TJX profit falls on weather, data breach
18.05.2007, 11:01
TJX Cos. Inc. reported quarterly operating profit that missed Wall Street estimates by a penny, as unseasonably cold and wet weather in many U.S. regions dampened sales at the off-price retailer.
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On a net basis, the operator of the Marshalls, T.J. Maxx and HomeGoods chains reported a 1-percent drop in earnings due to a $12 million charge related to a recent security breach of the retailer's computer system.
The Framingham, Massachusetts-based company posted net income for the first quarter ended April 28 of $162.1 million, or 34 cents per share, down from $163.8 million, or 34 cents per share, a year earlier.
The company's shares were down 1.7 percent to $27.88 in noon trading on the
New York Stock Exchange.
Excluding the charge, the retailer earned 37 cents a share. Analysts on average were expecting 38 cents, excluding items, according to Reuters Estimates.
Net sales for the quarter rose to $4.11 billion from $3.87 billion a year ago, as sales at stores open at least a year rose 2 percent, which Chief Executive Carol Meyrowitz said was "slightly below plan" due to the bad weather. Nonetheless, she said the company was able to achieve its plan for quarterly earnings by leveraging expenses.
Lazard Capital Markets analyst Todd Slater said in a research note that TJX's management had proven its ability to control costs when sales become soft.
"We think the first quarter will prove to be the company's most challenging quarter and that investors should be buying the dips," Slater said. He has a "buy" rating on the shares.
TJX said it expects same-store sales growth of 3 percent to 4 percent for the second quarter and 3 percent for the year.
SECURITY BREACH HURTS PROFIT
TJX said the charge in the second quarter was for costs incurred to investigate and contain the computer intrusion, enhance computer security and systems, and communicate with customers, as well as technical, legal and other fees.
Beyond these costs, the company said it does not yet have enough information to reasonably estimate the losses it may incur from the incident, including exposure to payment card companies and banks and various legal proceedings that are pending or may arise.
TJX has said that data from 45.7 million credit and debit cards, as well as personal information from about 451,000 customers, was stolen in a computer security breach over 18 months through mid-January.
Last month a banking industry body said groups representing 300 banks were planning to file a class-action lawsuit against TJX, seeking at least tens of millions of dollars in damages.
TJX said it expects earnings from continuing operations of 32 cents to 34 cents per share for the second quarter, excluding charges of 2 cents to 3 cents per share related to the security breach. Analysts on average were expecting 34 cents, excluding items, according to Reuters Estimates.
The company affirmed its full-year outlook for operating profit of $1.80 to $1.85 per share, excluding charges. Analysts on average had been expecting $1.85 per share, according to Reuters Estimates.
TJX currently trades at 15.4 times estimated earnings for the current fiscal year, below the average of its peers on the Dow Jones Titan Retail Index (^DJTRET - news), which has an average price to earnings multiple of 18.1.