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Item 7. Management’s Discussion and Analysis

2021-03-31 compared with 2020-03-27 · 315 added, 233 removed, 205 unchanged (73% of the section changed)

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

TJX provides projections and other forward-looking statements in the following discussions particularly relating to the Company’s future financial performance.

These forward-looking statements are estimates based on information currently available to the Company, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and subject to the cautionary statements set forth on page 2 of this Form 10-K.

The Company’s results are subject to risks and uncertainties including, but not limited to, those described in Part I, Item 1A, Risk Factors, and those identified from time to time in our other filings with the Securities and Exchange Commission.

TJX provides projections and other forward-looking statements in the following discussions particularly relating to our future financial performance.

These forward-looking statements are estimates based on information currently available to us, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and subject to the cautionary statements set forth on page 2 of this Form 10-K.

Our results are subject to risks and uncertainties including, but not limited to, those described in Part I, Item 1A, Risk Factors, and those identified from time to time in our other filings with the Securities and Exchange Commission.

TJX undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise.

The discussion that follows relates to our 52-week fiscal year ended February 1, 2020 (fiscal 2020) and our 52-week fiscal year ended February 2, 2019 (fiscal 2019).

The discussion that follows relates to our 52-week fiscal years ended January 30, 2021 (fiscal 2021) and February 1, 2020 (fiscal 2020).

Our 52-week fiscal year ended February 2, 2019 is referred to as fiscal 2019 and our 52-week fiscal year ended January 29, 2022 is referred to as fiscal 2022.

The following is a discussion of our consolidated operating results, followed by a discussion of our segment operating results.

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and worldwide.

We sell 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.

We operate over 4,500 stores and have four main segments:

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.

We operate over 4,500 stores through our four main segments:

in the U.S., Marmaxx (which operates T.J.

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The results of Sierra are included in the Marmaxx segment.

Impact of the COVID-19 Pandemic

After a novel coronavirus disease (“COVID-19”) emerged and spread worldwide, the World Health Organization declared COVID-19 a pandemic in March 2020, and national, 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 quarantine or isolation protocols.

We temporarily closed all of our stores, online businesses, distribution centers and offices in March 2020, with Associates working remotely where possible.

During April 2020, we temporarily furloughed the majority of hourly store and distribution center Associates in the U.S.

and Canada, with employee benefits coverage for eligible Associates continuing during the temporary furlough at no cost to impacted Associates.

We also took comparable actions with respect to portions of our European and Australian workforces.

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.

Early in the fourth quarter of fiscal 2021, in response to increasing cases of COVID-19, hundreds of our stores had additional temporary closures, the vast majority being in Europe and Canada, and additional stores may close temporarily in the future.

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.

Our results for fiscal 2021 were negatively impacted by the temporary closure of our stores for approximately 24% 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.

See additional details below by segment.

TJX Canada 29

TJX International 36

As of March 30, 2021, we had approximately 580 stores, primarily in Europe, that were temporarily closed due to government mandates in response to the COVID-19 global pandemic.

We expect closures in Europe and Canada to impact our first quarter fiscal 2022 results as stores are expected to be closed for approximately 71% and 12% of the quarter, respectively.

Although the majority of our Germany and Netherlands stores were reopened by the end of March, additional operating restrictions have been imposed, including appointment requirements, limited business hours and capacity constraints.

In total, based on current restrictions, we expect stores to be closed for approximately 12% of the first quarter of fiscal 2022.

All of our e-commerce businesses remain open, including tkmaxx.com in the U.K.

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

The continued scope and impact of the pandemic is unpredictable and has in the past caused, currently causes, 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 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 designed to protect the health and well-being of our Associates and customers to operate more safely in light of the COVID-19 pandemic.

We established several global task force teams focused on a broad range of strategies to navigate the Company through this global health crisis.

Globally, we have put in place practices including social distancing protocols (which include occupancy limits and reducing in-store inventory levels), access to personal protective equipment and enhanced cleaning efforts.

For example, upon reopening our stores, we 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, such as shopping carts, throughout the day.

Further, in many locations, including where mandated, we have required that shoppers wear a face covering in stores.

Financial Actions

Balance Sheet, Cash Flow and Liquidity

The temporary closure of our stores 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 23% decrease in net sales for fiscal 2021 compared to the same period last year, resulting in a significant decline in net profit for the full fiscal year.

During fiscal 2021, we generated $4.6 billion of operating cash flows and ended the year with $10.5 billion of cash.

In addition, we increased our borrowing capacity by entering into a $500 million 364 Day Revolving Credit Facility, making a total of $1.5 billion available to us under revolving credit facilities.

In the first quarter of fiscal 2021, TJX issued $4 billion aggregate principal amount of notes.

During the fourth quarter of fiscal 2021, we issued $1 billion in aggregate principal amount of notes and accepted $1.1 billion in combined aggregate principal amount of certain of its notes issued in the first quarter of fiscal 2021 pursuant to cash tender offers.

We paid $1.4 billion aggregate consideration (including transaction costs) and recorded a $0.3 billion pre-tax loss on the early extinguishment for the accepted notes.

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

We intend to continue to be prudent with our expenses for fiscal 2022.

Capital spending for fiscal 2022 is expected to be back in line with normal spending, and is expected to be in the range of $1.2 billion to $1.4 billion with incremental investments in our infrastructure and our distribution centers, both existing and new facilities.

We are planning approximately 120 net store openings for fiscal 2022.

We have currently suspended our share repurchase program.

While our Board of Directors did not declare a dividend in the first nine months of fiscal 2021, we declared a dividend of $0.26 per share in the fourth quarter of fiscal 2021, paid in March 2021.

We also declared a similar dividend of $0.26 per share in the first quarter of fiscal 2022.

During 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.

We elected to treat the COVID-19 pandemic-related rent deferrals as a resolution of a contingency by remeasuring the lease liability, with a corresponding offset to the right-of-use asset, using the remeasured consideration.

In addition to negotiating deferral of lease payments, we had temporarily extended payment terms on merchandise orders, which increased our accounts payable as of the end of the fiscal year, benefiting our operating cash flows.

As payment terms are reduced and we make deferred payments, we expect our operating cash flows to be negatively impacted.

We evaluated the value of our inventory in light of the temporary store closures in the first and fourth quarters of fiscal 2021 due to the COVID-19 pandemic.

Permanent markdowns, which had been or will be 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 fiscal 2021.

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 fiscal 2021 due to the COVID-19 pandemic, we determined that triggering events had occurred and that impairment assessments were warranted for certain stores.

This resulted in impairment charges of $72 million for fiscal 2021 , related to operating lease right of use assets and store fixed assets.

Operating Expenses

We 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, we provided discretionary appreciation bonuses during 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 in fiscal 2022.

