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TJX Profit Down Sharply on Costs Related to Security Breach

TJX said its second-quarter profit was cut by more than a half as the discount retailer recorded a $118 million charge due to costs from a massive breach of customer data, mostly to build up a reserve to cover estimated future expenses.

The owner of about 2,500 stores including T.J. Maxx and Marshalls said it also expects to record future breach-related charges of an additional $21 million, possibly in its next fiscal year.

Elise Amendola

Framingham, Mass.-based TJX also slightly raised its earnings expectations for its full fiscal year.

TJX reported net income of $59 million for the May-July period, or 13 cents per share, compared with a profit of $138.2 million, or 29 cents per share, in the same period a year ago.

Sales rose 9% to $4.31 billion, up from $3.99 billion a year ago. Total sales at stores open at least a year, or same-store sales, rose 5%.

The after-tax charge from the data breach equaled $118 million, or 25 cents per share. Not counting that expense, TJX's profit for the latest quarter equaled 38 cents per share, up from 29 cents per share in the year-ago period.

On that basis, the performance narrowly beat the consensus forecast of analysts surveyed by Thomson Financial, who expected a profit of 37 cents per share on revenue of $4.32 billion, on average.

TJX disclosed the breach on Jan. 17, and said March 28 that one or more intruders unearthed data from at least 45.7 million credit and debit cards. TJX faces lawsuits from banks, consumers and investors.

The second-quarter charge dwarfed the charges the company took in its previous two quarters: $5 million in last year's fiscal fourth quarter, and $12 million in this year's first quarter.

"We have continued to learn more about the computer intrusion(s) and are now able to estimate the company's liability," said Carol Meyrowitz, president and chief executive officer.

The charge from the latest period includes $11 million for costs incurred during the latest quarter, and $107 million for a reserve to cover potential losses from items including litigation and investigative expenses. The reserve doesn't include the $21 million in future costs that TJX expects to record as a non-cash charge.

The company has enjoyed generally brisk sales and stronger results than most other retailers in recent months despite negative publicity about the data theft.

"Our operating results mark the strongest second quarter performance in the company's history and were achieved on top of very strong performance last year," Meyrowitz said.

TJX said it expects a third quarter profit of 53 cents per share to 55 cents per share, and same-store sales growth of 3% to 4%. Analysts expect a profit of 55 cents per share.

The company also slightly increased its guidance for the full year, from its earlier projection of a profit of $1.80 to $1.85 per share, excluding the data breach costs. Now, TJX expects a range of $1.84 to $1.88 per share. Analysts expect a profit of $1.86 per share.

TJX operates T.J. Maxx, Marshalls, HomeGoods, A.J. Wright and Bob's Stores in the United States, Winners and HomeSense stores in Canada, and T.K. Maxx stores in Europe.

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