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Item 7. Management’s Discussion and Analysis

2022-03-30 compared with 2021-03-31 · 277 added, 321 removed, 199 unchanged (75% of the section changed)

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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 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 discussion that follows relates to our 52-week fiscal years ended January 29, 2022 (fiscal 2022), January 30, 2021 (fiscal 2021), February 1, 2020 (fiscal 2020) and January 28, 2023 (fiscal 2023).

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

Discussions of fiscal 2019 items and year-to-year comparisons between fiscal 2020 and fiscal 2019 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our annual report on Form 10-K for the fiscal year ended February 1, 2020.

Discussions of fiscal 2020 items and year-to-year comparisons between fiscal 2021 and fiscal 2020 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our annual report on Form 10-K for the fiscal year ended January 30, 2021.

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

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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:

We operate nearly 4,700 stores through our four main segments:

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

Maxx, Marshalls, tjmaxx.com and marshalls.com) and HomeGoods (which operates HomeGoods and Homesense);

Maxx, Marshalls, tjmaxx.com and marshalls.com) and HomeGoods (which operates HomeGoods, Homesense, and homegoods.com);

TJX Canada (which operates Winners, HomeSense and Marshalls in Canada);

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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.

The COVID-19 pandemic continued to impact the U.S.

and other countries around the world in fiscal 2022.

During fiscal 2022, while our stores in the U.S.

and all of our e-commerce businesses remained open for the entire period, we did have government-mandated temporary store closures in Europe, Canada and Australia, resulting in our stores being closed in the aggregate for approximately 4% of fiscal 2022.

Additionally, intermittently throughout the year, we operated under government-mandated shopping restrictions, including capacity limitations.

Stores were temporarily closed for approximately 24% of fiscal 2021 due to temporary closures across all geographies.

Overall, our fiscal 2022 results were significantly better than our fiscal 2021 results.

In addition to comparing current year results to fiscal 2021, we may, where meaningful, also compare these results to a comparable period in the fiscal year ended February 1, 2020, prior to the emergence of the pandemic.

We believe this additional comparison provides insight into how we are managing the business and performing as compared to our pre-pandemic results.

Highlights of our financial performance for fiscal 2022 include the following:

– 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.

– Net sales were $48.5 billion, $32.1 billion, and $41.7 billion for fiscal 2022, fiscal 2021, and fiscal 2020, respectively.

As of January 29, 2022, the number of stores in operation increased approximately 3% and selling square footage increased 2% compared to the end of fiscal 2021.

– Diluted earnings per share were $2.70 for fiscal 2022, which included a debt extinguishment charge of $0.15 per share, compared to $0.07 for fiscal 2021, which included a debt extinguishment charge of $0.19 per share, and $2.67 for fiscal 2020.

– Pre-tax margin (the ratio of pre-tax income to net sales) was 9.1%, 0.3%, and 10.6% for fiscal 2022, fiscal 2021, and fiscal 2020, respectively.

– A debt extinguishment charge of $0.2 billion reduced fiscal 2022 pre-tax margin by 0.5 percentage points and a debt extinguishment charge of $0.3 billion reduced fiscal 2021 pre-tax margin by 1.0 percentage point.

– Our cost of sales, including buying and occupancy costs, ratio was 71.5%, 76.3%, and 71.5% for fiscal 2022, fiscal 2021, and fiscal 2020, respectively.

– Our selling, general and administrative (“SG&A”) expense ratio was 18.7%, 21.8%, and 17.9% for fiscal 2022, fiscal 2021, and fiscal 2020, respectively.

– Our consolidated average per store inventories, including inventory on hand at our distribution centers (which excludes inventory in transit) and excluding our e-commerce sites and Sierra stores, were up 31% on a reported basis and 32% on a constant currency basis at the end of fiscal 2022 as compared to fiscal 2021, and we were up 3% on both a reported basis and constant currency basis at the end of fiscal 2022 as compared to fiscal 2020.

– During fiscal 2022, we returned $3.4 billion to our shareholders through share repurchases and dividends.

A dividend of $0.26 per share was declared in the fourth quarter of fiscal 2022 and paid in March of 2022.

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

Operating Results as a Percentage of Net Sales

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

Percentage of Net Sales

Fiscal 2022 Fiscal 2021 Fiscal 2020

Net sales 100.0 % 100.0 % 100.0 %

Cost of sales, including buying and occupancy costs 71.5 76.3 71.5

Selling, general and administrative expenses 18.7 21.8 17.9

Loss on early extinguishment of debt 0.5 1.0 —

Interest expense, net 0.2 0.6 —

Income before income taxes *

9.1 % 0.3 % 10.6 %

* Figures may not foot due to rounding.

