Tjx

History of TJX Companies, Inc.

The TJX Companies is the leading off-price apparel and home fashions retailer in the United States and worldwide. In 2005 alone TJX produced over $16 billion in revenue. To earn such an impressive bottom line TJX relies on its eight retail chains: TJMaxx, Marshalls, HomeGoods, A.J. Wright, Bob's Stores, TKMaxx, Winners, and HomeSense.

The TJX Companies, Inc. traces its history back to Zayre Corp. This corporation was the parent company of the Zayre Store chain of discount department stores, which was incorporated in 1962. Zayre, Yiddish for "very good", opened its first store in Hyannis, Massachusetts, in 1956. The early success of Zayre led to rapid growth. By the early 1970's Zayre had over 200 stores and diversified into specialty retailing. (Company History).

As Zayre grew, they began to acquire other retail chains. Among Zayre's early acquisitions was Hit or Miss, an off-price chain that specialized in upscale women's clothing. In 1969, Zayre bought the Hit or Miss chain and began its exploration of the upscale off-price fashion market. Zayre's timing could not have been better. During the recession of the 1970s, Hit or Miss's impressive success resulted in Zayre deciding to expand its off-price upscale apparel merchandising.

Zayre attempted to buy the Marshalls chain, which had already established itself as a retailer of off-price apparel for the whole family. When that effort failed, the company hired Bernard Cammarata, who had been Marshalls' top buyer. The strategic plan was to match Marshalls success by cloning their business model. In Auburn, Massachusetts, in March 1977, the first T.J. Maxx opened its doors. T.J. Maxx was the first attempt at imitating Marshalls. In 1983, Zayre had found yet another avenue to the off-price fashion market. Chadwick's of Boston began to sell Hit or Miss items through mail-order catalogs. The 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 (Company History).

Hit or Miss and T.J. Maxx brought in about 14 percent of the company's operating income in 1980, which was not significant, but by the mid-1980s, off-price specialty retailing became much more important to the parent company Zayre. In 1983, these two operations were producing almost half of Zayre's income. The success led to a renovation of the discount department stores and expansion of 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-price 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.

Establishment of TJX Companies and Divestment of Zayre

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, with Cammarata serving as president and CEO. 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 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, headed by Cammarata, began trading on the New York Stock Exchange.

The company's transition into an off-price 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 6 percent annual dividends, Ames had the option of paying the first four semiannual dividends with more Ames preferred stock rather than cash, an option that Ames exercised for each of the payments it had met. The value of Ames preferred stock was dubious, however, 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.

Early to Mid-1990s: Winners and Losers, Hits and Misses

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

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