What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-12-01 compared with 2020-08-28 · 251 added, 210 removed, 240 unchanged (66% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Thirteen Weeks (second quarter) and Twenty-Six Weeks (six months) Ended August 1, 2020

The Thirteen Weeks (second quarter) and Twenty-Six Weeks (six months) Ended August 3, 2019

The Thirteen Weeks (third quarter) and Thirty-Nine Weeks (nine months) Ended October 31, 2020

The Thirteen Weeks (third quarter) and Thirty-Nine Weeks (nine months) Ended November 2, 2019

We are the leading off-price apparel and home fashions retailer in the U.S.

11 unchanged sentences

Impact of the COVID-19 Pandemic

During 2019, COVID-19 emerged and spread worldwide.

The World Health Organization declared COVID-19 a pandemic in March 2020, and federal, state and local governments and private entities began issuing various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories and quarantining protocols.

I n March 2020, the Company temporarily closed all of its stores, distribution centers and offices, and online businesses, with Associates working remotely where possible .

In May 2020, the Company began reopening its stores and as of August 1, 2020, more than 4,500 of the Company’s worldwide stores, and each of its e-commerce shopping websites, have reopened.

In December 2019, a novel coronavirus (“COVID-19”) emerged and spread worldwide.

The World Health Organization declared COVID-19 a pandemic in March 2020, resulting in federal, state and local governments and private entities mandating various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories and quarantine or isolation protocols for those who may have been exposed to the virus.

In March 2020, the Company temporarily closed all of its stores, its online businesses, its distribution centers and its offices, with Associates working remotely where possible.

In May 2020, the Company began reopening stores with capacity constraints and reduced operating hours.

By the end of the second quarter, more than 4,500 of the Company’s worldwide stores, and each of its online businesses had reopened.

In response to increasing cases of COVID-19, a number of our stores have temporarily closed again.

As of November 30, 2020, the Company has approximately 500 stores temporarily closed due to local government mandates, primarily located in Europe.

The Company’s tkmaxx.com e-commerce business in the U.K.

remains open.

In addition to the temporary closure and reopening of our stores and other facilities, the ongoing COVID-19 pandemic has led to modifications to our operations, including implementing health and safety protocols, and impacted consumer behavior.

The continued scope and impact of the pandemic is unpredictable and may cause additional intermittent or prolonged periods of store closures, and may result in additional changes in consumer demand and behavior or require further modifications to our operations.

The continued scope and impact of the pandemic is unpredictable and has in the past, is now, and may continue to cause additional intermittent or prolonged periods of temporary store closures, and may result in additional changes in consumer demand and behavior or require further modifications to our operations.

These potential impacts may lead to increased asset recovery and valuation risks, such as impairment of our stores and other assets and an inability to realize deferred tax assets due to sustaining losses in certain jurisdictions.

The uncertainties in the global economy may also impact the financial viability of some of our suppliers, which may interrupt our supply chain, and require other changes to our operations.

The uncertainties in the global economy may also impact the financial viability or business operations of some of our suppliers and service providers (including transportation and logistics providers), which may interrupt our supply chain, and require other changes to our operations.

These and other factors have had and may continue to have a material impact on our business, results of operations, financial position and cash flows.

Store and Associate Actions

We have taken numerous steps to protect the health and well-being of our Associates, customers and communities.

We have taken numerous steps to protect the health and well-being of our Associates and customers.

We have been highly focused on the changes we are making to operate more safely in light of the COVID-19 pandemic.

2 unchanged sentences

For example, upon reopening its stores, the Company installed protective shields at registers, encouraged social distancing through regular in-store announcements, signage, and markers in our queue lines, implemented new processes for handling merchandise returns, and instituted new cleaning regimens, including enhanced cleaning of high-touch surfaces throughout the day.

Further, the Company has mandated that shoppers wear a face covering in its stores throughout the U.S.

In Europe and Australia, the Company is following regional governmental face covering requirements.

Further, the Company has required that shoppers wear a face covering in its stores throughout the U.S., Canada and Europe.

In Australia, the Company is following regional governmental face covering requirements.

Financial Actions

1 unchanged sentence

The temporary closure of our stores has had a material impact on our results of operations, financial position and liquidity.

As further detailed below in Results of Operations , this impact included a 42% decrease in net sales for the first six months of fiscal 2021 compared to the same period last year, resulting in net operating losses that include significant inventory write-downs.

The Company ended the second quarter with $6.6 billion of cash.

During the second quarter, the Company generated positive operating cash flows and paid off the $1.0 billion it drew down from its revolving credit facilities in March 2020.

Subsequent to the second quarter of fiscal 2021, on August 10, 2020, the Company also increased its borrowing capacity by entering into a new $500.0 million facility, making a total of $1.5 billion available to the Company under revolving credit facilities.

For additional information on the new credit facilities, see Note J—Long-Term Debt and Credit Lines.

The Company intends to continue to be prudent with its expenses and capital spend, now expected to be in a range of $0.6 billion to $0.8 billion, lowering fiscal 2021 planned store openings to approximately 50 stores, pausing a majority of our planned store remodels, and delaying a significant portion of distribution center, home office and IT capital spending.

The Company did not declare a dividend in the first six months of fiscal 2021 and does not expect to declare a dividend in the third quarter of fiscal 2021 and has suspended its share buyback program.

During the first half of fiscal 2021, we negotiated rent deferrals (primarily for second quarter lease payments) for a significant number of our stores, with repayment at later dates, primarily in fiscal 2022.

As further detailed below in Results of Operations , this impact included a 28% decrease in net sales for the first nine months of fiscal 2021 compared to the same period last year, resulting in net operating losses.

During the third quarter the Company generated positive operating cash flows and ended the third quarter with $10.6 billion of cash.

In addition, in the third quarter of fiscal 2021 the Company increased its borrowing capacity by entering into a new $500.0 million facility, making a total of $1.5 billion available to the Company under revolving credit facilities.

For additional information on the new credit facilities, see Note J—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements.

Additionally, subsequent to the end of the third quarter, the Company issued $1.0 billion in aggregate long-term debt and commenced cash tender offers to repurchase up to $750.0 million combined aggregate principal amount of certain of its notes issued on April 1, 2020.

As a result, in the fourth quarter of fiscal 2021, the Company expects to record a loss on early extinguishment of debt, the amount of which would be dependent on the results of the tender offers.

For additional information on these transactions, see Note M—Subsequent Events of Notes to Consolidated Financial Statements.

The Company intends to continue to be prudent with its expenses, and capital spend is expected to be in a range of $0.6 billion to $0.8 billion.

The reduction in capital spend includes lowering fiscal 2021 planned store openings to approximately 50 stores, pausing a majority of our planned store remodels, and delaying a significant portion of distribution center, home office and IT capital spending.

The Company plans to continue the suspension of its share buyback program.

While the Company's Board of Directors did not declare a dividend in the first nine months of fiscal 2021, the Company expects a dividend of $0.26 per share to be declared in the fourth quarter of fiscal 2021, payable in March 2021, subject to approval by its Board of Directors.

During the first nine months of fiscal 2021, we negotiated rent deferrals (primarily for second quarter lease payments) for a significant number of our stores, with repayment at later dates, primarily in fiscal 2022.

Consistent with updated guidance from the FASB in April 2020, we have elected to treat the COVID-19 pandemic-related rent deferrals as a resolution of a contingency by remeasuring the remaining consideration in the contract, with a corresponding adjustment to the right-of-use asset, using the remeasured consideration.

The Company did not reassess the lease classification and did not update the discount rate used to measure the lease liability.