Recent Events and Trends

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

Impact of Brexit

On December 24, 2020 the U.K.

and EU agreed upon the terms of their future trading relationship.

As expected the movement of goods between the U.K.

and EU is subject to additional regulatory and compliance requirements, which 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 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.

Divestiture of Equity Investment

Subsequent to the fiscal year ended January 29, 2022, given the recent Russian invasion of Ukraine, we committed to divesting our equity ownership in Familia.

As of March 2, 2022, Douglas Mizzi and Scott Goldenberg have resigned from their director and observer positions, respectively, on Familia’s board of directors, effective immediately.

As a result of this commitment to divest, we may recognize an investment loss of up to $225 million.

Prior to divestiture, we may be required to record an impairment charge if the fair value of our investment in Familia declines below its carrying value on our Consolidated Balance Sheets.

In fiscal 2020, we invested $225 million for a 25% non-controlling, minority interest in privately held Familia.

Familia, domiciled in Luxembourg, is an off-price retailer of apparel and home fashions with more than 400 stores in Russia.

We account for our investment in Familia using the equity method of accounting.

As of January 29, 2022, the carrying value of our investment in Familia was $186 million, which reflects the revaluing of the investment from Russian rubles to the U.S.

dollar, resulting in a cumulative translation loss and reducing the carrying value of our investment by approximately $40 million.

See additional information on the Equity Investment in Note A—Basis of Presentation and Summary of Accounting Policies of Notes to Consolidated Financial Statements.

The significant impact of the COVID-19 pandemic on our global retail operations that began during fiscal 2021 continued to impact our business in fiscal 2022.

We entered fiscal 2022 with significant ongoing global uncertainty related to the pandemic.

The health and safety of our Associates and customers remained a top priority during fiscal 2022, and we continue to monitor developments, including government requirements and recommendations that could result in possible additional impacts to our operations.

The below table represents total store days closed due to the COVID-19 pandemic as a percentage of potential total store days open in fiscal 2022 and fiscal 2021 by segment.

Fiscal 2022 Fiscal 2021

Marmaxx — % 20 %

HomeGoods — % 20 %

TJX Canada 12 % 29 %

TJX International 19 % 36 %

TJX Consolidated 4 % 24 %

Net sales totaled $48.5 billion, $32.1 billion, and $41.7 billion for fiscal 2022, fiscal 2021 and fiscal 2020, respectively.

Net sales from our e-commerce sites combined amounted to less than 3% of total sales for each of fiscal 2022, fiscal 2021 and fiscal 2020.

As a result of the extensive temporary store closures during fiscal 2021 due to the COVID-19 pandemic and our practice relating to the treatment of extended temporary store closures when calculating comp store sales, we had no stores classified as comp stores at the end of fiscal 2022 and fiscal 2021.

For fiscal 2022, we temporarily reported open-only comp store sales, as described below.

For fiscal 2023, we intend to return to our historical definition of comparable store sales.

While stores in the U.S.

were open for all of fiscal 2022, a significant number of stores in TJX Canada and TJX International experienced COVID-19 related temporary store closures and government-mandated shopping restrictions during fiscal 2022.

Therefore, we cannot measure year-over-year comparable store sales with fiscal 2022 in these geographies in a meaningful way.

As a result, the comparable stores included in the fiscal 2023 measure will consist of U.S.

stores only, which, we intend to refer to as U.S.

comparable store sales and will be calculated against sales for the comparable periods in fiscal 2022.

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

Fiscal 2022 vs Fiscal 2021

Net sales increased 51% in fiscal 2022 compared to fiscal 2021.

Our stores in the U.S.

and all of our e-commerce businesses remained open for the entire period, while we had temporary closures in Europe, Canada, and Australia resulting in our stores being closed in the aggregate for approximately 4% of fiscal 2022, as compared to stores across all geographies being temporarily closed for approximately 24% for fiscal 2021.

In addition to stores being open for more days in fiscal 2022, net sales further increased due to higher customer traffic and increased average basket.

Fiscal 2022 vs Fiscal 2020

Net sales increased 16% and open-only comp store sales were up 15% for fiscal 2022 compared to fiscal 2020.

open-only comp store sales were up 17% for fiscal 2022 compared to fiscal 2020.

This reflects an increase in average basket across all divisions.

Customer traffic was up in the U.S., where stores were open for all of fiscal 2022, and was down in geographies where we had COVID-19 related temporary store closures and government-mandated shopping restrictions.

Our open-only comp store sales increase in home fashions was significantly above our overall open-only comp increase.