We have implemented, and plan to continue to implement, cost saving initiatives to reduce some ongoing variable and discretionary spending.

In response to 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.

Throughout fiscal 2021 we continued to qualify for certain of these provisions, which partially offset related expenses.

During fiscal 2021 , these programs reduced our expenses by approximate ly $0.5 billion on our Consolidated Statements of Income.

RESULTS OF OPERATIONS

Matters Affecting Comparability

As a result of the COVID-19 pandemic, our stores were closed in the aggregate for approximately 24% of fiscal 2021.

In addition to lost revenues, we continued to pay wages and provide benefits to many of our Associates during the closures, and incurred incremental operating expenses upon reopening for new health and safety practices.

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

Highlights of our financial performance for fiscal 2021 include the following:

– Net sales increased to $41.7 billion for fiscal 2020, up 7% over fiscal 2019.

At February 1, 2020, the number of stores in operation increased 5% and selling square footage increased 4% over the end of fiscal 2019.

– Comp sales increased 4% in fiscal 2020 over an increase of 6% in fiscal 2019.

The fiscal 2020 increase was driven primarily by an increase in customer traffic at each of our four segments.

– Diluted earnings per share for fiscal 2020 were $2.67 compared to $2.43 per share in fiscal 2019.

– Our fiscal 2020 pre-tax margin (the ratio of pre-tax income to net sales) was 10.6%, a 0.1 percentage point decrease compared to 10.7% in fiscal 2019.

– Our cost of sales, including buying and occupancy costs, ratio for fiscal 2020 was 71.5% a 0.1 percentage point increase compared to 71.4% in fiscal 2019.

– Our selling, general and administrative (“SG&A”) expense ratio for fiscal 2020 was 17.9%, a 0.1 percentage point increase compared to 17.8% in fiscal 2019.

– Our consolidated average per store inventories, including inventory on hand at our distribution centers (which excludes inventory in transit) and excluding our e-commerce businesses, increased 4% on both a reported basis and a constant currency basis at the end of fiscal 2020 as compared to the prior year.

– During fiscal 2020, we repurchased 27.1 million shares of our common stock for $1.5 billion, on a “trade date basis”.

Earnings per share reflect the benefit of our stock repurchase programs.

In February 2020, our Board of Directors approved a repurchase program that authorizes the repurchase of up to an additional $1.5 billion of TJX common stock.

Investment in Familia

On November 18, 2019, the Company, through a wholly owned subsidiary, completed an investment of $225 million, excluding acquisition costs, for a 25% ownership stake in privately held Familia, an established, off-price apparel and home fashions retailer with more than 275 stores throughout Russia.

The Company's investment represents a non-controlling, minority position.

As part of this investment, TJX has the right to appoint and has appointed one member to the Board of Directors of Familia.

This investment is included in Other assets on our Consolidated Balance Sheets and is accounted for under the equity method of accounting from the date of investment forward.

TJX will report its share of Familia’s results on a one-quarter lag as their results are not expected to be available in time to be recorded in the concurrent period.

As a result, there were no reported earnings from TJX's investment in Familia for the fiscal year ended February 1, 2020.

– Net sales decreased 23% to $32.1 billion for fiscal 2021, versus fiscal 2020 sales of $41.7 billion.

As of January 30, 2021, 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 fiscal 2020.

– Diluted earnings per share for fiscal 2021 were $0.07 versus $2.67 per share in fiscal 2020.

– Pre-tax margin (the ratio of pre-tax income to net sales) for fiscal 2021 was 0.3%, a 10.3 percentage point decrease compared with 10.6% in fiscal 2020.

– The debt extinguishment charge of $0.3 billion reduced fiscal 2021 pre-tax margin by 1.0 percentage point and reduced earnings per share by $0.19 per share.

– Our cost of sales, including buying and occupancy costs, ratio for fiscal 2021 was 76.3%, a 4.8 percentage point increase compared with 71.5% in fiscal 2020.

– Our selling, general and administrative (“SG&A”) expense ratio for fiscal 2021 was 21.8%, a 3.9 percentage point increase compared with 17.9% in 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 21% on a reported basis and down 22% on a constant currency basis at the end of fiscal 2021 as compared to a 4% increase in average per store inventories on both a reported and constant currency basis at the end of fiscal 2020.

– There were no dividends declared during the first nine months of fiscal 2021 and share repurchases were suspended in the first quarter of fiscal 2021.

A dividend of $0.26 per share was declared in the fourth quarter of fiscal 2021 and paid in March of 2021.

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

Recent Events and Trends

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

The World Health Organization has declared COVID-19 a pandemic 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 quarantining of people who may have been exposed to the virus.

After close monitoring and taking into consideration the guidance from federal, state and local governments, in an effort to mitigate the spread of COVID-19, effective March 19, 2020, the Company closed all of its stores for at least two weeks and has temporarily closed its online businesses, its distribution centers and its offices with Associates working remotely where possible.

The Company continues to monitor developments, including government requirements and recommendations at the federal, state and local level to evaluate possible extensions to all or part of such closures.

We expect the cadence of store re-openings to vary by state and locality in the U.S., and by country.

TJX has committed to pay its Associates until the week ending April 4, 2020 during these closures.

The temporary closure of our stores is expected to have an adverse impact on our results of operations, financial position and liquidity.

In addition, we have taken several steps to further strengthen our financial position and balance sheet, and maintain financial liquidity and flexibility, including suspending our share repurchase program, reviewing operating expenses, evaluating merchandise purchases, reducing capital expenditures and drawing down $1.0 billion on our revolving credit facilities.

In addition, we do not intend to declare a dividend for the first quarter of fiscal 2021.

We continue to evaluate our dividend program in the near term, while we remain committed to paying our dividends whenever the environment normalizes for the long term.

We also withdrew our first quarter and full year fiscal 2021 financial guidance given on our February 26, 2020 earnings conference call.

The Company is not providing an updated outlook at this time.

As the COVID-19 pandemic is complex and rapidly evolving, the Company's plans as described above may change.

At this point, we cannot reasonably estimate the duration and severity of this pandemic, which could have a material adverse impact on our business, results of operations, financial position and cash flows.

See discussion above in the Impact of the COVID-19 Pandemic section.

Impact of Brexit

On January 31, 2020, the United Kingdom (“UK”) left the European Union (“EU”), commonly referred to as “Brexit”, and entered an 11-month transition period (the “Transition Period”), during which the UK continues to be treated as an EU member for most purposes.

This Transition Period is due to end on December 31, 2020, and the UK and EU are currently negotiating the terms of their future relationship that will apply after this date.

The terms of the future EU/UK trading relationship remain uncertain.