For the first half of fiscal 2021, the Company evaluated the value of its inventory in light of store closures due to the COVID-19 pandemic.

Permanent markdowns, which have been taken upon reopening of the stores, on transitional or out of season merchandise and merchandise that was already in markdown status, combined with the write-off of perishable goods, resulted in a reduction of approximately $0.4 billion in inventory for the six months ended August 1, 2020, which reflects a $0.1 billion reversal of the estimated markdowns recorded in the first quarter of fiscal 2021.

Given the substantial reduction in our sales and the reduced cash flow projections as a result of the store closures due to the COVID-19 pandemic, we determined that a triggering event occurred and that an impairment assessment was warranted for certain stores.

This analysis resulted in an immaterial amount of impairment charges related to long-lived assets and operating lease right of use assets in the first half of fiscal 2021.

In addition to negotiating deferral of lease payments, the Company also temporarily extended payment terms on merchandise orders which increased our accounts payable as of the end of the third quarter, benefiting our third quarter operating cash flows.

We have reduced the length of our extended payment terms to more closely align with our typical business terms and as we make deferred payments, our operating cash flows are likely to be negatively impacted.

The Company evaluated the value of its inventory in light of the temporary store closures in the first quarter of fiscal 2021 due to the COVID-19 pandemic.

Additional markdowns recorded throughout the year were taken in the ordinary course of business operations.

Given the substantial reduction in our sales and the reduced cash flow projections as a result of the temporary store closures during the first half of fiscal 2021 due to the COVID-19 pandemic, we determined that a triggering event had occurred in the first and second quarters of fiscal 2021 and that interim impairment assessments were warranted for certain stores.

This analysis resulted in an immaterial amount of impairment charges related to long-lived assets and operating lease right of use assets.

Operating Expenses

The Company has incurred additional payroll and supply costs associated with social distancing protocols and cleaning regimens in our stores, distribution centers, and offices.

In addition, the Company provided a discretionary appreciation bonus for the second quarter of fiscal 2021 to store and distribution center Associates and incurred incremental costs for personal protective equipment and additional cleaning supplies.

We expect that many of these costs will continue through the second half of fiscal 2021.

We have implemented, and plan to continue to implement, cost saving initiatives to reduce some ongoing variable and discretionary spending, including substantially reducing expenses such as advertising and other non-essential expenses in the short term.

The Company has incurred additional payroll costs associated with monitoring occupancy limits to comply with social distancing protocols and implementing enhanced cleaning regimens in our stores, distribution centers, and offices.

In addition, the Company provided a discretionary appreciation bonus for the second and third quarters of fiscal 2021 to store and distribution center Associates and incurred incremental costs for personal protective equipment and additional cleaning supplies.

We expect that many of these costs will continue through the last quarter of fiscal 2021 and into fiscal 2022.

We have implemented, and plan to continue to implement, cost saving initiatives to reduce some ongoing variable and discretionary spending, including substantially reducing expenses such as advertising, travel and other non-essential expenses in the short term.

As a result of the COVID-19 pandemic, governments in the U.S., U.K., Canada and various other jurisdictions have implemented programs to encourage companies to retain and pay employees who are unable to work or are limited in the work that they can perform in light of closures or a significant decline in sales.

TJX continued to pay and provide benefits to eligible impacted employees during the second quarter of fiscal 2021.

As such, we qualified for certain of these provisions, which partially offset related expenses.

During the second quarter of fiscal 2021 and the six months ended August 1, 2020 , these programs reduced our expenses by approximately $0.2 billion and $0.4 billion, respectively, on our Consolidated Statements of (Loss) Income.

The Company continued to qualify for certain of these provisions, which partially offset related expenses.

During the third quarter of fiscal 2021, these programs had an immaterial impact on our expenses.

During the nine months ended October 31, 2020 , these programs reduced our expenses by approximately $0.4 billion on our Consolidated Statements of Income (Loss).

RESULTS OF OPERATIONS

Matters Affecting Comparability

As a result of the COVID-19 pandemic, our stores, e-commerce businesses and distribution centers were closed for nearly one-third of the second quarter and approximately 40% of the first six months of fiscal 2021.

In addition to lost revenues, we continued to pay wages and provide benefits to many of our Associates during the closure, incurred higher expenses due to inventory write-down costs and incremental operating expenses upon reopening for new health and safety practices compliant with local requirements.

This significantly impacted the operating results of all of our divisions and as a result, comparisons of expense ratios on reported results are not a meaningful way to discuss our operating results for the periods ended August 1, 2020.

Overview of our financial performance for the quarter ended August 1, 2020:

– Net sales decreased 32% to $6.7 billion for the second quarter of fiscal 2021 versus last year’s second quarter of fiscal 2020 sales of $9.8 billion.

As of August 1, 2020, the number of stores in operation (including stores that had been temporarily closed due to COVID-19) increased 3% and selling square footage increased 3% compared to the end of the fiscal 2020 second quarter.

– Diluted (loss) earnings per share for the second quarter of fiscal 2021 were $(0.18) versus $0.62 in the second quarter of fiscal 2020.

– Pre-tax margin (the ratio of pre-tax (loss) income to net sales) for the second quarter of fiscal 2021 was (1.4)%, an 11.8 percentage point decrease compared with 10.4% in the second quarter of fiscal 2020.

– Our cost of sales, including buying and occupancy costs, ratio for the second quarter of fiscal 2021 was 77.6%, a 5.8 percentage point increase compared with 71.8% in the second quarter of fiscal 2020.

– Our selling, general and administrative (“SG&A”) expense ratio for the second quarter of fiscal 2021 was 22.9%, a 5.2 percentage point increase compared with 17.7% in the second quarter of fiscal 2020.

– 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 33% on a reported basis and down 34% on a constant currency basis at the end of the second quarter of fiscal 2021 as compared to a 6% increase in average per store inventories on a reported basis and a 7% increase on a constant currency basis in the second quarter of fiscal 2020.

– There were no dividends declared or share repurchases during the second quarter of fiscal 2021.

See the Impact of the COVID-19 Pandemic section above for the actions taken regarding the Company's share repurchase and dividend programs.

Although nearly all of our stores were open during the third quarter of fiscal 2021, as a result of the COVID-19 pandemic, our stores were closed in the aggregate for approximately 27% of the first nine months of fiscal 2021.

In addition to lost revenues, we continued to pay wages and provide benefits to many of our Associates during the closure, and incurred incremental operating expenses upon reopening for new health and safety practices that are compliant with local requirements as well as additional practices we chose to implement.

This significantly impacted the operating results of all of our divisions and our expense ratios as compared to the prior year.

Overview of our financial performance for the quarter ended October 31, 2020:

– Net sales decreased 3% to $10.1 billion for the third quarter of fiscal 2021 versus last year’s third quarter fiscal 2020 sales of $10.5 billion.

As of October 31, 2020, the number of stores in operation (including stores that had been temporarily closed due to COVID-19) increased 1% and selling square footage increased 1% compared to the end of the fiscal 2020 third quarter.

– Diluted earnings per share for the third quarter of fiscal 2021 were $0.71 versus $0.68 in the third quarter of fiscal 2020.

– Pre-tax margin (the ratio of pre-tax income to net sales) for the third quarter of fiscal 2021 was 10.0%, a 0.7 percentage point decrease compared with 10.7% in the third quarter of fiscal 2020.

– Our cost of sales, including buying and occupancy costs, ratio for the third quarter of fiscal 2021 was 69.8%, a 1.4 percentage point decrease compared with 71.2% in the third quarter of fiscal 2020.

