Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended May 1, 2021
OR
☐
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number 1-4908
The TJX Companies, Inc.
(Exact name of registrant as specified in its charter)
Delaware
04-2207613
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
770 Cochituate RoadFramingham, Massachusetts
01701
(Address of principal executive offices)
(Zip Code)
(508) 390-1000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $1.00 per share
TJX
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
The number of shares of registrant’s common stock outstanding as of May 21, 2021: 1,206,487,186
Cost of sales, including buying and occupancy costs
7,255,635
4,414,465
Selling, general and administrative expenses
2,064,992
1,313,920
Interest expense, net
44,688
23,351
Income (loss) before income taxes
721,346
(1,342,848)
(Provision) benefit for income taxes
(187,416)
455,359
Net income (loss)
$
533,930
$
(887,489)
Basic earnings (loss) per share
$
0.44
$
(0.74)
Weighted average common shares – basic
1,205,439
1,197,809
Diluted earnings (loss) per share
$
0.44
$
(0.74)
Weighted average common shares – diluted
1,221,517
1,197,809
The accompanying notes are an integral part of the unaudited consolidated financial statements.
3
THE TJX COMPANIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
IN THOUSANDS
Thirteen Weeks Ended
May 1, 2021
May 2, 2020
Net income (loss)
$
533,930
$
(887,489)
Additions to other comprehensive income (loss):
Foreign currency translation adjustments, net of related tax provision of $2,898 in fiscal 2022 and tax benefit of $6,948 in fiscal 2021
22,249
(129,158)
Reclassifications from other comprehensive income (loss) to net income (loss):
Amortization of prior service cost and deferred gains/losses, net of related tax provisions of $1,056 in fiscal 2022 and $1,746 in fiscal 2021
2,901
4,797
Amortization of loss on cash flow hedge, net of related tax provisions of $603 in fiscal 2022 and $76 in fiscal 2021
(263)
208
Other comprehensive income (loss), net of tax
24,887
(124,153)
Total comprehensive income (loss)
$
558,817
$
(1,011,642)
The accompanying notes are an integral part of the unaudited consolidated financial statements.
4
THE TJX COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
IN THOUSANDS, EXCEPT SHARE DATA
May 1, 2021
January 30, 2021
May 2, 2020
ASSETS
Current assets:
Cash and cash equivalents
$
8,775,485
$
10,469,570
$
4,287,835
Accounts receivable, net
621,177
461,139
172,463
Merchandise inventories
5,114,643
4,337,389
4,945,720
Prepaid expenses and other current assets
440,533
434,977
408,587
Federal, state and foreign income taxes recoverable
64,211
36,262
481,643
Total current assets
15,016,049
15,739,337
10,296,248
Net property at cost
5,067,824
5,036,096
5,201,697
Non-current deferred income taxes, net
135,765
127,191
36,742
Operating lease right of use assets
9,121,628
8,989,998
9,073,898
Goodwill
99,324
98,998
94,469
Other assets
860,844
821,935
712,186
TOTAL ASSETS
$
30,301,434
$
30,813,555
$
25,415,240
LIABILITIES
Current liabilities:
Accounts payable
$
4,433,295
$
4,823,397
$
1,071,190
Accrued expenses and other current liabilities
3,536,637
3,471,459
2,187,885
Current portion of operating lease liabilities
1,650,574
1,677,605
1,399,290
Current portion of long-term debt
—
749,684
—
Federal, state and foreign income taxes payable
286,455
81,523
11,182
Total current liabilities
9,906,961
10,803,668
4,669,547
Other long-term liabilities
1,033,236
1,063,902
786,008
Non-current deferred income taxes, net
33,930
37,164
113,229
Long-term operating lease liabilities
7,853,229
7,743,216
7,914,825
Long-term debt
5,334,864
5,332,921
7,192,413
Commitments and contingencies (See Note K)
SHAREHOLDERS’ EQUITY
Preferred stock, authorized 5,000,000 shares, par value $1, no shares issued
—
—
—
Common stock, authorized 1,800,000,000 shares, par value $1, issued and outstanding 1,206,386,746; 1,204,698,124 and 1,197,877,094 respectively
1,206,387
1,204,698
1,197,877
Additional paid-in capital
321,475
260,515
8,104
Accumulated other comprehensive loss
(581,184)
(606,071)
(797,324)
Retained earnings
5,192,536
4,973,542
4,330,561
Total shareholders’ equity
6,139,214
5,832,684
4,739,218
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
30,301,434
$
30,813,555
$
25,415,240
The accompanying notes are an integral part of the unaudited consolidated financial statements.
5
THE TJX COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
IN THOUSANDS
Thirteen Weeks Ended
May 1, 2021
May 2, 2020
Cash flows from operating activities:
Net income (loss)
$
533,930
$
(887,489)
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation and amortization
215,379
219,460
Loss on property disposals and impairment charges
931
26,424
Deferred income tax (benefit)
(16,181)
(48,464)
Share-based compensation
50,536
(11,531)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable
(156,999)
210,419
(Increase) in merchandise inventories
(750,553)
(136,027)
(Increase) in income taxes recoverable
(27,949)
(434,674)
Decrease (increase) in prepaid expenses and other current assets
12,254
(39,580)
(Decrease) in accounts payable
(410,244)
(1,567,597)
Increase (decrease) in accrued expenses and other liabilities
12,214
(578,178)
Increase (decrease) in income taxes payable
203,740
(13,290)
(Decrease) increase in net operating lease liabilities
(50,319)
65,578
Other, net
(49,466)
34,466
Net cash (used in) operating activities
(432,727)
(3,160,483)
Cash flows from investing activities:
Property additions
(225,293)
(210,525)
Purchase of investments
(7,345)
(14,792)
Sales and maturities of investments
7,733
4,214
Net cash (used in) investing activities
(224,905)
(221,103)
Cash flows from financing activities:
Payments on debt
(750,000)
—
Proceeds from long-term debt including revolving credit facilities
—
4,988,452
Payments for debt issuance expenses
—
(33,872)
Payments for repurchase of common stock
—
(201,500)
Cash dividends paid
(315,215)
(278,250)
Proceeds from issuance of common stock
36,539
37,444
Payments of employee tax withholdings for performance based stock awards
(24,426)
(21,765)
Net cash (used in) provided by financing activities
(1,053,102)
4,490,509
Effect of exchange rate changes on cash
16,649
(37,840)
Net (decrease) increase in cash and cash equivalents
(1,694,085)
1,071,083
Cash and cash equivalents at beginning of year
10,469,570
3,216,752
Cash and cash equivalents at end of period
$
8,775,485
$
4,287,835
The accompanying notes are an integral part of the unaudited consolidated financial statements.
6
THE TJX COMPANIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
IN THOUSANDS
Thirteen Weeks Ended
Common Stock
Shares
Par Value
$1
Additional Paid-In Capital
Accumulated Other Comprehensive Loss
Retained Earnings
Total
Balance, January 30, 2021
1,204,698
$
1,204,698
$
260,515
$
(606,071)
$
4,973,542
$
5,832,684
Net income
—
—
—
—
533,930
533,930
Other comprehensive income, net of tax
—
—
—
24,887
—
24,887
Cash dividends declared on common stock
—
—
—
—
(314,936)
(314,936)
Recognition of share-based compensation
—
—
50,536
—
—
50,536
Issuance of common stock under Stock Incentive Plan, net of shares used to pay tax withholdings
1,689
1,689
10,424
—
—
12,113
Balance, May 1, 2021
1,206,387
$
1,206,387
$
321,475
$
(581,184)
$
5,192,536
$
6,139,214
Thirteen Weeks Ended
Common Stock
Shares
Par Value
$1
Additional Paid-In Capital
Accumulated Other Comprehensive Loss
Retained Earnings
Total
Balance, February 1, 2020
1,199,100
$
1,199,100
$
—
$
(673,171)
$
5,422,283
$
5,948,212
Net (loss)
—
—
—
—
(887,489)
(887,489)
Other comprehensive (loss), net of tax
—
—
—
(124,153)
—
(124,153)
Recognition (reversal) of share-based compensation
—
—
20,304
—
(31,835)
(11,531)
Issuance of common stock under Stock Incentive Plan, net of shares used to pay tax withholdings
2,164
2,164
13,515
—
—
15,679
Common stock repurchased and retired
(3,387)
(3,387)
(25,715)
—
(172,398)
(201,500)
Balance, May 2, 2020
1,197,877
$
1,197,877
$
8,104
$
(797,324)
$
4,330,561
$
4,739,218
The accompanying notes are an integral part of the unaudited consolidated financial statements.
7
THE TJX COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The Consolidated Financial Statements and Notes thereto have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. These Consolidated Financial Statements and Notes thereto are unaudited and, in the opinion of management, reflect all normal recurring adjustments, accruals and deferrals among periods required to match costs properly with the related revenue or activity, considered necessary by The TJX Companies, Inc. (together with its subsidiaries, “TJX”) for a fair statement of its Consolidated Financial Statements for the periods reported, all in conformity with GAAP consistently applied. Investments for which the Company exercises significant influence but does not have control are accounted for under the equity method. The Consolidated Financial Statements and Notes thereto should be read in conjunction with the audited Consolidated Financial Statements, including the related notes, contained in TJX’s Annual Report on Form 10-K for the fiscal year ended January 30, 2021 (“fiscal 2021”).
These interim results are not necessarily indicative of results for the full fiscal year. TJX’s business, in common with the businesses of retailers generally, is subject to seasonal influences, with higher levels of sales and income generally realized in the second half of the year.
The January 30, 2021 balance sheet data was derived from audited Consolidated Financial Statements and does not include all disclosures required by GAAP.
COVID-19 Pandemic
The novel coronavirus disease (“COVID-19”), was first identified in December 2019 before spreading worldwide. The Company has been, and may continue to be, impacted by the COVID-19 pandemic. In response to the pandemic, primarily during the first quarter of fiscal 2021, the Company took several steps to strengthen its financial position and balance sheet and to maintain financial liquidity and flexibility. The COVID-19 pandemic is complex and rapidly evolving and the severity and duration of the pandemic is still unknown. Additionally, the resurgence or the emergence of new variants has caused and may continue to cause intermittent or prolonged periods of temporary store closures, and could elicit further actions and recommendations from governments and public health authorities that could impact our operations. In the first quarter of fiscal 2021, the Company temporarily closed all of its stores, distribution centers and offices, and online businesses until the second quarter of fiscal 2021, while during the first quarter of fiscal 2022, our stores in the United States remained open for the entire first quarter, and we had (and continue to have) store closures primarily in Europe and Canada. The Company continues to monitor developments, including government requirements and recommendations at the national, state, and local level that could result in possible additional impacts to our operations. The Company cannot reasonably estimate the duration and severity of this pandemic which has had, and may continue to have, a material impact on its business, results of operations, financial position and cash flows.
