T.J.

MAXX BUSINESS ACQUISITION Formal Report, 2013

Prepared by Alexandra Guevara Chief Consultant of Business Analysis

Report Distributed May 22, 2013

Prepared for Knights Investment Group Directors Committee KIG Corporation

T.J. Maxx Business Acquisition 2013

ABSTRACT This report thoroughly examines the T.J. Maxx chain with the purpose to acquire the retailer for investment. Broken down into different sections, are the categories that make up the concluded analysis. The main idea consists on why there is a need for investment in an off-retailer and what can they offer if the proposal finalizes. This report focuses on the marketing strategy, which includes a plan for investment, S.W.O.T analysis, amongst other key elements that evaluate what the company is doing internally and how it highlights externally to those seeking investment. Furthermore, the business analysis, which is broken down into past and future profit margins displays their growth in numbers with the solid purpose of gaining a detailed look at the financial standpoint of the company. This is the backbone for the company and their sub-categories explain in detail their influence within each field. The report commences by focusing on the start-up of this company by categorizing small elements that summarize their goals and motives. Moving onto an exclusive marketing plan that incorporates not only the strategy used to maintain a loyal base and rapid increase in revenue, but it also provides their outlook on the internal base of the company. These elements have laid out the foundation for the report itself by building a solid relationship between both the advertising and public fields, demonstrating the steps gather to conduct a conclusion on the possible acquisition of this off-retailer. The extensive research prepared for this report gathered sources both internally and external, to educate the directors of KIG and for the further analysis and observations.

T.J. Maxx Business Acquisition 2013 TABLE OF CONTENTS ABSTRACT ........................................................................................................................ 2 EXECUTIVE SUMMARY ................................................................................................ 4 INTRODUCTION .............................................................................................................. 5 BACKGROUND ................................................................................................................ 5 Fashion Forward Consumer ............................................................................................ 5 Off-Price in the Works .................................................................................................... 6 Business Expansion ........................................................................................................ 6 E-Commerce ................................................................................................................... 7 V.A.L.U.E FACT ................................................................................................................ 7 MARKETING STRATEGY ............................................................................................... 8 Social Media ................................................................................................................... 8 Advertisement ................................................................................................................. 9 S.W.O.T ANALYSIS ......................................................................................................... 9 COMPETITION ................................................................................................................. 9 ASSESMENT OF COMPANYS FUTURE .................................................................... 10 Consecutive Growth...................................................................................................... 11 ANALYSIS METHODOLOGY ....................................................................................... 11 CONCLUSIONS AND RECOMMENDATIONS ........................................................... 12 REFERENCES ................................................................................................................. 13 GLOSSARY ..................................................................................................................... 14

T.J. Maxx Business Acquisition 2013

EXECUTIVE SUMMARY The Knights Investment Group has asked to conduct an analysis on the T.J. Maxx franchise. This formal business report has gathered information from various sources to come up with the ideal solution on whether or not acquiring this large company would benefit KIG. The focus of this report is primarily on their financial and marketing which includes: Marketing Strategy S.W.O.T Analysis Assessment of the Companys Future

Each of these three categories carefully explain in further detail the strong points and the weakness of the company provided above and the way they should be carefully assessed if investment is to be considered in the future. The marketing strategy chosen demonstrates what the company has already begun in terms of social media and advertisement. This is important because as investors, there is no room for error and, by having a solid social media and advertisement plan externally produced, it leaves room for profit without having to put internal input. The S.W.O.T analysis is very important to take into consideration. The reason being, it gives you both the strengths and weakness from both sides of the company; internal and external. This lays the foundation for the investor in terms of what needs to be address, changed, and viewed before there is any arrangement. In the report itself, there are both internal and external strengths and weaknesses for the investor to take into consideration. The assessment of the companys future is the financial assessment part of this report. The graphs provided indicate the future growth of the company in terms on investor relations. Further information found in the actual graph itself with an in-depth analysis explaining the logistics behind this huge upcoming growth seen in the report, along with statistics and upcoming forecasts. The remaining graph contains seventeen years of dividend growth up until the year 2014. What this graph shows is that there is an increased possibility that investing in T.J. Maxx is at its peak point as of today. Based on these conclusions, recommendations for acquiring the T.J. Maxx Company are (1) to continue to assess the future financial growth of the company, (2) have an understanding of the marketing strategy, (3) implement a S.W.O.T analysis on a yearly basis to ensure the company is living up to their predicted outcomes. By following these three steps, assessing whether or not this company is a suitable match for KIG should be by no means, a firm answer.