In apparel, we had strong open-only comp store sales growth during fiscal 2022 compared to the same period in fiscal 2020.

Historical Comparable Store Sales

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.

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– Stores that are closed permanently or for an extended period of time

– Sales from our e-commerce sites, meaning sierra.com, tjmaxx.com, marshalls.com and tkmaxx.com

– Sales from our e-commerce sites, meaning sierra.com, tjmaxx.com, marshalls.com, homegoods.com and tkmaxx.com

We determine which stores are included in the comp sales calculation at the beginning of a fiscal year and the classification remains constant throughout that year unless a store is closed permanently or for an extended period during that fiscal year.

Beginning in fiscal 2020, Sierra stores that otherwise fit the comp store definition are included in comp stores in our Marmaxx segment.

Beginning in fiscal 2020, Sierra stores that fit the comp store definition were 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.

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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.

Percentage of Net Sales

Fiscal 2021 Fiscal 2020

Net sales 100.0 % 100.0 %

Cost of sales, including buying and occupancy costs 76.3 71.5

Selling, general and administrative expenses 21.8 17.9

Loss on early extinguishment of debt 1.0 —

Interest expense, net 0.6 —

Income before income taxes *

* Figures may not foot due to rounding.

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.

Open-Only Comp Store Sales

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

Since the second quarter of fiscal 2021, we temporarily reported open-only comp store sales.

Open-only comp store sales includes stores initially classified as comp stores at the beginning of fiscal 2021 that 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 fiscal 2020, prior to the pandemic.

Open-only comp store sales of our foreign segments are calculated by translating the current year using fiscal 2020’s exchange rates.

Revenues by Geography

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

Fiscal 2021 Fiscal 2020

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

Fiscal 2022 Fiscal 2021 Fiscal 2020

United States:

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South (including Puerto Rico) 27 27 25

West 16 16 15

Total United States 79 % 79 % 76 %

Canada 9 9 10

Europe 11 11 13

Australia 1 1 1

Total 100 % 100 %

Total TJX 100 % 100 % 100 %

Impact of Foreign Currency Exchange Rates

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dollars using currency rates in effect at different points in time.

Significant changes in foreign exchange rates between comparable prior periods can result in meaningful variations in net sales, net income 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 assets, liabilities, 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 mark-to-market gain or loss is effectively offset when the inventory being hedged is received and paid for.

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.

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

The mark-to-market adjustment on these derivatives does not affect net sales, but it does affect the cost of sales, operating margins and earnings we report.

Transactional Foreign Exchange

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Cost of Sales, Including Buying and Occupancy Costs

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.

Cost of sales, including buying and occupancy costs, was $34.7 billion, or 71.5% of net sales, $24.5 billion, or 76.3% of net sales, $29.8 billion, or 71.5% of net sales for fiscal 2022, fiscal 2021 and fiscal 2020, respectively.

Fiscal 2022 vs Fiscal 2021

The increase in the total cost of sales, including buying and occupancy costs, was primarily due to the additional cost of merchandise sold due to a higher level of sales in fiscal 2022 compared to fiscal 2021.

Our stores were temporarily closed in the aggregate for approximately 4% of fiscal 2022 and approximately 24% of fiscal 2021.

Merchandise margin improved during fiscal 2022, primarily driven by favorable markdowns, offset by increased freight costs.

In addition, supply chain costs increased due to additional investments in distribution capacity and higher wages, which, along with freight costs, are expected to continue into the next fiscal year.

Cost of sales, including buying and occupancy costs, was favorably impacted by approximately $27 million and $78 million of government programs for fiscal 2022 and fiscal 2021, respectively, in regions where we had temporary store closures.

Fiscal 2022 vs Fiscal 2020

The expense ratio was flat for fiscal 2022 compared to the fiscal 2020.

The ratio reflects the leverage on our occupancy costs due to the strong open-only comp store sales growth.

Within merchandise margin, strong markon and lower markdowns more than offset approximately 200 basis points of incremental freight costs in fiscal 2022.

The occupancy and merchandise margin improvements were offset by higher supply chain costs primarily due to additional investments to expand distribution capacity and higher wage costs.

Selling, General and Administrative Expenses

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.

SG&A expenses were $9.1 billion, or 18.7% of net sales, $7.0 billion, or 21.8% of net sales and $7.5 billion, or 17.9% of net sales for fiscal 2022, fiscal 2021 and fiscal 2020, respectively.

Fiscal 2022 vs Fiscal 2021

The increase in SG&A expense for fiscal 2022 was primarily driven by higher store payroll costs to support a higher sales volume.