Fiscal Year
TJX’s fiscal year ends on the Saturday nearest to the last day of January of each year. The current fiscal year ends January 29, 2022 (“fiscal 2022”) and is a 52-week fiscal year. Fiscal 2021 was also a 52-week fiscal year.
Use of Estimates
The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. TJX considers its accounting policies relating to leases, inventory valuation, impairment of long-lived assets, reserves for uncertain tax positions and loss contingencies to be the most significant accounting policies that involve management estimates and judgments. The Company considered COVID-19 related impacts to its estimates, as appropriate, within its consolidated financial statements and there may be changes to those estimates in future periods. The Company believes that its accounting estimates are appropriate after giving consideration to the ongoing uncertainties surrounding the severity and duration of the COVID-19 pandemic and the associated containment and remediation efforts. Actual amounts could differ from these estimates, and such differences could be material.
Reclassifications
Certain reclassifications have been made to prior year financial information to conform to the current year’s presentation.
8
Deferred Gift Card Revenue
The following table presents deferred gift card revenue activity:
In thousands
May 1, 2021
May 2, 2020
Balance, beginning of year
$
576,187
$
500,844
Deferred revenue
323,773
158,948
Effect of exchange rates changes on deferred revenue
2,899
(4,680)
Revenue recognized
(365,854)
(180,062)
Balance, end of period
$
537,005
$
475,050
The increase in both deferred revenue and revenue recognized versus the prior year reflects the impact of the temporary store and e-commerce closures in the first quarter of fiscal 2021 due to the COVID-19 pandemic. Gift cards are combined in one homogeneous pool and are not separately identifiable. As such, the revenue recognized consists of gift cards that were part of the deferred revenue balance at the beginning of the period as well as gift cards that were issued during the period.
Leases
Supplemental cash flow information related to leases for the thirteen weeks ended May 1, 2021 and May 2, 2020 is as follows:
Thirteen Weeks Ended
In thousands
May 1, 2021
May 2, 2020
Operating cash flows paid for operating leases
$
531,836
$
445,901
Lease liabilities arising from obtaining right of use assets
$
488,666
$
553,075
During fiscal 2021, the Company negotiated rent deferrals for a significant number of its stores, with repayment primarily throughout fiscal 2022.
Future Adoption of New Accounting Standards
From time to time, the Financial Accounting Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”). Unless otherwise discussed, the Company has reviewed the guidance and have determined that they will not apply or are not expected to be material to its Consolidated Financial Statements upon adoption and therefore are not disclosed.
Note B. Property at Cost
The following table presents the components of property at cost:
In thousands
May 1, 2021
January 30, 2021
May 2, 2020
Land and buildings
$
1,723,049
$
1,668,381
$
1,551,968
Leasehold costs and improvements
3,611,943
3,568,829
3,437,975
Furniture, fixtures and equipment
6,602,759
6,525,615
6,343,510
Total property at cost
$
11,937,751
$
11,762,825
$
11,333,453
Less: accumulated depreciation and amortization
6,869,927
6,726,729
6,131,756
Net property at cost
$
5,067,824
$
5,036,096
$
5,201,697
Depreciation expense was $212 million for the three months ended May 1, 2021 and $217 million for the three months ended May 2, 2020.
9
Note C. Accumulated Other Comprehensive (Loss) Income
Amounts included in accumulated other comprehensive loss are recorded net of taxes. The following table details the changes in accumulated other comprehensive loss for the twelve months ended January 30, 2021 and the three months ended May 1, 2021:
In thousands
Foreign Currency Translation
Deferred Benefit Costs
Cash Flow Hedge on Debt
Accumulated Other Comprehensive (Loss) Income
Balance, February 1, 2020
$
(457,120)
$
(215,483)
$
(568)
$
(673,171)
Additions to other comprehensive loss:
Foreign currency translation adjustments (net of taxes of $2,442)
15,588
—
—
15,588
Recognition of net gains/losses on benefit obligations (net of taxes of $9,974)
—
30,635
—
30,635
Reclassifications from other comprehensive loss to net income:
Amortization of loss on cash flow hedge (net of taxes of $303)
—
—
831
831
Amortization of prior service cost and deferred gains/losses (net of taxes of $7,298)
—
20,046
—
20,046
Balance, January 30, 2021
$
(441,532)
$
(164,802)
$
263
$
(606,071)
Additions to other comprehensive loss:
Foreign currency translation adjustments (net of taxes of $2,898)
22,249
—
—
22,249
Reclassifications from other comprehensive loss to net income:
Amortization of loss on cash flow hedge (net of taxes of $603)
—
—
(263)
(263)
Amortization of prior service cost and deferred gains/losses (net of taxes of $1,056)
—
2,901
—
2,901
Balance, May 1, 2021
$
(419,283)
$
(161,901)
$
—
$
(581,184)
Note D. Capital Stock and Earnings (Loss) Per Share
Capital Stock
Prior to the suspension of the Company’s share repurchase program, during the first quarter of fiscal 2021, TJX repurchased and retired 3.2 million shares of its common stock at a cost of $190 million on a “trade date” basis. TJX reflects stock repurchases in its financial statements on a “settlement date” or cash basis. TJX had cash expenditures under repurchase programs of $201 million for the three months ended May 2, 2020. These expenditures were funded by cash generated from operations.
In February 2020, the Company announced that its Board of Directors had approved, in January 2020, a new stock repurchase program that authorizes the repurchase of up to an additional $1.5 billion of TJX common stock from time to time. In February 2019, TJX announced that its Board of Directors had approved an additional stock repurchase program that authorized the repurchase of up to $1.5 billion of TJX common stock from time to time.
As of May 1, 2021, TJX had approximately $3.0 billion available under these previously announced stock repurchase programs.
All shares repurchased under the stock repurchase programs have been retired.
Subsequent to the end of the first quarter of fiscal 2022, the Company lifted the temporary suspension of its previously authorized stock repurchase programs.
10
Earnings (Loss) Per Share
The following table presents the calculation of basic and diluted earnings (loss) per share for net income (loss):
Thirteen Weeks Ended
Amounts in thousands, expect per share amounts
May 1, 2021
May 2, 2020
Basic earnings (loss) per share:
Net income (loss)
$
533,930
$
(887,489)
Weighted average common shares outstanding for basic earnings (loss) per share calculation
1,205,439
1,197,809
Basic earnings (loss) per share
$
0.44
$
(0.74)
Diluted earnings (loss) per share:
Net income (loss)
$
533,930
$
(887,489)
Weighted average common shares outstanding for basic earnings (loss) per share calculations
1,205,439
1,197,809
Assumed exercise / vesting of stock options and awards
16,078
—
Weighted average common shares outstanding for diluted earnings (loss) per share calculation
1,221,517
1,197,809
Diluted earnings (loss) per share
$
0.44
$
(0.74)
Cash dividends declared per share
$
0.26
$
—
The weighted average common shares for the diluted earnings per share calculation excludes the impact of outstanding stock options if the assumed proceeds per share of the option is in excess of the average price of TJX’s common stock for the related fiscal period. Such options are excluded because they would have an antidilutive effect. There were no such options excluded for the thirteen weeks ended May 1, 2021. For the period ended May 2, 2020, as a result of the net loss for the quarter, all options were antidilutive and therefore have been excluded from the calculation.
The Board of Directors declared a quarterly dividend of $0.26 per share in the first quarter of fiscal 2022.
Note E. Financial Instruments
As a result of its operating and financing activities, TJX is exposed to market risks from changes in interest and foreign currency exchange rates and fuel costs. These market risks may adversely affect TJX’s operating results and financial position. TJX seeks to minimize risk from changes in interest and foreign currency exchange rates and fuel costs through the use of derivative financial instruments when and to the extent deemed appropriate. TJX does not use derivative financial instruments for trading or other speculative purposes and does not use any leveraged derivative financial instruments. TJX recognizes all derivative instruments as either assets or liabilities in the Consolidated Balance Sheets and measures those instruments at fair value. The fair values of the derivatives are classified as assets or liabilities, current or non-current, based upon valuation results and settlement dates of the individual contracts. Changes to the fair value of derivative contracts that do not qualify for hedge accounting are reported in earnings in the period of the change. For derivatives that qualify for hedge accounting, changes in the fair value of the derivatives are either recorded in shareholders’ equity as a component of other comprehensive (loss) income or are recognized currently in earnings, along with an offsetting adjustment against the basis of the item being hedged.
11
Diesel Fuel Contracts
TJX hedges portions of its estimated notional diesel requirements based on the diesel fuel expected to be consumed by independent freight carriers transporting TJX’s inventory. Independent freight carriers transporting TJX’s inventory charge TJX a mileage surcharge based on the price of diesel fuel. The hedge agreements are designed to mitigate the volatility of diesel fuel pricing (and the resulting per mile surcharges payable by TJX) by setting a fixed price per gallon for the period being hedged. During fiscal 2021, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2022, and during the first three months of fiscal 2022, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for the first three months of fiscal 2023. The hedge agreements outstanding at May 1, 2021 relate to approximately 48% of TJX’s estimated notional diesel requirements for the remainder of fiscal 2022 and approximately 40% of TJX’s estimated notional diesel requirements for the first three months of fiscal 2023. These diesel fuel hedge agreements will settle throughout the remainder of fiscal 2022 and throughout the first four months of fiscal 2023. TJX elected not to apply hedge accounting to these contracts.
Foreign Currency Contracts
TJX enters into forward foreign currency exchange contracts to obtain economic hedges on portions of merchandise purchases made and anticipated to be made by the Company’s operations in currencies other than their respective functional currencies. As a result of the COVID-19 pandemic, there was a significant change in the Company's anticipated merchandise purchases during the first quarter of fiscal 2021 and the Company early settled derivative contracts designed to hedge merchandise purchases that would no longer take place. The settlement of these contracts resulted in a net gain of $25 million in the first quarter of fiscal 2021. The contracts outstanding at May 1, 2021 cover the merchandise purchases the Company is committed to over the next several months. Additionally, TJX’s operations in Europe are subject to foreign currency exposure as a result of their buying function being centralized in the U.K. All merchandise is purchased centrally in the U.K. and then shipped and billed to the retail entities in other countries. This intercompany billing to TJX’s European businesses’ Euro denominated operations creates exposure to the central buying entity for changes in the exchange rate between the Euro and British Pound. The inflow of Euros to the central buying entity provides a natural hedge for merchandise purchased from third-party vendors that is denominated in Euros. TJX calculates any excess Euro exposure each month and enters into forward contracts of approximately 30 days' duration to mitigate this exposure.
