the power of the TJX model.

I will keep my comments brief today, beginning with a recap of our second quarter performance. Then I will share our outlook for the back half of the year and why we are confident in the sustainability of our top and bottom line growth. Finally, I will reiterate our long-term goals for our global growth.

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

Jeff Naylor

Yes, thanks Carol. Good morning, everyone. So let me recap second quarter results. Our net sales reached $5.1 billion, that's a 7% increase over last year. The second quarter consolidated comp stores sales increased 3% and I should point out that's on top of 3% to 4% increases in each of the past four years.

Diluted earnings per share were $0.74 compared with last year's $0.61 per share. EPS benefited from a reduction in the provision related to the previously announced computer intrusions, which positively impacted EPS by $0.01 per share during the quarter. And if were to exclude that benefit, diluted EPS was $0.73, which is a 20% increase over last year. Year-over-year EPS growth for the quarter was positively impacted by foreign currency rates by approximately $0.01, but a higher tax rate adversely impacted EPS by $0.02, so that's a little bit on quality of earnings.

Consolidated pretax profit margin was 9.8%. That's up 110 basis points over prior year and that includes a 20-basis point positive impact from the intrusion provision benefits that I mentioned earlier. On an adjusted basis, excluding that benefit, pretax margins were 9.6%. That's up 90 basis points over the prior year. These were also – I should mention that pretax margin was also above the high end of our original guidance and that was primarily due to merchandise margin favorability.

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