In addition to these costs, incentive compensation costs and other variable store costs, such as advertising spend and credit processing fees, were higher in fiscal 2022 as compared to fiscal 2021 .

SG&A expense was favorably impacted by $214 million and $434 million from government programs for fiscal 2022 and fiscal 2021 , respectively, in regions where we had temporary store closures.

Fiscal 2022 vs Fiscal 2020

The expense ratio increased 0.8% for fiscal 2022 compared to fiscal 2020.

The increase was driven by higher store payroll costs, primarily due to incremental COVID-19 related payroll costs.

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.

On June 4, 2021, we completed make-whole calls for our $1.25 billion aggregate principal amount of 3.50% Notes maturing in 2025 and our $750 million aggregate principal amount of 3.75% Notes maturing in 2027.

As a result of these redemptions prior to their scheduled maturities, we recorded a pre-tax debt extinguishment charge of $242 million in the second quarter of fiscal 2022.

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

In fiscal 2021, we completed the issuance and sale of certain of our Notes and used the proceeds to partially fund the purchase of certain Notes, resulting in a pre-tax early extinguishment debt charge of $312 million.

Interest Expense, net

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In millions January 29,

2021 February 1,

2022 January 30,

Interest expense $ 123 $ 199

2 unchanged sentences

Interest expense, net $ 115 $ 181

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

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 interest expense decreased for fiscal 2022 compared to fiscal 2021, primarily due to the prior year’s refinancing of certain notes in December 2020 as well as the $2.75 billion pay down of outstanding debt during fiscal 2022.

Provision (Benefit) for Income Taxes

The effective income tax rate was 25.4%, (1.4)%, and 25.7% for fiscal 2022, fiscal 2021, and fiscal 2020, respectively.

The increase in the fiscal 2022 effective income tax rate was primarily due to the significant increase in profit in fiscal 2022 as compared to the mix of income and losses by jurisdictions in fiscal 2021.

Net Income and Diluted Earnings Per Share

Net income was $0.1 billion in fiscal 2021 compared to $3.3 billion in fiscal 2020.

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

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.

Net income was $3.3 billion, $0.1 billion, and $3.3 billion in fiscal 2022, fiscal 2021, and fiscal 2020, respectively.

Diluted earnings per share in fiscal 2022 were $2.70, which included a second quarter debt extinguishment charge of $0.15, $0.07 in fiscal 2021, which included a debt extinguishment charge of $0.19, and $2.67 in fiscal 2020.

Segment Information

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Our Marmaxx segment (T.J.

Maxx, Marshalls, tjmaxx.com and marshalls.com) and the HomeGoods segment (HomeGoods and Homesense) both operate in the United States.

Maxx, Marshalls, tjmaxx.com and marshalls.com) and our HomeGoods segment (HomeGoods, Homesense and homegoods.com) both operate in the United States.

Our TJX Canada segment operates Winners, HomeSense and Marshalls in Canada, and our TJX International segment operates T.K.

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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.

“Segment profit or loss,” as we define the term, may not be comparable to similarly titled measures used by other companies.

The terms “segment margin” or “segment profit margin” are used to describe segment profit or loss as a percentage of net sales.

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

Due to the temporary closing of 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.

When discussing current year segment results, in addition to comparing to fiscal 2021, we may, where meaningful, also compare these results to a comparable period in fiscal 2020, prior to the emergence of the pandemic.

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

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dollars in millions January 29,

2022 January 30,

2021 February 1,

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Marshalls 1,148 1,131 1,130

Sierra 59 48 46

Total 2,491 2,450 2,449

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Total 55,027 54,418 54,456

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.

Net sales for Marmaxx were $29.5 billion for fiscal 2022, an increase of 52% compared to $19.4 billion for fiscal 2021.

The increase in net sales reflects stores remaining open for all of fiscal 2022.

Stores were closed for approximately 20% of fiscal 2021 as a result of the COVID-19 pandemic.

In addition to stores being open for more days in fiscal 2022, net sales further increased due to higher customer traffic and increased average basket.

Net sales increased 15% compared to $25.7 billion for fiscal 2020.

Open-only comp store sales were up 13% compared to fiscal 2020.

The increase in open-only comp store sales for fiscal 2022 was primarily driven by an increase in average basket.

In addition, customer traffic was up slightly.

While our open-only comp store sales increase in home fashions continued to significantly exceed those of apparel, we had strong open-only comp store sales growth in apparel for fiscal 2022.

During fiscal 2022, we had strong sales at Marmaxx across all geographic regions.

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 2022 vs Fiscal 2021

Segment profit was $3.8 billion for fiscal 2022, an increase of $2.9 billion, compared to a segment profit of $0.9 billion for fiscal 2021.