TJX also enters into derivative contracts, generally designated as fair value hedges, to hedge intercompany debt and intercompany interest payable. The changes in fair value of these contracts are recorded in selling, general and administrative expenses and are offset by marking the underlying item to fair value in the same period. Upon settlement, the realized gains and losses on these contracts are offset by the realized gains and losses of the underlying item in selling, general and administrative expenses.
12
The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at May 1, 2021:
In thousands
Pay
Receive
Blended Contract Rate
Balance Sheet Location
Current Asset U.S.$
Current (Liability) U.S.$
Net Fair
Value in
U.S.$ at
May 1, 2021
Fair value hedges:
Intercompany balances, primarily debt and related interest:
zł
45,000
£
8,846
0.1966
Prepaid Exp
$
353
$
—
$
353
A$
80,000
U.S.$
62,032
0.7754
(Accrued Exp)
—
(98)
(98)
U.S.$
75,102
£
55,000
0.7323
Prepaid Exp
1,505
—
1,505
£
450,000
U.S.$
620,918
1.3798
Prepaid Exp / (Accrued Exp)
40
(5,582)
(5,542)
€
200,000
U.S.$
244,699
1.2235
Prepaid Exp
2,301
—
2,301
Economic hedges for which hedge accounting was not elected:
Diesel fuel contracts
Fixed on
3.1M – 3.8M
gal per month
Float on
3.1M – 3.8M
gal per month
N/A
Prepaid Exp
17,816
—
17,816
Intercompany billings in TJX International, primarily merchandise related:
€
163,000
£
141,240
0.8665
(Accrued Exp)
—
(166)
(166)
Merchandise purchase commitments:
C$
574,390
U.S.$
457,000
0.7956
(Accrued Exp)
—
(11,054)
(11,054)
C$
29,455
€
19,500
0.6620
(Accrued Exp)
—
(444)
(444)
£
282,746
U.S.$
391,800
1.3857
Prepaid Exp / (Accrued Exp)
1,939
(3,751)
(1,812)
A$
50,830
U.S.$
39,125
0.7697
Prepaid Exp / (Accrued Exp)
42
(356)
(314)
U.S.$
53,680
€
44,400
0.8271
Prepaid Exp / (Accrued Exp)
185
(267)
(82)
Total fair value of derivative financial instruments
$
24,181
$
(21,718)
$
2,463
13
The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at January 30, 2021:
In thousands
Pay
Receive
Blended Contract Rate
Balance Sheet Location
Current Asset U.S.$
Current (Liability) U.S.$
Net Fair
Value in
U.S.$ at
January 30, 2021
Fair value hedges:
Intercompany balances, primarily debt and related interest:
zł
45,000
£
8,846
0.1966
Prepaid Exp
$
11
$
—
$
11
A$
80,000
U.S.$
62,032
0.7754
Prepaid Exp
738
—
738
U.S.$
75,102
£
55,000
0.7323
Prepaid Exp
357
—
357
£
200,000
U.S.$
274,853
1.3743
Prepaid Exp
32
—
32
€
200,000
U.S.$
244,699
1.2235
Prepaid Exp / (Accrued Exp)
427
(182)
245
Economic hedges for which hedge accounting was not elected:
Diesel fuel contracts
Fixed on
1.5M – 3.8M
gal per month
Float on
1.5M– 3.8M
gal per month
N/A
Prepaid Exp
4,880
—
4,880
Merchandise purchase commitments:
C$
384,679
U.S.$
296,000
0.7695
Prepaid Exp / (Accrued Exp)
430
(5,627)
(5,197)
C$
5,391
€
3,500
0.6492
Prepaid Exp
24
—
24
£
203,264
U.S.$
263,950
1.2986
(Accrued Exp)
—
(15,086)
(15,086)
zł
30,000
£
5,865
0.1955
(Accrued Exp)
—
(29)
(29)
A$
46,985
U.S.$
35,250
0.7502
Prepaid Exp / (Accrued Exp)
144
(837)
(693)
U.S.$
99,810
€
83,700
0.8386
Prepaid Exp / (Accrued Exp)
1,986
(160)
1,826
Total fair value of derivative financial instruments
$
9,029
$
(21,921)
$
(12,892)
14
The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at May 2, 2020:
In thousands
Pay
Receive
Blended Contract Rate
Balance Sheet Location
Current Asset U.S.$
Current (Liability) U.S.$
Net Fair
Value in
U.S.$ at
May 2, 2020
Fair value hedges:
Intercompany balances, primarily debt and related interest:
zł
65,000
£
12,780
0.1966
Prepaid Exp
$
351
$
—
$
351
€
60,000
£
53,412
0.8902
Prepaid Exp
437
—
437
A$
110,000
U.S.$
70,802
0.6437
Prepaid Exp / (Accrued Exp)
1,788
(1,656)
132
U.S.$
72,475
£
55,000
0.7589
(Accrued Exp)
—
(3,744)
(3,744)
£
200,000
U.S.$
249,499
1.2475
Prepaid Exp / (Accrued Exp)
999
(2,332)
(1,333)
C$
350,000
U.S.$
248,821
0.7109
Prepaid Exp / (Accrued Exp)
640
(478)
162
Economic hedges for which hedge accounting was not elected:
Diesel fuel contracts
Fixed on
2.9M – 3.5M
gal per month
Float on
2.9M – 3.5M
gal per month
N/A
(Accrued Exp)
—
(30,167)
(30,167)
Intercompany billings in TJX International, primarily merchandise related:
€
49,100
£
43,144
0.8787
(Accrued Exp)
—
(65)
(65)
Merchandise purchase commitments:
C$
77,979
U.S.$
59,200
0.7592
Prepaid Exp
3,819
—
3,819
£
63,618
U.S.$
82,200
1.2921
Prepaid Exp
2,469
—
2,469
A$
17,438
U.S.$
11,780
0.6755
Prepaid Exp
578
—
578
zł
69,400
£
13,880
0.2000
Prepaid Exp
666
—
666
U.S.$
30,651
€
27,588
0.9001
Prepaid Exp / (Accrued Exp)
30
(404)
(374)
Total fair value of derivative financial instruments
$
11,777
$
(38,846)
$
(27,069)
Presented below is the impact of derivative financial instruments on the Consolidated Statements of Income (Loss) for the periods shown:
Amount of (Loss) Gain Recognized in Income / (Loss) by Derivative
Location of (Loss) Gain
Recognized in Income / (Loss) by
Derivative
Thirteen Weeks Ended
In thousands
May 1, 2021
May 2, 2020
Fair value hedges:
Intercompany balances, primarily debt and related interest
Selling, general and administrative expenses
$
(2,864)
$
(5,173)
Economic hedges for which hedge accounting was not elected:
Diesel fuel contracts
Cost of sales, including buying and occupancy costs
13,570
(22,854)
Intercompany billings in TJX International, primarily merchandise related
Cost of sales, including buying and occupancy costs
118
(1,852)
Merchandise purchase commitments
Cost of sales, including buying and occupancy costs
(15,969)
50,135
(Loss) gain recognized in income / (loss)
$
(5,145)
$
20,256
15
Note F. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date or “exit price.” The inputs used to measure fair value are generally classified into the following hierarchy:
Level 1:
Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2:
Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability
Level 3:
Unobservable inputs for the asset or liability
The following table sets forth TJX’s financial assets and liabilities that are accounted for at fair value on a recurring basis:
In thousands
May 1, 2021
January 30, 2021
May 2, 2020
Level 1
Assets:
Executive Savings Plan investments
$
384,442
$
363,729
$
296,031
Level 2
Assets:
Foreign currency exchange contracts
$
6,365
$
4,149
$
11,777
Diesel fuel contracts
17,816
4,880
—
Liabilities:
Foreign currency exchange contracts
$
21,718
$
21,921
$
8,679
Diesel fuel contracts
—
—
30,167
Investments designed to meet obligations under the Executive Savings Plan are invested in registered investment companies traded in active markets and are recorded at unadjusted quoted prices.
Foreign currency exchange contracts and diesel fuel contracts are valued using broker quotations, which include observable market information. TJX does not make adjustments to quotes or prices obtained from brokers or pricing services but does assess the credit risk of counterparties and will adjust final valuations when appropriate. Where independent pricing services provide fair values, TJX obtains an understanding of the methods used in pricing. As such, these instruments are classified within Level 2.
The fair value of TJX’s general corporate debt was estimated by obtaining market quotes given the trading levels of other bonds of the same general issuer type and market perceived credit quality. These inputs are considered to be Level 2. The fair value of long-term debt as of May 1, 2021 was $5.8 billion compared to a carrying value of $5.3 billion. The fair value of long-term debt as of January 30, 2021 was $5.9 billion compared to a carrying value of $5.3 billion. The fair value of the current portion of long-term debt as of January 30, 2021 was $754 million compared to a carrying value of $750 million. The fair value of long-term debt as of May 2, 2020 was $7.8 billion compared to a carrying value of $7.2 billion. These estimates do not necessarily reflect provisions or restrictions in the various debt agreements that might affect TJX’s ability to settle these obligations.
TJX’s cash equivalents are stated at cost, which approximates fair value due to the short maturities of these instruments.
Certain assets and liabilities are measured at fair value on a nonrecurring basis, where as the assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when there is evidence of an impairment. For the periods ended May 1, 2021, January 30, 2021 and May 2, 2020, the Company did not record any material impairments to long-lived assets.
Note G. Segment Information
TJX operates four main business segments. The Marmaxx segment (T.J. Maxx, Marshalls, tjmaxx.com and marshalls.com) and the HomeGoods segment (HomeGoods and Homesense) both operate in the United States, the TJX Canada segment operates Winners, HomeSense and Marshalls in Canada, and the TJX International segment operates T.K. Maxx, Homesense and tkmaxx.com in Europe and T.K. Maxx in Australia. In addition to our four main business segments, Sierra operates sierra.com and retail stores in the U.S. The results of Sierra are included in the Marmaxx segment.
All of TJX’s stores, with the exception of HomeGoods and HomeSense, sell family apparel and home fashions. HomeGoods and HomeSense offer home fashions.
