TJX COMPANIES INC /DE/
10-Qs and 10-Ks
PROXIES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
10-Q
(mark one)
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||
For the quarterly period ended
April 30, 2022
OR
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||
For the transition period from
to
Commission file number
1-4908
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
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| (Address of principal executive offices) | (Zip Code) | |||||||
(
508
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390-1000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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☒ | Accelerated filer | ☐ | |||||||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company |
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| Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES
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NO
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The number of shares of registrant’s common stock outstanding as of May 20, 2022:
1,171,635,933
The TJX Companies, Inc.
TABLE OF CONTENTS
2
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
THE TJX COMPANIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
IN THOUSANDS EXCEPT PER SHARE AMOUNTS
| Thirteen Weeks Ended | ||||||||
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April 30,
2022 |
May 1,
2021 |
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| Net sales | $ |
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$ |
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| Cost of sales, including buying and occupancy costs |
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| Selling, general and administrative expenses |
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| Impairment on equity investment |
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| Interest expense, net |
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| Income before income taxes |
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| Provision for income taxes |
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Net income
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$ |
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$ |
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Basic earnings per share
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$ |
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$ |
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| Weighted average common shares – basic |
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Diluted earnings per share
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$ |
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$ |
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| Weighted average common shares – diluted |
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The accompanying notes are an integral part of the unaudited consolidated financial statements.
3
THE TJX COMPANIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
IN THOUSANDS
| Thirteen Weeks Ended | ||||||||
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April 30,
2022 |
May 1,
2021 |
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| Net income | $ |
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$ |
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| Additions to other comprehensive (loss) income: | ||||||||
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Foreign currency translation adjustments, net of related tax benefit of $
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(
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| Reclassifications from other comprehensive (loss) income to net income: | ||||||||
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Amortization of prior service cost and deferred gains/losses, net of related tax provisions of $
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Amortization of loss on cash flow hedge, net of related tax provision of $
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(
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| Other comprehensive (loss) income, net of tax |
(
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| Total comprehensive income | $ |
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$ |
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||||
The accompanying notes are an integral part of the unaudited consolidated financial statements.
4
THE TJX COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
IN THOUSANDS, EXCEPT SHARE DATA
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April 30,
2022 |
January 29,
2022 |
May 1,
2021 |
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| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ |
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$ |
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$ |
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| Accounts receivable, net |
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| Merchandise inventories |
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| Prepaid expenses and other current assets |
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| Federal, state and foreign income taxes recoverable |
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| Total current assets |
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| Net property at cost |
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| Non-current deferred income taxes, net |
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| Operating lease right of use assets |
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| Goodwill |
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| Other assets |
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| Total Assets | $ |
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$ |
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$ |
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| Liabilities | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ |
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$ |
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$ |
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| Accrued expenses and other current liabilities |
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| Current portion of operating lease liabilities |
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| Federal, state and foreign income taxes payable |
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| Total current liabilities |
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| Other long-term liabilities |
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| Non-current deferred income taxes, net |
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| Long-term operating lease liabilities |
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| Long-term debt |
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Commitments and contingencies (See Note K)
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| Shareholders’ equity | |||||||||||
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Preferred stock, authorized
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Common stock, authorized
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| Additional paid-in capital |
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| Accumulated other comprehensive loss |
(
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(
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(
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| Retained earnings |
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| Total shareholders’ equity |
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| Total liabilities and shareholders’ equity | $ |
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$ |
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$ |
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The accompanying notes are an integral part of the unaudited consolidated financial statements.
5
THE TJX COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
IN THOUSANDS
| Thirteen Weeks Ended | ||||||||
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April 30,
2022 |
May 1,
2021 |
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| Cash flows from operating activities: | ||||||||
| Net income | $ |
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$ |
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| Adjustments to reconcile net income to cash (used in) operating activities: | ||||||||
| Depreciation and amortization |
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| Impairment on equity investment |
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| Loss on property disposals and impairment charges |
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| Deferred income tax provision (benefit) |
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(
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| Share-based compensation |
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| Changes in assets and liabilities: | ||||||||
| (Increase) in accounts receivable |
(
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(
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| (Increase) in merchandise inventories |
(
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(
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| Decrease (increase) in income taxes recoverable |
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(
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| (Increase) decrease in prepaid expenses and other current assets |
(
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| (Decrease) in accounts payable |
(
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(
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| (Decrease) increase in accrued expenses and other liabilities |
(
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| Increase in income taxes payable |
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| (Decrease) in net operating lease liabilities |
(
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(
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| Other, net |
(
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(
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| Net cash (used in) operating activities |
(
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(
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| Cash flows from investing activities: | ||||||||
| Property additions |
(
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(
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| Purchases of investments |
(
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(
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| Sales and maturities of investments |
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| Net cash (used in) investing activities |
(
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(
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| Cash flows from financing activities: | ||||||||
| Payments on debt |
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(
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| Payments for repurchase of common stock |
(
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| Cash dividends paid |
(
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(
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| Proceeds from issuance of common stock |
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| Payments of employee tax withholdings for performance based stock awards |
(
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(
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| Net cash (used in) financing activities |
(
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(
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| Effect of exchange rate changes on cash |
(
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| Net (decrease) in cash and cash equivalents |
(
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(
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| Cash and cash equivalents at beginning of year |
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| Cash and cash equivalents at end of period | $ |
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$ |
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The accompanying notes are an integral part of the unaudited consolidated financial statements.
6
THE TJX COMPANIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
IN THOUSANDS
| Thirteen Weeks Ended | ||||||||||||||||||||
| Common Stock | ||||||||||||||||||||
| Shares |
Par Value
$
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Additional Paid-In
Capital |
Accumulated Other Comprehensive
Loss |
Retained
Earnings |
Total | |||||||||||||||
| Balance, January 29, 2022 |
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$ |
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$ |
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$ |
(
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$ |
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$ |
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|||||||||
| Net income | — | — | — | — |
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||||||||||||||
| Other comprehensive (loss), net of tax | — | — | — |
(
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— |
(
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| Cash dividends declared on common stock | — | — | — | — |
(
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(
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| Recognition of share-based compensation | — | — |
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— | — |
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| Issuance of common stock under stock incentive plan, and related tax effect |
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(
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— | — |
(
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| Common stock repurchased |
(
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(
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(
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— |
(
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(
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| Balance, April 30, 2022 |
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$ |
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$ |
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$ |
(
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$ |
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$ |
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| Thirteen Weeks Ended | ||||||||||||||||||||
| Common Stock | ||||||||||||||||||||
| Shares |
Par Value
$
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Additional Paid-In
Capital |
Accumulated Other Comprehensive
Loss |
Retained
Earnings |
Total | |||||||||||||||
| Balance, January 30, 2021 |
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$ |
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$ |
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$ |
(
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$ |
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$ |
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| Net income | — | — | — | — |
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| Other comprehensive income, net of tax | — | — | — |
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— |
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| Cash dividends declared on common stock | — | — | — | — |
(
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(
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| Recognition of share-based compensation | — | — |
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— | — |
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| Issuance of common stock under stock incentive plan, and related tax effect |
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— | — |
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| Balance, May 1, 2021 |
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$ |
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$ |
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$ |
(
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$ |
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$ |
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The accompanying notes are an integral part of the unaudited consolidated financial statements.
