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"TJX's staunch commitment to the communities in which we have a corporate and retail presence continues to be a cornerstone of our Company. Through The TJX Foundation and other corporate contributions, our philanthropic efforts center on those organizations that help needy families and children."
The TJX Companies, Inc. is the largest off-price apparel retailer in North America. Each of its operating divisions approaches off-price apparel retailing from a different perspective. T.J. Maxx, the largest retailer of its kind in the United States with 578 stores nationwide, offers brand-name family apparel, fine jewelry, house and gift wares, as well as women's shoes and accessories at prices 20 to 60 percent below department store regular prices. Marshall's is the nation's second largest off-price apparel retailer. Acquired by TJX in 1995, Marshall's operates over 450 stores nationwide, offering brand-name family apparel, giftware, domestics, and accessories, as well as shoes for the entire family and a broad assortment of menswear. Winners Apparel Ltd. and T.K. Maxx, each modeled after the T.J. Maxx concept, are leading off-price family apparel chains in Canada and the United Kingdom, respectively. HomeGoods, a chain of off-price home fashion stores, operated 21 stores at the end of 1996, offering giftware, bed and bath accessories, rugs, lamps, and seasonal merchandise.
The TJX Companies, Inc. traces its history to Zayre Corp., parent of the Zayre Store chain of discount department stores incorporated in 1962. The first Zayre--Yiddish for "very good"--store opened in Hyannis, Massachusetts, in 1956. Its founders were two cousins, Stanley and Sumner Feldberg. With sales doubling every second or third year, the Feldbergs were quick to establish new Zayre stores, which numbered more than 200 by the early 1970s. By then, the company had diversified into specialty retailing.
Among Zayre's early acquisitions was the Hit or Miss chain, which opened its first store in Natick, Massachusetts, in 1965. The store flourished and grew into a chain so quickly that within four years it had attracted the attention of a giant by comparison, Zayre. In 1969 Zayre bought the Hit or Miss chain and began its exploration of the upscale off-priced fashion market. Zayre's timing could not have been better. During the recession of the 1970s, Hit or Miss's results climbed so rapidly that Zayre began to think of expanding its off-priced upscale apparel merchandising.
The T.J. Maxx concept was also inspired in part by this recession. Bernard Cammarata, once a buyer himself and the future president and CEO of TJX, was hired by Zayre Corp. to capitalize on the potential for a chain offering off-priced upscale apparel for the whole family. In Auburn, Massachusetts, in March 1977, he opened the first T.J. Maxx.
Within six years of the opening of the first T.J. Maxx store, Zayre had found yet another avenue to the off-priced fashion market. In 1983 Chadwick's of Boston began to sell selected Hit or Miss items through mail-order catalogs. Hit or Miss and Chadwick's crossover operations allowed customers to handle products before ordering, and brought the frequent buyer the convenience of home shopping.
By the mid-1980s off-priced specialty retailing was becoming more important to Zayre. Hit or Miss and T.J. Maxx had brought in just 14 percent of the company's operating income in 1980; by the first half of 1983 these operations were producing nearly 45 percent of income. At the same time, however, Zayre was renovating its discount department stores and expanding its product mix. In 1984 Zayre entered the membership warehouse-club market, launching B.J.'s Wholesale Club, and also acquired Home Club, Inc., a chain of home improvement stores, the following year. While neither of these ventures was immediately profitable, Hit or Miss and T.J. Maxx continued to thrive.
By 1986 the number of Hit or Miss stores in the United States had reached 420, and sales had climbed to $300 million. Some 70 percent of its inventory was made up of nationally known brands. The remaining 30 percent consisted of standard apparel, such as turtlenecks and corduroy pants, which were produced by Hit or Miss under its own private label. With such a merchandise mix, Hit or Miss was able to sell current fashion at 20 to 50 percent less than most specialty stores.
In 1986 profits of the Zayre chain, targeting low- to middle- income customers, dropped, although T.J. Maxx, Hit or Miss, and Chadwick's of Boston, targeting mid- to higher-income customers, continued to grow. That year alone, Zayre Corp. opened 35 more T.J. Maxx stores and 31 new Hit or Miss stores. In fact, Zayre Corp.'s off-priced retailing chains were so successful that by 1987 Zayre thought it prudent to organize them under one name and grant them autonomy from the decreasingly prosperous parent company.
TJX Companies is Established and Zayre is Sold
In June 1987 just ten years after its flagship chain, T.J. Maxx, opened its first store, The TJX Companies, Inc. was established as a subsidiary of Zayre. It sold 9.35 million shares of common stock in its initial public offering; Zayre owned 83 percent of the subsidiary.
During this time, Zayre was facing several challenges. In the first half of 1988, Zayre had operating losses of $69 million on sales of $1.4 billion. Observers blamed technological inferiority, poor maintenance, inappropriate pricing, and inventory pileups, and speculated Zayre was ripe for takeover. Throughout all this, subsidiary The TJX Companies continued to yield a profit.
In October 1988 the company decided to focus on TJX. It sold the entire chain of over 400 Zayre Stores to Ames Department Stores, Inc. In exchange, the company received $431.4 million in cash, a receivable note, and what was then valued at $140 million of Ames cumulative senior convertible preferred stock.