The increase was primarily driven by increased sales due to stores remaining open for all of fiscal 2022.

Merchandise margin improved primarily due to lower markdowns, partially offset by incremental freight costs.

Fiscal 2021 also benefited $171 million from government programs.

Fiscal 2022 vs Fiscal 2020

Segment profit increased by $0.3 billion compared to a segment profit of $3.5 billion for fiscal 2020, primarily due to the increase in sales.

Segment profit margin decreased to 12.9% for fiscal 2022 compared to 13.5% for fiscal 2020.

The decrease was primarily driven by incremental COVID-19 related store payroll costs and higher supply chain costs, partially offset by leverage on occupancy costs due to the strong open-only comp store sales growth and improved merchandise margin.

Within merchandise margin, strong markon and lower markdowns collectively more than offset incremental freight costs.

Our Marmaxx e-commerce sites, tjmaxx.com and marshalls.com, together with sierra.com, represented less than 3% of Marmaxx’s net sales for fiscal 2022, fiscal 2021 and fiscal 2020 and did not have a significant impact on year-over-year segment margin comparisons.

In fiscal 2023, we expect to open approximately 55 Marmaxx stores and 20 Sierra stores, which would increase selling square footage by approximately 2%.

Fiscal Year Ended

dollars in millions January 29,

2022 January 30,

2021 February 1,

10 unchanged sentences

Total 16,387 15,767 15,516

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.

Net sales for HomeGoods were $9.0 billion for fiscal 2022, an increase of 48%, compared to $6.1 billion for fiscal 2021.

The increase in net sales reflects stores remaining open for all of fiscal 2022.

Stores were temporarily closed for approximately 20% of fiscal 2021 as a result of the COVID-19 pandemic.

In addition to stores being open for more days in fiscal 2022, net sales further increased due to higher customer traffic and increased average basket.

Net sales increased 42% compared to $6.4 billion for fiscal 2020.

Open-only comp store sales were up 32% for fiscal 2022 compared to fiscal 2020.

The increase in open-only comp store sales was driven by an increase in average basket and customer traffic.

During fiscal 2022, we had strong sales at HomeGoods and Homesense across all major categories and geographic regions.

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.

Fiscal 2022 vs Fiscal 2021

Segment profit was $0.9 billion for fiscal 2022, an increase of $0.4 billion, compared to a segment profit of $0.5 billion for fiscal 2021.

The increase was primarily driven by increased sales due to stores remaining open for all of fiscal 2022, partially offset by lower merchandise margin due to increased freight costs.

Fiscal 2021 also benefited $46 million from government programs.

Fiscal 2022 vs Fiscal 2020

Segment profit increased by $0.2 billion compared to a segment profit of $0.7 billion for fiscal 2020, primarily due to the increase in sales.

Segment profit margin decreased to 10.1% for fiscal 2022 compared to 10.7% for fiscal 2020.

The decrease in segment profit margin was primarily driven by higher supply chain costs, lower merchandise margin, and incremental COVID-19 related store payroll costs and higher store wages, partially offset by the expense leverage on our occupancy and administrative costs due to the strong open-only comp store sales growth.

Within merchandise margin, incremental freight costs more than offset strong markon and lower markdowns.

During the third quarter of fiscal 2022, HomeGoods made online shopping available on www.homegoods.com.

In fiscal 2023, we expect to open approximately 60 HomeGoods stores, including 10 Homesense stores, which would increase selling square footage by approximately 7%.

FOREIGN SEGMENTS

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dollars in millions January 29,

2022 January 30,

2021 February 1,

12 unchanged sentences

Total 11,228 10,800 10,540

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.

Net sales for TJX Canada were $4.3 billion for fiscal 2022, an increase of 53% compared to $2.8 billion for fiscal 2021.

The increase in net sales reflected temporary store closures, which were closed for approximately 12% of fiscal 2022 and 29% of fiscal 2021, as a result of the COVID-19 pandemic.

In addition to stores being open for more days in fiscal 2022, net sales further increased due to higher customer traffic and increased average basket.

Net sales for TJX Canada increased 8% compared to $4.0 billion for fiscal 2020.

On a constant currency basis, net sales increased 2% for fiscal 2022.

Open-only comp store sales were up 8% for fiscal 2022 compared to fiscal 2020 and were negatively impacted by significant government-mandated shopping restrictions.

The increase in open-only comp store sales was driven by an increase in average basket, partially offset by reduced customer traffic.

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.