7
THE TJX COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A.
Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The Consolidated Financial Statements and Notes thereto have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. These Consolidated Financial Statements and Notes thereto are unaudited and, in the opinion of management, reflect all normal recurring adjustments, accruals and deferrals among periods required to match costs properly with the related revenue or activity, considered necessary by The TJX Companies, Inc. (together with its subsidiaries, “TJX”) for a fair statement of its Consolidated Financial Statements for the periods reported, all in conformity with GAAP consistently applied. Investments for which the Company exercises significant influence but does not have control are accounted for under the equity method. The Consolidated Financial Statements and Notes thereto should be read in conjunction with the audited Consolidated Financial Statements, including the related notes, contained in TJX’s Annual Report on Form 10-K for the fiscal year ended January 29, 2022 (“fiscal 2022”).
These interim results are not necessarily indicative of results for the full fiscal year. TJX’s business, in common with the businesses of retailers generally, is subject to seasonal influences, with higher levels of sales and income generally realized in the second half of the year.
Fiscal Year
TJX’s fiscal year ends on the Saturday nearest to the last day of January of each year. The current fiscal year ends January 28, 2023 (“fiscal 2023”) and is a 52-week fiscal year. Fiscal 2022 was also a 52-week fiscal year.
Use of Estimates
The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. TJX considers its accounting policies relating to inventory valuation, reserves for uncertain tax positions and loss contingencies to be the most significant accounting policies that involve management estimates and judgments. Actual amounts could differ from these estimates, and such differences could be material. TJX considered the impact of COVID-19 on its estimates and the Company cannot reasonably estimate with certainty the duration and severity of this pandemic which has had, and may continue to have, a material impact on its business, results of operations, financial position and cash flows.
Deferred Gift Card Revenue
| In thousands |
April 30,
2022 |
May 1,
2021 |
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| Balance, beginning of year | $ |
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$ |
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| Deferred revenue |
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| Effect of exchange rates changes on deferred revenue |
(
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| Revenue recognized |
(
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(
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| Balance, end of period | $ |
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$ |
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Gift cards are combined in one homogeneous pool and are not separately identifiable. As such, the revenue recognized consists of gift cards that were part of the deferred revenue balance at the beginning of the period as well as gift cards that were issued during the period.
8
Leases
| Thirteen Weeks Ended | ||||||||
| In thousands |
April 30,
2022 |
May 1,
2021 |
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| Operating cash flows paid for operating leases | $ |
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$ |
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| Lease liabilities arising from obtaining right of use assets | $ |
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$ |
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Future Adoption of New Accounting Standards
From time to time, the Financial Accounting Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”). The Company has reviewed the new guidance and has determined that it will either not apply to TJX or is not expected to be material to its Consolidated Financial Statements upon adoption and therefore, they are not disclosed.
Note B.
Property at Cost
| In thousands |
April 30,
2022 |
January 29,
2022 |
May 1,
2021 |
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Land and buildings
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$ |
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$ |
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$ |
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Leasehold costs and improvements
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| Furniture, fixtures and equipment |
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| Total property at cost | $ |
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$ |
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$ |
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Less: accumulated depreciation and amortization
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| Net property at cost | $ |
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$ |
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$ |
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Depreciation expense was $
218
million for the three months ended April 30, 2022 and $
212
million for the three months ended May 1, 2021.
Non-cash investing activities in the cash flows consist of accrued capital additions of $
176
million and $
90
million as of the periods ended April 30, 2022 and May 1, 2021, respectively.
9
Note C.
Accumulated Other Comprehensive (Loss) Income
| In thousands |
Foreign
Currency Translation |
Deferred
Benefit Costs |
Cash
Flow Hedge on Debt |
Accumulated
Other Comprehensive (Loss) Income |
||||||||||
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Balance, January 30, 2021
|
$ |
(
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$ |
(
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$ |
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$ |
(
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| Additions to other comprehensive loss: | ||||||||||||||
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Foreign currency translation adjustments (net of taxes of $
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(
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— | — |
(
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Recognition of net gains/losses on benefit obligations (net of taxes of $
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— |
(
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— |
(
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| Reclassifications from other comprehensive loss to net income: | ||||||||||||||
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Amortization of loss on cash flow hedge (net of taxes of $
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— | — |
(
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(
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Amortization of prior service cost and deferred gains/losses (net of taxes of $
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— |
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— |
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Balance, January 29, 2022
|
$ |
(
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$ |
(
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$ |
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$ |
(
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| Additions to other comprehensive loss: | ||||||||||||||
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Foreign currency translation adjustments (net of taxes of $
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(
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(
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| Reclassifications from other comprehensive loss to net income: | ||||||||||||||
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Amortization of prior service cost and deferred gains/losses (net of taxes of $
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— |
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— |
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Balance, April 30, 2022
|
$ |
(
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$ |
(
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$ |
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$ |
(
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Note D.
Capital Stock and Earnings Per Share
Capital Stock
TJX repurchased and retired
9.5
million shares of its common stock at a cost of approximately $
0.6
billion during the quarter ended April 30, 2022, on a “trade date” basis. TJX reflects stock repurchases in its consolidated financial statements on a “settlement date” or cash basis. TJX had cash expenditures under repurchase programs of $
0.6
billion for the three months ended April 30, 2022. These expenditures were funded by cash generated from operations.
In February 2022, the Company announced that its Board of Directors had approved a new stock repurchase program that authorizes the repurchase of up to an additional $
3.0
billion of TJX common stock from time to time. Under this program and previously announced programs, TJX had approximately $
3.2
billion available for repurchase as of April 30, 2022.
All shares repurchased under the stock repurchase programs have been retired.
