TJX Companies, the US parent company behind off-price retailer TK Maxx, has blamed the poor second quarter performance of its European business on operations in the UK and Ireland.
Tumbling second quarter profits at TJX Europe, were attributed in part to “minor growing pains” at TK Maxx in the UK and Ireland.
Profits slumped 76% to $8m (£5.1m) in the 26 weeks to July 31, with second quarter profits, for the last 13 weeks of the period, dropping from from $24.7m (£15.8m) to $2.1m (£1.3m)
Debra McConnell, vice president, global communications for TJX Companies said: “It’s important to note that TJX Europe’s second quarter profit decline was due to weaker-than-expected results in the UK and Ireland.”
She added that the weak performance was “nothing we haven’t seen or addressed before in our other businesses” and added that historically about 85% of TJX Europe’s annual profits are generated in the second half of the year.
For the full fiscal year 2011, she predicted that the European division would produce 15% to 20% profit growth.
McConnell said that the growth elements of the European business, which includes TK Maxx in Germany and Poland, continue to outperform internal expectations. The business has begun a rapid roll-out of stores in Europe and made key appointments to spearhead the growth.
The European figures were also skewed by the impact of currency fluctuations as the company reports in US dollars. Excluding the negative impact of exchange rates TJX Europe’s profit in the first half was $16m (£10.2m) versus $35m (£22.4m) in the previous year, a decline of 54%, said McConnell.
“TK Maxx is a well-established business in the UK and Ireland and we are very confident in TJX Europe as an important growth vehicle for our company,” she said.