| TJX COMPANIES INC /DE/ ITEM 1A RISK FACTORS The statements in this Section describe the major risks to our business and should be considered carefully |
| In addition, these statements constitute our cautionary statements under the Private Securities Litigation Reform Act of 1995 |
| 6 _________________________________________________________________ [52]Table of Contents Our disclosure and analysis in this 2005 Form 10-K and in our 2005 Annual Report to Shareholders contain some forward-looking statements, including some of the statements made under Item 1, “Business,” Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 8, “Financial Statements and Supplementary Data,” and in our 2005 Annual Report to Stockholders under “Letter to Shareholders” and “Financial Graphs |
| ” From time to time, we also provide forward-looking statements in other materials we release to the public as well as oral forward-looking statements |
| Such statements give our current expectations or forecasts of future events; they do not relate strictly to historical or current facts |
| We have generally identified such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will,” “target,” “forecast” and similar expressions in connection with any discussion of future operating or financial performance |
| All statements that address activities, events or developments that we intend, expect or believe may occur in the future are forward-looking statements |
| In particular, these include statements relating to future actions, future performance or results of current and anticipated sales, expenses, interest rates, foreign exchange rates, the outcome of contingencies, such as legal proceedings, and financial results |
| We cannot guarantee that any forward-looking statement will be realized |
| Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions |
| Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected |
| We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise |
| You are advised, however, to consult any further disclosures we make on related subjects in our Form 10-Q and 8-K reports to the SEC The risks that follow, individually or in the aggregate, are those that we think could cause our actual results to differ materially from those stated or implied in forward-looking statements |
| You should understand that it is not possible to predict or identify all such factors |
| Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties |
| Our revenue growth could be adversely affected if we do not continue to expand our operations successfully |
| TJX has rapidly expanded the number of chains and stores it operates and its selling square footage |
| Our revenue growth is dependent upon our ability to continue to expand successfully through new store openings as well as our ability to increase same store sales |
| Successful store growth requires selection of store locations in appropriate geographies, availability of attractive stores or store sites in such locations and negotiation of acceptable terms |
| Competition for desirable sites and increases in real estate, construction and development costs could limit our growth opportunities |
| Even if we succeed in opening new stores, these new stores may not achieve the same sales or profit levels as our existing stores |
| Further, expansion places demands upon us to manage rapid growth, and we may not do so successfully |
| We may have difficulty extending our off-price model in new product lines, chains and geographic regions |
| TJX has expanded its original off-price model into different product lines, chains, geographic areas and countries |
| TJX’s growth is dependent upon our ability to successfully execute our off-price retail apparel and home fashions concepts in new markets and geographic regions |
| If the Company is unable to successfully execute its concepts in these new markets and regions, or if consumers there are not receptive to the concepts, TJX’s financial performance could be adversely affected |
| If we fail to execute our opportunistic buying and inventory management well, our business could be adversely affected |
| TJX purchases the majority of our inventory opportunistically with our buyers purchasing close to need |
| To drive traffic to the stores and to increase same store sales, the treasure hunt nature of the off-price buying experience requires continued replenishment of fresh high quality, attractively priced merchandise |
| While opportunistic buying enables our buyers to buy at the right time and price, in the quantities we need and into market trends, it places considerable discretion in our buyers, subjecting us to risks on the timing, quantity and nature of inventory flowing to the stores |
| We rely on our expansive distribution infrastructure to support delivering goods to our stores on time |
| We must effectively and timely distribute inventory to stores, maintain an appropriate mix and level of inventory and effectively manage 7 _________________________________________________________________ [53]Table of Contents pricing and markdowns |
| Failure to acquire and manage our inventory well and to operate our distribution infrastructure effectively, can adversely affect our performance and our relationship with our customers |
| Our success depends upon our marketing, advertising and promotional efforts |
| If we are unable to implement them successfully, or if our competitors are more effective than we are, our revenue may be adversely affected |
| We use marketing and promotional programs to attract customers to our stores and to encourage purchases by our customers |
| We use various media for our promotional efforts, including print, television, database marketing and direct marketing |
| If we fail to choose the appropriate medium for our efforts, or fail to implement and execute new marketing opportunities, our competitors may be able to attract some of our customers and cause them to decrease purchases in our stores and increase purchases elsewhere, which might negatively impact our revenues |
| Changes in the amount and degree of promotional intensity or merchandising strategy by our competitors could cause TJX to have difficulties in retaining existing customers and attracting new customers |
| Unseasonable weather in the markets in which our stores operate could adversely affect our operating results |
| Customers’ willingness to shop and their demand for the merchandise in our stores is affected by adverse and unseasonable weather |
| Frequent or unusually heavy snow, ice or rain storms, severe cold or heat or extended periods of unseasonable temperatures in our markets could adversely affect our sales and increase markdowns |
| We operate in highly competitive markets, and we may not be able to compete effectively |
| The retail business is highly competitive |
| TJX competes for customers, associates, locations, merchandise, services and other important aspects of its business with many other local, regional, national and international retailers |
| TJX also faces competition from alternative retail distribution channels such as catalogues and internet sites |