T.J. Maxx Business Acquisition 2013

INTRODUCTION Knights Investment Group (KIG) is a privately owned corporation looking to invest in a company that has tremendous growth and provides outstanding leadership roles in its franchise. As the leading consultant for KIG, executing a plan and establishing a recommendation that has thorough background information on the desired company will provide an abstract on a plan for investment. This report will examine the T.J. Maxx Company as a plan for investment. Included in this report will be an in-depth examination of this large retail chain with the purpose of assessing their future profits in this leading field. T.J. Maxx, owned by the TJX Companies is the largest offprice retail in both apparel and home fashions in the U.S and worldwide (TJX Company, 2013). With over 35 years of history under their belt, T.J Maxx has produced outstanding retail achievement and has introduced developmental ways of bringing variety to their customers. The purpose of this report is to acquire the T.J. Maxx Company by conducting an S.W.O.T analysis, which will give us an in-detail look at their past success to accumulate research and provide an estimate of T.J. Maxxs future assessment. As a consultant for KIG, I wil l be providing a plan for conquering the desired company by providing graphs with the future growth in the years to come. BACKGROUND Founded in Framingham, Massachusetts and a subsidiary of the TJX Companies, T.J. Maxx is an off-price fashion retail chain that caters to the upper-middle class clientele (TJX Companies, p. 2, 2011). This massive outlet provides clothing and accessories including: Womens Apparel Mens Apparel Footwear Handbags Accessories Jewelry Beauty Activewear

Fashion Forward Consumer T.J. Maxx is a leading retailer that has its focus primarily in the day-to-day fashion forward woman. Being a fashionable investment in todays economic aware society, investing in them will bring: 5

T.J. Maxx Business Acquisition 2013 1. Value-oriented consumers that are looking for good deals on brand name labels. 2. Operational glance at the production between the retailer and merchandiser. Having a content customer base is the main priority and has always been part of the T.J. Maxx plan. Reaching the loyalty of their consumers has increased their overall ratings amongst their competitors, making them a valuable asset to KIG. Compared to an oversize boutique, this large retail chain carries one of a kind pieces not found in any of its competitors. Distinguishing themselves from the merchandise carried by others, expanding to a global market, and keeping currents trends in top priority have expanded the limits for this growing retail chain. Off-Price in the Works An average off-price consumer is one who will regularly visit a discounted store in search of trending styles once featured in high-end retailers at an elevated price. As often as once a week, these label hunters are on the lookout for their favorite brands. Items at off-price stores are sold as cheap as 60% off their original value. The reason being, many of these items are said to be from past seasons or just excessive merchandise from their previous retailers. The true reason behind the low prices, according to USA Today is that, Department and specialty stores display clothes long before people us ually have a need to wear them, so when stores return merchandise that isn't selling to the manufacturers, the manufacturers can easily turn around and quickly sell it to off-price stores in the same season (O Donnell, 2011). Although there has been a lot of speculation whether or not T.J. Maxx sells old season products or not, CEO Carol Meyrowitz commented, 85% of what the stores sell is from the same season and same year it was designed for, and 85% is purchas ed directly from manufacturers (ODonnell, 2011). Having these distinctions amongst its off-price competitors gives T.J. Maxx the opportunity to climb up the leader boards. Meyrowitz calls it, Opportunistic buying (ODonnell, 2011). Business Expansion T.J. Maxx has expanded their business to over six continents. This retail chain has growth from both their national and international locations. Moving to the international market benefited the company by providing vast growth in annual sales, production, and product. Besides their outstanding growth within their own chain, the TJX Companies has also acquired stores such as Marshalls and HomeGoods, which has produced millions of dollars in annual revenue per retailer. According to TJX Annual Report, Annual net sales reached $23.2 million, a 6% growth from the previous year (p.2, 2011). 6