Earnings Per Share
| Thirteen Weeks Ended | ||||||||
| Amounts in thousands, expect per share amounts |
April 30,
2022 |
May 1,
2021 |
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Basic earnings per share:
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Net income
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$ |
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$ |
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Weighted average common shares outstanding for basic earnings per share calculation
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Basic earnings per share
|
$ |
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$ |
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Diluted earnings per share:
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Net income
|
$ |
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$ |
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Weighted average common shares outstanding for basic earnings per share calculation
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| Assumed exercise / vesting of stock options and awards |
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Weighted average common shares outstanding for diluted earnings per share calculation
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Diluted earnings per share
|
$ |
|
$ |
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| Cash dividends declared per share | $ |
|
$ |
|
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10
Note E.
Financial Instruments
As a result of its operating and financing activities, TJX is exposed to market risks from changes in interest and foreign currency exchange rates and fuel costs. These market risks may adversely affect TJX’s operating results and financial position. TJX seeks to minimize risk from changes in interest and foreign currency exchange rates and fuel costs through the use of derivative financial instruments when and to the extent deemed appropriate. TJX does not use derivative financial instruments for trading or other speculative purposes and does not use any leveraged derivative financial instruments. TJX recognizes all derivative instruments as either assets or liabilities in the Consolidated Balance Sheet and measures those instruments at fair value. The fair values of the derivatives are classified as assets or liabilities, current or non-current, based upon valuation results and settlement dates of the individual contracts. Changes to the fair value of derivative contracts that do not qualify for hedge accounting are reported in earnings in the period of the change. For derivatives that qualify for hedge accounting, changes in the fair value of the derivatives are either recorded in shareholders’ equity as a component of Accumulated other comprehensive (loss) or are recognized currently in earnings, along with an offsetting adjustment against the basis of the item being hedged.
Diesel Fuel Contracts
TJX hedges portions of its estimated notional diesel requirements based on the diesel fuel expected to be consumed by independent freight carriers transporting TJX’s inventory. Independent freight carriers transporting TJX’s inventory charge TJX a mileage surcharge based on the price of diesel fuel. The hedge agreements are designed to mitigate the volatility of diesel fuel pricing (and the resulting per mile surcharges payable by TJX) by setting a fixed price per gallon for the period being hedged. During fiscal 2022, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2023, and during the first three months of fiscal 2023, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for the first three months of fiscal 2024. The hedge agreements outstanding at April 30, 2022 relate to approximately
51
% of TJX’s estimated notional diesel requirements for the remainder of fiscal 2023 and approximately
47
% of TJX’s estimated notional diesel requirements for the first three months of fiscal 2024. These diesel fuel hedge agreements will settle throughout fiscal 2023 and throughout the first four months of fiscal 2024. TJX elected not to apply hedge accounting to these contracts.
Foreign Currency Contracts
TJX enters into forward foreign currency exchange contracts to obtain economic hedges on portions of merchandise purchases made and anticipated to be made by the Company’s operations in currencies other than their respective functional currencies. The contracts outstanding at April 30, 2022 cover merchandise purchases the Company is committed to over the next several months. Additionally, TJX’s operations in Europe are subject to foreign currency exposure as a result of their buying function being centralized in the U.K. All merchandise is purchased centrally in the U.K. and then shipped and billed to the retail entities in other countries. This intercompany billing to TJX’s European businesses’ Euro denominated operations creates exposure to the central buying entity for changes in the exchange rate between the Euro and British Pound. A portion of the inflows of Euros to the central buying entity provides a natural hedge for merchandise purchased from third-party vendors that is denominated in Euros. TJX calculates any excess Euro exposure each month and enters into forward contracts of approximately
30
days' duration to mitigate this exposure.
TJX also enters into derivative contracts, generally designated as fair value hedges, to hedge intercompany debt. The changes in fair value of these contracts are recorded in Selling, general and administrative expenses and are offset by marking the underlying item to fair value in the same period. Upon settlement, the realized gains and losses on these contracts are offset by the realized gains and losses of the underlying item in Selling, general and administrative expenses.
11
| In thousands | Pay | Receive |
Blended
Contract Rate |
Balance Sheet
Location |
Current
Asset U.S.$ |
Current
(Liability) U.S.$ |
Net Fair
Value in
U.S.$ at
April 30,
2022 |
||||||||||||||||||||||
| Fair value hedges: | |||||||||||||||||||||||||||||
| Intercompany balances, primarily debt related: | |||||||||||||||||||||||||||||
| zł |
|
£ |
|
|
Prepaid Exp | $ |
|
$ |
|
$ |
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| € |
|
£ |
|
|
(Accrued Exp) |
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(
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(
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| A$ |
|
U.S.$ |
|
|
Prepaid Exp |
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|||||||||||||||||||||
| U.S.$ |
|
£ |
|
|
(Accrued Exp) |
|
(
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(
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|||||||||||||||||||||
| £ |
|
U.S.$ |
|
|
Prepaid Exp |
|
|
|
|||||||||||||||||||||
| € |
|
U.S.$ |
|
|
Prepaid Exp |
|
|
|
|||||||||||||||||||||
| Economic hedges for which hedge accounting was not elected: | |||||||||||||||||||||||||||||
| Diesel fuel contracts |
Fixed on
gal per month
|
Float on
gal per month
|
N/A | Prepaid Exp |
|
|
|
||||||||||||||||||||||
| Intercompany billings in TJX International, primarily merchandise related: | |||||||||||||||||||||||||||||
| € |
|
£ |
|
|
(Accrued Exp) |
|
(
|
(
|
|||||||||||||||||||||
| Merchandise purchase commitments: | |||||||||||||||||||||||||||||
| C$ |
|
U.S.$ |
|
|
Prepaid Exp |
|
|
|
|||||||||||||||||||||
| C$ |
|
€ |
|
|
(Accrued Exp) |
|
(
|
(
|
|||||||||||||||||||||
| £ |
|
U.S.$ |
|
|
Prepaid Exp / (Accrued Exp) |
|
(
|
|
|||||||||||||||||||||
| A$ |
|
U.S.$ |
|
|
Prepaid Exp |
|
|
|
|||||||||||||||||||||
| zł |
|
£ |
|
|
Prepaid Exp |
|
|
|
|||||||||||||||||||||
| U.S.$ |
|
€ |
|
|
(Accrued Exp) |
|
(
|
(
|
|||||||||||||||||||||
| Total fair value of derivative financial instruments | $ |
|
$ |
(
|
$ |
|
|||||||||||||||||||||||
12
| In thousands | Pay | Receive |
Blended
Contract Rate |
Balance Sheet
Location |
Current
Asset U.S.$ |
Current
(Liability) U.S.$ |
Net Fair
Value in
U.S.$ at
January 29,
2022 |
||||||||||||||||||||||
| Fair value hedges: | |||||||||||||||||||||||||||||
| Intercompany balances, primarily debt related: | |||||||||||||||||||||||||||||
| zł |
|
£ |
|
|
Prepaid Exp | $ |
|
$ |
|
$ |
|
||||||||||||||||||
| € |
|
£ |
|
|
Prepaid Exp |
|
|
|
|||||||||||||||||||||
| A$ |
|
U.S.$ |
|
|
Prepaid Exp |
|
|
|
|||||||||||||||||||||
| U.S.$ |
|
£ |
|
|
(Accrued Exp) |
|
(
|
(
|
|||||||||||||||||||||
| € |
|
U.S.$ |
|
|
Prepaid Exp |
|
|
|
|||||||||||||||||||||
| Economic hedges for which hedge accounting was not elected: | |||||||||||||||||||||||||||||
| Diesel fuel contracts |
Fixed on
gal per month
|
Float on
gal per month
|
N/A | Prepaid Exp |
|
|
|
||||||||||||||||||||||
| Intercompany billings in TJX International, primarily merchandise related: | |||||||||||||||||||||||||||||
| € |
|
£ |
|
|
(Accrued Exp) |
|
(
|
(
|
|||||||||||||||||||||
| Merchandise purchase commitments: | |||||||||||||||||||||||||||||
| C$ |
|
U.S.$ |
|
|
Prepaid Exp / (Accrued Exp) |
|
(
|
|
|||||||||||||||||||||
| C$ |
|
€ |
|
|
(Accrued Exp) |
|
(
|
(
|
|||||||||||||||||||||
| £ |
|
U.S.$ |
|
|
Prepaid Exp / (Accrued Exp) |
|
(
|
|
|||||||||||||||||||||
| zł |
|
£ |
|
|
Prepaid Exp / (Accrued Exp) |
|
(
|
|
|||||||||||||||||||||
| A$ |
|
U.S.$ |
|
|
Prepaid Exp |
|
|
|
|||||||||||||||||||||
| U.S.$ |
|
€ |
|
|
(Accrued Exp) |
|
(
|
(
|
|||||||||||||||||||||
| Total fair value of derivative financial instruments | $ |
|
$ |
(
|
$ |
|
|||||||||||||||||||||||
13
| In thousands | Pay | Receive |
Blended
Contract Rate |
Balance Sheet
Location |
Current
Asset U.S.$ |
Current
(Liability) U.S.$ |
Net Fair
Value in
U.S.$ at
May 1,
2021 |
||||||||||||||||||||||
| Fair value hedges: | |||||||||||||||||||||||||||||
| Intercompany balances, primarily debt related: | |||||||||||||||||||||||||||||
| zł |
|
£ |
|
|
Prepaid Exp | $ |
|
$ |
|
$ |
|
||||||||||||||||||
| A$ |
|
U.S.$ |
|
|
(Accrued Exp) |
|
(
|
(
|
|||||||||||||||||||||
| U.S.$ |
|
£ |
|
|
Prepaid Exp |
|
|
|
|||||||||||||||||||||
| £ |
|
U.S.$ |
|
|
Prepaid Exp / (Accrued Exp) |
|
(
|
(
|
|||||||||||||||||||||
| € |
|
U.S.$ |
|
|
Prepaid Exp |
|
|
|
|||||||||||||||||||||
| Economic hedges for which hedge accounting was not elected: | |||||||||||||||||||||||||||||
| Diesel fuel contracts |
Fixed on
gal per month
|
Float on
gal per month
|
N/A | Prepaid Exp |
|
|
|
||||||||||||||||||||||
| Intercompany billings in TJX International, primarily merchandise related: | |||||||||||||||||||||||||||||
| € |
|
£ |
|
|
(Accrued Exp) |
|
(
|
(
|
|||||||||||||||||||||
| Merchandise purchase commitments: | |||||||||||||||||||||||||||||
| C$ |
|
U.S.$ |
|
|
(Accrued Exp) |
|
(
|
(
|
|||||||||||||||||||||
| C$ |
|
€ |
|
|
(Accrued Exp) |
|
(
|
(
|
|||||||||||||||||||||
| £ |
|
U.S.$ |
|
|
Prepaid Exp / (Accrued Exp) |
|
(
|
(
|
|||||||||||||||||||||
| A$ |
|
U.S.$ |
|
|
Prepaid Exp / (Accrued Exp) |
|
(
|
(
|
|||||||||||||||||||||
| U.S.$ |
|
€ |
|
|
Prepaid Exp / (Accrued Exp) |
|
(
|
(
|
|||||||||||||||||||||
| Total fair value of derivative financial instruments | $ |
|
$ |
(
|
$ |
|
|||||||||||||||||||||||
|
Amount of Gain (Loss) Recognized
in Income by Derivative |
|||||||||||
|
Location of Gain (Loss)
Recognized in Income by
Derivative
|
Thirteen Weeks Ended | ||||||||||
| In thousands |
April 30,
2022 |
May 1,
2021 |
|||||||||
| Fair value hedges: | |||||||||||
| Intercompany balances, primarily debt related | Selling, general and administrative expenses | $ |
|
$ |
(
|
||||||
| Economic hedges for which hedge accounting was not elected: | |||||||||||
| Diesel fuel contracts | Cost of sales, including buying and occupancy costs |
|
|
||||||||
| Intercompany billings in TJX International, primarily merchandise related | Cost of sales, including buying and occupancy costs |
(
|
|
||||||||
| Merchandise purchase commitments | Cost of sales, including buying and occupancy costs |
|
(
|
||||||||
| Gain (loss) recognized in income | $ |
|
$ |
(
|
|||||||
14
Note F.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date or “exit price”. The inputs used to measure fair value are generally classified into the following hierarchy:
| Level 1: | Unadjusted quoted prices in active markets for identical assets or liabilities | |||||||
| Level 2: | Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability | |||||||
| Level 3: | Unobservable inputs for the asset or liability | |||||||
| In thousands |
April 30,
2022 |
January 29,
2022 |
May 1,
2021 |
||||||||
| Level 1 | |||||||||||
| Assets: | |||||||||||
| Executive Savings Plan investments | $ |
|
$ |
|
$ |
|
|||||
| Level 2 | |||||||||||
| Assets: | |||||||||||
| Foreign currency exchange contracts | $ |
|
$ |
|
$ |
|
|||||
| Diesel fuel contracts |
|
|
|
||||||||
| Liabilities: | |||||||||||
| Foreign currency exchange contracts | $ |
|
$ |
|
$ |
|
|||||
Investments designed to meet obligations under the Executive Savings Plan are invested in registered investment companies traded in active markets and are recorded at unadjusted quoted prices.
Foreign currency exchange contracts and diesel fuel contracts are valued using broker quotations, which include observable market information. TJX does not make adjustments to quotes or prices obtained from brokers or pricing services but does assess the credit risk of counterparties and will adjust final valuations when appropriate. Where independent pricing services provide fair values, TJX obtains an understanding of the methods used in pricing. As such, these instruments are classified within Level 2.
The fair value of TJX’s general corporate debt was estimated by obtaining market quotes given the trading levels of other bonds of the same general issuer type and market perceived credit quality. These inputs are considered to be Level 2. The fair value of long-term debt as of April 30, 2022 was $
3.2
billion compared to a carrying value of $
3.4
billion. The fair value of long-term debt as of January 29, 2022 was $
3.5
billion compared to a carrying value of $
3.4
billion. The fair value of long-term debt as of May 1, 2021 was $
5.8
billion compared to a carrying value of $
5.3
billion. These estimates do not necessarily reflect provisions or restrictions in the various debt agreements that might affect TJX’s ability to settle these obligations. For additional information on long-term debt, see Note I—Long-Term Debt and Credit Lines.
TJX’s cash equivalents are stated at cost, which approximates fair value due to the short maturities of these instruments.
Certain assets and liabilities are measured at fair value on a nonrecurring basis, whereas the majority of assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when there is evidence of an impairment. For the periods ended April 30, 2022, January 29, 2022 and May 1, 2021, the Company did not record any material impairments to long-lived assets.
15
Note G.
Segment Information
TJX operates
four
main business segments. The Marmaxx segment (T.J. Maxx, Marshalls, tjmaxx.com and marshalls.com) and the HomeGoods segment (HomeGoods, Homesense, and homegoods.com) both operate in the United States, the TJX Canada segment operates Winners, HomeSense and Marshalls in Canada, and the TJX International segment operates T.K. Maxx, Homesense and tkmaxx.com in Europe and T.K. Maxx in Australia. In addition to the Company’s
four
main business segments, Sierra operates sierra.com and retail stores in the U.S. The results of Sierra are included in the Marmaxx segment.
All of TJX’s stores, with the exception of HomeGoods and HomeSense, sell family apparel and home fashions. HomeGoods and HomeSense offer home fashions.
TJX evaluates the performance of its segments based on “segment profit or loss,” which it defines as pre-tax income or loss before general corporate expense, interest expense, net and certain separately disclosed unusual or infrequent items. “Segment profit or loss,” as defined by TJX, may not be comparable to similarly titled measures used by other entities. This measure of performance should not be considered an alternative to net income or cash flows from operating activities as an indicator of TJX’s performance or as a measure of liquidity.
| Thirteen Weeks Ended | ||||||||
| In thousands |
April 30,
2022 |
May 1,
2021 |
||||||
| Net sales: | ||||||||
| In the United States: | ||||||||
| Marmaxx | $ |
|
$ |
|
||||
| HomeGoods |
|
|
||||||
| TJX Canada |
|
|
||||||
| TJX International |
|
|
||||||
| Total net sales | $ |
|
$ |
|
||||
| Segment profit (loss): | ||||||||
| In the United States: | ||||||||
| Marmaxx | $ |
|
$ |
|
||||
| HomeGoods |
|
|
||||||
| TJX Canada |
|
|
||||||
| TJX International |
|
(
|
||||||
| Total segment profit |
|
|
||||||
| General corporate expense |
|
|
||||||
| Impairment on equity investment |
|
|
||||||
| Interest expense, net |
|
|
||||||
| Income before income taxes | $ |
|
$ |
|
||||
Note H.
Pension Plans and Other Retirement Benefits
| Funded Plan | Unfunded Plan | |||||||||||||
| Thirteen Weeks Ended | Thirteen Weeks Ended | |||||||||||||
| In thousands |
April 30,
2022 |
May 1,
2021 |
April 30,
2022 |
May 1,
2021 |
||||||||||
| Service cost | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Interest cost |
|
|
|
|
||||||||||
| Expected return on plan assets |
(
|
(
|
|
|
||||||||||
| Amortization of net actuarial loss and prior service cost |
|
|
|
|
||||||||||
| Total expense | $ |
|
$ |
|
$ |
|
$ |
|
||||||
16
TJX’s policy with respect to the funded plan is to fund, at a minimum, the amount required to maintain a funded status of
80
% of the applicable pension liability (the Funding Target pursuant to the Internal Revenue Code section 430) or such other amount as is sufficient to avoid restrictions with respect to the funding of nonqualified plans under the Internal Revenue Code. The Company does not anticipate any required funding in fiscal 2023 for the funded plan. The Company anticipates making contributions of $
4
million to provide current benefits coming due under the unfunded plan in fiscal 2023.
The amounts included in amortization of net actuarial loss and prior service cost in the table above have been reclassified in their entirety from Accumulated other comprehensive loss to the Consolidated Statements of Income, net of related tax effects, for the periods presented.
Note I.
Long-Term Debt and Credit Lines
| In thousands |
April 30,
2022 |
January 29,
2022 |
May 1,
2021 |
||||||||
|
|
$ |
|
$ |
|
$ |
|
|||||
|
|
— | — |
|
||||||||
|
|
|
|
|
||||||||
|
|
— | — |
|
||||||||
|
|
|
|
|
||||||||
|
|
|
|
|
||||||||
|
|
|
|
|
||||||||
|
|
|
|
|
||||||||
| Total debt |
|
|
|
||||||||
| Debt issuance costs |
(
|
(
|
(
|
||||||||
| Long-term debt | $ |
|
$ |
|
$ |
|
|||||
Senior Unsecured Notes
On June 4, 2021, the Company completed make-whole calls for its $
1.25
billion aggregate principal amount of
3.500
% Notes maturing in 2025 and its $
750
million aggregate principal amount of
3.750
% Notes maturing in 2027, which
3.500
% Notes and
3.750
% Notes were originally issued and sold on April 1, 2020. Interest on the Company's remaining outstanding notes is payable semi-annually.
17
Credit Facilities
The Company has
two
revolving credit facilities, a $
1
billion senior unsecured revolving credit facility maturing in June 2026 (the “2026 Revolving Credit Facility”) and a $
500
million revolving credit facility that matures in May 2024 (the “2024 Revolving Credit Facility”). Under these credit facilities, the Company has maintained a borrowing capacity of $
1.5
billion. The terms of these revolving credit facilities require quarterly payments on the committed amount and payment of interest on borrowings at rates based on LIBOR or a base rate plus a variable margin, in each case based on the Company’s long-term debt ratings. The 2024 Revolving Credit Facility requires usage fees based on total credit extensions under the facility. As of April 30, 2022, January 29, 2022 and May 1, 2021, there were
no
amounts outstanding under any of the Company’s facilities. Each of these facilities require TJX to maintain a ratio of funded debt to earnings before interest, taxes, depreciation and amortization and rentals (EBITDAR) of not more than
3.50
to 1.00 on a rolling four-quarter basis. TJX was in compliance with all covenants related to its credit facilities at the end of all periods presented.
As of April 30, 2022, January 29, 2022 and May 1, 2021, TJX Canada had
two
uncommitted credit lines, a C$
10
million facility for operating expenses and a C$
10
million letter of credit facility. As of April 30, 2022, January 29, 2022 and May 1, 2021, and during the quarters and year then ended, there were
no
amounts outstanding on the Canadian credit lines. As of April 30, 2022, January 29, 2022 and May 1, 2021, the Company’s European business at TJX International had an uncommitted credit line of £
5
million. As of April 30, 2022, January 29, 2022 and May 1, 2021, and during the quarters and year then ended, there were
no
amounts outstanding on the European credit line.
Note J.
Income Taxes
The e
ffective income tax rate was
31.1
% for the first quarter of fiscal 2023 and
26.0
% for the first quarter of fiscal 2022. The increase in the effective income tax rate is primarily due to the impairment of our minority investment stake in Familia, which at this time we estimate to have no associated tax benefit, and a reduction of excess tax benefits from share-based compensation, partially offset by the change of jurisdictional mix of profits and losses and the resolution of various tax matters.
TJX had net unrecognized tax benefits of $
273
million as of April 30, 2022, $
288
million as of January 29, 2022 and $
278
million as of May 1, 2021.
TJX is subject to U.S. federal income tax as well as income tax in multiple state, local and foreign jurisdictions. In the U.S. and India, fiscal years through 2010 are no longer subject to examination. In all other jurisdictions, fiscal years through 2011 are no longer subject to examination.
TJX’s accounting policy is to classify interest and penalties related to income tax matters as part of income tax expense. The accrued amounts for interest and penalties on the Consolidated Balance Sheets was $
44
million as of April 30, 2022, $
43
million as of January 29, 2022 and $
38
million as of May 1, 2021.
Based on the final resolution of tax examinations, judicial or administrative proceedings, changes in facts or law, expirations of statutes of limitations in specific jurisdictions or other resolutions of, or changes in, tax positions, it is reasonably possible that unrecognized tax benefits for certain tax positions taken on previously filed tax returns may change materially from those represented on the consolidated financial statements as of April 30, 2022. During the next 12 months, it is reasonably possible that tax audit resolutions may reduce unrecognized tax benefits by up to $
44
million, which would reduce the provision for taxes on earnings.
Note K.
Contingent Obligations, Contingencies, and Commitments
Contingent Contractual Obligations
TJX is a party to various agreements under which it may be obligated to indemnify the other party with respect to certain losses related to matters including title to assets sold, specified environmental matters or certain income taxes. These obligations are sometimes limited in time or amount. There are no amounts reflected in the Company’s Consolidated Balance Sheets with respect to these contingent obligations.
Legal Contingencies
TJX is subject to certain legal proceedings, lawsuits, disputes and claims that arise from time to time in the ordinary course of its business. TJX has accrued immaterial amounts in the accompanying Consolidated Financial Statements for certain of its legal proceedings.
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Thirteen Weeks (first quarter) Ended April 30, 2022
Compared to
The Thirteen Weeks (first quarter) Ended May 1, 2021
OVERVIEW
We are the leading off-price apparel and home fashions retailer in the U.S. and worldwide. Our mission is to deliver great value to our customers every day. We do this by selling a rapidly changing assortment of apparel, home fashions and other merchandise at prices generally 20% to 60% below full-price retailers’ (including department, specialty, and major online retailers) regular prices on comparable merchandise, every day through our stores
and five distinctive branded e-commerce sites
. We operate over 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, Homesense and homegoods.com); TJX Canada (which operates Winners, HomeSense and Marshalls in Canada); and TJX International (which operates T.K. Maxx, Homesense and tkmaxx.com in Europe, and T.K. Maxx in Australia). In addition to our four main segments, Sierra operates sierra.com and retail stores in the U.S. The results of Sierra are included in the Marmaxx segment.
RESULTS OF OPERATIONS
As an overview of our financial performance, results for the quarter ended April 30, 2022 include the following:
–
Net sales increased 13% to $11.4 billion for the first quarter of fiscal 2023 over last year’s first quarter sales of $10.1 billion. As of April 30, 2022, the number of stores in operation increased 2% and selling square footage increased 1% compared to the end of the first quarter of fiscal 2022.
–
U.S. comp store sales growth was flat for the first quarter of fiscal 2023. The U.S. open-only comp store sales increase was 17% for the comparable period last year ended May 1, 2021.
–
Net sales increased 163% and 41% for TJX International and TJX Canada, respectively.
–
Diluted earnings per share for the first quarter of fiscal 2023 were $0.49, which included a $218 million impairment on our equity investment in Familia, or $0.19 per share, versus $0.44 in the first quarter of fiscal 2022.
–
Pre-tax margin (the ratio of pre-tax income to net sales) for the first quarter of fiscal 2023 was 7.5%, which included a negative 1.9 percentage point impact from the impairment on our equity investment in Familia, and was a 0.3 percentage point increase compared with 7.2% in the first quarter of fiscal 2022.
–
Our cost of sales ratio, including buying and occupancy costs, for the first quarter of fiscal 2023 was 72.1%, a 0.2 percentage point increase compared with 71.9% in the first quarter of fiscal 2022.
–
Our selling, general and administrative (“SG&A”) expense ratio for the first quarter of fiscal 2023 was 18.4%, a 2.1 percentage point decrease compared with 20.5% in the first quarter of 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 35% on a reported basis and 37% on a constant currency basis at the end of the first quarter of fiscal 2023.
–
During the first quarter of fiscal 2023, we returned $0.9 billion to our shareholders through share repurchases and dividends.
19
Operating Results as a Percentage of Net Sales
The following table sets forth our consolidated operating results as a percentage of net sales:
| Thirteen Weeks Ended | ||||||||
|
April 30,
2022 |
May 1,
2021 |
|||||||
| Net sales | 100.0 | % | 100.0 | % | ||||
| Cost of sales, including buying and occupancy costs | 72.1 | 71.9 | ||||||
| Selling, general and administrative expenses | 18.4 | 20.5 | ||||||
| Impairment on equity investment | 1.9 | — | ||||||
| Interest expense, net | 0.2 | 0.4 | ||||||
|
Income before provision for income taxes
*
|
7.5 | % | 7.2 | % | ||||
*
Figures may not foot due to rounding.
Net Sales
Net sales for the quarter ended April 30, 2022 totaled $11.4 billion, a 13% increase versus last year’s first quarter fiscal 2022 net sales of $10.1 billion. Net sales from our e-commerce sites combined amounted to less than 3% of total sales for each of the first quarters 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. 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 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.
Net sales increased 13% for the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022, primarily due to an increase in average basket driven by higher average ticket. The increase in net sales also reflects having a fully open store base for the first quarter of fiscal 2023 compared to temporary store closures for 14% of the first quarter of fiscal 2022, defined as the total store days closed due to the COVID-19 pandemic as a percentage of potential total store days open during the period.
U.S. comp store sales were flat for the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022. U.S. comp store sales reflects an increase in average basket driven by higher average ticket as well as an increase in customer traffic in Marmaxx, partially offset by lower customer traffic in HomeGoods. For the first quarter ended April 30, 2022, comp store sales growth in the U.S. was strongest in the South region. Apparel outperformed home fashions for the first quarter ended April 30, 2022.
As of April 30, 2022, our store count increased 2% and selling square footage increased 1% compared to the end of the first quarter last year.
Definition of Comp Store Sales
We define 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 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
–
Stores that are closed permanently or for an extended period of time
–
Sales from our e-commerce sites
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.
Comp sales of our foreign segments are calculated by translating the current year’s comp sales using the prior year’s exchange rates. This removes the effect of changes in currency exchange rates, which we believe is a more accurate measure of segment operating performance.
20
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.
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 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.
Impact of Foreign Currency Exchange Rates
Our operating results are affected by foreign currency exchange rates as a result of changes in the value of the U.S. dollar or a division’s local currency in relation to other currencies. We specifically refer to “foreign currency” as the impact of translational foreign currency exchange and mark-to-market of inventory derivatives, as described in detail below. This does not include the impact foreign currency exchange rates can have on various transactions that are denominated in a currency other than an operating division's local currency, which are referred to as “transactional foreign exchange,” and also described below.
Translation Foreign Exchange
In our consolidated financial statements, we translate the operations of TJX Canada and TJX International from local currencies into U.S. dollars using currency rates in effect at different points in time. Significant changes in foreign exchange rates between comparable prior periods can result in meaningful variations in 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.
Mark-to-Market Inventory Derivatives
We routinely enter into inventory-related hedging instruments to mitigate the impact on earnings of changes in foreign currency exchange rates on merchandise purchases denominated in currencies other than the local currencies of our divisions, principally TJX Canada and TJX International. As we have not elected “hedge accounting” for these instruments, as defined by U.S. generally accepted accounting principles (“GAAP”), we record a mark-to-market gain or loss on the derivative instruments in our results of operations at the end of each reporting period. In subsequent periods, the income statement impact of the mark-to-market adjustment is effectively offset when the inventory being hedged is received and paid for. While these effects occur every reporting period, they are of much greater magnitude when there are sudden and significant changes in currency exchange rates during a short period of time. The mark-to-market adjustment on these derivatives does not affect net sales, but it does affect the cost of sales, operating margins and earnings we report.
Transactional Foreign Exchange
When discussing the impact on our results of the effect of foreign currency exchange rates on certain transactions, we refer to it as “transactional foreign exchange”. This primarily includes the impact that foreign currency exchange rates may have on the year-over-year comparison of merchandise margin as well as “foreign currency gains and losses” on transactions that are denominated in a currency other than the operating division's local currency. These two items can impact segment margin comparison of our foreign divisions and we have highlighted them when they are meaningful to understanding operating trends.
Cost of Sales, Including Buying and Occupancy Costs
Cost of sales, including buying and occupancy costs, as a percentage of net sales was 72.1% for the first quarter of fiscal 2023, an increase of 0.2 percentage points from 71.9% for the first quarter of fiscal of 2022.
The increase in the cost of sales ratio, including buying and occupancy costs, was primarily attributable to lower merchandise margin, partially offset by leverage on occupancy as a result of a higher level of sales in the first quarter of fiscal 2023 compared to fiscal 2022 and
favorable mark-to-market adjustments on inventory an
d fuel hedges. Within merchandise margin, strong markon and a benefit from our pricing initiative were more than offset by approximately 220 basis points of incremental freight.
21
Selling, General and Administrative Expenses
SG&A expenses, as a percentage of net sales, were 18.4% for the first quarter of fiscal 2023, a decrease of 2.1 percentage points over last year’s first quarter ratio of 20.5%.
The decrease in the SG&A ratio for the first quarter of fiscal 2023 compared to the same period of fiscal 2022 was primarily driven by store payroll due to a reduction of COVID-related costs.
Impairment on Equity Investment
During the quarter ended April 30, 2022, due to the Russian invasion of Ukraine, the Company announced that it has committed to divesting its minority investment in Familia, an off-price retailer of apparel and home fashions domiciled in Luxembourg that operates stores in Russia. As a result, we performed an impairment analysis and concluded that there was an other-than-temporary impairment of this investment. We recorded an impairment charge of $218 million representing the entire carrying value of the investment. This charge had a $0.19 negative impact on earnings per share for the first quarter of fiscal 2023.
Interest Expense, net
The components of interest expense, net are summarized below:
| Thirteen Weeks Ended | ||||||||
| In millions |
April 30,
2022 |
May 1,
2021 |
||||||
| Interest expense | $ | 22.9 | $ | 47.0 | ||||
| Capitalized interest | (1.6) | (1.1) | ||||||
| Interest (income) | (2.5) | (1.2) | ||||||
| Interest expense, net | $ | 18.8 | $ | 44.7 | ||||
Net interest expense decreased for the first quarter of fiscal 2023 compared to the same period in fiscal 2022, primarily due to the $2.75 billion pay down of outstanding debt during fiscal 2022.
Provision for Income Taxes
The e
ffective income tax rate was 31.1% for the first quarter of fiscal 2023 compared to 26.0% for the first quarter of fiscal 2022. The increase in the effective income tax rate is primarily due to the impairment of our minority investment stake in Familia, which at this time we estimate to have no associated tax benefit, and a reduction of excess tax benefits from share-based compensation, partially offset by the change of jurisdictional mix of profits and losses and the resolution of various tax matters.