– Our selling, general and administrative (“SG&A”) expense ratio for the third quarter of fiscal 2021 was 19.6%, a 1.6 percentage point increase compared with 18.0% in the third quarter of fiscal 2020.

– 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 30% on both a reported and constant currency basis at the end of the third quarter of fiscal 2021 as compared to a 9% increase in average per store inventories on both a reported and constant currency basis in the third quarter of fiscal 2020.

– There were no dividends declared or share repurchases during the third quarter of fiscal 2021.

The Company expects a dividend of $0.26 per share to be declared in the fourth quarter of fiscal 2021, payable in March of 2021, subject to approval by its Board of Directors.

See the Impact of the COVID-19 Pandemic section above for the actions taken regarding the Company's share repurchase programs.

Recent Events and Trends

24 unchanged sentences

The impact on vendor and competitor pricing, consumer demand, potential tariff pass-throughs and the fluctuation of the Chinese currency remains uncertain.

Net sales for the quarter ended August 1, 2020 totaled $6.7 billion, a 32% decrease versus last year’s second quarter net sales of $9.8 billion.

Net sales for the six months ended August 1, 2020 totaled $11.1 billion, a 42% decrease versus last year’s six-month net sales of $19.1 billion.

The decrease in net sales for both periods was driven by temporary store and online business closures as a result of the COVID-19 pandemic, with most stores being closed for nearly one-third of the second quarter and approximately 40% of the first six months of fiscal 2021.

As a result of the extended store closures 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 second quarter fiscal 2021.

In order to provide a performance indicator for our stores as they reopen, the Company is 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, and 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 prior year.

Our historical definition of comp sales is presented below for reference.

Open-only comp store sales were down 3% for the second quarter and the first six months of fiscal 2021 as compared to same periods last year.

These results reflect a decrease in customer traffic partially offset by increased average basket.

Our stores were open for approximately two-thirds of the second quarter.

Sales were strong across all divisions as we reopened and declined during the quarter, with open-only comp percentages ending the quarter down mid-teens.

This decline was due to lower traffic and lower inventory levels.

While the environment remains uncertain, these significantly lower open-only comps continued into the start of the third quarter and we expect that this trend may continue through the third quarter.

Home businesses across all major divisions outperformed apparel for the second quarter and first six months of fiscal 2021.

Net sales for the quarter ended October 31, 2020 totaled $10.1 billion, a 3% decrease versus last year’s third quarter net sales of $10.5 billion.

The decrease in net sales was driven by lower customer traffic, partially offset by an increased average basket.

We believe lower customer traffic was partially driven by a reduction in store operating hours during the quarter, which had a negative impact on net sales.

Net sales for the nine months ended October 31, 2020 totaled $21.2 billion, a 28% decrease versus last year’s nine-month net sales of $29.5 billion.

The decrease in net sales was driven by temporary store and online business closures as a result of the COVID-19 pandemic, with stores being closed in the aggregate for approximately 27% of the first nine months of fiscal 2021.

In order to provide a performance indicator for our stores as they reopen, since the second quarter of fiscal 2021 the Company has 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 current period against sales for the same days in the prior year.

Our historical definition of comp store sales is presented below for reference.

Open-only comp store sales were down 5% for the third quarter of fiscal 2021 and 4% for the first nine months of fiscal 2021 as compared to the same periods last year.

These results reflect a decrease in customer traffic, partially offset by an increased average basket across all divisions, with the exception of HomeGoods which saw an increase in both customer traffic and average basket in the third quarter of fiscal 2021.

Our stores were closed in the aggregate for approximately 27% of the first nine months of fiscal 2021.

Sales were softer across all divisions at the beginning of the quarter and improved significantly during the quarter.

We believe this improvement was primarily due to a combination of a more seasonable merchandise mix and higher store inventory levels as the quarter progressed.

Home fashion across all major segments outperformed apparel for the third quarter and first nine months of fiscal 2021.

Within apparel, our beauty and activewear categories were particularly strong.

Historical Definition of Comp Store Sales

17 unchanged sentences

The following table sets forth certain information about our operating results as a percentage of net sales for the following periods:

Thirteen Weeks Ended Twenty-Six Weeks Ended

2020 August 3,

2019 August 1,

2020 August 3,

Thirteen Weeks Ended Thirty-Nine Weeks Ended

2020 November 2,

2019 October 31,

2020 November 2,

Net sales 100.0 % 100.0 % 100.0 % 100.0 %

2 unchanged sentences

Interest expense, net 0.5 — 0.6 —

(Loss) income before provision for income taxes *

Income (loss) before provision for income taxes *

10.0 % 10.7 % (2.0) % 10.4 %

8 unchanged sentences

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 (loss) income and (loss) earnings per share growth as well as the net sales and operating results of these segments.

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.

3 unchanged sentences

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 (loss) income statement impact of the mark-to-market adjustment is effectively offset when the inventory being hedged is received and paid for.

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.

5 unchanged sentences

Cost of Sales, Including Buying and Occupancy Costs

Cost of sales, including buying and occupancy costs, was $5.2 billion for the second quarter of fiscal 2021, a decrease of $1.9 billion, compared to $7.0 billion for the second quarter of fiscal 2020.

Cost of sales, including buying and occupancy costs, was $9.6 billion for the six months ended August 1, 2020, a decrease of $4.1 billion, compared to $13.7 billion for the six months ended August 3, 2019.

The most significant factor in this decline was the cost of merchandise on lost sales, which were approximately $3.1 billion less than last year’s sales for the fiscal 2020 second quarter and approximately $8.0 billion less than sales for the first six months of fiscal 2020.

Merchandise margin remained strong due to favorable markon and lower than expected markdowns for the second quarter of fiscal 2021.

The merchandise margin for the six months ended August 1, 2020 also reflects improved markon which was more than offset by markdowns, primarily recorded in the first quarter of fiscal 2021.

Our estimated markdowns recorded in the first quarter of fiscal 2021 were partially reversed by $0.1 billion in the second quarter of fiscal 2021 as actual markdowns came in lower due to strong sales demand upon initial reopening.

In addition, a significant change in our inventory levels has an impact on our buying and distribution costs as a portion of these costs are typically allocated to our cost for merchandise.

As a result of our reduced buying activity and lower inventory levels, a greater portion of these costs were expensed in the second quarter and first six months of fiscal 2021 as compared to last year.

The temporary closure of our distribution centers resulted in reduced payroll costs due to Associate furloughs at our distribution centers during the second quarter and first six months of fiscal 2021.

In addition, payroll costs were reduced by approximately $28 million for the second quarter and by approximately $63 million for the first six months of fiscal 2021 from government programs available in the U.S.

Cost of sales, including buying and occupancy costs, was $7.1 billion, or 69.8% of net sales for the third quarter of fiscal 2021, compared to $7.4 billion, or 71.2% of net sales for the third quarter of fiscal 2020.

Cost of sales, including buying and occupancy costs, was $16.7 billion, or 78.6% of net sales for the nine months ended October 31, 2020, compared to $21.1 billion, or 71.5% of net sales for the nine months ended November 2, 2019.

The main reason for the decrease in the total cost of sales, including buying and occupancy costs for the quarter and year-to-date periods was the reduction in cost of merchandise sold due to a reduction in net sales as compared to the prior year, specifically the fiscal 2021 nine month period, when our stores were closed in the aggregate for approximately 27% of the period.

The improvement in the expense ratio of 1.4% for the fiscal 2021 third quarter was primarily due to an increase in merchandise margin as a result of a higher markon and lower markdowns for the third quarter of fiscal 2021 as compared to last year’s third quarter.