The company continued to hone in on its profitable new core business, selling unrelated operations. In June 1989 it spun off its warehouse club division, Waban, Inc., which owned B.J.'s and Home Club. Zayre gave shareholders one share of Waban for each two shares of Zayre they owned, as well as a $3.50 per share cash payment. The same month, the company acquired an outstanding minority interest in TJX. On the day it acquired the minority interest, the company merged with TJX. Later that month, the company changed its name from Zayre Corp. to The TJX Companies, Inc. The newly named company began trading on the New York Stock Exchange.
The company's transition into an off-priced fashion business was relatively smooth, but the Ames preferred stock it received in the Zayre transaction had been a problem. This preferred stock was not registered and had no active market. While the stock was entitled to six percent annual dividends, Ames had the option of paying the first four semi-annual dividends with more Ames preferred stock rather than cash, an option that Ames exercised for each of the payments it had met. However, the value of Ames preferred stock was dubious, as Ames had been closing stores and experiencing losses.
In April 1990, TJX established a $185 million reserve against its Ames preferred stock and contingent lease liabilities on former Zayre stores as a result of Ames's announcement of continued poor performance. That same month, Ames filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.
The 1990s: Winners and Losers
On a bright note, TJX's operations remained solid. In 1991 T.J. Maxx, by far the company's largest division, posted record results for the 15th consecutive year since it opened. At the end of 1991 T.J. Maxx had 437 stores in 46 states. It planned to open many more stores, focusing primarily on the only scantily penetrated southwestern United States, as well as expanding several existing stores. T.J. Maxx also planned to follow up its success in jewelry and shoes by opening up these respective departments at locations that did not carry these items. It also planned to expand high-performance nonapparel categories, such as giftware and domestic items. T.J. Maxx also embarked on an effort to enlarge a number of stores to a larger format ranging from 30,000 to 40,000 square feet. This change facilitated expansion of all departments, especially giftware and housewares, as well as other nonapparel categories. T.J. Maxx opened 21 stores during 1996 and closed 30. The store recorded excellent sales in 1996, which increased five percent over the previous year.
The purchase of Marshalls from the Melville Corp. brought TJX a prize to complement T.J. Maxx. The immediate plan called for closing certain underperforming T.J. Maxx and Marshalls stores. Marshalls opened 11 stores in 1996 and closed 53. Sales at Marshalls rose ten percent in 1996. Fifteen openings and 50 closings were planned for 1997; more were not expected, since many of the existing stores had performed so well. TJX credited this success with its back-to-basics approach. The prior Marshall ownership had strayed from off-price strategies, so TJX refocused the business. It emphasized nonpromotional marketing, quality brand names at low prices, and timely markdowns&mdashø draw customers back and strongly.
Success at T.J Maxx and Marshalls hinged on execution of the off-price concept, which demanded rapid inventory turnover at the store level. "Opportunistic buying" was done "in season," that is, close to customer need. Merchandise moved into warehouses and out to stores through state-of-the-art distribution centers and sophisticated inventory tracking systems. In effect, each of the 1,000-plus stores received two shipments of merchandise with a total of 10,000 items. Markdowns also played a major role, adding value for customers and clearing shelves. Despite the similarities in operations, TJX was determined that T.J. Maxx and Marshalls retain distinct identities.
TJX ventured into Canada in 1990 to acquire the five-store Winners Apparel Ltd. chain. Building on the off-price concept, similar to that of T.J. Maxx, Winners opened 13 stores in 1996, bringing its total to 65. Moreover, Winners planned on opening about 13 more stores in 1997. TJX viewed Winners as a meaningful way to expand over the next several years&mdashout 12 new stores per year for the next several years. In fact, store sales posted an increase of 13 percent in 1996, plus an increase in operating income of 114 percent.
T.K. Maxx, also inspired by the T.J. Maxx concept, caught on in the United Kingdom in 1996. Comparable store sales increased by 30 percent, outperforming any predicted sales figures. This move abroad proved that further expansion was key to TJX's growth strategy.
Not all the news among TJX holdings was good. Despite concerted efforts to bolster merchandise assortment and value, sales at TJX's HomeGoods stores flagged. Moreover, Hit or Miss had a difficult time in the early 1990s, transitioning its business in a recessionary economy. After closing many nonperforming stores and renovating others, TJX sold this women's specialty division in 1995.
In late 1996 the company also sold its Chadwick's of Boston catalog division to Brylane L.P., owner of the Lane Bryant women's fashion chain. Proceeds from the sale totaled about $300 million, plus cash, a note, and certain receivables. The after-tax gain enabled TJX to repay about $500 million of debt, including the debt incurred in relation to the 1995 acquisition of Marshalls. The transaction left TJX with a stronger cash position and in a position of greater flexibility.
Overall, 1996 was a banner year for The TJX Companies. Sales from continuing operations hit $7 billion, up from $4 billion in 1995, fueled largely by the Marshalls acquisition and the economies of scale it allowed TJX to achieve. Focusing on containing expenses in order to pass greater values on to the customer and thereby increase sales volume, TJX expected to see continued earnings growth as the 20th century drew to a close. At the same time, the T.K. Maxx chain in England, planning on expansion onto the European Continent, represented another encouraging prospect for growth.
Principal Divisions: T.J. Maxx; HomeGoods; Marshalls; T.K. Maxx (United Kingdom); Winners Apparel Ltd. (Canada).
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