Our TJX Europe management team has evaluated a range of possible outcomes, identified areas of concern, and implemented strategies to help mitigate them.

We expect the future EU/UK trading relationship will subject the movement of goods between the UK and the EU to additional regulatory and compliance requirements, which is likely 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 UK and the EU and have established resources and systems to support this plan.

There are also likely to be additional customs duty costs on EU/UK trade, the extent of which remain uncertain.

Any customs duties may also impact the profitability of our European division, at least in the short term.

New immigration requirements between the UK and EU countries may also have a negative impact on our ability to recruit and retain current and future talent in the region.

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 is expected 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.

However, a proportion 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 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.

We believe the steps we have taken, and plan to take, will help us mitigate the effects when the Transition Period ends .

Administration has imposed tariffs on imports from China.

We continue to monitor the developments very closely and have started to see margin pressure based on the tariffs currently in place on the goods sourced directly from China.

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 fiscal 2020 totaled $41.7 billion, a 7% increase over fiscal 2019.

The increase reflected a 4% increase from comp stores and a 4% increase from non-comp sales.

Foreign currency had a 1% negative impact in fiscal 2020.

Net sales from our e-commerce businesses combined amounted to approximately 2% of total sales and had an immaterial impact on fiscal 2020 sales growth.

Consolidated net sales for fiscal 2019 totaled $39.0 billion, a 9% increase over fiscal 2018.

The increase reflected a 6% increase from comp stores and a 3% increase from non-comp sales.

Foreign currency had a neutral impact in fiscal 2019.

Net sales from our e-commerce businesses combined amounted to approximately 2% of total sales and had an immaterial impact on fiscal 2019 sales growth.

Revenues by Geography

The percentages of our consolidated revenues by geography for the last two fiscal years are as follows:

Fiscal 2020 Fiscal 2019

United States:

Northeast 23 % 23 %

Midwest 13 % 13 %

South (including Puerto Rico) 25 % 25 %

West 15 % 15 %

Subtotal 76 % 76 %

Canada 10 % 10 %

Europe 13 % 13 %

Australia 1 % 1 %

Total 100 % 100 %

Comparable Store Sales

We define comparable store sales (“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 calculate comp sales on a 52-week basis by comparing the current and prior year weekly periods that are most closely aligned.

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.

Net sales for fiscal 2021 totaled $32.1 billion, a 23% decrease over fiscal 2020.

The decrease in net sales was driven by temporary store closures as a result of the COVID-19 pandemic and lower customer traffic, with stores closed in the aggregate for approximately 24% of fiscal 2021.

Net sales from our e-commerce businesses combined amounted to approximately 3% of total sales.

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 under our historical definition, we had no stores classified as comp stores at the end of fiscal 2021.

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.

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.

Open-only comp sales of our foreign segments are calculated by translating the current year using the prior year’s exchange rates.

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

Open-only comp store sales were down 4% for fiscal 2021 as compared to last year.

These results reflect a decrease in customer traffic, partially offset by an increased average basket across all divisions.

Our stores were closed in the aggregate for approximately 24% of fiscal 2021.

Home fashion across all major segments outperformed apparel for fiscal 2021.

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.

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.

We define customer traffic to be the number of transactions in stores included in the comp sales calculation 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 included in the comp sales calculation.

Sales excluded from comp sales (“non-comp sales”) consists of

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

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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.

For fiscal 2020 results, 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 of our foreign segments at the same exchange rates used in the prior 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.

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 other retail companies.

Comp sales increases across all of our segments for fiscal 2020 were primarily due to an increase in customer traffic.

In fiscal 2020, home fashions and apparel both grew, with apparel outperforming home fashions.

Geographically, in the U.S., all regions reported solid comp sales increases with the Southwest and Southeast regions reporting the highest comp sales increases.

In Canada, comp sales were below the consolidated average and TJX International was well above the consolidated average.

Comp sales increases across all of our segments for fiscal 2019 were primarily due to an increase in customer traffic.

In fiscal 2019, home fashions and apparel both grew, with apparel outperforming home fashions.

Geographically, in the U.S., the Southeast, Great Lakes and the Southwest regions reported the highest comp sales increases, and the Mid Atlantic was below the consolidated average.

Comp sales increases for TJX Canada and TJX International were below the consolidated average.

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.

Operating Results as a Percentage of Net Sales

The following table sets forth our consolidated operating results as a percentage of net sales.

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Selling, general and administrative expenses 21.8 17.9

Pension settlement charge — 0.1

Loss on early extinguishment of debt 1.0 —

Interest expense, net 0.6 —

Income before provision for income taxes *

10.6 % 10.7 %

Income before income taxes *

* Figures may not foot due to rounding.

Revenues by Geography

The percentages of our consolidated revenues by geography for the last two fiscal years are as follows:

Fiscal 2021 Fiscal 2020

United States:

Northeast 23 % 23 %

Midwest 13 13

South (including Puerto Rico) 27 25

Total United States 79 % 76 %

Australia 1 1

Total 100 % 100 %

Impact of foreign currency exchange rates

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dollar or a division’s local currency in relation to other currencies.

We specifically refer to “foreign currency” as the impact of translational foreign exchange and mark-to-market of inventory derivatives, as described in detail below.

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.

Translational Foreign Exchange

In our financial statements, we translate the operations of TJX Canada and TJX International from local currencies into U.S.

Translation Foreign Exchange

In our consolidated 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 consolidated net sales, net income and 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 and earnings 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.

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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 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 mark-to-market gain or loss 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.

The mark-to-market gain or loss on these derivatives does not affect net sales, but it does affect the cost of sales, operating margins and net income.

Transactional Foreign Exchange

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Cost of Sales, Including Buying and Occupancy Costs

Cost of sales, including buying and occupancy costs, as a percentage of net sales was 71.5% in fiscal 2020 compared to 71.4% in fiscal 2019.

The increase in this expense ratio during fiscal 2020 was driven by higher supply chain costs, partially offset by the expense leverage on the strong comp sales growth.

Cost of sales, including buying and occupancy costs, was $24.5 billion, or 76.3% of net sales for fiscal 2021 compared to $29.8 billion, or 71.5% of net sales for fiscal 2020.

The main reason for the decrease in the total cost of sales, including buying and occupancy costs, was the reduction in cost of merchandise sold due to a reduction in net sales as compared to the prior year, primarily due to our stores being temporarily closed in the aggregate for approximately 24% of fiscal 2021.

The increase in the expense ratio of 4.8% for fiscal 2021 was primarily driven by the impact of lower sales primarily 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 occupancy costs were comparable to last year but increased the expense ratio by approximately 2.1 percentage points due to the lower sales volume.

