TO OUR FELLOW SHAREHOLDERS:
The year 2003 was one of steady
growth and strong performance for The TJX Companies.
In a challenging retail environment, we achieved significant
sales and profit increases, and are pleased that our
earnings per share growth was at the higher end of our
expectations. We stated at the outset of the year that
our best growth opportunities would be in the second
half of 2003 and the year unfolded as we had expected
it would, with a very strong finish. We attribute a
good deal of our strong 2003 performance to the flexibility
of our business model and the successful execution of
our merchandising and inventory strategies. We also
benefited from successful expense control, as well as
an extra week in this year?s 53-week fiscal calendar.
We are pleased that our strong results led to a 44%
after-tax return on average shareholders? equity, which
we achieved while maintaining an excellent financial
position. 2003 marked the fifth consecutive year that
we have achieved an after-tax return on average shareholders?
equity of 42% or greater, putting us in the upper echelon
of the retail industry. Diluted earnings per share were
$1.28, which represents a 19% increase over $1.08 in
2002. Net income reached $658 million compared with
$578 million last year, a 14% increase. Revenues grew
11% to $13.3 billion for the 53-week fiscal year, compared
with 2002?s 52-week fiscal year. Comparable store sales
increased 1% on a comparable 52-week basis, which was
below our expectations, but offset by strong merchandise
margin performance. Also, foreign currency exchange
rates benefited our consolidated comparable store sales
and profit increases.
STEADY GROWTH AT
MARMAXX AND WINNERS
The Marmaxx Group,
the internal combination of T.J. Maxx and Marshalls,
delivered very solid results, achieving total sales
of $9.9 billion in 2003. While comparable store sales
for the year decreased 1% from the previous year, new
stores performed very well and Marmaxx achieved excellent
bottom-line results. Segment profit increased by 8%
to $962 million in 2003, over the $888 million earned
last year, and segment profit margin reached 9.7%, which
was ahead of our expectations. Marmaxx?s ability to
deliver strong margin performance in a challenging year
is testament to this division?s sharp execution of its
off-price merchandising and inventory strategies. Marmaxx
also benefited from its increased distribution capacity,
which has given our merchandising organization even
greater ability to make purchase decisions later in
the selling cycle, resulting in better, smarter buys
and greater merchandise margins.
Our Marmaxx division continues to grow and successfully
open stores across the U.S. In 2003, we netted a total
of 76 additional T.J. Maxx and Marshalls stores, ending
the year with 1,418 stores. The ongoing excellent performance
of our new stores gives us great confidence in our ability
to continue to grow this division and ultimately, operate
a total of 1,800 T.J. Maxx and Marshalls stores.
Winners and HomeSense, our Canadian
businesses, topped the billion-U.S.-dollar mark, reaching
$1.1 billion in total sales. Comparable store sales
increased 19% in U.S. dollars and 4% in local currency,
which we believe more meaningfully reflects our operating
performance. Segment profit margin was 9.9% and segment
profit increased 25% to $107 million, reflecting the
growth of our Canadian businesses and the favorable
currency exchange rate. We are very pleased with the
continued growth of Winners and the expansion of HomeSense,
our Canadian home fashions concept. Winners received
great customer response for this division?s first superstores,
which it opened in 2003. We added 14 Winners and 10
HomeSense stores to end the year with 160 Winners and
25 HomeSense locations.
GREAT PERFORMANCE
OF YOUNGER BUSINESSES
We are delighted with the performance
of our younger businesses, which continue to make greater
contributions to our consolidated results. HomeGoods
grew sales to $877 million and outpaced our bottom-line
expectations with a segment profit increase of 55% in
2003. While comparable store sales for this division
increased 1%, which was below our expectations, we are
very pleased with HomeGoods? strong segment profit margin,
which reached 5.7% for the year. Great results at new
stores, along with excellent execution of its merchandising
and inventory strategies, were the drivers of HomeGoods?
strong year. HomeGoods opened 40 stores in 2003, ending
the year with 182, and we look forward to the continued
successful growth of this exciting off-price concept.
T.K. Maxx, in the U.K. and Ireland,
had an outstanding year in 2003, exceeding both our
sales and profit goals. Sales totaled $992 million and
comparable store sales increased 16% in U.S. dollars
and 6% in local currency. Segment profit increased 37%
to $59 million and segment profit margin was 6.0%. These
results were driven by T.K. Maxx?s solid execution of
its merchandising and inventory strategies, its continued
levering of expenses as this business grows, and to
a smaller extent, currency exchange rates. T.K. Maxx
completed the year with 147 stores by adding 24 locations,
including several large-format T.K. Maxx stores. These
larger stores utilize mezzanine floor space to add more
selling square footage at little incremental occupancy
cost. We are very pleased with the performance of T.K.