The lower markdowns in the third quarter of fiscal 2021 included the benefit of the timing of markdowns between the second and third quarter.

The improvement in merchandise margin was partially offset by an increase in distribution costs, particularly higher wages and incremental costs to maintain health and safety protocols at our distribution centers.

The increase in the expense ratio of 7.1% for the nine months ended October 31, 2020, was primarily driven by the impact of lower sales as a result of temporary store closures.

A significant portion of our occupancy costs are fixed and although we negotiated rent deferrals to help with our liquidity, our year over year occupancy costs were comparable to last year but negatively impacted the expense ratio by approximately 3.0 percentage points due to the lower sales volume.

Our distribution costs, primarily wage increases and incremental costs to implement and maintain health and safety protocols, increased the expense ratio by approximately 1.5 percentage points despite a reduction in payroll costs due to Associate furloughs and $67 million in benefits received from government programs available in the U.S.

and in Canada, the U.K.

and various other jurisdictions.

These payroll savings were partially offset by incremental payroll and supply costs to implement safety protocols upon reopening as well as a discretionary appreciation bonus for our Associates.

It is important to note that a significant portion of our occupancy costs are fixed and although rent deferrals were negotiated to help with our liquidity, our year over year occupancy costs were comparable.

There was a reduction in some of our variable costs due to the store and distribution center closures, such as store repairs and maintenance and travel costs.

Merchandise margin was also negatively impacted by increased markdowns as a percentage of net sales, primarily due to those taken earlier in the year as we revalued inventories upon the reopening of our stores.

Lastly, a significant change in our inventory levels has an impact on our buying and distribution costs as a portion of these costs are typically allocated to our cost for merchandise.

As a result of our reduced buying activity and lower inventory levels, a greater portion of these costs were expensed in first nine months of fiscal 2021 as compared to last year.

Selling, General and Administrative Expenses

SG&A expenses were $1.5 billion for the second quarter of fiscal 2021, a decrease of $0.2 billion, compared to $1.7 billion for the second quarter of fiscal 2020.

SG&A expenses were $2.8 billion for the six months ended August 1, 2020, a decrease of $0.6 billion, compared to $3.4 billion for the six months ended August 3, 2019.

The decrease for the second quarter and six months ended August 1, 2020 was primarily driven by lower store payroll costs.

The lower store payroll costs reflect store closures partially offset by incremental payroll investments as stores reopened to allow for enhanced cleaning and monitoring capacity, as well as a discretionary appreciation bonus for the second quarter of fiscal 2021.

Store payroll also includes the additional payroll we paid our Associates during the temporary store closures, which was partially offset by $196 million for the second quarter and $348 million for the first six months of fiscal 2021 from government programs available in the U.S.

SG&A expenses were $2.0 billion, or 19.6% of net sales for the third quarter of fiscal 2021, compared to $1.9 billion, or 18.0% of net sales for the third quarter of fiscal 2020.

SG&A expenses were $4.8 billion, or 22.8% of net sales for the nine months ended October 31, 2020, compared to $5.3 billion, or 18.0% of net sales for the nine months ended November 2, 2019.

The increase in SG&A expenses as a percentage of net sales for the third quarter and nine months ended October 31, 2020 was primarily driven by incremental store payroll investments to allow for enhanced cleaning and monitoring capacity, discretionary appreciation bonuses for the second and third quarters of fiscal 2021, and personal protective equipment for our Associates.

Store payroll also includes the additional payroll we paid our Associates during the temporary store closures, which was partially offset by reduced operating hours.

Store payroll was also reduced by $29 million for the third quarter and $377 million for the first nine months of fiscal 2021 from government programs available in the U.S.

and in Canada, the U.K.

and various other jurisdictions.

Additionally, other variable store costs such as credit processing fees and advertising spend were lower as a result of the temporary store closures due to the COVID-19 pandemic.

These incremental costs were partially offset by expense savings, including advertising spend, as well as other variable store costs such as credit processing fees, which were lower as a result of the temporary store closures due to the COVID-19 pandemic.

Interest Expense, net

The components of interest expense, net are summarized below:

Thirteen Weeks Ended Twenty-Six Weeks Ended

In millions August 1,

2020 August 3,

2019 August 1,

2020 August 3,

Thirteen Weeks Ended Thirty-Nine Weeks Ended

In millions October 31,

2020 November 2,

2019 October 31,

2020 November 2,

Interest expense $ 55.8 $ 15.4 $ 148.6 $ 46.1

2 unchanged sentences

Interest expense, net $ 52.9 $ 3.3 $ 133.6 $ 7.0

Net interest expense increased for the second quarter of fiscal 2021 and the six months ended August 1, 2020 compared to the same periods in fiscal 2020, primarily driven by the issuance of additional debt, lower interest income and borrowings on the revolving credit facilities due to the COVID-19 pandemic.

Net interest expense increased for the third quarter of fiscal 2021 and the nine months ended October 31, 2020 compared to the same periods in fiscal 2020, primarily driven by the issuance of additional debt in fiscal 2021 and lower interest income due to the COVID-19 pandemic.

In addition, the nine months ended October 31, 2020 included interest expense on the $1.0 billion of borrowings on the revolving credit facilities, which were paid off in the second quarter of fiscal 2021.

Provision for Income Taxes

The e ffective income tax rate was (132.8)% for the second quarter of fiscal 2021 compared to 25.7% for the second quarter of fiscal 2020.

The e ffective income tax rate was 23.2% for the six months ended August 1, 2020 compared to 25.5% for the six months ended August 3, 2019.

The second quarter’s negative effective income tax rate is primarily due to the reversal of income tax benefit recorded in the first quarter related to the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) enacted on March 27, 2020.

The CARES Act provides for net operating losses incurred in fiscal 2021 to be carried back to earlier tax years that have higher tax rates than the current year.

The projected losses subject to carry back to earlier years decreased in the second quarter of fiscal 2021, resulting in a reduction of the year to date income tax benefit and a second quarter negative effective income tax rate.

Net (Loss) / Income and Diluted (Loss) Earnings Per Share

Net (loss) income for the second quarter of fiscal 2021 was $(214) million, or $(0.18) per diluted share compared to $759 million, or $0.62 per diluted share for the second quarter of fiscal 2020.

Net (loss) income for the six months ended August 1, 2020 was $(1.1) billion, or $(0.92) per diluted share compared to $1.5 billion, or $1.19 per diluted share for the six months ended August 3, 2019.

The e ffective income tax rate was 14.7% for the third quarter of fiscal 2021 compared to 26.2% for the third quarter of fiscal 2020.

The e ffective income tax rate was 43.9% for the nine months ended October 31, 2020 compared to 25.7% for the nine months ended November 2, 2019.

The decrease in the third quarter, and increase in the year to date, effective income tax rates of fiscal 2021 are primarily due to the jurisdictional mix of profits and losses and the better than anticipated third quarter results.

Net Income / (Loss) and Diluted Earnings (Loss) Per Share

Net income for the third quarter of fiscal 2021 was $867 million, or $0.71 per diluted share compared to $828 million, or $0.68 per diluted share for the third quarter of fiscal 2020.

The Company’s lower tax rate in the third quarter of fiscal 2021 resulted in an increase in earnings per share of approximately $0.09 compared to the same period in fiscal 2020.

Net (loss) income for the nine months ended October 31, 2020 was $(0.2) billion, or $(0.20) per diluted share compared to $2.3 billion, or $1.86 per diluted share for the nine months ended November 2, 2019.