T.J. Maxx Business Acquisition 2013 Due to their acquisition of international locations, T.J. Maxx has opened the door for a wider demographic reach in various locations throughout U.S and abroad. T.J. Maxx continues to open more stores in influential cities across the United States such as Wall Street in New York City (TJX Companies, p.5, 2011). E-Commerce In the 2011 T.J. Maxx annual report, the company has said to begin their process of beginning an e-commerce to increase customer base and lever their business up $23 billion with the addition of e-Commerce (p.3, 2013). The following list provides the advantages of adding e-commerce to the company. Profitable Accounts: an online addition to this already powerful retail chain will gain profitable accounts with other retail outlets and recognition of potential partnerships with suppliers. Online Acquisitions: Buying out online merchants, facilitating the sourcing of merchandise, and proving the 700 buyers a beneficial product attainment.

New acquisition of Sierra Trading Post has been said to bring profitable expertise and will began to be promoted during the half of 2013 according to the TJX Investor Handout (TJX Companies, slide 3, 2013). V.A.L.U.E FACT The V.A.L.U.E fact establishes their social corporate responsibility, as well as what the company believes they stand for: Vendor Social Compliance Since 2005, T.J. Maxx has conducted over 65 extensive training programs for their vendors, buying agents, and management at factories whom produce TJX products (TJX Responsibility Report, p.17, 2013) Investment in training produces expertise knowledge in the buying field adds to the quality and production. Attention to Governance Mentioned in their Code of Ethics, TJX is committed to the highest standards of ethics (TJX Responsibility Report, p.21, 2013). This means, operating in a responsible manner by following guidelines that ensure staff, shareholders, and vendors are their main priority. Leveraging Differences Being a multi-cultural company that embraces diversity throughout the company, and outside including their vendors to create worldwide connections and begin to establish long-term relationships. 7

T.J. Maxx Business Acquisition 2013

United with our Communities T.J. Maxx considers every neighborhood in which we do business to be our community (TJX Responsibility Report, p.35, 2013) Giving back to those who have supported their stores and created profitable business is what united with the community implies to the company. Environmental Initiatives T.J. Maxx beliefs everyone should have an important role in the environment (TJX Responsibility Report, p.49, 2013). They have been working on projects within their own stores to manage electrical and water outlets. MARKETING STRATEGY Fashion direct from designers and savings directly to you Their 2010 campaign open the door for T.J. Maxx to branch out into a bigger power by taking the everyday Fashionista, and making her a Maxxinista. This is a great example of how T.J. Maxx is using social media effectively to branch out into fashion-forward off-retailer. T.J. Maxx builds upon their reputation of offering their customers high-priced items for a fraction of the price. Advertising with social media in mind targets consumer savvy buyers that understand the benefit of an off-price retail store. Social Media The following list includes all the social media applications T.J. Maxx has promoted both on their website and on a worldwide level: Instagram: takes the trendy shoppers into a quick glance of their latest style trend reports. Followers: 19,500 Facebook: used to gain costumer comments on their latest purchases, holds weekly contests, and advertises any trending merchandise. Followers: 1.3M Pinterest: fashion journal in which others can pin their Maxxinista clothing into their own closets for further advertising. Followers: 13,504 Twitter: builds personal relationships with their consumers through interaction. Follower: 83,715

Keeping up with the latest social media outlets has been another resourceful venture since social media plays a huge role when looking into profitable companies to invest due to their influence on the consumers. 8