Our distribution costs increased the expense ratio by approximately 1.6 percentage points due to processing more units while our merchandise mix had a lower average ticket.

In addition, distribution costs reflect wage increases, discretionary appreciation bonuses, and incremental costs to implement and maintain health and safety protocols, despite a reduction in payroll costs due to Associate furloughs in the first half of fiscal 2021 and $78 million in benefits received from government programs available in the U.S., Canada, the U.K.

and various other jurisdictions.

Merchandise margin was negatively impacted by increased markdowns as a percentage of net sales, as well as increased freight costs partially offset by strong mark-on.

The increased markdowns include those taken to revalue inventories due to our temporary store closures.

Selling, General and Administrative Expenses

SG&A expenses as a percentage of net sales were 17.9% in fiscal 2020 compared to 17.8% in fiscal 2019.

The increase in this expense ratio reflects wage increases and incremental systems and technology costs, partially offset by the expense leverage on the strong comp sales growth, primarily advertising costs.

Pension Settlement Charge

During fiscal 2019, we annuitized and transferred current pension obligations for certain U.S.

retirees and beneficiaries under the qualified pension plan through the purchase of a group annuity contract with an insurance company.

We transferred $207.4 million of pension plan assets to the insurance company, thereby reducing our pension benefit obligations.

The transaction had no cash impact to TJX but did result in a non-cash pre-tax pension settlement charge of $36.1 million.

SG&A expenses were $7 billion, or 21.8% of net sales for fiscal 2021, compared to $7.5 billion, or 17.9% of net sales for fiscal 2020.

The increase in SG&A expenses as a percentage of net sales for fiscal 2021 was primarily driven by store payroll and store supply costs which negatively impacted the expense ratio by 2.7 percentage points.

These costs were primarily COVID-related, including incremental store payroll investments to allow for enhanced cleaning and monitoring capacity, discretionary appreciation bonuses, and personal protective equipment for our Associates.

These incremental costs were partially offset by expense savings, including lower advertising and travel 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.

We also paid certain Associates during the temporary store closures, which was partially offset by $434 million from government programs available in the U.S., Canada, the U.K.

and various other jurisdictions.

Loss On Early Extinguishment of Debt

On November 30, 2020 we issued $500 million aggregate principal amount of 1.150% notes due 2028 and $500 million aggregate principal amount of 1.600% notes due 2031.

We used the proceeds to partially fund the purchase, on December 4, 2020, of $365 million of our 4.500% notes due 2050 and $754 million of our 3.875% notes due 2030 that were tendered and accepted in our cash tender offer.

We recorded a pre-tax loss on the early extinguishment of debt of $312 million.

For additional information on the debt transactions, see Note K—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements.

Interest Expense, net

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Fiscal Year Ended

In millions February 1,

In millions January 30,

2021 February 1,

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Interest expense, net $ 181 $ 10

The increase in interest expense, net for fiscal 2020 compared to fiscal 2019 was primarily driven by a decrease in interest income due to lower rates and lower capitalized interest on capital projects, partially offset by the elimination of build-to-suit accounting as a result of adopting the new lease accounting standard.

For additional information, see Note A—Basis of Presentation and Summary of Accounting Policies of Notes to Consolidated Financial Statements.

Net interest expense increased for fiscal 2021 compared to fiscal 2020, primarily driven by the issuance of additional debt in fiscal 2021 due to the COVID-19 pandemic and lower interest income.

In addition, fiscal 2021 included interest expense on the $1 billion of borrowings on the revolving credit facilities, which were paid off in the second quarter of fiscal 2021.

Provision for Income Taxes

Our effective annual income tax rate was 25.7% in fiscal 2020 compared to 26.7% in fiscal 2019.

The decrease in the fiscal 2020 effective income tax rate is primarily driven by fiscal 2019 including a charge related to the 2017 Tax Act that was not incurred in fiscal 2020 and change in the jurisdictional mix of income.

The effective income tax rate was (1.4)% for fiscal 2021 compared to 25.7% for fiscal 2020.

The decrease in the fiscal 2021 effective income tax rate is primarily driven by the negative impact of the COVID-19 pandemic to our results and the change in the jurisdictional mix of income and losses.

Net Income and Diluted Earnings Per Share

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Diluted earnings per share were $0.07 in fiscal 2021 and $2.67 in fiscal 2020.

The pension settlement charge had a $0.02 negative impact on earnings per share in fiscal 2019.

Foreign currency exchange rates had a $0.01 negative impact on earnings per share in fiscal 2020 when compared to fiscal 2019.

Our stock repurchase programs, which reduce our weighted average diluted shares outstanding, benefited our earnings per share growth by approximately 3% in each fiscal year presented.

The loss on early extinguishment of debt reduced net income by $229 million, or $0.19 per share, for the twelve months ended January 30, 2021.

Our stock repurchase programs, which reduce our weighted average diluted shares outstanding, had no impact on our earnings per share in fiscal 2021 as we suspended the program in March 2020 as a result of the COVID-19 pandemic.

Our stock repurchase programs benefited our earnings per share growth by approximately 3% in fiscal 2020.

Segment Information

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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, interest expense, net, and certain separately disclosed unusual or infrequent items.

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.

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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 all of our 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, 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.

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.

Fiscal Year Ended

dollars in millions February 1,

dollars in millions January 30,

2021 February 1,

Net sales $ 19,363 $ 25,665

Segment profit margin $ 3,469.8 $ 3,253.9

Segment profit margin as a percentage of net sales 13.5 % 13.5 %

Increase in comp sales 5 % 7 %

Segment profit $ 891 $ 3,470

Segment margin 4.6 % 13.5 %

Stores in operation at end of period:

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Total 54,418 54,456

Net sales for Marmaxx increased 7% in fiscal 2020 on top of an 8% increase in fiscal 2019.

The sales increase of 7% in fiscal 2020 reflects a 5% increase from comp sales and a 2% increase from non-comp sales.

The sales increase of 8% in fiscal 2019 reflects a 7% increase from comp sales and a 1% increase from non-comp sales.

Sales of our U.S.

e-commerce businesses represented approximately 3% of Marmaxx’s net sales in both fiscal 2020 and fiscal 2019.

Comp sales growth at Marmaxx for fiscal 2020 was primarily due to a 4% increase in customer traffic on top of a 5% increase in customer traffic in fiscal 2019.

Geographically, comp sales were strongest in the Southwest and Southeast regions.

Home fashions outperformed apparel in fiscal 2020 with both categories posting solid comp sales growth.

Segment Profit Margin

Segment profit margin was 13.5% for both fiscal 2020 and fiscal 2019.

Merchandise margin slightly increased for fiscal 2020 compared to fiscal 2019 as favorable mark-on and lower markdowns were partially offset by increased freight costs and tariff pressures.