Segment Information

10 unchanged sentences

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 (loss) 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 all of our stores as a result of the COVID-19 pandemic, the Company’s 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, the Company is temporarily reporting a new sales measure, open-only comp store sales.

These measures of performance should not be considered an alternative to net income (loss) or cash flows from operating activities as an indicator of our performance or as a measure of liquidity.

Due to the temporary closing of all of our stores as a result of the COVID-19 pandemic, the Company’s historical definition of comp store sales is not applicable for the reported periods.

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 current period against sales for the same days in the prior year.

Presented below is selected financial information related to our business segments.

Thirteen Weeks Ended Twenty-Six Weeks Ended

dollars in millions August 1,

2020 August 3,

2019 August 1,

2020 August 3,

Thirteen Weeks Ended Thirty-Nine Weeks Ended

dollars in millions October 31,

2020 November 2,

2019 October 31,

2020 November 2,

Net sales $ 5,785 $ 6,354 $ 12,442 $ 18,262

Segment profit (loss) $ 101 $ 855 $ (609) $ 1,651

Segment profit $ 665 $ 820 $ 56 $ 2,472

Segment margin 11.5 % 12.9 % 0.4 % 13.5 %

8 unchanged sentences

Total 54,483 54,323

Net sales for Marmaxx decreased 35% for the second quarter and 44% for the first six months of fiscal 2021 as compared to the same periods last year.

The decrease in net sales for the second quarter and first six months was due to the temporary closures of all stores as a result of the COVID-19 pandemic and, upon reopening, lower customer traffic, partially offset by an increase in the average basket.

Open-only comp store sales were down 6% for the second quarter and 5% for first six months of fiscal 2021.

Home fashions outperformed apparel for the second quarter of fiscal 2021 and for the six months ended August 1, 2020.

Segment Profit / (Loss)

Segment profit was $101 million for the second quarter of fiscal 2021, a decrease of $754 million, compared to a segment profit of $855 million for the same period last year.

Segment loss was $(609) million for the six months ended August 1, 2020, a decrease of $2.3 billion, compared to a segment profit of $1.7 billion for the same period last year.

The decrease for the second quarter and first six months was primarily driven by a reduction in sales from the temporary store closures.

The decrease for the first six months reflects increased markdowns on merchandise primarily taken in the first quarter of fiscal 2021 due to the COVID-19 pandemic.

The estimated write down in the first quarter of fiscal 2021 was partially reversed in the second quarter of fiscal 2021 as actual markdowns came in lower due to strong sales demand upon initial reopening.

In addition, segment profit declined as a result of our reduced buying activity and lower inventory levels resulting in higher buying and distribution costs in the second quarter and first six months of fiscal 2021 as compared to last year.

The decline in segment profit was partially offset by a reduction in store payroll while the stores were closed, lower advertising spend and other variable store expenses.

The reduction in payroll reflects approximately $83 million for the second quarter of fiscal 2021 and $171 million for the six months ended August 1, 2020 from government programs as described in the Impacts of the COVID-19 Pandemic section above.

Despite a decline in total store payroll costs, we incurred incremental payroll investments as stores reopened to allow for enhanced cleaning and capacity monitoring.

e-commerce businesses, which represented approximately 4% of Marmaxx’s net sales for the second quarter and first six months of fiscal 2021 and less than 3% for the second quarter and first six months of fiscal 2020, did not have a significant impact on year-over-year segment margin comparisons for the second quarter and first six months of fiscal 2021.

Along with our stores, we temporarily closed our online businesses during the first six months of fiscal 2021, as a result of the COVID-19 pandemic.

Thirteen Weeks Ended Twenty-Six Weeks Ended

dollars in millions August 1,

2020 August 3,

2019 August 1,

2020 August 3,

Net sales for Marmaxx decreased 9% for the third quarter and 32% for the first nine months of fiscal 2021 as compared to the same periods last year.

The decrease in net sales for the third quarter was primarily due to lower customer traffic, partially offset by an increase in the average basket.

We believe lower customer traffic was partially driven by a reduction in store operating hours during the quarter, which had a negative impact on net sales.

The decrease in net sales for the first nine months was due to the temporary closures of all stores as a result of the COVID-19 pandemic and, upon reopening, lower customer traffic, partially offset by an increase in the average basket.

Open-only comp store sales were down 10% for the third quarter and 7% for first nine months of fiscal 2021.

Home fashions outperformed apparel for the third quarter of fiscal 2021 and for the nine months ended October 31, 2020.

Within apparel, our beauty and activewear categories were particularly strong.

Segment Profit

Segment profit was $665 million for the third quarter of fiscal 2021, a decrease of $155 million, compared to a segment profit of $820 million for the same period last year.

Segment profit was $56 million for the nine months ended October 31, 2020, a decrease of $2.4 billion, compared to a segment profit of $2.5 billion for the same periods last year.

The decrease for the third quarter was primarily driven by the reduction in sales, despite strong merchandise margin due to higher markon and lower markdowns.

The lower markdowns in the third quarter of fiscal 2021 included the benefit of the timing of markdowns between the second and third quarter.

Segment profit was also negatively impacted by increased payroll costs associated with social distancing protocols and cleaning regimens, appreciation bonuses for store and distribution center Associates and costs for cleaning supplies and personal protective equipment for our Associates (“incremental COVID-19 costs”).

These expense increases were partially offset by lower advertising spend and other variable store expenses.

The decrease for the first nine months was primarily driven by a reduction in sales from the temporary store closures.

This decrease reflects increased markdowns on merchandise primarily taken in the first quarter of fiscal 2021 due to the COVID-19 pandemic.

In addition, segment profit declined as a result of our reduced buying activity and lower inventory levels resulting in higher buying and distribution costs in the first nine months of fiscal 2021 as compared to last year and incremental COVID-19 costs.

The decline in segment profit was partially offset by a reduction in store payroll while the stores were closed, lower advertising spend, reduced travel and other variable store expenses.

The reduction in payroll reflects approximately $171 million for the nine months ended October 31, 2020 from government programs as described in the Impacts of the COVID-19 Pandemic section above.

During the third quarter of fiscal 2020, Marmaxx made online shopping available at www.marshalls.com, along with www.tjmaxx.com.

e-commerce businesses, which represented approximately 3% of Marmaxx’s net sales for the third quarter and first nine months of fiscal 2021 and less than 3% for the third quarter and first nine months of fiscal 2020, did not have a significant impact on year-over-year segment margin comparisons for the third quarter and first nine months of fiscal 2021.

Along with our stores, we temporarily closed our online businesses for a portion of the first six months of fiscal 2021 as a result of the COVID-19 pandemic.

Thirteen Weeks Ended Thirty-Nine Weeks Ended

dollars in millions October 31,

2020 November 2,

2019 October 31,

2020 November 2,

Net sales $ 1,876 $ 1,582 $ 3,872 $ 4,404

Segment proft (loss) $ 98 $ 129 $ (56) $ 266

Segment profit $ 291 $ 173 $ 235 $ 439

Segment margin 15.5 % 10.9 % 6.1 % 10.0 %

7 unchanged sentences

Total 15,767 15,477

Net sales for HomeGoods decreased 13% in the second quarter and 29% for the first six months of fiscal 2021 as compared to the same periods last year.

The decrease in net sales for the second quarter and first six months is due to the temporary closures of all stores as a result of the COVID-19 pandemic and, upon reopening, lower customer traffic, partially offset by an increase in the average basket.

Open-only comp store sales were up 20% for the second quarter and 12% for first six months of fiscal 2021.