Fiscal 2022 vs Fiscal 2021

Segment profit was $0.5 billion for fiscal 2022, an increase of $0.4 billion, compared to a segment profit of $0.1 billion for fiscal 2021.

The increase for fiscal 2022 was primarily driven by increased sales due to having fewer temporary store closures in fiscal 2022 compared to fiscal 2021.

Within merchandise margin, lower markdowns and higher markon were partially offset by increased freight costs.

Fiscal 2022 also reflected $84 million of government programs compared to $148 million for fiscal 2021.

Fiscal 2022 vs Fiscal 2020

Segment profit decreased $31 million compared to a segment profit of $516 million for fiscal 2020.

Segment profit margin decreased to 11.2% for fiscal 2022 compared to 12.8% for fiscal 2020.

The decrease in segment profit margin was primarily driven by higher supply chain costs and higher store payroll, including incremental COVID-19 related costs, net of government programs.

This was partially offset by improved merchandise margin.

Within merchandise margin, strong markon and lower markdowns collectively more than offset incremental freight costs.

In fiscal 2023, we expect to open approximately 10 stores in Canada, which would increase selling square footage by approximately 1%.

TJX International

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dollars in millions January 29,

2022 January 30,

2021 February 1,

Net sales $ 5,729 $ 3,842 $ 5,665

Segment (loss) profit $ (504) $ 307

Segment profit (loss) $ 161 $ (504) $ 307

Segment margin 2.8 % (13.1) % 5.4 %

Stores in operation at end of period:

Maxx 618 602 594

Homesense 77 78 78

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Total 14,736 14,382 14,136

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.

Net sales for TJX International were $5.7 billion for fiscal 2022, an increase of 49% compared to $3.8 billion for fiscal 2021.

The increase in net sales reflected temporary store closures, which were closed for approximately 19% of fiscal 2022 and 36% of fiscal 2021, as a result of the COVID-19 pandemic.

In addition to stores being open for more days in fiscal 2022, net sales further increased due to higher customer traffic and increased average basket.

Net sales for TJX International increased 1% compared to $5.7 billion for fiscal 2020.

On a constant currency basis, net sales decreased 5% for fiscal 2022 compared to fiscal 2020.

Open-only comp store sales were up 6% for fiscal 2022 compared to fiscal 2020 and were negatively impacted by significant government-mandated shopping restrictions.

The increase in open-only comp store sales was driven by an increase in average basket, partially offset by reduced customer traffic.

E-commerce sales at tkmaxx.com represented less than 6% of TJX International’s net sales for fiscal 2022, fiscal 2021, and fiscal 2020, respectively.

Segment Profit/(Loss)

Fiscal 2022 vs Fiscal 2021

Segment profit was $0.2 billion for fiscal 2022, an increase of $0.7 billion, compared to a segment loss of $(0.5) billion for fiscal 2021.

The increase for fiscal 2022 was primarily driven by increased sales due to having fewer temporary store closures in fiscal 2022 compared to fiscal 2021.

The increase in segment profit includes improved merchandise margin primarily due to lower markdowns.

Fiscal 2022 also reflected $157 million of government programs compared to $140 million for fiscal 2021.

Fiscal 2022 vs Fiscal 2020

Segment profit decreased $0.1 billion compared to a segment profit of $0.3 billion for fiscal 2020.

Segment profit margin decreased to 2.8% for fiscal 2022 compared to 5.4% for fiscal 2020.

The decrease in segment profit was primarily driven by incremental store payroll, higher supply chain costs and reduced merchandise margin.

Within merchandise margin, increased freight expense was partially offset by lower markdowns.

Segment profit was favorably impacted by the government programs received in fiscal 2022.

In fiscal 2023, we expect to open approximately 15 stores in Europe and approximately 10 stores in Australia, which would increase selling square footage by approximately 3%.

GENERAL CORPORATE EXPENSE

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In millions January 29,

2021 February 1,

2022 January 30,

General corporate expense $ 611 $ 439

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

The increase in general corporate expense for fiscal 2022 was primarily driven by higher share-based and incentive compensation costs.

ANALYSIS OF FINANCIAL CONDITION

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As of January 29, 2022, 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.

We believe our existing cash and cash equivalents, internally generated funds and our credit facilities, under which facilities we have $1.5 billion available as of the period ended January 29, 2022, as described in Note J—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements, are adequate to meet our operating needs for the foreseeable future.

As of January 29, 2022, we held $6.2 billion in cash.

Approximately $1.4 billion of our cash was held by our foreign subsidiaries with $0.6 billion 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 January 30, 2021.

We have 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 January 29, 2022.

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.