Segment profit margin also reflects higher supply chain costs and wage increases.

These were offset by the expense leverage on the strong 5% comp sales growth, store expense savings and lower incentive compensation accruals in fiscal 2020.

e-commerce businesses, including our newest e-commerce website www.marshalls.com, which was introduced during fiscal 2020, did not have a significant impact on year-over-year segment profit margin comparisons.

Net sales for Marmaxx decreased 25% for fiscal 2021 as compared to last year.

The decrease in net sales was primarily due to the temporary closures of all stores as a result of the COVID-19 pandemic.

The stores were closed for approximately 20% of fiscal 2021.

In addition, the decrease in net sales was due to lower customer traffic, partially offset by an increase in the average basket.

Open-only comp store sales were down 7% for fiscal 2021.

Home fashions outperformed apparel for fiscal 2021.

Segment Profit

Segment profit was $0.9 billion for fiscal 2021, a decrease of $2.6 billion, compared to a segment profit of $3.5 billion for fiscal 2020.

The decrease 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 half of fiscal 2021 due to the COVID-19 pandemic as well as increased freight costs, partially offset by stronger mark-on.

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 fiscal 2021 as compared to last year, and as a result of incremental COVID-19 costs.

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

The reduction in payroll reflects approximately $171 million for fiscal 2021 from government programs as described in the Impacts of the COVID-19 Pandemic section above.

In addition, a significant portion of our occupancy costs are fixed.

As a result, while our occupancy costs were comparable to last year, they negatively impacted segment margin by approximately 2.2 percentage points, primarily due to the lower sales volume.

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

e-commerce businesses, which represented approximately 3% of Marmaxx’s net sales for both fiscal 2021 and fiscal 2020, did not have a significant impact on year-over-year segment margin comparisons.

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

Fiscal Year Ended

dollars in millions February 1,

dollars in millions January 30,

2021 February 1,

Net sales $ 6,096 $ 6,356

Segment profit margin $ 680.5 $ 671.9

Segment profit margin as a percentage of net sales 10.7 % 11.6 %

Increase in comp sales 2 % 4 %

Segment profit $ 510 $ 681

Segment margin 8.4 % 10.7 %

Stores in operation at end of period:

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Total 15,767 15,516

Net sales for HomeGoods increased 10% in fiscal 2020, on top of a 13% increase in fiscal 2019.

The sales increase of 10% in fiscal 2020 reflects an 8% increase from non-comp sales and a 2% increase from comp sales.

The sales increase of 13% in fiscal 2019 reflects a 9% increase from non-comp sales and a 4% increase from comp sales.

Comp sales growth at HomeGoods for fiscal 2020 was due to a 2% increase in customer traffic on top of a 5% increase in customer traffic in fiscal 2019.

Geographically, comp sales were strongest in the Southwest and Southeast regions.

Segment Profit Margin

Segment profit margin decreased to 10.7% for fiscal 2020 compared to 11.6% for fiscal 2019.

Merchandise margin increased in fiscal 2020 compared to fiscal 2019.

The increase was primarily driven by favorable mark-on partially offset by increased tariff costs.

The decrease in segment profit margin reflects the investment in store growth, higher supply chain costs, the expense deleverage on the 2% comp sales growth as well as wage increases.

These collectively reduced segment profit margin by approximately 0.9 percentage points.

Net sales for HomeGoods decreased 4% for fiscal 2021 as compared to last year.

The decrease in net sales was primarily due to the temporary closures of all stores as a result of the COVID-19 pandemic.

The stores were closed for approximately 20% of fiscal 2021.

In addition, the decrease in net sales was due to lower customer traffic, partially offset by an increase in the average basket.

Open-only comp store sales were up 13% for fiscal 2021.

Segment Profit

Segment profit was $510 million for fiscal 2021, a decrease of $171 million, compared to a segment profit of $681 million for fiscal 2020.

The decrease was primarily driven by a reduction in sales due to temporary store closures and increased store and distribution payroll costs, including incremental COVID-19 costs.

The decline in segment profit was partially offset by improved merchandise margin, lower advertising and travel spend and other variable store expense savings.

Merchandise margin reflects strong mark-on and favorable markdowns net of increased freight costs.

The increase in payroll includes a reduction of approximately $46 million for fiscal 2021 from government programs as described in the Impacts of the COVID-19 Pandemic section above.

During the fourth quarter of fiscal 2021, we announced our plan to make online shopping available on www.homegoods.com in late fiscal 2022.

FOREIGN SEGMENTS

Fiscal Year Ended

dollars in millions February 1,

dollars in millions January 30,

2021 February 1,

Net sales $ 2,836 $ 4,031

Segment profit margin $ 515.6 $ 551.6

Segment profit margin as a percentage of net sales 12.8 % 14.3 %

Increase in comp sales 2 % 4 %

Segment profit $ 124 $ 516

Segment margin 4.4 % 12.8 %

Stores in operation at end of period:

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Total 10,800 10,540

Net sales for TJX Canada increased 4% in fiscal 2020, on top of a 6% increase in fiscal 2019.

The sales increase of 4% in fiscal 2020 reflects a 4% increase from non-comp sales and a 2% increase from comp sales, offset by a 2% negative impact of foreign currency translation.

The sales increase of 6% in fiscal 2019 reflects a 4% increase from comp sales, a 4% increase from non-comp sales, offset by a 2% negative impact of foreign currency translation.

Comp sales growth at TJX Canada for fiscal 2020 was driven by a 3% increase in customer traffic on top of a 5% increase in customer traffic in fiscal 2019.

Segment Profit Margin

Segment profit margin decreased to 12.8% in fiscal 2020 compared to 14.3% in fiscal 2019.

Merchandise margin decreased by approximately 0.7 percentage points.

The decline in merchandise margin was due to the impact of transactional foreign exchange on the cost of merchandise and higher freight costs.

The decrease in segment profit margin also reflects an unfavorable year-over-year comparison related to a lease buyout gain in the first quarter of fiscal 2019, higher supply chain costs, the expense deleverage on the 2% comp sales growth and wage increases.

Net sales for TJX Canada decreased 30% for fiscal 2021 compared to last year.

The decrease in net sales was primarily due to temporary store closures, closed for approximately 29% of fiscal 2021, as a result of the COVID-19 pandemic.

In addition, net sales decreased due to lower customer traffic, partially offset by an increase in the average basket.

Open-only comp store sales were down 8% for fiscal 2021.

Segment Profit

Segment profit was $124 million for fiscal 2021, a decrease of $392 million, compared to a segment profit of $516 million for fiscal 2020.

The decrease was primarily driven by a reduction in sales due to the temporary store closures, including incremental COVID-19 costs.

