Changing of the guard at TJX

Carol Meyrowitx, the newly-seated CEO of The TJX Cos. Inc., understands the off-price retail business "in her DNA," as one analyst puts it. She is a talented merchant and has a way with people, industry experts say. But most of all, she has the faith of TJX Chair Bernard "Ben" Cammarata, the retail pioneer who built TJX into the largest off-price apparel and home fashion retailer in the world.

After working her way up through the ranks at Framingham-based TJX since 1983 and being named company president in October 2005, Meyrowitz officially added CEO to her title on January 28. She replaces her mentor, Cammarata, who had been serving as acting CEO since fall of 2005 to orchestrate a company makeover. He will remain chair of the board.

As we went to press, TJX was targeted by a class action suit (see Newsbriefs, page 8) filed in U.S. District Court in Boston on behalf of consumers. Mark Montagna, an analyst for C.L. King and Associates, which makes no market in TJX, says the filing of the suit did not surprise him, and he thinks the leadership transition will still be smooth. He says he thinks TJX will handle the matter.

Overall, Donald Trott, managing director at Jefferies in New York who follows TJX and makes no market in the stock, deems the CEO switch, "not even that much of a transition," noting that Meyrowitz has been working in tandem with Cammarata for the past 18 months. "It’s still the Ben and Carol Show."

Nonetheless, notes analyst Dana Cohen of Banc of America Securities (of which TJX is an investment banking client), following Cammarata into the chief executive’s chair of the off-price leader worldwide is no mean feat. "She’s supplanting the guy who created the company," Cohen says, but adds, "I definitely think she’s up for it."

Because of TJX’s policy of not granting employee interviews, even of its top executives, Meyrowitz could not be reached for this story. But analysts and industry experts paint a picture of a strong leader and talented retailer with a good reputation in her own right. Because she bears Cammarata’s seal of approval, those who don’t know her well, such as retail analyst Kurt Barnard of Montclair, N.J- based Barnard’s Retail Trend Report, still consider her a good choice for CEO. He says she will likely continue the Cammarata strategy that has brought improvement to the company’s stores and bottom line over the past 18 months.

Meyrowitz’ two-decade climb through the company ranks is a key factor in making her the best choice for CEO, analysts say. Off-price retailing is a complex business that is unlike traditional retail, says Montagna. "The best place to train is TJX," he says.

Meyrowitz has done that. She began her tenure with the company in buying, merchandising and management positions at Chadwick’s of Boston and Hit or Miss, both former divisions of TJX, some 24 years ago. Prior to that, she had worked for several department store chains. In 1999, she was named senior vice president of TJX’s largest division, The Marmaxx Group (the combined group of T.J. Maxx and Marshalls). She was promoted to executive vice president of merchandising at Marmaxx in 2000 and, eventually, to president of Marmaxx and senior executive vice president of TJX.

Meanwhile, Cammarata had turned over the CEO spot to company veteran Edmond English in 2000, beginning a tenure of lukewarm performance results for TJX. Meyrowitz actually left TJX in January of 2005 to join private Boston equity firm Berkshire Partners LLC. She was slated to stay on as a consultant to the company through that September. Before she finished her advisory tenure, however, English abruptly resigned in September of 2005. Cammarata returned as CEO, bringing Meyrowitz back with him as company president.

Meyrowitz’ appointment as CEO, experts say, came as no surprise even though TJX had indicated it was considering seeking a top executive from outside. Montagna says he never thought the company would look beyond Meyrowitz. "She’s been exposed to Wall Street for years," he says. "Everybody knows who she is." Besides, Montagna says, where else would you find someone as experienced in off-price retail.

Trott says Cammarata has viewed Meyrowitz as a protégé for years. He and other analysts see Meyrowitz’ biggest strength in her strong talent as a merchant, and in her years of buying experience. "It’s an art," Trott says. "She has a feeling for what’s going on out there in the market."

And Cohen describes Meyrowitz as a "strong leader" who has a very "down-to-earth" style and is a "people person." She says the longstanding relationship between Cammarata and Meyrowitz is "almost familial."

Beyond the analysts’ perspective, Yankee Candle CEO Craig Rydin, who recruited Meyrowitz for his company’s board of directors two years ago, also praises her "great intellectual horsepower" and leadership skills. She brought "instantaneous value added" to his 10-member board with her extensive merchant background and "great feel for product," he says.