We monitor debt financing markets on an ongoing basis and from time to time may incur additional long-term indebtedness depending on prevailing market conditions, liquidity requirements, existing economic conditions and other factors.

During fiscal 2022 we have used, and in the future we may use, operating cash flow and cash on hand to repay portions of our indebtedness, depending on prevailing market conditions, liquidity requirements, existing economic conditions, contractual restrictions and other factors.

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.

Operating Activities

Net cash provided by operating activities was $3.1 billion in fiscal 2022 and $4.6 billion in fiscal 2021.

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.

Our operating cash flows decreased by $1.5 billion compared to fiscal 2021 due to the $4.7 billion change in merchandise inventories net of accounts payable, driven by rebuilding inventory levels in fiscal 2022 as well as the timing of merchandise payments in fiscal 2021.

In addition, operating cash flows were negatively impacted by the $0.3 billion decrease in net operating lease liabilities due to the repayment of many of the rent deferrals negotiated in fiscal 2021.

The decrease in operating cash flows was partially offset by a $3.2 billion increase in net income.

Temporary store closures in fiscal 2021 resulted in net income of $0.1 billion in fiscal 2021 compared to net income of $3.3 billion in fiscal 2022.

Investing Activities

Net cash used in investing activities resulted in net cash outflows of $1.0 billion in fiscal 2022 and $0.6 billion in fiscal 2021.

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.

The cash outflows for both periods were primarily driven by capital expenditures and were lower in fiscal 2021 due to the COVID-19 pandemic.

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

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In millions January 29,

2021 February 1,

2022 January 30,

New stores $ 79 $ 61

3 unchanged sentences

$ 1,045 $ 568

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 expect our capital expenditures in fiscal 2023 will be in the range of approximately $1.7 billion to $1.9 billion, including approximat ely $1.0 billion to $1.1 billion for our offices and distribution centers (including buying and merchandising systems and other information systems) to support growth, approximately $0.5 billion to $0.6 billion for store renovations and approximately $0.2 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 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.

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 both fiscal 2021 and fiscal 2020.

Net cash used in financing activities resulted in net cash outflows of $6.2 billion in fiscal 2022 compared to net cash inflows of $3.2 billion in fiscal 2021.

In fiscal 2022, the cash outflows were primarily driven by debt repayments, equity repurchases and dividend payments.

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

The cash outflows in fiscal 2022 were due to the completion of make-whole calls and the redemption at par of certain of our notes.

The notes redeemed via make-whole calls were issued in the first quarter of fiscal 2021 in response to the COVID-19 pandemic.

As a result of these redemptions prior to their scheduled maturities, we recorded a pre-tax debt extinguishment charge of $242 million in fiscal 2022.

Additionally, in fiscal 2022 we redeemed at par $750 million principal outstanding, 2.75% Notes due June 15, 2021.

The result of these debt redemptions resulted in a $2.75 billion reduction of outstanding debt since the beginning of fiscal 2022 and will result in more than $90 million of annualized interest expense savings.

The cash inflows in fiscal 2021 were a result of completing the issuance and sale of $4 billion aggregate principal amount of notes.

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

In fiscal 2022, we lifted the temporary suspension of our repurchase program and we paid $2.2 billion to repurchase and retire 31.3 million shares of our stock on a settlement basis under our previously authorized stock repurchase programs.

Prior to the temporary suspension of our share repurchase program, we paid $0.2 billion to repurchase and retire 3.4 million shares on a settlement basis in fiscal 2021.

These outflows for both periods were partially offset by proceeds from the exercise of employee stock options, net of shares withheld for taxes, of $0.2 billion in both fiscal 2022 and fiscal 2021.

In January 2022, the Board of Directors approved a new stock repurchase program that authorizes the repurchase of up to an additional $3.0 billion of our common stock from time to time.

We currently plan to repurchase approximately $2.25 billion to $2.5 billion of stock under our stock repurchase programs in fiscal 2023.

We determine the timing and amount of repurchases based on our assessment of various factors including excess cash flow, liquidity, economic and market conditions, our assessment of prospects for our business, legal requirements, and other factors.

The timing and amount of these purchases may change.

As of January 29, 2022, approximately $3.8 billion remained available under our existing stock repurchase programs.

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

We declared quarterly dividends on our common stock of $0.26 per share for each of the quarters in fiscal 2022 which totaled $1.04 per share in fiscal 2022.

As a result of the uncertainty surrounding the COVID-19 pandemic, no dividends were declared in the first nine months of fiscal 2021.

Cash payments for dividends on our common stock totaled $1.3 billion for fiscal 2022 and $0.3 billion for fiscal 2021.