| Changes in the merchandising, pricing and promotional activities of those competitors and in the retail industry generally, may adversely affect our performance |
| If we do not attract and retain quality sales, distribution center and other associates in large numbers as well as experienced buying and management personnel, our performance could be adversely affected |
| TJX’s performance is dependent on recruiting, developing, training and retaining quality sales, distribution center and other associates in large numbers as well as experienced buying and management personnel |
| Many of our associates are in entry level or part-time positions with historically high rates of turnover |
| TJX’s ability to meet our labor needs while controlling costs is subject to external factors such as unemployment levels, prevailing wage rates, minimum wage legislation and changing demographics |
| In the event of increasing wage rates, if we do not increase our wages competitively, our customer service could suffer because of a declining quality of our workforce, or our earnings would decrease if we increase our wage rates |
| In addition, certain associates in our distribution centers are members of unions and therefore subject us to the risk of labor actions |
| Further, our off-price model limits the market for experienced buying and management personnel and requires us to do significant internal training and development |
| Changes that adversely impact TJX’s ability to attract and retain quality associates and management personnel could adversely affect our performance |
| If we engage in mergers or acquisitions of new businesses, or divest any of our current businesses, our business will be subject to additional risks |
| We have used mergers and acquisitions to grow our business in the past |
| For example, in 2003, we completed the acquisition of Bob’s Stores |
| Integrating new stores and concepts can be a difficult task |
| We may consider attractive opportunities to acquire new businesses or to divest any of our current business segment |
| Acquisition or divestiture activities may divert attention of our executive management team away from the existing businesses |
| We may do a less than optimal job of due diligence or evaluation of target companies |
| Failure to execute on mergers or divestitures in a satisfactory manner could have an adverse effect on our future business prospects or our financial performance in the future |
| 8 _________________________________________________________________ [54]Table of Contents If we are unable to operate information systems and implement new technologies effectively, our business could be disrupted or our sales or profitability could be reduced |
| The efficient operation of our business is dependent on our information systems, including our ability to operate them effectively and successfully to implement new technologies, systems, controls and adequate disaster recovery systems |
| In addition, we must protect the confidentiality of our and our customers’ data |
| The failure of TJX’s information systems to perform as designed or our failure to implement and operate them effectively could disrupt our business or subject us to liability and thereby harm our profitability |
| We expect to continue to depend upon strong cash flows from our operations to support capital expansion, operations, debt repayment and our stock repurchase program |
| TJX’s business is dependent upon its operations generating strong cash flows to support our capital expansion requirements, our general operating activities and our stock repurchase programs and to fund debt repayment and the availability of financing sources |
| Our inability to continue to generate sufficient cash flows to support these activities or the lack of availability of financing in adequate amounts and on appropriate terms could adversely affect our financial performance or our earnings per share growth |
| Consumer spending is adversely affected by general economic factors that are beyond our control, which could adversely affect our sales and operating results |
| Interest rates; recession; inflation; deflation; consumer credit availability; consumer debt levels; energy costs; tax rates and policy; unemployment trends; the threat or possibility of war, terrorism or other global or national unrest; political or financial instability; and other general economic factors have significant effects on consumer confidence and spending, which in turn affect retail sales at TJX General economic factors in the United States and in other countries where we operate are beyond our control and could adversely affect our sales and performance |
| We are subject to import risks, including potential disruptions in supply, changes in duties, tariffs, quotas and voluntary export restrictions on imported merchandise, strikes and other events affecting delivery; and economic, political or other problems in countries from or through which merchandise is imported |
| Many of the products sold in our stores are sourced by our vendors and to a limited extent by us in many foreign countries |
| Political or financial instability, trade restrictions, tariffs, currency exchange rates, transport capacity and costs and other factors relating to international trade are beyond our control and could affect the availability and the price of our inventory |
| Our expanding international operations expose us to risks inherent in foreign operations |
| We have a significant presence in Canada, the United Kingdom and Ireland |
| We may also seek to expand into other international markets in the future |
| Our foreign operations encounter risks similar to those faced by our US operations, as well as risks inherent in foreign operations, such as local customs and competitive conditions and foreign currency fluctuations, which could have an adverse impact on our worldwide profitability |
| Changes in laws and regulations and accounting rules and principles could negatively affect our business operations and financial performance |
| Various aspects of TJX’s operations are subject to federal, state or local laws, rules and regulations, any of which may change from time to time |
| Generally accepted accounting principles may change from time to time, as well |
| Additionally, TJX is frequently involved in various litigation matters that arise in the ordinary course of business |
| Litigation, regulatory developments and changes in accounting rules and principles could adversely affect TJX’s business operations and financial performance |
| 9 _________________________________________________________________ [55]Table of Contents We maintain internal controls over financial reporting, but they cannot provide absolute assurance that there will not be material errors in our financial reporting |
| TJX maintains a system of internal controls over financial reporting, but there are limitations inherent in internal control systems |
| If we are unable to maintain adequate and effective internal control over financial reporting, TJX’s financial performance could be adversely affected |
| A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met |
| In addition, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be appropriate relative to their costs |