The parent company of off-price retailer TK Maxx is to slow its pace of growth in Europe in a bid to get back on track after a 52% fall in full year profits.
TJX Europe’s profits - excluding the impact of foreign exchange - fell to $79m (£48.8m) for the year to January 29, and the decline accelerated in the fourth quarter, when profits fell 72% to $22m (£13.6m). Like-for-likes fell 6% in the fourth quarter and 3% in the year as a whole, compared to increases of 6% and 5% respectively last year.
Total sales, again excluding foreign exchange impacts, were $812m (£502m) for the quarter and $2.6bn (£1.6bn) for the year. representing increases of 13% and 10% respectively. The total sales growth was driven by an increase of store numbers of 54 to a total of 331. All but 54 of TJX Europe’s stores are in the UK, with the remainder in Germany and Poland, which performed well. In the UK TK Maxx increased its store count by 20 to 253.
In a statement, a spokeswoman for parent company The TJX Companies said “we very are confident that [TJX Europe] will get back onto its very solid track this year. We strongly believe that the issues we are addressing will be remedied, and we are slightly slowing our pace of growth in Europe in 2011 to give this business time to regain its very firm traction.”
She added that the European operation is being strengthened so that newer employees benefit more from the knowledge of more experienced executives. TK Maxx has grown rapidly in the UK, and there is expected to be more focus on buying and the product mix to shift the business back to the core principles of TK Maxx’s off-price model.
The spokeswoman said that in the long-term TJX Europe, which also owns furniture retailer HomeSense, plans to grow to between 750 to 875 stores. The US-based parent company performed much better than its European arm, with net sales up 8% to $21.9bn (£13.5bn) and group like-for-likes up 4%.