T.J. Maxx Business Acquisition 2013

Advertising T.J. Maxx has certainly found their place in this bargain-hunting market economy. Customers who continually shop at T.J. Maxx agree that trendy items do not need to be purchased at fullprice retailers because this one-stop shop can supply them with all their clothing needs. Due to this fact, customers believe they are shopping smart; therefore, the advertising plays off their testimonies. T.J. Maxx has been very cleaver with their Maxxinista campaign by including style experts and worldwide bloggers to introduce their new campaign. S.W.O.T ANALYSIS The analysis provided the by the S.W.O.T is a marketing strategy used to implement the further assessment of the company. As with any company, there is always room for improvement. The analysis of T.J. Maxx was formulated based on the annual report. Internal Strengths: Daily discounted items up to 20-60% off, items are usually within the same season, twice a week shipment of items, national and international recognition. External Strengths: Rapid increase for store demand in various demographic areas, affordable, overseas brand development, new social media development. Internal Weaknesses: Weak in-house staff training, store organization and development of layout. External Weaknesses: Poor brand advertisement, past lawsuits. Internal Opportunities: online retail (e-commerce), international expansion, yearly growth, profitable investments. External Opportunities: larger consumer base, rapid economy growth, various investing opportunities. Internal and External Threats: Rapid consumer change, competitive market, growth of counterfeit merchandise.

COMPETITION According to Hoovers (2012) the top three competitors of T.J. Maxx are: Target Corporation Kohls Corporation Ross Stores Inc. 9

T.J. Maxx Business Acquisition 2013 Although these competitors fall under similar categories, T.J. Maxx is still the number one leading off-retailer. The economys downturn brought stores such as T.J. Maxx into new heights due to the population looking for bargains. Keep in mind, these are off-retailer outlets, not including full-price stores. ASSESMENT OF COMPANYS FUTURE

Figure 1.0 Courtesy of Nasdaq

The chart in Figure 1.0 provided an estimate of the companys 5 -year growth beginning with the year 2008 until 2013. The chart has shown slow growth in the year 2009 but rapidly escalating in numbers by 2010 and reaching 45.00 in 2013. After carefully assessing the table below, Nasdaq came up with the following predictions for the years 2013-2014: F2013 EPS Growth: 23.9% F2014 EPS Growth: 11.4% According to the percentages above, T.J. Maxx will have an outstanding EPS growth of 23.9% in the year 2013 giving the Knights Investment Group a perfect opportunity due to the companys escalating profitability and power for investment shares. In 2014, the profitability of investment drops 12.5% giving KIG a head start if we are to invest in the year 2013. As stated by USA Today, T.J. Maxx has only been down once in their 36 yearsin 1995 (2011). With the economy shifting rapidly, an increase in consumer awareness has brought light into this retail chain. As commented by Fox Business, during the first fiscal quarter in 2012, T.J. Maxx had already increased their profits by 36% in comparison to 2011 (Booton, 2012). As mentioned in the previous paragraph, it was only in 1995 when T.J. Maxx did not produce a high profit in 10

T.J. Maxx Business Acquisition 2013 comparison to their other years in business. Analysts are looking for higher fiscal 2013 earnings of $2.39 a share and second-quarter profit of 51 cents (Booton, 2012). These analyses conclude huge marginal profits in the long-run. Consecutive Growth The chart below, courtesy of TJX indicates the companys consecutive growth in a 17 -year span. Part of investing into a company is to give careful examination to this chart to consider what part of the share, if acquired, the shareholder will receive. The dividend is the amount that the shareholder gets within the financial year.

Courtesy of TJX Companies

As the concurring growth of the shareholders continues to expand in the following years to come, TJX will provide: The ability to manage a stock in a shifting economy Establish capitol within the company itself

ANALYSIS METHODOLOGY This formal report consisted of careful research and examination both containing primary and secondary sources. The strategic plan used to gather the information on T.J. Maxx consisted of: 1. Scheduling a time and date for the research to initiate. 11