Segment Profit / (Loss)

Segment profit was $98 million for the second quarter of fiscal 2021, a decrease of $31 million, compared to a segment profit of $129 million for the same period last year.

Segment loss was $(56) million for the six months ended August 1, 2020, a decrease of $322 million, compared to a segment profit of $266 million for the same period last year.

The decrease for the second quarter and first six months was primarily driven by a reduction in sales due to the temporary store closures.

In addition, the decrease for the first six months reflects increased markdowns on merchandise primarily taken in the first quarter of fiscal 2021 due to the COVID-19 pandemic.

The decline in segment profit was partially offset by a reduction in store payroll while the stores were closed and lower advertising spend.

The reduction in payroll reflects approximately $24 million for the second quarter of fiscal 2021 and $46 million for the six months ended August 1, 2020 from government programs as described in the Impacts of the COVID-19 Pandemic section above.

Despite a decline in total store payroll costs, we incurred incremental payroll investments as stores reopened to allow for enhanced cleaning and capacity monitoring.

Net sales for HomeGoods increased 19% in the third quarter of fiscal 2021 and decreased 12% for the first nine months of fiscal 2021 as compared to the same periods last year.

The increase in net sales for the third quarter was primarily due to higher customer traffic and an increase in the average basket.

We believe customer traffic was negatively impacted by a reduction in store operating hours during the quarter.

Open-only comp store sales were up 15% for the third quarter and 14% for first nine months of fiscal 2021.

Segment Profit

Segment profit was $291 million for the third quarter of fiscal 2021, an increase of $118 million, compared to a segment profit of $173 million for the same period last year.

Segment profit was $235 million for the nine months ended October 31, 2020, a decrease of $204 million, compared to a segment profit of $439 million for the same periods last year.

The increase for the third quarter was driven by increased sales and higher merchandise margin driven by strong markon and lower markdowns.

This was partially offset by incremental COVID-19 costs.

The decrease for the first nine months was primarily driven by a reduction in sales due to the temporary store closures.

The decline in segment profit was partially offset by a reduction in store payroll while the stores were closed, lower advertising spend, reduced travel and other variable store expenses.

The reduction in payroll reflects approximately $46 million for the nine months ended October 31, 2020 from government programs as described in the Impacts of the COVID-19 Pandemic section above.

On November 18, 2020 we announced our plan to make online shopping available on www.HomeGoods.com in late fiscal 2022.

FOREIGN SEGMENTS

Thirteen Weeks Ended Twenty-Six Weeks Ended

dollars in millions August 1,

2020 August 3,

2019 August 1,

2020 August 3,

Thirteen Weeks Ended Thirty-Nine Weeks Ended

dollars in millions October 31,

2020 November 2,

2019 October 31,

2020 November 2,

Net sales $ 1,028 $ 1,082 $ 1,999 $ 2,897

Segment profit (loss) $ 22 $ 118 $ (75) $ 215

Segment profit $ 177 $ 170 $ 101 $ 386

Segment margin 17.2 % 15.7 % 5.1 % 13.3 %

9 unchanged sentences

Total 10,800 10,519

Net sales for TJX Canada decreased 39% during the second quarter and 46% for the first six months of fiscal 2021 compared to the same periods last year.

The decrease in the net sales for the second quarter and first six months is due to the temporary closures of all stores as a result of the COVID-19 pandemic and, upon reopening, lower customer traffic, partially offset by an increase in the average basket.

Open-only comp store sales were down 18% for the second quarter and 13% for first six months of fiscal 2021.

Segment Profit / (Loss)

Segment profit was $22 million for the second quarter of fiscal 2021, a decrease of $96 million, compared to a segment profit of $118 million for the same period last year.

Segment loss was $(75) million for the six months ended August 1, 2020, a decrease of $290 million, compared to a segment profit of $215 million for the same period last year.

The decrease for the second quarter and first six months was primarily driven by a reduction in sales due to the temporary store closures.

In addition, the decrease for the first six months reflects increased markdowns on merchandise primarily taken in the first quarter of fiscal 2021 due to the COVID-19 pandemic.

The decline in segment profit was partially offset by a reduction in store payroll while the stores were closed.

The reduction in payroll reflects approximately $73 million for the second quarter of fiscal 2021 and $104 million for the six months ended August 1, 2020 from government programs as described in the Impacts of the COVID-19 Pandemic section above.

Despite a decline in total store payroll costs, we incurred incremental payroll investments as stores reopened to allow for enhanced cleaning and capacity monitoring.

Net sales for TJX Canada decreased 5% during the third quarter and 31% for the first nine months of fiscal 2021 compared to the same periods last year.

The decrease in net sales for the third quarter was primarily due to lower customer traffic, partially offset by an increase in the average basket.

We believe lower customer traffic was partially driven by a reduction in store operating hours during the quarter, which had a negative impact on net sales.

Open-only comp store sales were down 7% for the third quarter and 10% for first nine months of fiscal 2021.

Segment Profit

Segment profit was $177 million for the third quarter of fiscal 2021, an increase of $7 million, compared to a segment profit of $170 million for the same period last year.

Segment profit was $101 million for the nine months ended October 31, 2020, a decrease of $285 million, compared to a segment profit of $386 million for the same periods last year.

The increase for the third quarter was primarily due to an increase in merchandise margin.

The increase in merchandise margin was primarily due to strong markon and lower markdowns.

The segment profit also reflects incremental COVID-19 costs, partially offset by approximately $27 million from government programs as described in the Impacts of the COVID-19 Pandemic section above.

The decrease for the first nine months was primarily driven by a reduction in sales due to the temporary store closures.

In addition, the decrease for the first nine months reflects increased markdowns on merchandise primarily taken in the first quarter of fiscal 2021 due to the COVID-19 pandemic and incremental COVID -19 costs.

The decline in segment profit was partially offset by a reduction in store payroll while the stores were closed, lower advertising spend, reduced travel and other variable store expenses.

The reduction in payroll reflects approximately $131 million for the nine months ended October 31, 2020 from government programs as described in the Impacts of the COVID-19 Pandemic secti on above.

TJX International

Thirteen Weeks Ended Twenty-Six Weeks Ended

dollars in millions August 1,

2020 August 3,

2019 August 1,

2020 August 3,

Thirteen Weeks Ended Thirty-Nine Weeks Ended

dollars in millions October 31,

2020 November 2,

2019 October 31,

2020 November 2,

Net sales $ 1,429 $ 1,433 $ 2,881 $ 3,947

Segment (loss) profit $ (131) $ 50 $ (390) $ 79

Segment profit (loss) $ 87 $ 99 $ (303) $ 178

Segment margin 6.1 % 6.9 % (10.5) % 4.5 %

7 unchanged sentences

Maxx Australia 1,077 990

Total 14,204 13,860

Net sales for TJX International decreased 31% for the second quarter and 42% for the first six months of fiscal 2021 compared to the same periods last year.

Open-only comp store sales were down 1% for both the second quarter and first six months of fiscal 2021.

E-commerce sales represented approximately 4% of TJX International’s net sales for the second quarter and first six months of fiscal 2021 and less than 3% for the second quarter and first six months of fiscal 2020.

Along with our stores, we temporarily closed our online businesses during the first six months of fiscal 2021, due to the COVID-19 pandemic.

Segment (Loss) / Profit

Segment loss was $(131) million for the second quarter of fiscal 2021, a decrease of $181 million, compared to a segment profit of $50 million for the same period last year.

Segment loss was $(390) million for the six months ended August 1, 2020, a decrease of $469 million, compared to a segment profit of $79 million for the same period last year.