16
TJX evaluates the performance of its segments based on “segment profit or loss,” which it defines as pre-tax income or loss before general corporate expense, interest expense, net and certain separately disclosed unusual or infrequent items. “Segment profit or loss,” as defined by TJX, may not be comparable to similarly titled measures used by other entities. The terms “segment margin” or “segment profit margin” are used to describe segment profit or loss as a percentage of net sales. These measures of performance should not be considered alternatives to net income (loss) or cash flows from operating activities as an indicator of TJX’s performance or as a measure of liquidity.
Presented below is financial information with respect to TJX’s business segments:
Thirteen Weeks Ended
In thousands
May 1, 2021
May 2, 2020
Net sales:
In the United States:
Marmaxx
$
6,640,486
$
2,697,779
HomeGoods
2,141,756
759,865
TJX Canada
765,536
379,636
TJX International
538,883
571,608
Total net sales
$
10,086,661
$
4,408,888
Segment profit (loss):
In the United States:
Marmaxx
$
824,855
$
(709,669)
HomeGoods
251,602
(153,703)
TJX Canada
71,577
(97,181)
TJX International
(221,558)
(258,617)
Total segment profit (loss)
926,476
(1,219,170)
General corporate expense
160,442
100,327
Interest expense, net
44,688
23,351
Income (loss) before income taxes
$
721,346
$
(1,342,848)
Note H. Pension Plans and Other Retirement Benefits
Presented below is financial information relating to TJX’s funded defined benefit pension plan (“qualified pension plan” or “funded plan”) and its unfunded supplemental pension plan (“unfunded plan”) for the periods shown:
Funded Plan
Unfunded Plan
Thirteen Weeks Ended
Thirteen Weeks Ended
In thousands
May 1, 2021
May 2, 2020
May 1, 2021
May 2, 2020
Service cost
$
12,219
$
12,540
$
755
$
709
Interest cost
12,812
12,519
780
801
Expected return on plan assets
(23,992)
(22,242)
—
—
Amortization of net actuarial loss and prior service cost
2,803
5,509
1,154
1,034
Total expense
$
3,842
$
8,326
$
2,689
$
2,544
TJX’s policy with respect to the funded plan is to fund, at a minimum, the amount required to maintain a funded status of 80% of the applicable pension liability (the Funding Target pursuant to the Internal Revenue Code section 430) or such other amount as is sufficient to avoid restrictions with respect to the funding of nonqualified plans under the Internal Revenue Code. The Company does not anticipate any required funding in fiscal 2022 for the funded plan. The Company anticipates making contributions of $4 million to provide current benefits coming due under the unfunded plan in fiscal 2022.
The amounts included in amortization of net actuarial loss and prior service cost in the table above have been reclassified in their entirety from accumulated other comprehensive loss to the Consolidated Statements of Income (Loss), net of related tax effects, for the periods presented.
17
Note I. Long-Term Debt and Credit Lines
The table below presents long-term debt, exclusive of current installments, as of May 1, 2021, January 30, 2021 and May 2, 2020. All amounts are net of unamortized debt discounts.
In thousands
May 1, 2021
January 30, 2021
May 2, 2020
Revolving credit facilities:
$500 million revolver, maturing March 11, 2022
$
—
$
—
$
500,000
$500 million revolver, maturing May 10, 2024
—
—
500,000
General corporate debt:
2.750% senior unsecured notes, redeemed on April 15, 2021 (effective interest rate of 2.76% after reduction of unamortized debt discount of $25 at January 30, 2021 and $81 at May 2, 2020)
$
—
$
749,975
$
749,919
2.500% senior unsecured notes, maturing May 15, 2023 (effective interest rate of 2.51% after reduction of unamortized debt discount of $89 at May 1, 2021, $100 at January 30, 2021 and $134 at May 2, 2020)
499,911
499,900
499,866
3.500% senior unsecured notes, maturing April 15, 2025 (effective interest rate of 3.58% after reduction of unamortized debt discount of $3,956 at May 1, 2021, $4,208 at January 30, 2021 and $4,966 at May 2, 2020)
1,246,044
1,245,792
1,245,034
2.250% senior unsecured notes, maturing September 15, 2026 (effective interest rate of 2.32% after reduction of unamortized debt discount of $3,979 at May 1, 2021, $4,165 at January 30, 2021 and $4,725 at May 2, 2020)
996,021
995,835
995,275
3.750% senior unsecured notes, maturing April 15, 2027 (effective interest rate of 3.76% after reduction of unamortized debt discount of $437 at May 1, 2021, $456 at January 30, 2021 and $511 at May 2, 2020)
749,563
749,544
749,489
1.150% senior unsecured notes, maturing May 15, 2028 (effective interest rate of 1.18% after reduction of unamortized debt discount of $907 at May 1, 2021 and $939 at January 30, 2021)
499,093
499,061
—
3.875% senior unsecured notes, maturing April 15, 2030, see tender offer details below (effective interest rate of 3.89% after reduction of unamortized debt discount of $553 at May 1, 2021, $568 at January 30, 2021 and $1,549 at May 2, 2020)
495,297
495,282
1,248,451
1.600% senior unsecured notes, maturing May 15, 2031 (effective interest rate of 1.61% after reduction of unamortized debt discount of $595 at May 1, 2021 and $610 at January 30, 2021)
499,405
499,390
—
4.500% senior unsecured notes, maturing April 15, 2050; see tender offer details below (effective interest rate of 4.52% after reduction of unamortized debt discount of $2,189 at May 1, 2021, $2,208 at January 30, 2021 and $4,405 at May 2, 2020)
383,310
383,291
745,595
Total debt
5,368,644
6,118,070
7,233,629
Current maturities of long-term debt, net of debt issuance costs
—
(749,684)
—
Debt issuance costs
(33,780)
(35,465)
(41,216)
Long-term debt
$
5,334,864
$
5,332,921
$
7,192,413
During the fiscal quarter ended May 2, 2020, given the rapidly changing environment and level of uncertainty created by the COVID-19 pandemic, the Company completed the issuance and sale of (a) $1.25 billion aggregate principal amount of 3.500% notes due 2025, (b) $750 million aggregate principal amount of 3.750% notes due 2027, (c) $1.25 billion aggregate principal amount of 3.875% notes due 2030 and (d) $750 million aggregate principal amount of 4.500% notes due 2050. Portions of the 3.875% notes due 2030 and 4.500% notes due 2050 were subsequently repurchased, reducing the aggregate principal amount outstanding to $495.5 million and $385.5 million, respectively, pursuant to cash tender offers made by the Company in December 2020. Interest on these notes are payable semi-annually.
In November 2020, TJX completed the issuance of (a) $500 million aggregate principal amount of 1.150% notes due 2028 and (b) $500 million aggregate principal amount of 1.600% notes due 2031. Interest on these notes are payable semi-annually beginning May 2021.
18
On April 15, 2021, the Company redeemed all of the outstanding $750 million in aggregate principal amount of its 2.750% Notes due June 15, 2021 at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon to the redemption date. Subsequent to the end of the first quarter of fiscal 2022, the Company announced make-whole calls for its $1.25 billion aggregate principal amount of 3.500% Notes maturing in 2025 and its $750 million aggregate principal amount of 3.750% Notes maturing in 2027 pursuant to notices of redemption issued to holders of such notes in accordance with the applicable indenture. These make-whole calls are expected to settle in June 2021, and once completed the Company anticipates recording a pre-tax loss on the early extinguishment of these notes of approximately $250 million in the second quarter of fiscal 2022.
During the fiscal quarter ended May 1, 2021, TJX had a $500 million 364 day revolving credit facility that matures in August 2021 (the “364-Day Revolving Credit Facility”), a $500 million revolving credit facility that matures in March 2022 (the “2022 Revolving Credit Facility”) and a $500 million revolving credit facility that matures in May 2024 (the “2024 Revolving Credit Facility”). Under these credit facilities, the Company has borrowing capacity of $1.5 billion, all of which remains available to the Company. The terms of these revolving credit facilities require quarterly payments on the committed amount and payment of interest on borrowings at rates based on LIBOR or a base rate plus a variable margin, in each case based on the Company’s long term debt ratings. The 2022 Revolving Credit Facility and the 2024 Revolving Credit Facility require usages fees based on total credit extensions under such facilities. As of May 2, 2020, $1 billion was outstanding under these two facilities, and was subsequently repaid in July 2020. The amounts drawn are included as outstanding long-term debt in the table above. The six month interest rate on these borrowings was 1.757% through May 15, 2020, and increased to 2.007% through the payoff date. As of May 1, 2021 and January 30, 2021, there were no amounts outstanding under any of the Company’s facilities. TJX was in compliance with all covenants related to its credit facilities at the end of all periods presented.
As of May 1, 2021, January 30, 2021 and May 2, 2020, TJX Canada had two uncommitted credit lines, a C$10 million facility for operating expenses and a C$10 million letter of credit facility. As of May 1, 2021, January 30, 2021 and May 2, 2020, and during the quarters and year then ended, there were no amounts outstanding on the Canadian credit line. As of May 1, 2021, January 30, 2021 and May 2, 2020, our European business at TJX International had an uncommitted credit line of £5 million. As of May 1, 2021, January 30, 2021 and May 2, 2020, and during the quarters and year then ended, there were no amounts outstanding on the European credit line.
Note J. Income Taxes
The effective income tax rate was 26.0% for the first quarter of fiscal 2022 and 33.9% for the first quarter of fiscal 2021. The decrease in the effective income tax rate was primarily a result of the ability to carry back the anticipated loss from the first quarter of fiscal 2021 to earlier tax years with higher tax rates due to a benefit provided by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) enacted on March 27, 2020.
TJX had net unrecognized tax benefits of $278 million as of May 1, 2021, $272 million as of January 30, 2021 and $256 million as of May 2, 2020.
TJX is subject to U.S. federal income tax as well as income tax in multiple state, local and foreign jurisdictions. In the U.S. and India, fiscal years through 2010 are no longer subject to examination. In all other jurisdictions, fiscal years through 2011 are no longer subject to examination.
TJX’s accounting policy classifies interest and penalties related to income tax matters as part of income tax expense. The total accrued amount on the Consolidated Balance Sheets for interest and penalties was $38 million as of May 1, 2021, $36 million as of January 30, 2021 and $30 million as of May 2, 2020.
Based on the outcome of tax examinations or judicial or administrative proceedings, or as a result of the expiration of statutes of limitations in specific jurisdictions, it is reasonably possible that unrecognized tax benefits for certain tax positions taken on previously filed tax returns may change materially from those presented in the Consolidated Financial Statements. During the next 12 months, it is reasonably possible that tax examinations of prior years’ tax returns or judicial or administrative proceedings that reflect such positions taken by TJX may be finalized. As a result, the total net amount of unrecognized tax benefits may decrease, which would reduce the provision for taxes on earnings, by a range of zero to $42 million.