Rydin, CEO since 2001, says he goes to Meyrowitz for personal mentoring advice and considers her a "phenomenal role model" for women in business in Massachusetts, and says TJX and its shareholders are extremely fortunate to have a woman of her talent.

Outside the board room or analysts’ circles, Meyrowitz apparently keeps a low profile. She resides in West Newton. Company information indicates that she was educated in the United States but doesn’t say where or what degrees she holds. In 2004, Meyrowitz was honored by the Needlers’ Foundation, a non-profit which supports hospitals and children’s foundations across the country, as the Woman of the Year at a gala dinner in New York City which raised $2 million for the cause.

Turnaround team

While the TJX Board of Directors announced its intention to make Meyrowitz CEO last September, Trott says it was likely the turnaround process that made them wait until last week to make the change official. For one thing, he says, the company needed Meyrowitz to focus her merchandising skills on the various TJX divisions that needed tweaking, while Cammarata was needed to stay on the day-to-day operations of the company.

When Cammarata stepped in, TJX’s profits for the third quarter of 2005 had fallen by 14.8 percent and same-store sales were flat. Cammarata and Meyrowitz launched a return to what he called "sweaty palms" buying to infuse more excitement and better deals into the company’s 1500 T.J. Maxx and Marshalls stores. The team also cut costs, improved in-store merchandizing, and beefed up advertising. They also set out to improve the performance of the company’s newer divisions, HomeGoods, A.J. Wright and Bob’s Stores.

TJX’s turnaround under the Cammarata/Meyrowitz team was most recently evident in the company’s holiday sales results. TJX’s December same-store sales were up 6 percent, well above analysts’ expectation of 3 percent. The company is slated to report its results for fiscal 2007, which ended Jan. 27, in late February.

On Nov. 14, 2006, Cammarata opened his conference call with analysts by heralding a record third-quarter performance and the fourth consecutive quarter where earnings per share growth exceeded 20 percent ($.48 compared to $.32 a year ago.) For the first three quarters of fiscal 2007, the company’s results exceeded analysts’ expectations, with net sales of $12.4 billion, a 9 percent increase over last year. Comparable same-store sales were up 4 percent for that nine-month period. Also in Q3, Bob’s Stores was on its way to cutting its losses in half for the year and A.J. Wright had a 4 percent increase in same store sales, though bottom line sales fell short of expectations.

Meyrowitz will be continuing the company’s effort to find profitable formulas for its newer divisions. While some analysts have suggested that TJX should spin-off A.J. Wright, which is geared to the lower-income, off-price shopper, and sell Bob’s, the company’s only non-off-price division, Cammarata and Meyrowitz have noted continued opportunities at both to expand the company’s focus beyond its more mature off-price divisions.

Challenges remain

One of Meyrowitz’ biggest challenges will be to keep up the momentum of the turnaround effort. "The low-hanging fruit – the easier things – have probably been picked at this point," says Montagna. It’s harder to keep making improvements in the second year of such an effort, he says. But, he adds, Meyrowitz has a good management team around her, particularly financial people, and he thinks she will succeed.

Cohen too stresses the importance of Meyrowitz having the "right people" supporting her and running the divisions while she balances the bigger-picture aspects of running the company.

As for the ongoing task of dealing with the credit-card information breach, Montagna says he’s confident TJX will do what’s needed to address its customer’s protection. "It’s basically an additional headache that anybody wouldn’t want to deal with," he says. But, he adds, just about any company could be victimized as TJX was.

Trott says the market’s lack of reaction to the data breach thus far means it is not a major threat to the company investor-wise. If questions arise about TJX’s data systems, he says, criticism will fall on Cammarata, English or other company officials and not Meyrowitz.

While the data debacle plays itself out, Meyrowitz is expected to continue the company’s cost-cutting strategies, honing risk-taking buying tactics and furthering the other turnaround strategies she and Cammarata have been working on for 18 months.

As Cammarata stated in a press release following the September 2006 announcement of Meyrowitz’ naming as CEO, "She is a visionary leader and a great generator of ideas and I am confident her ideas will continue to drive profitable sales, which remains our chief goal."