The decrease for the second quarter and first six months was primarily driven by a reduction in sales due to the temporary store closures.

In addition, the decrease for the first six months reflects increased markdowns on merchandise primarily taken in the first quarter of fiscal 2021 due to the COVID-19 pandemic.

The decline in segment profit was partially offset by a reduction in occupancy costs, store payroll while closed and lower advertising spend.

The reduction in payroll reflects approximately $40 million for the second quarter of fiscal 2021 and $86 million for the six months ended August 1, 2020 from government programs as described in the Impacts of the COVID-19 Pandemic section above.

14,350 14,138

Net sales for TJX International were flat for the third quarter and decreased 27% for the first nine months of fiscal 2021 compared to the same periods last year.

Net sales for the third quarter were flat primarily due to lower customer traffic, offset by an increase in the average basket and a favorable impact of foreign currency translation.

We believe lower customer traffic was partially driven by a reduction in store operating hours during the quarter, which had a negative impact on net sales.

The decrease in net sales for the first nine months was primarily due to the temporary closures of all stores as a result of the COVID-19 pandemic and, upon reopening, lower customer traffic, partially offset by an increase in the average basket.

Open-only comp store sales were down 6% for the third quarter and 4% for the first nine months of fiscal 2021.

E-commerce sales were less than 5% of TJX International’s net sales for the third quarter and first nine months of fiscal 2021 and approximately 3% for the third quarter and first nine months of fiscal 2020.

Along with our stores, we temporarily closed our online businesses for a portion of the first six months of fiscal 2021, due to the COVID-19 pandemic.

Segment Profit / (Loss)

Segment profit was $87 million for the third quarter of fiscal 2021, a decrease of $12 million, compared to a segment profit of $99 million for the same period last year.

Segment (loss) was $(303) million for the nine months ended October 31, 2020, a decrease of $481 million, compared to a segment profit of $178 million for the same periods last year.

The decrease for the third quarter was primarily driven by incremental COVID-19 costs, partially offset by the year-over-year mark-to-market impact of the inventory derivatives.

The decrease for the first nine months was primarily driven by a reduction in sales due to the temporary store closures.

The d ecline in segment profit was partially offset by a reduction in occupancy costs, reduced store payroll while stores were closed, lower advertising and tra vel spend.

The reduction in payroll reflects approximately $90 million for the nine months ended October 31, 2020 from government programs as described in the Impacts of the COVID-19 Pandemic section above.

GENERAL CORPORATE EXPENSE

Thirteen Weeks Ended Twenty-Six Weeks Ended

In millions August 1,

2020 August 3,

2019 August 1,

2020 August 3,

Thirteen Weeks Ended Thirty-Nine Weeks Ended

In millions October 31,

2020 November 2,

2019 October 31,

2020 November 2,

General corporate expense $ 150 $ 138 $ 374 $ 388

2 unchanged sentences

The mark-to-market adjustment of our fuel hedges is included in cost of sales, including buying and occupancy costs.

The decrease in general corporate expense for the second quarter was primarily driven by the mark-to-market adjustment on the fuel hedge partially offset by contributions to TJX's charitable foundations made during the quarter.

The decrease in general corporate expense for the first six months of fiscal 2021 was primarily driven by lower share-based compensation costs partially offset by contributions to TJX's charitable foundations made during the second quarter.

The increase in general corporate expense for the third quarter was primarily driven by contributions to TJX's charitable foundations.

The decrease in general corporate expense for the first nine months of fiscal 2021 was primarily driven by lower share-based compensation costs and IT costs partially offset by contributions to TJX's charitable foundations made during the third quarter.

ANALYSIS OF FINANCIAL CONDITION

Liquidity and Capital Resources

As part of the actions we have taken, and are continuing to take, relating to the COVID-19 pandemic, as described in Impact of the COVID-19 Pandemic above and in Note B—Impact of the COVID-19 Pandemic of Notes to Consolidated Financial Statements, in the first quarter of fiscal 2021, TJX issued $4.0 billion aggregate principal amount of notes, and in May 2020, the Company amended the covenant requirements under its revolving credit facilities.

In March 2020, we drew down $1.0 billion on our revolving credit facilities, and in the second quarter of fiscal 2021, the Company paid off these borrowings.

Subsequent to the fiscal quarter ending August 1, 2020, on August 10, 2020, the Company increased its borrowing capacity by entering into a new $500 million facility, making a total of $1.5 billion available to the Company under revolving credit facilities.

Subsequent to the end of the third quarter, on November 18, 2020, in order to refinance a portion of the notes issued on April 1, 2020, we concurrently commenced tender offers to repurchase up to $750.0 million combined aggregate principal amount of certain of the existing notes and commenced a notes offering pursuant to which we issued $1.0 billion in aggregate long-term debt on November 30, 2020 to fund, in whole or in part, the tender offers.

Any net proceeds not used to fund the tender offers will be used for general corporate purposes, which may include working capital and capital expenditures and repayment of indebtedness.

For additional information on these transactions, see Note M—Subsequent Events of Notes to Consolidated Financial Statements.

In March 2020, we drew down $1.0 billion on our revolving credit facilities, and in May 2020, the Company amended the covenant requirements under its revolving credit facilities.

In July 2020, the Company repaid these borrowings.

On August 10, 2020, the Company increased its borrowing capacity by entering into a new $500 million facility, making a total of $1.5 billion available to the Company under revolving credit facilities in the third quarter of fiscal 2021.

See Note J—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements for additional details of these transactions.

The Company did not declare a dividend for the first half of fiscal 2021 and does not expect to declare a dividend in the third quarter of fiscal 2021.

No dividend was declared in the first nine months of fiscal 2021.

In November 2020, the Company announced that it expects a quarterly dividend of $0.26 per share to be declared in December 2020, payable in March 2021, subject to the approval of its Board of Directors.

The Company suspended its share repurchase program and does not anticipate repurchasing any stock for the remainder of fiscal 2021.

1 unchanged sentence

The Company has also reduced and plans to continue to reduce spending more broadly across the Company, evaluating operating expenses and taking actions to reduce ongoing variable and discretionary spending and only incur critical operating and capital spending.

The Company has negotiated rent deferrals for a significant amount of our stores, with repayment at later dates, primarily in fiscal 2022.

The Company has negotiated rent deferrals for a significant amount of our stores, primarily for second quarter lease payments, with repayment at later dates, primarily in fiscal 2022.

The challenges posed by the COVID-19 pandemic on the Company's business are evolving rapidly.

1 unchanged sentence

We believe that our existing cash, internally generated funds and our credit facilities, as described in Note J—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements will be sufficient to fund necessary operating cash requirements and capital expenditures for at least the next twelve months.

As of August 1, 2020, we held $6.6 billion in cash.

As of October 31, 2020, we held $10.6 billion in cash.

Approximately $1.9 billion of our cash was held by our foreign subsidiaries with $1.2 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 August 1, 2020.

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

Net cash provided by operating activities resulted in net cash inflows of $0.2 billion for the six months ended August 1, 2020 and $0.9 billion for the six months ended August 3, 2019.

The Company's operating cash flows for the six months ended August 1, 2020 decreased by $0.7 billion compared to the first six months of fiscal 2020.

Net cash provided by operating activities resulted in net cash inflows of $4.3 billion for the nine months ended October 31, 2020 and $1.9 billion for the nine months ended November 2, 2019.

The Company's operating cash flows for the nine months ended October 31, 2020 increased by $2.4 billion compared to the first nine months of fiscal 2020.

The COVID-19 pandemic had a material impact on the Company's operating cash flows.