We expect to pay quarterly dividends for fiscal 2023 of $0.295 per share, or an annual dividend of $1.18 per share, subject to the declaration and approval by our Board of Directors.

This would represent a 13% increase over the per share dividends declared and paid in fiscal 2022.

Contractual Obligations

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

In millions Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years

Long-term debt and other long-term obligations (a)

$ 7,510 $ 918 $ 808 $ 1,518 $ 4,266

Operating lease liabilities, including imputed interest (b)

10,277 2,050 3,300 2,419 2,508

Purchase obligations (c)

5,019 4,785 232 2 —

Total obligations $ 22,806 $ 7,753 $ 4,340 $ 3,939 $ 6,774

(a) Includes estimated interest costs.

(b) Operating lease liabilities exclude legally binding minimum lease payments for leases signed but not yet commenced and include options to extend lease terms that are now deemed reasonably certain of being exercised according to our Lease Accounting Policy.

See the descriptions of our financing arrangements, commitments and contingencies, and contractual obligations outlined below and within the following Notes to Consolidated Financial Statements.

– See Note J—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements for future payments under long-term debt arrangements (including current installments).

– See Note L—Leases of Notes to Consolidated Financial Statements.

Operating lease liabilities exclude legally binding minimum lease payments for approximately 170 leases signed but not yet commenced and include options to extend lease terms that are now deemed reasonably certain of being exercised according to our Lease Accounting Policy.

The balances do not include variable costs for insurance, real estate taxes, other operating expenses and, in some cases, rentals based on a percentage of sales;

these items totaled approximately one-third of the total minimum rent for fiscal 2022.

(c) Includes estimated obligations under purchase orders for merchandise and under agreements for capital items, products and services used in our business, including executive employment and other agreements.

Excludes agreements that can be canceled without penalty.

We also have long-term liabilities for which it is not reasonably possible for us to predict when they may be paid which include $680 million for employee compensation and benefits and $264 million for uncertain tax positions.

CRITICAL ACCOUNTING POLICIES

– See Note M—Accrued Expenses and Other Liabilities, Current and Long Term of Notes to Consolidated Financial Statements for long-term liabilities for which it is not reasonably possible for us to predict when they may be paid, which includes $0.6 billion for employee compensation and benefits and $0.3 billion for uncertain tax positions.

– We also have non-cancellable purchase obligations under purchase orders for merchandise and under agreements for capital items, products and services used in our business, including executive employment and other agreements.

CRITICAL ACCOUNTING ESTIMATES

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.

We consider our most critical accounting policies, involving management estimates and judgments, to be those relating to the areas described below.

We consider our most critical accounting estimates, involving uncertainty requiring management estimates and judgments, to be those relating to the areas described below.

Inventory Valuation

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Under the retail method, permanent markdowns are reflected in inventory valuation when the price of an item is reduced.

Typically, a significant area of judgment in the retail method is the amount and timing of permanent markdowns.

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, however we take a full physical inventory near the fiscal year end to determine shrinkage at year end.

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;

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

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

Operating leases are included in “Operating lease right of use assets”, “Current portion of operating lease liabilities”, and “Long-term operating lease liabilities” on our Consolidated Balance Sheets.

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, 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.

The majority of our leases are retail store locations and the possession date is typically 30 to 60 days prior to the opening of the store and generally occurs before the commencement of the lease term, as specified in the lease.

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 TJX Canada leases.

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

Our lease terms include options to extend the lease when it is reasonably certain that we will exercise that option.

Lease expense for lease payments is recognized on a straight-line basis over the lease term within “Cost of sales, including buying and occupancy costs”.

Reserves for Uncertain Tax Positions

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Loss Contingencies

Certain conditions may exist as of the date the financial statements are issued that may result in a loss to us but will not be resolved until one or more future events occur or fail to occur.

Certain conditions may exist as of the date the consolidated financial statements are issued that may result in a loss to us but will not be resolved until one or more future events occur or fail to occur.

Our management, with the assistance of our legal counsel, assesses such contingent liabilities.

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In assessing loss contingencies related to legal proceedings that are pending against us or claims that may result in such proceedings, our legal counsel assists us in evaluating the perceived merits of any legal proceedings or claims as well as the perceived merits of the relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be reasonably estimated, we will accrue for the estimated liability in the financial statements.

If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be reasonably estimated, we will disclose the nature of the contingent liability, together with an estimate of the range of the possible loss or a statement that such loss is not reasonably estimable.

RECENT ACCOUNTING PRONOUNCEMENTS

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.

For a discussion of any new accounting pronouncements, 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.

We do not expect any recently issued accounting pronouncements will have a material effect on our consolidated 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