The decline in segment profit was partially offset by improved merchandise margin, a reduction in store payroll while the stores were closed, lower advertising and travel spend and other variable store expense savings.

Merchandise margin reflects strong mark-on net of increased markdowns and freight.

The reduction in payroll reflects approximately $148 million for fiscal 2021 from government programs as described in the Impacts of the COVID-19 Pandemic secti on above.

In addition, a significant portion of our occupancy costs are fixed.

As a result, while our occupancy costs were comparable to last year, they negatively impacted segment margin by approximately 3.8 percentage points, primarily due to the lower sales volume.

TJX International

Fiscal Year Ended

dollars in millions February 1,

dollars in millions January 30,

2021 February 1,

Net sales $ 3,842 $ 5,665

Segment profit margin $ 307.1 $ 285.8

Segment profit margin as a percentage of net sales 5.4 % 5.4 %

Increase in comp sales 8 % 3 %

Segment (loss) profit $ (504) $ 307

Segment margin (13.1) % 5.4 %

Stores in operation at end of period:

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Total 14,382 14,136

Net sales for TJX International increased 8% in fiscal 2020 on top of an 8% increase in fiscal 2019.

The sales increase of 8% in fiscal 2020 reflects an 8% increase from comp sales, a 4% increase from non-comp sales, offset by a 4% negative impact from foreign currency translation.

The sales increase of 8% in fiscal 2019 reflects a 4% increase from non-comp sales, a 3% increase from comp sales and a 1% positive impact from foreign currency translation.

E-commerce sales represent 3% of TJX International’s net sales in both fiscal 2020 and fiscal 2019.

Comp sales growth at TJX International for fiscal 2020 was driven by a 7% increase in customer traffic on top of a 4% increase in customer traffic in fiscal 2019.

Segment Profit Margin

Segment profit margin was 5.4% for both fiscal 2020 and fiscal 2019.

Merchandise margin decreased in fiscal 2020 compared to fiscal 2019.

The decline in merchandise margin was primarily driven by the impact of transactional foreign exchange on the cost of merchandise, partially offset by favorable markdowns.

Segment profit margin also reflects the expense leverage on the strong 8% comp sales growth.

This was partially offset by higher incentive compensation accruals in fiscal 2020, incremental systems and technology costs and wage increases.

Net sales for TJX International decreased 32% for fiscal 2021 compared to last year.

The decrease in net sales was primarily due to the temporary store closures, closed for approximately 36% of fiscal 2021, as a result of the COVID-19 pandemic.

In addition, net sales decreased due to lower customer traffic, partially offset by an increase in the average basket.

Open-only comp store sales were down 2% for fiscal 2021.

E-commerce sales were approximately 5% of TJX International’s net sales for fiscal 2021 and 3% for fiscal 2020.

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

Once reopened during the second quarter of fiscal 2021, the online business remained open through fiscal 2021.

Segment (Loss) / Profit

Segment loss was $(504) million for fiscal 2021, a decrease of $811 million, compared to a segment profit of $307 million for fiscal 2020.

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

In addition, the decrease reflects increased markdowns on merchandise due to the COVID-19 pandemic and incremental COVID-19 costs.

The d ecline in segment profit was partially offset by reduced store payroll, a reduction in occupancy costs and lower advertising and travel spend .

The reduction in payroll reflects approximately $140 million for fiscal 2021 from government programs as described in the Impacts of the COVID-19 Pandemic section above.

In addition, a significant portion of our occupancy costs are fixed.

As a result, while our occupancy costs were comparable to last year, they negatively impacted segment margin by approximately 3.1 percentage points, primarily due to the lower sales volume.

GENERAL CORPORATE EXPENSE

Fiscal Year Ended

In millions February 1,

In millions January 30,

2021 February 1,

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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 fiscal 2020 was primarily driven by incremental systems and technology costs and stock compensation costs, offset by the favorable year-over-year comparison from the corporate IT restructuring costs incurred in fiscal 2019.

The decrease in general corporate expense for fiscal 2021 was primarily driven by lower share-based and incentive compensation costs.

ANALYSIS OF FINANCIAL CONDITION

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Our liquidity requirements have traditionally been funded through cash generated from operations, supplemented, as needed, by short-term bank borrowings and the issuance of commercial paper.

As of February 1, 2020, there were no short-term bank borrowings or commercial paper outstanding.

As part of the actions we have taken relating to the COVID-19 pandemic, as described above in Recent Events and Trends , on March 20, 2020, we drew down $1 billion on our revolving credit facilities.

We believe our existing cash and cash equivalents, internally generated funds and our credit facilities, described in Note J—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements, are adequate to meet our operating needs over the next fiscal year, subject to the length and severity of the COVID-19 pandemic.

As of February 1, 2020, TJX held $3.2 billion in cash.

Approximately $1.0 billion of our cash was held by our foreign subsidiaries with $584.7 million held in countries where we intend to indefinitely reinvest any undistributed earnings.

TJX has provided for all applicable state and foreign withholding taxes on all undistributed earnings of its foreign subsidiaries in Canada, Puerto Rico, Italy, India, Hong Kong and Vietnam through February 1, 2020.

As of January 30, 2021, there were no short-term bank borrowings or commercial paper outstanding.

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 billion aggregate principal amount of notes.

In the fourth quarter of fiscal 2021, we refinanced $1.1 billion in aggregate principal amount of our higher interest notes with the issuance and sale of $1 billion in aggregate principal amount of lower interest rate senior notes.

For additional information on these transactions, see Note K—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements.

In March 2020, we drew down $1 billion on our revolving credit facilities, subsequently repaying these borrowings in July 2020.

On August 10, 2020, we increased our borrowing capacity by entering into a $500 million 364-day facility, making a total of $1.5 billion available to us under revolving credit facilities.

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

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

In the fourth quarter of fiscal 2021, our Board of Directors declared a quarterly dividend of $0.26 per share, paid in March 2021.

W e declared a similar dividend of $0.26 per share in the first quarter of Fiscal 2022.

We have currently suspended our share repurchase program.

We qualified for certain government programs in the U.S., the U.K., Canada and other jurisdictions to support payroll and other operating cost s.

We also reduced spending more broadly across the Company, reducing capital spending, evaluating operating expenses and taking actions to reduce ongoing variable and discretionary spending.

W e negotiated rent deferrals for fiscal 2021 for a significant amount of our stores, primarily for second quarter lease payments, with repayment at later dates, primarily in fiscal 2022.

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

As payment terms are reduced and we make deferred payments, we expect our operating cash flows to be negatively impacted.

Th e challenges posed by the COVID-19 pandemic on our business continue to evolve.

Consequently, we will continue to evaluate our financial position in light of future developments, particularly those relating to the COVID-19 pandemic.

