TK Maxx is to slow its store opening programme and has bolstered its management team in an attempt to turn its business around following a collapse in profits.
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Profits at TJX Europe, the parent company of TK Maxx and HomeSense, fell 52% last year. The company said its buying had lost focus, but it was confident it would turn round with stronger senior management in place.
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 plummeted 72% to $22m (£13.6m). Like-for-likes fell 6% in the fourth quarter and 3% in the year as a whole, compared with increases of 6% and 5% respectively last year.
“We stubbed our toes, we grew too fast,” said Carol Meyrowitz, chief executive of TJX Europe’s parent company The TJX Companies. “We had a fairly new team that needed a lot of learnings in terms of time in their jobs.”
On a conference call with analysts, Meyrowitz said the Watford-based European business, headed by Paul Sweetenham, had been strengthened.
“We’ve injected strong veterans at a high level, and given people smaller jobs so they can have time in their jobs,” she said.
Meyrowitz said the problems stemmed from the buying operation, and that the focus on product had been increased. “We’re much more country focused in terms of getting the right fashion to the right country,” she said.
Total sales in Europe, 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 in store numbers by 54 to 331. All but 54 of TJX Europe’s stores are in the UK, with the remainder in Germany and Poland.
In the long term, TJX Europe plans to grow to between 750 and 875 stores. Meyrowitz said she was confident signs of recovery would start to emerge towards the end of the first half.