T.J. Maxx Business Acquisition 2013 2. Building an outline that included all the parts discussed above. 3. Formatting the layout of the report accordingly. A lot of the information found came from business websites that have previously analyzed the company. An example of this is found in the graphs used in the body of the report. The information gathered, backed up by sources was analyzed according to those specific measures. In the report itself, there are sections in which the base of the analysis comes primarily from my own background understanding and assessment of the company. The information incorporated in the report was mostly past and future statistics. The reason being, it is a business report and the main purpose is to analyze if the company chosen has future growth and investment potential. The only expert gathered information from was from T.J. Maxxs own CEO, Carol Meyrowitz. Having her voice within the report gave a lot of insight in many aspects such as fashion retailing to business. Other sources, as mentioned, have been business related websites that although, they have not been peer-reviewed, either came from T.J. Maxxs annual report, or their corporation handouts. Other additional sources were Fox Business and USA Today. CONCLUSIONS AND RECOMMENDATIONS The T.J. Maxx Companies have seen incomparable revenue growth throughout their history in the retail atmosphere. An exceptional example of what an off-brand retailer should incorporate in their day-to-day operations, this company has exceeded the expectations of the report provided. The research conducted in the report has proven to be an effective strategy in regards to the acquisition of T.J. Maxx. According to my own analysis of the company, I do believe acquiring T.J. Maxx as an investment for the Knights Investment Group would be an enormous step into the off-retailer atmosphere. This company has proven itself to have remarkable growth within the national and international market. They have also shown to be a leader in the retailing field, by producing extraordinary merchandise availability and their ability to morph into the new economy. One thing to keep in mind, the economy will be fluctuating, as it has been doing for the past few years now. Investing in a company that has withstood the hardships and even the roughest side of the economy, will benefit KIG by means of not only revenue and growth, but the public relations component of the corporation will outstandingly increase. It is not only smart to acquire this company, it is essential for KIG to re-invent their image and lay out a foundation for future investments.

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T.J. Maxx Business Acquisition 2013

REFERENCES Booton, J. T.J. Maxx Profit Climbs 36% on Comp-Store Sales Growth. Fox Business. Retrieved May 16, 2013, from http://www.foxbusiness.com/industries/2012/05/15/tjmaxx-profit-climbs-36-on-comparable-sales-growth/ Divident [Def. 1]. (n.d.). Investopedia. In Investopedia. Retrieved May 22, 2013, from http://www.investopedia.com/terms/d/dividend.asp EPS [Def. 1]. (n.d.). Investopedia. In Investopedia. Retrieved May 22, 2013, from http://www.investopedia.com/terms/e/eps.asp Fiscal Year [Def. 1]. (n.d.). Investopedia. In Investopedia. Retrieved May 22, 2013, from http://www.investopedia.com/terms/f/fiscalyear.asp ODonnell, J. Behind the bargains at T.J. Maxx, Marshalls. USA Today. Retrieved May 16, 2013, from http://usatoday30.usatoday.com/money/industries/retail/story/2011-10-25/tjxceo-carol-meyrowitz/50916340/1 Our History. TJX Companies. Retrieved April 18, 2013, from http://www.tjx.com/about_history.asp The TJX Companies, Inc. Hoovers. Retrieved April 18, 2013, from http://www.hoovers.com/company-information/cs/companyprofile.The_TJX_Companies_Inc.54741cf926 The TJX Companies Inc. Corporate Responsibility Report. (2011). Retrieved from, http://thomson.mobular.net/thomson/7/2968/4514/document_0/TJX_CSR11.pdf (2013). TJX Companies Investor Handout March [PowerPoint Slides]. Retrieved from: http://www.tjx.com/files/pdf/TJX-Investor-Handout-March2013.pdf T.J. Maxx Companies Inc. 2011 Annual Report. (2011). Retrieved from, http://thomson.mobular.net/thomson/7/3301/4645/document_0/TJX_AR_2011_FINAL.p df

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T.J. Maxx Business Acquisition 2013

GLOSSARY Dividend: A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. The dividend is most often quoted in terms of the dollar amount each share receives (dividends per share). Earnings Per Share: The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability. Fiscal Year: A period that a company or government uses for accounting purposes and preparing financial statements. The fiscal year may or may not be the same as a calendar year.

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