19
Note K. Contingent Obligations and Contingencies
Contingent Obligations
TJX has contingent obligations on leases, for which it was a lessee or guarantor, which were assigned to third parties without TJX being released by the landlords. The Company has had numerous leases from its former operations where its guarantee required it to satisfy some of these lease obligations and TJX established appropriate reserves. The Company may be contingently liable on up to eight leases of former TJX businesses, for which the Company believes the likelihood of future liability to TJX is remote. The Company may also be contingently liable for assignments and subleases if the assignees or subtenants do not fulfill their obligations. TJX estimates the undiscounted value of these contingent obligations as of May 1, 2021 to be approximately $9 million. TJX believes that most or all of these contingent obligations will not revert to the Company and, to the extent they do, may be resolved for substantially less due to mitigating factors including TJX's ability to potentially further sublet.
TJX is a party to various agreements under which it may be obligated to indemnify the other party with respect to certain losses related to matters including title to assets sold, specified environmental matters or certain income taxes. These obligations are often limited in time and amount. There are no amounts reflected in the Company’s Consolidated Balance Sheets with respect to these contingent obligations.
Contingencies
TJX is subject to certain legal proceedings, lawsuits, disputes and claims that arise from time to time in the ordinary course of its business. In addition, TJX is a defendant in several lawsuits filed in federal and state courts brought as putative class, collective, and/or representative actions on behalf of various groups of current and former salaried and hourly associates in the U.S. The lawsuits allege violations of the Fair Labor Standards Act and of state wage and hour and other labor statutes. The lawsuits are in various procedural stages and seek monetary damages, injunctive relief and attorneys’ fees. In connection with ongoing litigation, an immaterial amount has been accrued in the accompanying Consolidated Financial Statements.
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Thirteen Weeks (first quarter) Ended May 1, 2021
Compared to
The Thirteen Weeks (first quarter) Ended May 2, 2020
OVERVIEW
We are the leading off-price apparel and home fashions retailer in the U.S. and worldwide. Our mission is to deliver great value to our customers every day. We do this by selling a rapidly changing assortment of apparel, home fashions and other merchandise at prices generally 20% to 60% below full-price retailers’ (including department, specialty, and major online retailers) regular prices on comparable merchandise, every day through our stores and four distinctive branded e-commerce sites. We operate over 4,600 stores through our four main segments: in the U.S., Marmaxx (which operates T.J. Maxx, Marshalls, tjmaxx.com and marshalls.com) and HomeGoods (which operates HomeGoods and Homesense); TJX Canada (which operates Winners, HomeSense and Marshalls in Canada); and TJX International (which operates T.K. Maxx, Homesense and tkmaxx.com in Europe, and T.K. Maxx in Australia). In addition to our four main segments, Sierra operates sierra.com and retail stores in the U.S. The results of Sierra are included in the Marmaxx segment.
RESULTS OF OPERATIONS
The novel coronavirus disease (“COVID-19”) continues to impact our financial results. During the first quarter of fiscal 2022, while our stores in the United States remained open for the entire first quarter, we had store closures primarily in Europe and Canada, and continue to have store closures, as discussed below. Overall, our first quarter results for fiscal 2022 are significantly better than our results for the first quarter of fiscal 2021, when the pandemic resulted in the temporary closure of all our stores for approximately 50% of the quarter.
In addition to comparing current year results to fiscal 2021, we may, where meaningful, also compare these results to a comparable period in fiscal 2020, prior to the emergence of the pandemic. Although we are not fully past the negative impacts of the pandemic, we feel this additional comparison provides insight into how we are managing the business and performing as compared to pre-pandemic results.
Overview of our financial performance for the quarter ended May 1, 2021 includes the following:
–Net sales were $10.1 billion, $4.4 billion and $9.3 billion for the first quarter of fiscal 2022, fiscal 2021 and fiscal 2020, respectively. As of May 1, 2021, the number of stores in operation (including stores that had been or continue to be temporarily closed due to COVID-19) increased 2% and selling square footage increased 2% compared to the end of the fiscal 2021 first quarter.
–Diluted earnings (loss) per share were $0.44, $(0.74) and $0.57 for the first quarter of fiscal 2022, fiscal 2021 and fiscal 2020, respectively.
–Pre-tax margin (the ratio of pre-tax income (loss) to net sales) was 7.2%, (30.5)% and 10.1% for the first quarter of fiscal 2022, fiscal 2021 and fiscal 2020, respectively.
–Our cost of sales, including buying and occupancy costs, ratio was 71.9%, 100.1% and 71.5% for the first quarter of fiscal 2022, fiscal 2021 and fiscal 2020, respectively.
–Our selling, general and administrative (“SG&A”) expense ratio was 20.5%, 29.8% and 18.3% for the first quarter of fiscal 2022, fiscal 2021 and fiscal 2020, respectively.
–Our consolidated average per store inventories, including inventory on hand at our distribution centers (which excludes inventory in transit) and excluding our e-commerce sites and Sierra stores, were down 8% on a reported basis and down 11% on a constant currency basis at the end of the first quarter of fiscal 2022 as compared to a 7% decrease in average per store inventories on a reported basis and 6% decrease on a constant currency basis in the first quarter of fiscal 2021.
–A dividend of $0.26 per share was declared in the first quarter of fiscal 2022 and no dividends were declared during the first quarter of fiscal 2021. There were no share repurchases during the first quarter of fiscal 2022. During the first quarter of fiscal 2021, we returned approximately $0.5 billion to our shareholders through payment of the dividend declared in the fourth quarter of fiscal 2020 and share repurchases.
–In April 2021, we redeemed $750 million of debt that was due to mature in June 2021 at par.
–Subsequent to the end of the first quarter of fiscal 2022, we announced make-whole calls that will, upon completion, reduce outstanding debt by $2 billion. We also lifted the temporary suspension of our share repurchase programs.
21
Recent Events and Trends
COVID-19
COVID-19 was first identified in December 2019 before spreading worldwide and being declared a pandemic by the World Health Organization in March 2020. In response to the COVID-19 pandemic, we temporarily closed all of our stores, online businesses, distribution centers and offices in March 2020, with Associates working remotely where possible. When we began to reopen stores and distribution centers in May 2020, we implemented new health and safety practices, including practices related to personal protective equipment, enhanced cleaning and social distancing protocols (which include occupancy limits and reducing in-store inventory levels). In response to the pandemic, primarily during the first quarter of fiscal 2021, we took several steps to strengthen our financial position and balance sheet and to maintain financial liquidity and flexibility.
In response to increasing cases of COVID-19 and due to government mandates, hundreds of stores had additional temporary closures during the first quarter of fiscal 2022, primarily located in Europe and Canada. Our results for the first quarter of fiscal 2022 and fiscal 2021 were negatively impacted by the temporary closure of our stores for approximately 14% of the first quarter of fiscal 2022 and approximately 50% of the first quarter of fiscal 2021 in the aggregate. This represents total store days closed due to the COVID-19 pandemic as a percentage of potential total store days open.
The below tables represents the first quarter of fiscal 2022 and the first quarter of fiscal 2021 store closures by segment (in percentage of store days closed).
Thirteen Weeks Ended
May 1, 2021
May 2, 2020
Marmaxx
—
%
50
%
HomeGoods
—
49
TJX Canada
25
53
TJX International
69
49
Total
14
%
50
%
As of May 23, 2021, we had approximately 260 stores, primarily located in Canada, that were still temporarily closed due to government mandates in response to the COVID-19 pandemic. In total, based on the restrictions currently in place, we expect stores to be closed for approximately 3% of the second quarter of fiscal 2022. All of our e-commerce businesses remained open throughout the first quarter of fiscal 2022, including tkmaxx.com in the U.K. We continue to monitor developments, including government requirements and recommendations at the national, state, and local level that could result in possible additional impacts to our operations.
Impact of Brexit
On December 24, 2020 the U.K. and EU agreed upon the terms of their future trading relationship. As expected, the movement of goods between the U.K. and EU is subject to additional regulatory and compliance requirements, which has had, and is expected to continue to have, a negative impact on our ability to efficiently move merchandise in the region. We have realigned our European division's supply chain to reduce the volume of merchandise flowing between the U.K. and the EU and have established resources and systems to support this plan.
The new trade deal provides for zero customs duties and zero quotas on trade between the U.K. and the EU in goods that are produced in each of the U.K. and the EU. However, a portion of the merchandise we source in the U.K. and the EU is produced somewhere else in the world, and therefore will be subject to additional customs duty costs under the new trade deal. These additional customs duties and the related operational costs are likely to impact the profitability of our European division, at least in the short term.
New immigration requirements between the U.K. and EU countries may also have a negative impact on our ability to recruit and retain current and future talent in the region. We continue to communicate with our Associates about the new immigration requirements.
In addition to these operational impacts, factors including changes in legislation, consumer confidence and behavior, economic conditions, interest rates and foreign currency exchange rates could result in a significant financial impact to our European operations, particularly in the short term. These impacts may not be known until we are fully operational after the COVID-19 restrictions are lifted, as the COVID-19 pandemic has led to modifications of our operations in fiscal 2021 and continuing into fiscal 2022.
22
Net Sales
Net sales totaled $10.1 billion, $4.4 billion and $9.3 billion for the first quarter of fiscal 2022, fiscal 2021 and fiscal 2020, respectively. Net sales from our e-commerce businesses combined amounted to less than 3% of total sales for the first quarters of fiscal 2022, fiscal 2021 and fiscal 2020.
As a result of the extended store closures during fiscal 2021 due to the COVID-19 pandemic and our policy relating to the treatment of extended store closures when calculating comp store sales, we had no stores classified as comp stores at the end of the first quarter fiscal 2022 and fiscal 2021. Our historical definition of comp store sales is presented below for reference.
Open-Only Comp Store Sales
In order to provide a performance indicator for our stores as they reopened, since the second quarter of fiscal 2021, we have been temporarily reporting a new sales measure, open-only comp store sales. Open-only comp store sales includes stores initially classified as comp stores at the beginning of fiscal 2021 that have had to temporarily close due to the COVID-19 pandemic. For the first quarter of fiscal 2022, this measure reports the sales increase or decrease of these stores for the days the stores were open in the current period against sales for the same days in the first quarter of fiscal 2020 prior to the pandemic. Open-only comp sales of our foreign segments are calculated by translating the current year using the first quarter of fiscal 2020’s exchange rates.