The loss of sales as a result of temporarily closing our stores and e-commerce businesses resulted in a net loss of $1.1 billion for the first six months of fiscal 2021 compared with net income of $1.5 billion in the six months of fiscal 2020.

This decrease in cash flows was offset by the $1.4 billion favorable impact of a decrease in merchandise inventories, net of accounts payable and an increase in income taxes recoverable, accrued expenses and lease liabilities of $0.4 billion.

The favorable impact of the change in merchandise inventories, net of accounts payable was driven by lower inventory levels.

The loss of sales as a result of temporarily closing our stores and e-commerce businesses resulted in a net loss of $0.2 billion for the first nine months of fiscal 2021 compared with net income of $2.3 billion in the first nine months of fiscal 2020.

This decrease in cash flows was offset by the $4.2 billion favorable impact of an increase in merchandise inventories, net of accounts payable as well as an increase in accrued expenses, income taxes payable and lease liabilities of $0.8 billion.

The favorable impact of the change in merchandise inventories, net of accounts payable was driven by lower inventory levels and the timing of payments for merchandise sold in the third quarter.

The lower inventory levels were planned to accommodate social distancing and decreased further primarily due to better than planned sales during the third quarter of fiscal 2021 and delivery delays due to bottlenecks in the supply chain.

Investing Activities

Net cash used in investing activities resulted in net cash outflows of $0.3 billion for the six months ended August 1, 2020 and $0.6 billion for the six months ended August 3, 2019.

Net cash used in investing activities resulted in net cash outflows of $0.4 billion for the nine months ended October 31, 2020 and $1.0 billion for the nine months ended November 2, 2019.

The cash outflows for both periods were driven by capital expenditures.

Investing activities in the first six months of fiscal 2021 primarily reflected property additions for new stores, store improvements and renovations as well as investments in our offices and distribution centers, including buying and merchandising systems and other information systems.

Cash outflows for property additions were $0.3 billion for the first six months of fiscal 2021 and $0.6 billion for the first six months of fiscal 2020.

Investing activities in the first nine months of fiscal 2021 primarily reflected property additions for new stores, store improvements and renovations as well as investments in our offices and distribution centers, including buying and merchandising systems and other information systems.

Cash outflows for property additions were $0.4 billion for the first nine months of fiscal 2021 and $1.0 billion for the first nine months of fiscal 2020.

In order to preserve liquidity throughout the COVID-19 pandemic, we have decreased new store openings to approximately 50 stores and paused most scheduled store remodels, thereby deferring a substantial amount of our previously planned fiscal 2021 capital expenditures.

2 unchanged sentences

Financing Activities

Net cash provided by (used in) financing activities resulted in net cash inflows of $3.5 billion in the first six months of fiscal 2021 and net cash outflows of $1.1 billion for the six months ended August 3, 2019.

The cash inflows in the first six months of fiscal 2021 were a result of completing the issuance and sale of (a) $1.25 billion aggregate principal amount of 3.50% notes due 2025, (b) $750 million aggregate principal amount of 3.75% notes due 2027, (c) $1.25 billion aggregate principal amount of 3.875% notes due 2030 and (d) $750 million aggregate principal amount of 4.50% notes due 2050, all of which were outstanding at August 1, 2020.

Net cash provided by (used in) financing activities resulted in net cash inflows of $3.5 billion in the first nine months of fiscal 2021 and net cash outflows of $1.8 billion for the nine months ended November 2, 2019.

The cash inflows in the first nine months of fiscal 2021 were a result of completing the issuance and sale of (a) $1.25 billion aggregate principal amount of 3.50% notes due 2025, (b) $750 million aggregate principal amount of 3.75% notes due 2027, (c) $1.25 billion aggregate principal amount of 3.875% notes due 2030 and (d) $750 million aggregate principal amount of 4.50% notes due 2050, all of which were outstanding at October 31, 2020.

In addition, in the first quarter of fiscal 2021, we drew down $1.0 billion on our previously undrawn revolving credit facilities, which were paid off in full during the second quarter of fiscal 2021.

Subsequent to the fiscal quarter ending August 1, 2020, on August 10, 2020, the Company increased its borrowing capacity under revolving credit facilities by entering into a new $500 million 364 Day Revolving Credit Facility, maturing in August 2021.

O n August 10, 2020, the Company increased its borrowing capacity under revolving credit facilities by entering into a new $500 million 364 Day Revolving Credit Facility, maturing in August 2021.

With the new revolving credit facility, the Company has increased its borrowing capacity to $1.5 billion, all of which currently remains available to the Company.

See Note J—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements for additional information.

Subsequent to the end of the third quarter, the Company initiated transactions to refinance a portion of its existing long-term debt, which it expects to complete in the fourth quarter of fiscal 2021.

See Note J—Long-Term Debt and Credit Lines and Note M—Subsequent Events of Notes to Consolidated Financial Statements for additional information.

Under our stock repurchase programs, during the first quarter of fiscal 2021, we paid $0.2 billion to repurchase and subsequently retired 3.4 million shares of our stock on a settlement basis.

These outflows were partially offset by proceeds from the exercise of employee stock options, net of shares withheld for taxes in the first six months of fiscal 2021.

We paid $0.7 billion to repurchase and subsequently retired 13.3 million shares on a settlement basis in the first six months of fiscal 2020.

These outflows were partially offset by proceeds from the exercise of employee stock options, net of shares withheld for taxes in the first nine months of fiscal 2021.

We paid $1.2 billion to repurchase and subsequently retired 22.2 million shares on a settlement basis in the first nine months of fiscal 2020.

For further information regarding equity repurchases, see Note E—Capital Stock and (Loss) Earnings Per Share of Notes to Consolidated Financial Statements.

2 unchanged sentences

In March 2020, prior to the declaration of the COVID-19 pandemic, we paid our fourth quarter fiscal 2020 quarterly dividend which totaled $0.3 billion.

As a result of the uncertainty surrounding the COVID-19 pandemic, the Company did not declare a dividend for the first or second quarter of fiscal 2021 and does not anticipate declaring a dividend in the third quarter of fiscal 2021.

The Company is committed to resuming dividend payments whenever the environment and its business stabilize for the long term.

We declared quarterly dividends on our common stock wh ich totaled $0.46 per share in the first six months of fiscal 2020.

Cash payments for dividends on our common stock totaled $0.3 billion for the first six months of fiscal 2021 and $0.5 billion for the first six months of fiscal 2020.

As a result of the uncertainty surrounding the COVID-19 pandemic, n o dividend was declared in the first nine months of fiscal 2021.

In November 2020, the Company announced that it expects a quarterly dividend of $0.26 per share to be declared in the fourth quarter of fiscal 2021, payable in March 2021, subject to the approval of its Board of Directors.

We declared quarterly dividends on our common stock wh ich totaled $0.69 per share in the first nine months of fiscal 2020.

Cash payments for dividends on our common stock totaled $0.3 billion for the first nine months of fiscal 2021 and $0.8 billion for the first nine months of fiscal 2020.

Contractual Obligations

Changes to our aggregate indebtedness, including related interest and terms for new issuances, are described in Note J—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements.

During the first half of fiscal 2021, we negotiated rent deferrals for a significant number of our stores, with repayments to later dates, primarily in fiscal 2022.

During the first nine months of fiscal 2021, we negotiated rent deferrals for a significant number of our stores, with repayments to later dates, primarily in fiscal 2022.

In addition, approximately $1.0 billion of obligations under purchase orders for merchandise were cancelled in the first quarter of fiscal 2021.

34 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis