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Item 7. Management’s Discussion and Analysis

2023-03-29 compared with 2022-03-30 · 147 added, 246 removed, 230 unchanged (63% 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 29, 2022 (fiscal 2022), January 30, 2021 (fiscal 2021), February 1, 2020 (fiscal 2020) and January 28, 2023 (fiscal 2023).

The discussion that follows relates to our 52-week fiscal years ended January 28, 2023 (fiscal 2023) and January 29, 2022 (fiscal 2022) and our 53-week fiscal year ended February 3, 2024 (fiscal 2024).

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

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We do this by selling a rapidly changing assortment of apparel, home fashions and other merchandise at prices generally 20% to 60% below full-price retailers’ (including department, specialty, and major online retailers) regular prices on comparable merchandise, every day through our stores and five distinctive branded e-commerce sites.

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

We operate over 4,800 stores through our four main segments:

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

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Maxx in Australia).

In addition to our four main segments, Sierra operates sierra.com and retail stores in the U.S.

In addition to our four main segments, Sierra operates retail stores and sierra.com in the U.S.

The results of Sierra are included in the Marmaxx segment.

RESULTS OF OPERATIONS

Matters Affecting Comparability

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 2023 include the following:

– 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.

– Net sales increased 3% to $49.9 billion for fiscal 2023 versus $48.5 billion for fiscal 2022.

As of January 28, 2023, both the number of stores in operation and selling square footage increased approximately 3% compared to the end of fiscal 2022.

comp store sales were flat in fiscal 2023.

open-only comp store sales increased 17% for fiscal 2022.

See Net Sales below for definitions of both U.S.

comp store sales and U.S.

open-only comp store sales.

– Net sales increased 13% for TJX Canada and increased 8% for TJX International in fiscal 2023.

On a constant currency basis, net sales increased 18% for TJX Canada and increased 22% for TJX International.

– Diluted earnings per share were $2.97 for fiscal 2023, which included a $0.14 net of tax charge related to the write-down and the divestiture of our minority investment in Familia, compared to $2.70 for fiscal 2022, which included a debt extinguishment charge of $0.15 per share.

– Pre-tax margin (the ratio of pre-tax income to net sales) for fiscal 2023 was 9.3%, which included a 0.4 percentage point charge related to the write-down of our minority investment in Familia.

This was a 0.2 percentage point increase compared to 9.1% for fiscal 2022, which included a 0.5 percentage point debt extinguishment charge.

– Our cost of sales, including buying and occupancy costs, ratio for fiscal 2023 was 72.4%, a 0.9 percentage point increase compared to 71.5% for fiscal 2022.

– Our selling, general and administrative (“SG&A”) expense ratio for fiscal 2023 was 17.9%, a 0.8 percentage point decrease compared to 18.7% for fiscal 2022.

– 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 1% on a reported basis and up 2% on a constant currency basis at the end of fiscal 2023 as compared to the prior year.

– During fiscal 2023, we returned $3.6 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.

A dividend of $0.295 per share was declared in the fourth quarter of fiscal 2023 and paid in March 2023.

Operating Results as a Percentage of Net Sales

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Percentage of Net Sales

Fiscal 2022 Fiscal 2021 Fiscal 2020

Fiscal 2023 Fiscal 2022

Net sales 100.0 % 100.0 %

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Selling, general and administrative expenses 17.9 18.7

Impairment on equity investment 0.4 —

Loss on early extinguishment of debt — 0.5

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Income before income taxes *

9.1 % 0.3 % 10.6 %

* Figures may not foot due to rounding.

Recent Events and Trends

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.

Net sales for fiscal 2023 totaled $49.9 billion, a 3% increase versus net sales of $48.5 billion for fiscal 2022.

The increase includes a 5% increase in non-comp store sales, partially offset by a 2% negative impact from foreign currency exchange rates.

The non-comp store sales increase reflects a fully open store base for fiscal 2023 compared to temporary store closures in fiscal 2022.

Net sales from our e-commerce sites combined amounted to less than 3% of total sales for each of fiscal 2023 and fiscal 2022.

For fiscal 2023, we returned to our historical definition of comparable store sales (as defined below).

While stores in the U.S.

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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.

We calculated comp sales on a 52-week basis by comparing the current and prior year weekly periods that are most closely aligned.

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

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

comparable store sales (“U.S.

comp store sales”), and are calculated against sales for the comparable periods in fiscal 2022.

We expect all geographies to return to the historical definition of comparable store sales in fiscal 2024.

comp store sales were flat for fiscal 2023 compared to a 17% U.S.

open-only comp store sales (as defined below) increase for fiscal 2022.

comp store sales for fiscal 2023 reflect an increase in average basket driven by higher average ticket offset by a decrease in customer traffic.

Strong apparel sales offset a decline in home fashions sales for fiscal 2023.

As of January 28, 2023, our store count increased 3% and selling square footage increased 3% compared to the same period last year.

Definition of Comparable Store Sales

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

Relocated stores and stores that have changed in size are generally classified in the same way as the original store, and we believe that the impact of these stores on the consolidated comp percentage is immaterial.

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

– New stores - stores that have not yet met the comp sales criteria, which represents a substantial majority of non-comp sales

Sales excluded from comp store sales (“non-comp store sales”) consist of sales from:

– New stores - stores that have not yet met the comp store sales criteria, which represents a substantial majority of non-comp store sales

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

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

– Sales from our e-commerce sites

We determine which stores are included in the comp store 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.

Comp store sales of our foreign segments are calculated by translating the current year’s comp store 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 that of other retail companies.

Comp store sales may be referred to as “same store” sales by other retail companies.

The method for calculating comp store sales varies across the retail industry, therefore our measure of comp store sales may not be comparable to that of other retail companies.

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.

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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.

Due to the temporary closing of stores as a result of the COVID-19 pandemic, our historical definition of comp store sales was not applicable for fiscal 2022.

In order to provide a performance indicator for its stores, during fiscal 2022, we temporarily reported open-only comp store sales.

Open-only comp store sales included stores initially classified as comp stores at the beginning of fiscal 2021.

This measure reported the sales increase or decrease of these stores for the days the stores were open in fiscal 2022 against sales for the same days in fiscal 2020, prior to the emergence of the global pandemic.

open-only comp store sales reports the open-only comp store sales for our Marmaxx and HomeGoods segments.

Revenues by Geography

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

Fiscal 2022 Fiscal 2021 Fiscal 2020

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

Fiscal 2023 Fiscal 2022

United States:

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South (including Puerto Rico) 27 27

West 16 16 15

Total United States 77 % 79 %

Canada 9 9 10

Europe 11 11 13

Australia 1 1

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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.

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, which is referred to as “transactional foreign exchange,” and also described below.

Translation Foreign Exchange

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Cost of Sales, Including Buying and Occupancy Costs

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, as a percentage of net sales was 72.4% for fiscal 2023, an increase of 0.9 percentage points over 71.5% of net sales for fiscal 2022.

The increase in the total cost of sales, including buying and occupancy costs, was primarily attributable to lower merchandise margin and investments in supply chain.

Merchandise margin reflected approximately 1.2 percentage points of incremental freight costs as well as higher markdowns and shrink expense, partially offset by strong markon.

Cost of sales, including buying and occupancy costs, was favorably impacted by approximately $9 million and $27 million of government programs for fiscal 2023 and fiscal 2022, 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 $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 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.

SG&A expenses, as a percentage of net sales, were 17.9% for fiscal 2023, a decrease of 0.8 percentage points over 18.7% for fiscal 2022.

The decrease in SG&A ratio for fiscal 2023 was primarily driven by store payroll due to a reduction of COVID-related costs and lower share-based and incentive compensation costs, partially offset by higher store wages.

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

Impairment on Equity Investment

During fiscal 2023, we announced and completed the divestiture of our minority investment in Familia.

As a result, we recorded an impairment charge of $218 million in the first quarter of fiscal 2023 representing the entire carrying value of the investment.

Additionally, we realized a $54 million tax benefit when we completed the divestiture of this investment during the third quarter of fiscal 2023.

Interest Expense, net

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Interest expense, net $ 6 $ 115

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 interest expense decreased for fiscal 2023 compared to fiscal 2022, primarily due to an increase in interest income, due to an increase in prevailing rates, as well as the $2.75 billion pay down of outstanding debt during fiscal 2022.

Provision for Income Taxes

In August 2022, the Inflation Reduction Act of 2022 (“IRA”), was signed into law.

Among other things, the IRA imposes a 15% corporate alternative minimum tax (the “Corporate AMT”) for tax years beginning after December 31, 2022 and levies a 1% excise tax on net stock repurchases after December 31, 2022.

The excise tax on the net repurchase portion of the IRA did not have an impact on our results of operations or financial position in fiscal 2023 and we do not expect the Corporate AMT, excise tax, or other provisions of the IRA to have a material impact on our consolidated financial statements.

The effective income tax rate was 24.5% for fiscal 2023 compared to 25.4% for fiscal 2022.

The decrease in the fiscal 2023 effective income tax rate was primarily due to the lapse of statutes of limitations and resolution of various tax matters, and the change of jurisdictional mix of profits and losses, partially offset by a reduction of excess tax benefits from share-based compensation.

Net Income and Diluted Earnings Per Share

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.

Net income was $3.5 billion in fiscal 2023 compared to $3.3 billion in fiscal 2022.

Diluted earnings per share in fiscal 2023 were $2.97 compared to $2.70 in fiscal 2022.

The $218 million impairment on our previously-held minority investment in Familia, net of the $54 million tax benefit, had a $0.14 negative impact on earnings per share for fiscal 2023.

Foreign currency had a $0.06 negative impact on earnings per share in fiscal 2023 compared to a neutral impact on earnings per share in fiscal 2022.

A $242 million debt extinguishment charge in fiscal 2022 had a $0.15 negative impact on earnings per share for fiscal 2022.

Segment Information

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Maxx in Australia.

In addition to our four main segments, Sierra operates sierra.com and retail stores in the U.S.

In addition to our four main segments, Sierra operates retail stores and sierra.com in the U.S.

The results of Sierra are included in the Marmaxx segment.

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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.

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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2023 January 29,

2021 February 1,

Net sales $ 30,545 $ 29,483

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Segment margin 12.7 % 12.9 %

Comp store sales (a)

Stores in operation at end of period:

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Marshalls 1,183 1,148

Sierra 59 48 46

Total 2,560 2,491

Selling square footage at end of period (in thousands):

Maxx 27,887 27,707 27,781

Selling square footage at end of period (in millions):

Marshalls 27 26

Sierra 960 796 766

Total 55,027 54,418 54,456

(a) Comp store sales reported for fiscal 2023 and open-only comp store sales reported for fiscal 2022.

Net sales for Marmaxx were $30.5 billion for fiscal 2023, an increase of 4% compared to $29.5 billion for fiscal 2022.

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

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%.

The increase in net sales reflects a 3% increase from comp store sales and a 1% increase from non-comp store sales.

Comp sales growth at Marmaxx was primarily attributable to an increase in average basket driven by higher average ticket.

For fiscal 2023, positive apparel sales outperformed a decline in home fashion sales.

All geographies generally performed in line with the overall comp store sales increase.

Segment Profit Margin

Segment profit margin decreased to 12.7% for fiscal 2023 compared to a segment profit margin of 12.9% for fiscal 2022.

The decrease in segment profit margin was driven by lower merchandise margin and higher store wages, partially offset by store payroll reflecting lower COVID-related expenses.

Within merchandise margin, incremental freight costs, higher markdowns and shrink expense were partially offset by strong markon.

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 2023 and fiscal 2022 and did not have a significant impact on year-over-year segment margin comparisons.

In fiscal 2024, we expect to add approximately 45 Marmaxx net new stores and 18 new Sierra stores, which would increase selling square footage by approximately 2%.

Fiscal Year Ended

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2023 January 29,

2021 February 1,

Net sales $ 8,264 $ 8,995

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Segment margin 6.3 % 10.1 %

Comp store sales (a)

Stores in operation at end of period:

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Total 940 889

Selling square footage at end of period (in thousands):

Selling square footage at end of period (in millions):

HomeGoods 16 15

Homesense 1 1

Total 16,387 15,767 15,516

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

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%.

(a) Comp store sales reported for fiscal 2023 and open-only comp store sales reported for fiscal 2022.

Net sales for HomeGoods were $8.3 billion for fiscal 2023, a decrease of 8%, compared to $9.0 billion for fiscal 2022.

The decrease in net sales reflects an 11% decrease from comp store sales, partially offset by a 3% increase from non-comp store sales.

Comp store sales decline for HomeGoods for fiscal 2023 reflected a decrease in customer traffic, partially offset by an increase in average basket driven by higher average ticket.

All geographies performed in line with the overall comp store sales decline.

Segment Profit Margin

Segment profit margin decreased to 6.3% for fiscal 2023 compared to a segment profit margin of 10.1% for fiscal 2022.

The decrease in segment profit margin for fiscal 2023 was driven by deleverage on lower comp store sales, primarily in occupancy and administrative costs, lower merchandise margin and higher store and distribution wages, partially offset by store payroll reflecting lower COVID-related expenses.

Merchandise margin included incremental freight costs of approximately 3 percentage points as well as higher markdowns, partially offset by strong markon.

Our HomeGoods e-commerce site, homegoods.com, represented less than 1% of HomeGoods net sales for fiscal 2023 and fiscal 2022, and did not have a significant impact on year-over-year segment margin comparisons.

In fiscal 2024, we expect to add up to approximately 50 HomeGoods stores, of which 18 are Homesense stores.

This would increase selling square footage by approximately 6%.

FOREIGN SEGMENTS

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2023 January 29,

2021 February 1,

Net sales $ 4,912 $ 4,343

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Total 554 546

Selling square footage at end of period (in thousands):

Winners 6,300 6,015 5,986

Selling square footage at end of period (in millions):

HomeSense 3 3

Marshalls 2 2

Total 11,228 10,800 10,540

Net sales for TJX Canada were $4.9 billion for fiscal 2023, an increase of 13% compared to $4.3 billion for fiscal 2022.

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

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%.

The increase in net sales reflected having a fully open store base for fiscal 2023, compared to temporary store closures in fiscal 2022, as a result of the COVID-19 pandemic.

Within net sales, an increase in average basket driven by higher average ticket was partially offset by the negative foreign currency exchange rate impact of 5% for fiscal 2023.

Segment Profit Margin

Segment profit margin increased to 14.0% for fiscal 2023 compared to a segment profit margin of 11.2% for fiscal 2022.

The increase for fiscal 2023 was primarily driven by leverage on increased sales, primarily in occupancy and administrative costs, and higher merchandise margin as well as lower store payroll reflecting lower COVID-related expenses, and lower incentive compensation costs.

Merchandise margin reflects strong markon partially offset by incremental freight costs for fiscal 2023.

In fiscal 2024, we expect to add approximately 11 stores in Canada, which would increase selling square footage by approximately 2%.

TJX International

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2023 January 29,

2021 February 1,

Net sales $ 6,215 $ 5,729

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

Segment profit $ 347 $ 161

Segment margin 5.6 % 2.8 %

Stores in operation at end of period:

Maxx 618 602 594

Homesense 78 77

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Total 781 763

Selling square footage at end of period (in thousands):

Maxx 12,412 12,131 11,997

Selling square footage at end of period (in millions):

Homesense 1 1

Maxx Australia 1 1

Total 14,736 14,382 14,136

Net sales for TJX International were $6.2 billion for fiscal 2023, an increase of 8% compared to $5.7 billion for fiscal 2022.

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%.

The increase in net sales reflects having a fully open store base, compared to temporary store closures in fiscal 2022 as a result of the COVID-19 pandemic, which was partially offset by the negative foreign currency exchange rate impact of 14%.

E-commerce sales at tkmaxx.com were approximately 3% and 5% of TJX International’s net sales for fiscal 2023 and fiscal 2022, respectively.

Segment Profit Margin

Segment profit margin increased to 5.6% for fiscal 2023 compared to a segment profit margin of 2.8% for fiscal 2022.

This increase was primarily driven by leverage on increased sales, primarily in occupancy and administrative costs as well as higher merchandise margin, lower COVID-related expenses in stores and distribution centers and lower incentive compensation costs.

Within merchandise margin, strong markon was partially offset by incremental freight costs and higher markdowns.

Fiscal 2022 also reflected $157 million from government programs received in regions where we had temporary store closures.

In fiscal 2024, we expect to add approximately 18 net new stores in Europe and approximately 6 net new stores in Australia, which would increase selling square footage by approximately 2%.

GENERAL CORPORATE EXPENSE

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General corporate expenses are primarily included in SG&A expenses.

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

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

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

The decrease in general corporate expense for fiscal 2023 was primarily driven by lower share-based and incentive compensation costs, timing of funding to TJX’s charitable foundations partially offset by the mark-to-market adjustment on fuel and inventory derivatives.

ANALYSIS OF FINANCIAL CONDITION

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As of January 28, 2023, there were no short-term bank borrowings or commercial paper outstanding.

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.

We believe our existing cash and cash equivalents, internally generated funds and our credit facilities, under which facilities we had $1.5 billion available as of the period ended January 28, 2023, 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 28, 2023, we held $5.5 billion in cash.

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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.

In fiscal 2024, we intend to use and in the future we may continue to 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.

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Net cash provided by operating activities was $4.1 billion in fiscal 2023 and $3.1 billion in fiscal 2022.

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.

Our operating cash flows increased by $1 billion compared to fiscal 2022 primarily due to the $1.5 billion change in merchandise inventories net of accounts payable.

The change in inventory was primarily driven by the fiscal 2022 rebuilding of inventory levels.

The increase in operating cash flows was partially offset by a $0.7 billion decrease in accrued expenses, the largest component of which was lower incentive compensation costs.

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 were lower in fiscal 2021 due to the COVID-19 pandemic.

Investing activities resulted in net cash outflows of $1.5 billion in fiscal 2023 and $1 billion in fiscal 2022.

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

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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$ 1,457 $ 1,045

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 expect our capital expenditures in fiscal 2024 will be in the range of approximately $1.7 billion to $1.9 billion, including approximat ely $0.9 billion to $1 billion for our offices and distribution centers (including buying and merchandising systems and other information systems) to support growth, approximately $0.6 billion to $0.7 billion for store renovations and approximatel y $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 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.

Net cash used in financing activities resulted in net cash outflows of $3.3 billion in fiscal 2023 compared to net cash outflows of $6.2 billion in fiscal 2022.

In fiscal 2023 the cash outflows were primarily driven by equity repurchases and dividend payments.

In fiscal 2022 the cash outflows were primarily driven by equity repurchases, dividend payments and $3 billion of debt repayments.

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.

Our 2.50% ten-year Notes due May 2023 will mature during the second quarter of fiscal 2024 and are included within our current maturities of long-term debt.

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.

Under our stock repurchase program, we paid $2.3 billion to repurchase and retire 34.9 million shares of our stock on a settlement basis in fiscal 2023.

We paid $2.2 billion to repurchase and retire 31.3 million shares of our stock on a settlement basis in fiscal 2022.

These outflows for both periods were partially offset by proceeds from the exercise of employee stock options of $0.3 billion in fiscal 2023 and $0.2 billion in fiscal 2022.

In February 2023, the Board of Directors announced a new stock repurchase program that authorizes the repurchase of up to an additional $2 billion of our common stock from time to time.

We currently plan to repurchase approximately $2 billion to $2.5 billion of stock under our stock repurchase programs in fiscal 2024.

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

The Inflation Reduction Act of 2022, which became law in August 2022, levies a 1% excise tax on net stock repurchases after December 31, 2022.

Historically, during the year we have made discretionary share repurchases.

Beginning on January 1, 2023, these purchases are subject to the excise tax.

The excise tax on the net stock repurchase portion of the IRA did not have an impact on our results of operations or financial position in fiscal 2023, and based on historical net repurchase activity, we do not expect it to have a material impact in future years.

See Note K—Income Taxes of Notes to Consolidated Financial Statements for additional information.

We declared quarterly dividends on our common stock of $0.295 per share for each of the quarters in fiscal 2023 which totaled $1.18 per share in fiscal 2023.

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 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.

Cash payments for dividends on our common stock totaled $1.3 billion for both fiscal 2023 and fiscal 2022.

We expect to pay quarterly dividends for fiscal 2024 of $0.3325 per share, or an annual dividend of $1.33 per share, subject to the declaration and approval by our Board of Directors.

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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