We define customer traffic to be the number of transactions in stores and average ticket to be the average retail price of the units sold. We define average transaction or average basket to be the average dollar value of transactions.
Q1 Fiscal 2022 vs Q1 Fiscal 2021
Net sales increased 129% in the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 due to the temporary closures of all stores and online businesses during the first quarter of fiscal 2021 as a result of the COVID-19 pandemic. Stores were closed for approximately 14% of the first quarter of fiscal 2022, primarily in Europe and portions of Canada, as compared to stores across all geographies being closed for approximately 50% of the first quarter of fiscal 2021 as a result of the COVID-19 pandemic.
Q1 Fiscal 2022 vs Q1 Fiscal 2020
Net sales increased 9% in the first quarter of fiscal 2022 compared to the first quarter of fiscal 2020. Open-only comp store sales were up 16% for fiscal 2022 as compared to fiscal 2020. This reflects an increase in average basket across all divisions partially offset by a reduction in customer traffic. Home fashion across all major segments outperformed apparel for the first quarter of fiscal 2022.
Historical Definition of Comp Store Sales
We are temporarily reporting a new sales measure, open-only comp store sales, as described above. The following reflects the way that we have historically classified and reported comp sales results.
Historically, we defined comparable store sales, or comp sales, to be sales of stores that have been in operation for all or a portion of two consecutive fiscal years, or in other words, stores that are starting their third fiscal year of operation. We calculated comp sales on a 52-week basis by comparing the current and prior year weekly periods that are most closely aligned. Relocated stores and stores that have changed in size are generally classified in the same way as the original store, and we believe that the impact of these stores on the consolidated comp percentage is immaterial.
Sales excluded from comp sales (“non-comp sales”) consist of sales from:
–New stores - stores that have not yet met the comp sales criteria, which represents a substantial majority of non-comp sales
–Stores that are closed permanently or for an extended period of time
–Sales from our e-commerce sites, meaning sierra.com, tjmaxx.com, marshalls.com and tkmaxx.com
We determine which stores are included in the comp sales calculation at the beginning of a fiscal year and the classification remains constant throughout that year unless a store is closed permanently or for an extended period during that fiscal year. Beginning in fiscal 2020, Sierra stores that otherwise fit the comp store definition are included in comp stores in our Marmaxx segment.
Comp sales of our foreign segments are calculated by translating the current year’s comp sales using the prior year’s exchange rates. This removes the effect of changes in currency exchange rates, which we believe is a more accurate measure of segment operating performance.
23
Comp sales may be referred to as “same store” sales by other retail companies. The method for calculating comp sales varies across the retail industry, therefore our measure of comp sales may not be comparable to that of other retail companies.
The following table sets forth certain information about our operating results as a percentage of net sales for the following periods:
Thirteen Weeks Ended
May 1, 2021
May 2, 2020
May 4, 2019
Net sales
100.0
%
100.0
%
100.0
%
Cost of sales, including buying and occupancy costs
71.9
100.1
71.5
Selling, general and administrative expenses
20.5
29.8
18.3
Interest expense, net
0.4
0.5
—
Income (loss) before provision for income taxes*
7.2
%
(30.5)
%
10.1
%
*Figures may not foot due to rounding.
Impact of foreign currency exchange rates
Our operating results are affected by foreign currency exchange rates as a result of changes in the value of the U.S. dollar or a division’s local currency in relation to other currencies. We specifically refer to “foreign currency” as the impact of translational foreign currency exchange and mark-to-market of inventory derivatives, as described in detail below. This does not include the impact foreign currency exchange rates can have on various transactions that are denominated in a currency other than an operating division's local currency referred to as “transactional foreign exchange,” also described below.
Translation Foreign Exchange
In our financial statements, we translate the operations of TJX Canada and TJX International from local currencies into U.S. dollars using currency rates in effect at different points in time. Significant changes in foreign exchange rates between comparable prior periods can result in meaningful variations in net sales, net income (loss) and earnings (loss) per share growth as well as the net sales and operating results of these segments. Currency translation generally does not affect operating margins, or affects them only slightly, as sales and expenses of the foreign operations are translated at approximately the same rates within a given period.
Mark-to-Market Inventory Derivatives
We routinely enter into inventory-related hedging instruments to mitigate the impact on earnings of changes in foreign currency exchange rates on merchandise purchases denominated in currencies other than the local currencies of our divisions, principally TJX Canada and TJX International. As we have not elected “hedge accounting” for these instruments, as defined by U.S. generally accepted accounting principles (“GAAP”), we record a mark-to-market gain or loss on the derivative instruments in our results of operations at the end of each reporting period. In subsequent periods, the income (loss) statement impact of the mark-to-market adjustment is effectively offset when the inventory being hedged is received and paid for. While these effects occur every reporting period, they are of much greater magnitude when there are sudden and significant changes in currency exchange rates during a short period of time. The mark-to-market adjustment on these derivatives does not affect net sales, but it does affect the cost of sales, operating margins and earnings we report.
Transactional Foreign Exchange
When discussing the impact on our results of the effect of foreign currency exchange rates on certain transactions, we refer to it as “transactional foreign exchange”. This primarily includes the impact that foreign currency exchange rates may have on the year-over-year comparison of merchandise margin as well as “foreign currency gains and losses” on transactions that are denominated in a currency other than the operating division's local currency. These two items can impact segment margin comparison of our foreign divisions and we have highlighted them when they are meaningful to understanding operating trends.
24
Cost of Sales, Including Buying and Occupancy Costs
Cost of sales, including buying and occupancy costs, was $7.3 billion, or 71.9% of net sales, $4.4 billion, or 100.1% of net sales and $6.6 billion, or 71.5% of net sales for the first quarters of fiscal 2022, fiscal 2021 and fiscal 2020, respectively.
Q1 Fiscal 2022 vs Q1 Fiscal 2021
The increase in the total cost of sales, including buying and occupancy costs, was mainly attributable to the reduction in cost of merchandise sold due to a lower level of sales in the first quarter of fiscal 2021, due to our stores being temporarily closed in the aggregate for approximately 50% of the first quarter of fiscal 2021. In addition, merchandise margin significantly improved compared to the first quarter of fiscal 2021 primarily driven by lower markdowns in the first quarter of fiscal 2022 as a result of the incremental markdowns taken in fiscal 2021 due to the temporary store closures. The first quarter of fiscal 2022 also reflects higher supply chain costs.
Cost of sales, including buying and occupancy costs was favorably impacted by approximately $21 million and $35 million of government programs for the first quarters of fiscal 2022 and fiscal 2021, respectively, in regions where we had closures.
Q1 Fiscal 2022 vs Q1 Fiscal 2020
The increase in the expense ratio of 0.4% in the first quarter of fiscal 2022 compared to fiscal 2020 reflects higher supply chain costs primarily driven by higher wages and expenses related to the additional distribution capacity. Additionally, in the first quarter of fiscal 2022, the expense deleveraged on the supply chain costs due to lost sales as a result of the temporary store closures. The increase in the expense ratio was partially offset by the leverage on our occupancy costs due to the strong open-only comp sales growth as well as improved merchandise margin in the first quarter of fiscal 2022. Merchandise margin reflects strong markon and lower markdowns, mostly offset by higher freight costs.
Selling, General and Administrative Expenses
SG&A expenses were $2.1 billion, or 20.5% of net sales, $1.3 billion, or 29.8% of net sales and $1.7 billion, or 18.3% of net sales for the first quarters of fiscal 2022, fiscal 2021 and fiscal 2020, respectively.
Q1 Fiscal 2022 vs Q1 Fiscal 2021
The increase in SG&A expenses for the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 was driven by higher store payroll and store supply costs primarily due to incremental COVID-19 expenses. Additionally, these costs and other variable store costs such as advertising spend and credit processing fees were up as compared to the first quarter of fiscal 2021 as a result of increased store operating days.
Payroll was favorably impacted by $121 million and $152 million of government programs for both the first quarter of fiscal 2022 and fiscal 2021, respectively, in regions where we had store closures.
Q1 Fiscal 2022 vs Q1 Fiscal 2020
The increase in the expense ratio of 2.2% in the first quarter of fiscal 2022 compared to the first quarter of fiscal 2020 was driven by higher store payroll and store supply costs primarily due to incremental COVID-19 expenses. These incremental costs were partially offset by the government programs received in fiscal 2022.
Interest Expense, net
The components of interest expense, net are summarized below:
Thirteen Weeks Ended
In millions
May 1, 2021
May 2, 2020
May 4, 2019
Interest expense
$
47.0
$
32.6
$
15.3
Capitalized interest
(1.1)
(1.0)
(0.7)
Interest (income)
(1.2)
(8.2)
(13.8)
Interest expense, net
$
44.7
$
23.4
$
0.8
Net interest expense increased for the first quarter of fiscal 2022 compared to the same period in fiscal 2021, primarily due to the additional borrowings initiated in fiscal 2021, which only partially impacted the first quarter of fiscal 2021.
25
Provision for Income Taxes
The effective income tax rate was 26.0%, 33.9% and 25.2% for the first quarters of fiscal 2022, fiscal 2021 and fiscal 2020, respectively. The decrease in the first quarter effective income tax rate of fiscal 2022 was primarily a result of the ability to carry back the anticipated loss from the first quarter of fiscal 2021 to earlier tax years with higher tax rates due to a benefit provided by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) enacted on March 27, 2020.
Net Income / (Loss) and Diluted Earnings (Loss) Per Share
Net income (loss) was $534 million, $(887) million and $700 million for the first quarters of fiscal 2022, fiscal 2021 and fiscal 2020, respectively.
Net income (loss) per diluted share was $0.44, $(0.74) and $0.57 for the first quarters of fiscal 2022, fiscal 2021 and fiscal 2020, respectively.
Segment Information
We operate four main business segments. Our Marmaxx segment (T.J. Maxx, Marshalls, tjmaxx.com and marshalls.com) and the HomeGoods segment (HomeGoods and Homesense) both operate in the United States. Our TJX Canada segment operates Winners, HomeSense and Marshalls in Canada, and our TJX International segment operates T.K. Maxx, Homesense and tkmaxx.com in Europe and T.K. Maxx in Australia. In addition to our four main segments, Sierra operates sierra.com and retail stores in the U.S. The results of Sierra are included in the Marmaxx segment.
We evaluate the performance of our segments based on “segment profit or loss,” which we define as pre-tax income or loss before general corporate expense and interest expense, net, and certain separately disclosed unusual or infrequent items. “Segment profit or loss,” as we define the term, may not be comparable to similarly titled measures used by other entities. The terms “segment margin” or “segment profit margin” are used to describe segment profit or loss as a percentage of net sales. These measures of performance should not be considered an alternative to net income or cash flows from operating activities as an indicator of our performance or as a measure of liquidity.