We believe our existing cash and cash equivalents, internally generated funds and our credit facilities, described in Note K—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements, are adequate to meet our operating needs over the next fiscal year.

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 January 30, 2021, TJX held $10.5 billion in cash.

Approximately $1.2 billion of our cash was held by our foreign subsidiaries with $0.8 billion held in countries where we intend to indefinitely reinvest any undistributed earnings.

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 was $4.1 billion in fiscal 2020 and fiscal 2019.

The cash generated from operating activities in each of these fiscal years was largely due to operating earnings.

Operating cash flows for fiscal 2020 were essentially flat to fiscal 2019.

Net income, adjusted for non-cash items increased operating cash flows in fiscal 2020 as compared to fiscal 2019 by $0.3 billion.

This was primarily offset by a decrease in cash flows attributable to a reduction in income taxes payable.

Operating cash flows for fiscal 2019 increased by $1.1 billion compared to fiscal 2018.

Net income, adjusted for non-cash items increased operating cash flows in fiscal 2019 as compared to fiscal 2018 by $0.5 billion.

In addition there was a $0.6 billion increase in cash flows related to prepaid expenses and other current assets largely due to the prefunding of certain service contracts in fiscal 2018.

Net cash provided by operating activities was $4.6 billion in fiscal 2021 and $4.1 billion in fiscal 2020.

Our operating cash flows increased by $0.5 billion compared to fiscal 2020.

The COVID-19 pandemic had a material impact on our operating cash flows.

The loss of sales as a result of temporarily closing our stores and e-commerce businesses resulted in net income of $0.1 billion for the twelve month period ended January 30, 2021 compared with net income o f $3.3 billion in the twelve month period ended February 1, 2020.

This decrease in cash flows was more than offset by the combination of a $2.1 billion favorable impact from the increase in accounts payable, a $0.9 billion favorable impact due to the decrease in merchandise inventories, as well as a $0.6 billion favorable impact due to the increases in accrued expenses, income taxes payable and lease liabilities.

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

Investing Activities

Net cash used in investing activities resulted in net cash outflows of $0.6 billion in fiscal 2021 and $1.5 billion in fiscal 2020.

The cash outflows were primarily driven by capital expenditures and, in fiscal 2020, the Company invested $0.2 billion in Familia, an established off-price apparel and home fashion retail chain in Russia.

In addition, the activity in fiscal 2019 reflects the liquidation of short-term investments by TJX Canada as a result of a repatriation of earnings during the year.

The cash outflows for both periods were primarily driven by capital expenditures and, in fiscal 2020, we invested $0.2 billion in Familia, an established off-price apparel and home fashion retail chain in Russia.

Net cash used in investing activities include capital expenditures for the last two fiscal years as set forth in the table below.

Fiscal Year Ended

In millions February 1,

In millions January 30,

2021 February 1,

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$ 568 $ 1,223

As a result of the uncertainty surrounding the length and severity of the COVID-19 pandemic, we are reducing our expected capital expenditures for fiscal 2021.

The Company's investment represents a non-controlling, minority position.

As part of this investment, TJX has the right to appoint and has appointed one member to the Board of Directors of Familia.

In fiscal 2019 we purchased $0.2 billion of investments, and these cash outflows were more than offset by $0.6 billion of inflows related to investments that were sold or matured during fiscal 2019.

This activity primarily related to short-term investments which had initial maturities in excess of 90 days and are not classified as cash on the Consolidated Balance Sheets presented.

We expect our capital expenditures in fiscal 2022 will be in the range of approximately $1.2 billion to $1.4 billion, including approximately $0.7 billion to $0.8 billion for our offices and distribution centers (including buying and merchandising systems and other information systems) to support growth, approximately $0.4 billion to $0.5 billion for store renovations and approximately $0.1 billion for new stores.

We plan to fund these expenditures with our existing cash balances and through internally generated funds.

Financing Activities

Net cash used in financing activities resulted in net cash outflows of $2.4 billion in fiscal 2020 and $3.1 billion in fiscal 2019.

These cash outflows were primarily driven by equity repurchases and dividend payments, partially offset by issuances of common stock.

TJX repurchased and retired 27.1 million shares of its common stock at a cost of $1.5 billion during fiscal 2020, on a “trade date basis.” TJX reflects stock repurchases in its financial statements on a “settlement date” or cash basis.

Under our stock repurchase programs, we spent $1.6 billion to repurchase 28.2 million shares of our stock in fiscal 2020 and $2.4 billion to repurchase 50.8 million shares of our stock in fiscal 2019.

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

Net cash used in financing activities resulted in net cash inflows of $3.2 billion in fiscal 2021 and net cash outflows of $2.4 billion in fiscal 2020.

In fiscal 2021, these cash inflows were primarily driven by debt transactions.

In fiscal 2020, the cash outflows were primarily driven by equity repurchases and dividend payments, partially offset by issuances of common stock.

The cash inflows in fiscal 2021 were a result of completing the issuance and sale in the first quarter of fiscal 2021 of (a) $1.25 billion aggregate principal amount of 3.500% notes due 2025, (b) $0.75 billion aggregate principal amount of 3.750% notes due 2027, (c) $1.25 billion aggregate principal amount of 3.875% notes due 2030 and (d) $0.75 billion aggregate principal amount of 4.500% notes due 2050.

In addition, in the first quarter of fiscal 2021, we drew down $1 billion on our previously undrawn revolving credit facilities, which were paid off in full during the second quarter of fiscal 2021.

During the fourth quarter, we issued $1 billion in aggregate principal amount of notes and accepted $1.1 billion in combined aggregate principal amount of certain of our notes issued in the first quarter of fiscal 2021 pursuant to cash tender offers.

We paid $1.4 billion aggregate consideration in connection with the tender offers, including transaction costs and recorded a $312 million pre-tax loss on the early extinguishment for the accepted notes.

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

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

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

Under our stock repurchase programs, TJX spent $1.6 billion to repurchase 28.2 million shares of our stock in fiscal 2020.

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

In February 2020, TJX announced that its Board of Directors had approved 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 connection with the actions taken related to the COVID-19 pandemic as described in Recent Events and Trends , the Company suspended its share repurchase program.

We declared quarterly dividends on our common stock which totaled $0.92 per share in fiscal 2020 and $0.78 per share in fiscal 2019.

I n March 2020, in connection with the actions taken related to the COV ID-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, we suspended our share repurchase program.

In March 2020, we paid our quarterly dividend declared in the fourth quarter of fiscal 2020, which totaled $0.3 billion .

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

The Board of Directors declared a quarterly dividend of $0.26 per share in the fourth quarter of fiscal 2021, paid in March 2021.