Maxx and how the growth prospects for this division
are developing.
A.J. Wright had an excellent year,
far surpassing our expectations by achieving profitability
for the year, when we had anticipated that A.J. Wright
would only narrow its operating loss in 2003. A.J. Wright?s
sales were also above plan, increasing to $422 million,
and comparable store sales increased 8%. This young
division achieved these strong results while continuing
to aggressively grow its store base, adding 24 new stores
to end the year with 99 stores. Further, in 2003, we
saw a continuation of strong performance at our new
stores. Also, A.J. Wright doubled its distribution capacity
with the addition of a second distribution center, located
in the Midwest. A.J. Wright is a unique shopping destination
for the moderate-income consumer, whether she is seeking
great values on ?fast fashion? or basic items, and remains
a significant long-term growth vehicle for our Company.
NEWEST SEED FOR
FUTURE GROWTH
Bob?s Stores,
which we acquired in late 2003, is a 31-store, value-oriented,
branded apparel retailer based in the Northeast that
fits well with our Company, strategically and culturally.
TJX acquired Bob?s Stores for a purchase price of approximately
$58 million. Bob?s Stores? merchandise assortment includes
family, casual and active apparel, emphasizing menswear,
workwear and shoes. Bob?s Stores brings with it a very
loyal, male-oriented customer base, which complements
our largely female customer profile. We plan to grow
Bob?s Stores slowly and deliberately at first, taking
time to get the concept right before rolling out its
store base more aggressively. Long term, we believe
Bob?s Stores has the potential to be a 400-store retail
chain. We are very excited about the growth prospects
for Bob?s Stores and are delighted to welcome this strong
organization to the TJX family of companies.
EXCESS CASH AND
STRONG BALANCE SHEET
In 2003, our businesses once
again produced excellent returns on investment, which
allowed us to grow our Company, maintain a strong balance
sheet, and create value for our shareholders. Our excellent
credit rating is among the highest in the entire retail
industry. We continue to generate significant amounts
of excess cash and, in addition to investing in our
operations, we increased shareholder value through our
aggressive share repurchase program. In 2003, we repurchased
$515 million in TJX stock, retiring 27 million shares.
Since 1997, we have repurchased $3.1 billion in TJX
stock, retiring 236 million shares. As always, we remain
committed to increasing shareholder value. With our
strong balance sheet and ability to generate significant
amounts of excess cash from our businesses, we are confident
in our ability to continue to provide value to our shareholders
through both dividend payments and the share repurchase
program.
DEPTH IN MANAGEMENT
TEAM
After the end of the year,
we repositioned our senior management team to more strategically
align our divisions and support our ongoing growth plans.
Donald Campbell has transitioned from the position of
Chief Financial Officer to Chief Administrative and
Business Development Officer, a critical role as we
expand our current businesses and add new businesses
to our organization. Jeffrey Naylor, who has extensive
experience in senior financial positions in the retail
and consumer products industries, joined TJX to succeed
Don Campbell in the position of Chief Financial Officer.
In March 2004, Arnold Barron, Peter Maich, Carol Meyrowitz,
and Alex Smith were promoted to Senior Executive Vice
Presidents, along with Don Campbell and Jeff Naylor.
We are very pleased with these moves, which better position
us for future growth, and are fortunate to have such
a wealth of talent within our organization from which
to draw.
Additionally, at Winners, in Canada, David Margolis
retired as President of that division in May 2003. We
extend our sincere gratitude to David, who joined TJX
in 1990, for his many years of service to the Company.
CONFIDENCE IN OUR
FUTURE
Opportunities at TJX abound
in our current portfolio of concepts, which include
a number of growth vehicles. New stores across all divisions
are performing very well. Our Marmaxx and Winners divisions
continue to grow, and our younger divisions are contributing
more to our Company each year. We believe that we can
grow to a Company of over 4,400 stores from our current
concepts alone.
There is an excitement in the air at The TJX Companies
as we make further inroads in certain areas of our business
and embark in new directions. With the acquisition of
Bob?s Stores, we have yet another vehicle for long-term
growth. In 2004, we expect to launch two e-commerce
websites so that customers can shop our T.J. Maxx and
HomeGoods concepts on the Internet. Also, we have successfully
tested and plan to roll out expanded jewelry and accessories
departments at T.J. Maxx and an expanded footwear department
at Marshalls, further differentiating these concepts.
We expect to open 182 stores on a consolidated basis
during 2004 and to grow selling square footage by 9%.
Our financial strength affords us the flexibility to
invest in growing our businesses and developing new
ones, while we continue to deliver value to our shareholders.
We thank all of our dedicated Associates, who now number
approximately 105,000, our customers, our vendors, our
other business associates, and our fellow shareholders
for their ongoing support.
Respectfully, |