Due to the temporary closing of stores as a result of the COVID-19 pandemic, our historical definition of comp store sales is not applicable for the reported periods. In order to provide a performance indicator for our stores as they reopen, we have been temporarily reporting a new sales measure, open-only comp store sales. Open-only comp store sales includes stores initially classified as comp stores at the beginning of fiscal 2021 that have had to temporarily close due to the COVID-19 pandemic. This measure reports the sales increase or decrease of these stores for the days the stores were open in the first quarter of fiscal 2022 against sales for the same days in fiscal 2020, prior to the emergence of the pandemic.
When discussing current year segment results, in addition to comparing to fiscal 2021, we may, where meaningful, also compare these results to a comparable period in fiscal 2020, prior to the emergence of the pandemic. As the TJX International segment results for the first quarter of fiscal 2022 were significantly impacted by temporary store closures due to the COVID-19 pandemic, we do not believe a comparison to fiscal 2020 would be meaningful.
Presented below is selected financial information related to our business segments.
26
U.S. SEGMENTS
Marmaxx
Thirteen Weeks Ended
U.S. dollars in millions
May 1, 2021
May 2, 2020
Net sales
$
6,640
$
2,698
Segment profit (loss)
$
825
$
(710)
Segment margin
12.4
%
(26.3)
%
Stores in operation at end of period:
T.J. Maxx
1,282
1,273
Marshalls
1,147
1,130
Sierra
52
46
Total
2,481
2,449
Selling square footage at end of period (in thousands):
T.J. Maxx
27,872
27,776
Marshalls
26,187
25,907
Sierra
853
766
Total
54,912
54,449
Net Sales
Net sales for Marmaxx were $6.6 billion for the first quarter of fiscal 2022, an increase of 146% compared to $2.7 billion for the first quarter of fiscal 2021. The increase reflects significant temporary store closings in the first quarter of fiscal 2021. Stores were closed for nearly half of the first quarter of fiscal 2021 as a result of the COVID-19 pandemic. Net sales increased 14% compared to $5.8 billion for the first quarter of fiscal 2020.
Open-only comp store sales were up 12% for the first quarter of fiscal 2022 compared to the first quarter of fiscal 2020. The increase in open-only comp sales was primarily driven by an increase in average basket. Home fashions outperformed apparel for the first quarter of fiscal 2022.
Segment Profit / (Loss)
Segment profit was $825 million for the first quarter of fiscal 2022, an increase of $1.5 billion, compared to a segment loss of $(710) million for the first quarter of fiscal 2021. The increase for the first quarter was primarily driven by increased sales due to the temporary store closures in the first quarter of fiscal 2021. The first quarter of fiscal 2021 also reflects $88 million of government programs.
Segment profit increased by $29 million compared to a segment profit of $796 million for the first quarter of fiscal 2020. Segment profit margin decreased to 12.4% for the first quarter of fiscal 2022 compared to 13.7% for the first quarter of fiscal 2020. This decrease was primarily driven by incremental COVID-19 store payroll costs and higher supply chain costs. The higher supply chain costs were driven by higher wages and expenses related to the additional distribution capacity. These decreases in segment profit margin were partially offset by expense leverage on our occupancy costs and improved merchandise margin. Merchandise margin reflects strong markon and lower markdowns, mostly offset by higher freight costs.
Our U.S. e-commerce businesses, which represented approximately 3% of Marmaxx’s net sales for each of the first quarters of fiscal 2022, fiscal 2021 and fiscal 2020 did not have a significant impact on year-over-year segment margin comparisons for the first quarter of fiscal 2022. We temporarily closed our online businesses for a portion of the first quarter of fiscal 2021 as a result of the COVID-19 pandemic.
27
HomeGoods
Thirteen Weeks Ended
U.S. dollars in millions
May 1, 2021
May 2, 2020
Net sales
$
2,142
$
760
Segment profit (loss)
$
252
$
(154)
Segment margin
11.7
%
(20.2)
%
Stores in operation at end of period:
HomeGoods
843
814
Homesense
39
34
Total
882
848
Selling square footage at end of period (in thousands):
HomeGoods
15,425
14,915
Homesense
837
733
Total
16,262
15,648
Net Sales
Net sales for HomeGoods were $2.1 billion for the first quarter of fiscal 2022, an increase of 182%, compared to $760 million for the first quarter of fiscal 2021. The increase reflects significant temporary store closings in the first quarter of fiscal 2021. Stores were closed for nearly half of the first quarter of fiscal 2021 as a result of the COVID-19 pandemic. Net sales increased 53% compared to $1.4 billion for the first quarter of fiscal 2020.
Open-only comp store sales were up 40% for the first quarter of fiscal 2022 compared to the first quarter of fiscal 2020. The increase in open-only comp sales was driven by an increase in customer traffic and average basket.
Segment Profit / (Loss)
Segment profit was $252 million for the first quarter of fiscal 2022, an increase of $406 million compared to a segment loss of $(154) million for the first quarter of fiscal 2021. The increase for the first quarter of fiscal 2022 was primarily driven by increased sales due to the temporary store closures in the first quarter of fiscal 2021. The first quarter of fiscal 2021 also reflects $22 million of government programs.
Segment profit increased by $115 million compared to a segment profit of $137 million for the first quarter of fiscal 2020. Segment profit margin increased to 11.7% for the first quarter of fiscal 2022 compared to 9.8% for the first quarter of fiscal 2020. The increase in segment profit margin was primarily driven by expense leverage on our occupancy costs due to the strong open-only comp sales growth and lower travel spend. This was partially offset by store payroll costs as a result of incremental COVID-19 costs and higher wages, as well as a reduction in merchandise margin. Merchandise margin reflects increased freight costs partially offset by favorable markdowns.
We plan to make online shopping available on www.homegoods.com in the fall of fiscal 2022.
28
FOREIGN SEGMENTS
TJX Canada
Thirteen Weeks Ended
U.S. dollars in millions
May 1, 2021
May 2, 2020
Net sales
$
766
$
380
Segment profit (loss)
$
72
$
(97)
Segment margin
9.3
%
(25.6)
%
Stores in operation at end of period:
Winners
284
279
HomeSense
143
139
Marshalls
103
100
Total
530
518
Selling square footage at end of period (in thousands):
Winners
6,113
6,003
HomeSense
2,644
2,553
Marshalls
2,159
2,102
Total
10,916
10,658
Net Sales
Net sales for TJX Canada were $766 million for the first quarter of fiscal 2022, an increase of 102% compared to $380 million for the first quarter of fiscal 2021. The increase reflects temporary store closings for both periods, which were approximately 25% of the first quarter of fiscal 2022 and approximately 53% of the first quarter of fiscal 2021 as a result of the COVID-19 pandemic. In addition, many stores that have remained open or have subsequently reopened continue to be subject to capacity constraints. Net sales for TJX Canada decreased 10% compared to $848 million for the first quarter of fiscal 2020.
Open-only comp store sales were up 9% for the first quarter of fiscal 2022 compared to the first quarter of fiscal 2020. The increase in open-only comp sales was driven by an increase in average basket, partially offset by reduced customer traffic.
Segment Profit / (Loss)
Segment profit was $72 million for the first quarter of fiscal 2022, an increase of $169 million compared to a segment loss of $(97) million for the first quarter of fiscal 2021. The increase for the first quarter of fiscal 2022 was primarily driven by increased sales due to the reduction in store closures compared to the first quarter of fiscal 2021. The first quarters of fiscal 2022 and 2021 also reflect $58 million and $31 million, respectively, of government programs.
Segment profit decreased by $25 million compared to a segment profit of $97 million for the first quarter of fiscal 2020. Segment profit margin decreased to 9.3% for the first quarter of fiscal 2022 compared to 11.4% for the first quarter of fiscal 2020. The decrease in segment profit margin was primarily driven by expense deleverage on our occupancy costs due to the reduction in sales because of store closures, the unfavorable impact of the mark-to-market of the inventory derivatives as well as higher supply chain costs. This was partially offset by improved merchandise margin, which reflects strong markon partially offset by increased freight costs.
29
TJX International
Thirteen Weeks Ended
U.S. dollars in millions
May 1, 2021
May 2, 2020
Net sales
$
539
$
572
Segment (loss)
$
(222)
$
(259)
Segment margin
(41.1)
%
(45.2)
%
Stores in operation at end of period:
T.K. Maxx
604
596
Homesense
78
78
T.K. Maxx Australia
64
56
Total
746
730
Selling square footage at end of period (in thousands):
T.K. Maxx
12,160
12,019
Homesense
1,142
1,142
T.K. Maxx Australia
1,143
1,019
14,445
14,180
Net Sales
Net sales for TJX International were $539 million for the first quarter of fiscal 2022, a decrease of 6% compared to $572 million for the first quarter of fiscal 2021. The decrease reflects temporary store closings for both periods, which were approximately 69% of the first quarter of fiscal 2022 and approximately 49% of the first quarter of fiscal 2021 as a result of the COVID-19 pandemic. In addition, many stores that have remained open or have subsequently reopened continue to be subject to capacity constraints.
E-commerce sales were approximately 12% and 4% of TJX International’s net sales for the first quarter of fiscal 2022 and fiscal 2021, respectively. Along with our stores, we temporarily closed all of our online business during the first quarter of fiscal 2021. Since reopening in the second quarter of fiscal 2021, our online businesses have remained open through the first quarter of fiscal 2022.
Segment (Loss)
Segment loss was $(222) million for the first quarter of fiscal 2022, an improvement of $37 million compared to a segment loss of $(259) million for the first quarter of fiscal 2021. The segment loss reflects significant temporary store closures for both periods. The improvement in segment loss for the first quarter of fiscal 2022 was primarily the result of improved merchandise margin due to favorable markdowns compared with the first quarter of fiscal 2021. The improvement in merchandise margin was partially offset by incremental COVID-19 related costs, net of government programs. The first quarters of fiscal 2022 and 2021 reflect $84 million and $46 million, respectively, of government programs.
GENERAL CORPORATE EXPENSE
Thirteen Weeks Ended
In millions
May 1, 2021
May 2, 2020
General corporate expense
$
160
$
100
General corporate expense for segment reporting purposes represents those costs not specifically related to the operations of our business segments. General corporate expenses are primarily included in SG&A expenses. The mark-to-market adjustment of our fuel hedges is included in cost of sales, including buying and occupancy costs.
The increase in general corporate expense for the first quarter of fiscal 2022 was primarily driven by higher share-based and incentive compensation costs and contributions to TJX’s charitable foundations, partially offset by the mark-to-market adjustment on the fuel hedges.
30
ANALYSIS OF FINANCIAL CONDITION
Liquidity and Capital Resources
Subsequent to the end of the first quarter of fiscal 2022, we announced make-whole calls for our $1.25 billion aggregate principal outstanding 3.50% Notes and our $750 million aggregate principal outstanding 3.75% notes, both of which series of notes were issued in the first quarter of fiscal 2021 in response to the COVID-19 pandemic. These make-whole calls are expected to settle on June 4, 2021 and we anticipate recording a pre-tax loss on the early extinguishment of these notes of approximately $250 million in the second quarter of fiscal 2022. Additionally, in the first quarter of fiscal 2022, we redeemed $750 million principal outstanding, 2.75% Notes due June 15, 2021. The result of these debt redemptions once completed are expected to be a $2.75 billion reduction of outstanding debt since the beginning of fiscal 2022 and more than $90 million of annualized interest expense savings. For additional information on these transactions, see Note I—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements.
In response to the pandemic, primarily during the first quarter of fiscal 2021, we took several steps to strengthen our financial position and balance sheet and to maintain financial liquidity and flexibility, including, among other things, issuing $4 billion in aggregate principal long-term debt. The challenges posed by the COVID-19 pandemic on our business continue to evolve and the severity and duration of the pandemic is still unknown. Consequently, we will continue to evaluate our financial position in light of future developments. We believe our existing cash and cash equivalents, internally generated funds and our credit facilities, described in Note I—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements, are adequate to meet our operating needs over the next twelve months.
Our liquidity requirements have traditionally been funded through cash generated from operations, supplemented, as needed, by bank borrowings and the issuance of commercial paper. As of May 1, 2021, there were no short-term bank borrowings or commercial paper outstanding. We monitor debt financing markets on an ongoing basis and from time to time may incur additional long-term indebtedness depending on prevailing market conditions, liquidity requirements, existing economic conditions and other factors. In the first quarter of fiscal 2022 we have used, and in the future we may use operating cash flow and cash on hand to repay portions of our indebtedness, depending on prevailing market conditions, liquidity requirements, existing economic conditions, contractual restrictions and other factors. As such, we may, from time to time, seek to retire, redeem, prepay or purchase our outstanding debt through redemptions, cash purchases, prepayments, refinancings and/or exchanges, in open market purchases, privately negotiated transactions, by tender offer or otherwise. If we use our operating cash flow and/or cash on hand to repay our debt, it will reduce the amount of cash available for additional capital expenditures.
As of May 1, 2021, we held $8.8 billion in cash. Approximately $0.9 billion of our cash was held by our foreign subsidiaries with $0.5 billion held in countries where we provisionally intend to indefinitely reinvest any undistributed earnings. TJX provided for all applicable state and foreign withholding taxes on all undistributed earnings of our foreign subsidiaries in Canada, Puerto Rico, Italy, India, Hong Kong and Vietnam through May 1, 2021. If we repatriate cash from such subsidiaries, we should not incur additional tax expense and our cash would be reduced by the amount of withholding taxes paid.
Operating Activities
Operating activities resulted in net cash outflows of $0.4 billion for the three months ended May 1, 2021 and $3.2 billion for the three months ended May 2, 2020. Our operating cash flows for the three months ended May 1, 2021 increased by $2.7 billion compared to the first three months of fiscal 2021. Our fiscal 2022 operating cash flows improved significantly compared to fiscal 2021, which is primarily attributable to additional stores being open in fiscal 2022 after the temporary closures of all our stores for approximately 50% of the first quarter of fiscal 2021. The fiscal 2021 loss of sales as a result of the temporarily closures resulted in a net loss of $0.9 billion in the first three months of fiscal 2021 compared to net income of $0.5 billion for the first three months of fiscal 2022. The decrease in income taxes recoverable, net favorably impacted operating cash flows by $0.6 billion. The increase in operating cash flows was also attributable to the $0.5 billion favorable impact of the change in merchandise inventories, net of accounts payable, driven by the timing of payments for merchandise sold.
Investing Activities
Investing activities resulted in net cash outflows of $0.2 billion for both the three months ended May 1, 2021 and the three months ended May 2, 2020. The cash outflows for both periods were driven by capital expenditures.
Investing activities in the first three months of fiscal 2022 primarily reflected property additions for new stores, store improvements and renovations as well as investments in our distribution centers and offices, including buying and merchandising systems and other information systems. Cash outflows for property additions were $0.2 billion for both the first three months of fiscal 2022 and the first three months of fiscal 2021. Our expected fiscal 2022 capital investments total $1.2 billion to $1.4 billion. We plan to fund these expenditures through internally generated funds.
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Financing Activities
Financing activities resulted in net cash outflows of $1.1 billion in the first three months of fiscal 2022 and net cash inflows of $4.5 billion for the three months ended May 2, 2020.
Debt
The cash outflows in the first three months of fiscal 2022 were a result of the redemption at par of certain of our notes maturing in the second quarter of fiscal 2022. The cash inflows in the first three months of fiscal 2021 were a result of completing the issuance and sale of $4 billion aggregate principal amount of notes. In addition, in the first quarter of fiscal 2021, we drew down $1 billion on our previously undrawn revolving credit facilities, which we subsequently repaid in July 2020. See Note I—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements for additional information.
Equity
The cash inflows in the first three months of fiscal 2022 were a result of proceeds from the exercise of employee stock options, net of shares withheld for taxes. The cash outflows in the first three months of fiscal 2021 were a result of the $0.2 billion repurchase and retirement of 3.4 million shares of our stock on a settlement basis under our stock repurchase program. These outflows were partially offset by proceeds from the exercise of employee stock options, net of shares withheld for taxes in the first three months of fiscal 2021. In March 2020, in connection with the actions taken related to the COVID-19 pandemic, we suspended our share repurchase program. Subsequent to the end of the first quarter of fiscal 2022, we lifted the temporary suspension of our repurchase program and announced plans to repurchase approximately $1.0 billion to $1.25 billion of stock in fiscal 2022 under our previously authorized stock repurchase programs. As of May 1, 2021, approximately $3 billion remained available under our existing stock repurchase programs.
Dividends
We declared a quarterly dividend on our common stock which totaled $0.26 per share in the first quarter of fiscal 2022. As a result of the uncertainty surrounding the COVID-19 pandemic, no dividends were declared in the first quarter of fiscal 2021. Cash payments for dividends on our common stock totaled $0.3 billion for both the first quarter of fiscal 2022 and the first quarter of fiscal 2021. We also declared a dividend of $0.26 per share in the second quarter of fiscal 2022 payable in September 2021.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
For a discussion of accounting standards, see Note A—Basis of Presentation and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements included in TJX’s Annual Report on Form 10-K for the fiscal year ended January 30, 2021 and Note A—Basis of Presentation and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
FORWARD-LOOKING STATEMENTS
Various statements made in this Quarterly Report on Form 10-Q are forward-looking and involve a number of risks and uncertainties. All statements that address activities, events or developments that we intend, expect or believe may occur in the future are forward-looking statements. The following are some of the factors that could cause actual results to differ materially from the forward-looking statements: the ongoing COVID-19 pandemic and associated containment and remediation efforts; execution of buying strategy and inventory management; various marketing efforts; customer trends and preferences; competition; operational and business expansion; management of large size and scale; merchandise sourcing and transport; labor costs and workforce challenges; personnel recruitment, training and retention; data security and maintenance and development of information technology systems; corporate and retail banner reputation; cash flow; expanding international operations; fluctuations in quarterly operating results and market expectations; mergers, acquisitions, or business investments and divestitures, closings or business consolidations; real estate activities; inventory or asset loss; economic conditions and consumer spending; market instability; serious disruptions or catastrophic events; disproportionate impact of disruptions in the second half of the fiscal year; commodity availability and pricing; adverse or unseasonable weather; fluctuations in currency exchange rates; compliance with laws, regulations and orders and changes in laws, regulations and applicable accounting standards; outcomes of litigation, legal proceedings and other legal or regulatory matters; quality, safety and other issues with our merchandise; tax matters; and other factors that may be described in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission. We do not undertake to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied in such statements will not be realized.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 30, 2021.
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Item 4. Controls and Procedures
We have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of May 1, 2021 pursuant to Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level in ensuring that information required to be disclosed by us in the reports that we file or submit under the Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms; and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of implementing controls and procedures.
There were no changes in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Act) during the fiscal quarter ended May 1, 2021 identified in connection with the evaluation by our management, including our Chief Executive Officer and Chief Financial Officer, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
There have been no material changes to the risk factors disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended January 30, 2021, as filed with the Securities Exchange Commission on March 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Information on Share Repurchases
The number of shares of common stock repurchased by TJX during the first quarter of fiscal 2022 and the average price paid per share are as follows:
Total
Number of Shares
Repurchased(a)
Average Price Paid
Per Share(b)
Total Number of
Shares Purchased as
Part of Publicly
Announced
Plans or Programs(c)
Approximate Dollar
Value of Shares that
May Yet be
Purchased Under
the Plans or
Programs(c)
January 31, 2021 through February 27, 2021
—
$
—
—
$
2,985,692,971
February 28, 2021 through April 3, 2021
—
$
—
—
$
2,985,692,971
April 4, 2021 through May 1, 2021
—
$
—
—
$
2,985,692,971
Total
—
—
(a)Consists of shares repurchased under publicly announced stock repurchase programs.
(b)Includes commissions for the shares repurchased under stock repurchase programs.
(c)In February 2019 and 2020, TJX announced stock repurchase programs authorizing $1.5 billion and $1.5 billion, respectively, in repurchases of TJX common stock from time to time. As of May 1, 2021 approximately $3 billion in aggregate remained available under both plans. In March 2020, as a result of the COVID-19 pandemic, TJX suspended its share repurchase program. Subsequent to the end of the first quarter of fiscal 2022, the Company reinstated its share repurchase program.
The following materials from The TJX Companies, Inc.’s Quarterly Report on Form 10-Q for the quarter ended May 1, 2021, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Income (Loss), (ii) the Consolidated Statements of Comprehensive (Loss) Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Shareholders’ Equity, and (vi) Notes to Consolidated Financial Statements.
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The cover page from The TJX Companies, Inc.’s Quarterly Report on Form 10-Q for the quarter ended May 1, 2021, formatted in Inline XBRL (included in Exhibit 101)
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