We also declared a similar dividend of $0.26 per share in the first quarter of fiscal 2022.

TJX declared quarterly dividends on our common stock which totaled $0.92 per share in fiscal 2020.

Cash payments for dividends on our common stock totaled $0.3 billion in fiscal 2021 and $1.1 billion in fiscal 2020.

We also received proceeds from the exercise of employee stock options of $0.2 billion in fiscal 2020 and $0.3 billion in fiscal 2019.

The Company does not intend to declare a dividend for the first quarter of fiscal 2021.

As a result of the uncertainty surrounding the COVID-19 pandemic, the Company is evaluating its dividend program in the near term, while it remains committed to paying dividends whenever the environment normalizes for the long term.

We also received proceeds from the exercise of employee stock options of $0.2 billion in both fiscal 2021 and fiscal 2020.

Contractual Obligations

As of February 1, 2020, we had known contractual obligations under long-term debt arrangements (including current installments), other long-term obligations, operating leases for property and equipment and purchase obligations as follows:

As of January 30, 2021, we had known contractual obligations under long-term debt arrangements (including current installments), other long-term obligations, operating leases for property and equipment and purchase obligations as follows:

Payments Due by Period

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CRITICAL ACCOUNTING POLICIES

We prepare our consolidated financial statements in accordance with GAAP which require us to make certain estimates and judgments that impact our reported results.

We prepare our consolidated financial statements in accordance with GAAP which requires us to make certain estimates and judgments that impact our reported results.

These judgments and estimates are based on historical experience and other factors which we continually review and believe are reasonable.

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However, as a normal business practice, we have a specific policy as to when and how markdowns are to be taken, greatly reducing management’s discretion and the need for management estimates as to markdowns.

Inventory shrinkage requires estimating a shrinkage rate for interim periods, but we take a full physical inventory near the fiscal year end to determine shrinkage at year end.

Historically, the variance between estimated shrinkage and actual shrinkage has not been material to our annual financial results.

Inventory shrinkage requires estimating a shrinkage rate for interim periods, however we take a full physical inventory near the fiscal year end to determine shrinkage at year end.

We do not generally enter into arrangements with vendors that provide for rebates and allowances that could ultimately affect the value of inventory.

Impairment of Long-lived Assets, Goodwill and Tradenames

We evaluate our goodwill, tradenames and long-lived assets, inclusive of operating lease right of use assets, for indicators of impairment at least annually in the fourth quarter of each fiscal year or whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

Significant judgment is involved in projecting the cash flows of individual stores, as well as of our business units, which involve a number of factors including historical trends, recent performance and general economic assumptions.

If we determine that an impairment of long-lived assets, operating lease right of use assets or tradenames has occurred, we record an impairment charge equal to the excess of the carrying value of those assets over the estimated fair value of the assets.

If we determine that an impairment of goodwill has occurred, we record an impairment charge equal to the excess of the carrying value of the applicable reporting unit over the estimated fair value of the reporting unit, but not in excess of the carrying amount of goodwill.

We determine the fair value of our business units using the discounted cash flow method which requires assumptions for the weighted average cost of capital (“WACC”) and revenue growth for the related business unit.

The fair value of our business units exceeds their carrying value by a significant amount.

Impairment of Long-lived Assets

We evaluate our long-lived assets, inclusive of operating lease right of use assets, for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

Significant judgment is involved in projecting the cash flows of individual stores, which involve a number of factors including historical trends, recent performance and general economic assumptions.

If we determine that an impairment has occurred, we record an impairment charge equal to the excess of the carrying value of those assets over the estimated fair value of the assets.

We estimate fair value by obtaining market appraisals or using other valuation techniques.

Lease Accounting

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Right of use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

At the inception of the arrangement, the Company determines if an arrangement is a lease based on assessment of the terms and conditions of the contract.

At the inception of the arrangement, we determine if an arrangement is a lease based on assessment of the terms and conditions of the contract.

Operating lease ROU assets and lease liabilities are recognized at possession date based on the present value of lease payments over the lease term.

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Our lessors do not provide an implicit rate, nor is one readily available, therefore we use our incremental borrowing rate based on the information available at possession date in determining the present value of future lease payments.

The incremental borrowing rate is calculated based on the US Consumer Discretionary yield curve and adjusted for collateralization and foreign currency impact for TJX International and Canada leases.

The incremental borrowing rate is calculated based on the US Consumer Discretionary yield curve and adjusted for collateralization and foreign currency impact for TJX International and TJX Canada leases.

The operating lease ROU asset also includes any acquisition costs offset by lease incentives.

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Reserves for Uncertain Tax Positions

Like many large corporations, our income and other tax returns and reports are regularly audited by federal, state and local tax authorities in the United States and in foreign jurisdictions where we operate and such authorities may challenge positions we take.

Similar to many large corporations, our income and other tax returns and reports are regularly audited by federal, state and local tax authorities in the United States and in foreign jurisdictions where we operate and such authorities may challenge positions we take.

We are engaged in various administrative and judicial proceedings in multiple jurisdictions with respect to assessments, claims, deficiencies and refunds and other tax matters, which proceedings are in various stages of negotiation, assessment, examination, litigation and settlement.

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Final resolutions of our tax positions or changes in accruals for uncertain tax positions could result in additional tax expense or benefit and could have a material impact on our results of operations of the period in which an examination or proceeding is resolved or in the period in which a changed outcome becomes probable and reasonably estimable.

The 2017 Tax Act significantly changes how corporations are taxed, requiring complex computations to be performed that were not previously required in U.S.

tax law, significant judgments to be made in interpretation of the provisions and significant estimates in calculations, and the preparation and analysis of information not previously relevant or regularly produced.

Treasury Department, the IRS, and other standard-setting bodies could interpret or issue guidance on how provisions of the 2017 Tax Act will be applied or otherwise administered that is different from our interpretation.

As we continue to interpret any additional guidance, we may make adjustments to amounts that we have recorded that may materially impact our provision for income taxes in the period in which the adjustments are made.

Loss Contingencies

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RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of new accounting pronouncements related to leases, internal use software, income taxes, and comprehensive income, see Note A—Basis of Presentation and Summary of Accounting Policies of Notes to Consolidated Financial Statements included in this annual report on Form 10-K, including the dates of adoption and estimated effects on our results of operations, financial position or cash flows.

For a discussion of new accounting pronouncements related to income taxes, see Note A—Basis of Presentation and Summary of Accounting Policies of Notes to Consolidated Financial Statements included in this annual report on Form 10-K, including the dates of adoption and estimated effects on our results of operations, financial position or cash flows.

We do not expect any other recently issued accounting pronouncements will have a material effect on our financial statements.

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-K

Item 7. Management’s Discussion and Analysis