Net Income and Diluted Earnings Per Share
Net income for the first quarter of fiscal 2023 was $0.6 billion, or $0.49 per diluted share compared with $0.5 billion, or $0.44 per diluted share for the first quarter of fiscal 2022. The $218 million impairment on our equity investment in Familia had a $0.19 negative impact on earnings per share for the first quarter of fiscal 2023.
Segment Information
We operate four main business segments. Our Marmaxx segment (T.J. 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. Maxx, Homesense and tkmaxx.com in Europe and T.K. Maxx in Australia. In addition to our four main segments, Sierra operates sierra.com and retail stores in the U.S. The results of Sierra are included in the Marmaxx segment.
We evaluate the performance of our segments based on “segment profit or loss,” which we define as pre-tax income or loss before general corporate expense and interest expense, net, and certain separately disclosed unusual or infrequent items. “Segment profit or loss,” as we define the term, may not be comparable to similarly titled measures used by other 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.
Presented below is selected financial information related to our business segments.
22
U.S. SEGMENTS
Marmaxx
| Thirteen Weeks Ended | ||||||||
| U.S. dollars in millions |
April 30,
2022 |
May 1,
2021 |
||||||
| Net sales | $ | 6,872 | $ | 6,640 | ||||
| Segment profit | $ | 904 | $ | 825 | ||||
| Segment margin | 13.2 | % | 12.4 | % | ||||
| Stores in operation at end of period: | ||||||||
| T.J. Maxx | 1,285 | 1,282 | ||||||
| Marshalls | 1,155 | 1,147 | ||||||
| Sierra | 60 | 52 | ||||||
| Total | 2,500 | 2,481 | ||||||
| Selling square footage at end of period (in thousands): | ||||||||
| T.J. Maxx | 27,894 | 27,872 | ||||||
| Marshalls | 26,252 | 26,187 | ||||||
| Sierra | 975 | 853 | ||||||
| Total | 55,121 | 54,912 | ||||||
Net Sales
Net sales for Marmaxx were $6.9 billion for the first quarter of fiscal 2023, an increase of 3% compared to $6.6 billion for the first quarter of fiscal 2022. The increase in the first quarter was driven by a 3% increase from comp store sales compared to a 12% open-only comp store sales increase in the first quarter of fiscal 2022. The increase in comp store sales was primarily attributable to an increase in customer traffic as well as an increase in average basket driven by higher average ticket. Apparel outperformed home fashions during the quarter and geographically, comp store sales growth in the quarter was strongest in the South region.
Segment Profit
Segment profit margin increased to 13.2% for the first quarter of fiscal 2023 compared to 12.4% for the same period last year. The increase in segment margin was primarily driven by store and distribution center payroll reflecting lower COVID-related expenses and fewer units processed, partially offset by higher wage and lower merchandise margin. Within merchandise margin, incremental freight costs were mostly offset by strong markon and a benefit related to our pricing initiative.
Our Marmaxx e-commerce sites, tjmaxx.com and marshalls.com, together with sierra.com, represented less than 3% of Marmaxx’s net sales for the first quarter of fiscal 2023 and fiscal 2022, and did not have a significant impact on year-over-year segment margin comparisons.
23
HomeGoods
| Thirteen Weeks Ended | ||||||||
| U.S. dollars in millions |
April 30,
2022 |
May 1,
2021 |
||||||
| Net sales | $ | 2,036 | $ | 2,142 | ||||
| Segment profit | $ | 122 | $ | 252 | ||||
| Segment margin | 6.0 | % | 11.7 | % | ||||
| Stores in operation at end of period: | ||||||||
| HomeGoods | 859 | 843 | ||||||
| Homesense | 39 | 39 | ||||||
| Total | 898 | 882 | ||||||
| Selling square footage at end of period (in thousands): | ||||||||
| HomeGoods | 15,701 | 15,425 | ||||||
| Homesense | 837 | 837 | ||||||
| Total | 16,538 | 16,262 | ||||||
Net Sales
Net sales for HomeGoods were $2.0 billion for the first quarter of fiscal 2023, a decrease of 5%, compared to $2.1 billion for the first quarter of fiscal 2022. The decrease in the first quarter represents a 7% decrease from comp store sales, partially offset by a 2% increase from non-comp store sales. The decrease in comp store sales was driven by a decrease in customer traffic, partially offset by an increase in average basket driven by a higher average ticket. Open-only comp store sales were up 40% for the first quarter of fiscal 2022.
Segment Profit
Segment profit margin decreased to 6.0% for the first quarter of fiscal 2023 compared to 11.7% for the same period last year. The decrease in segment profit margin was driven by lower merchandise margin, deleverage on lower comp store sales, primarily in occupancy and administrative costs, investments in supply chain and higher wage. The decrease in segment profit margin was partially offset by store and distribution payroll reflecting lower COVID-related expenses and fewer units processed. Within merchandise margin, approximately 700 basis points of incremental freight costs and higher markdowns were partially offset by strong markon and a benefit related to our pricing initiative.
During the third quarter of fiscal 2022, HomeGoods made online shopping available at www.homegoods.com. The e-commerce site did not have a significant impact on year-over-year segment margin comparisons for the first quarter of fiscal 2023, representing less than 1.0% of HomeGoods net sales for the first quarter of fiscal 2023.
24
FOREIGN SEGMENTS
TJX Canada
| Thirteen Weeks Ended | ||||||||
| U.S. dollars in millions |
April 30,
2022 |
May 1,
2021 |
||||||
| Net sales | $ | 1,082 | $ | 766 | ||||
| Segment profit | $ | 127 | $ | 72 | ||||
| Segment margin | 11.7 | % | 9.3 | % | ||||
| Stores in operation at end of period: | ||||||||
| Winners | 293 | 284 | ||||||
| HomeSense | 148 | 143 | ||||||
| Marshalls | 106 | 103 | ||||||
| Total | 547 | 530 | ||||||
| Selling square footage at end of period (in thousands): | ||||||||
| Winners | 6,297 | 6,113 | ||||||
| HomeSense | 2,729 | 2,644 | ||||||
| Marshalls | 2,220 | 2,159 | ||||||
| Total | 11,246 | 10,916 | ||||||
Net Sales
Net sales for TJX Canada were $1.1 billion for the first quarter of fiscal 2023, an increase of 41% compared to $0.8 billion for the first quarter of fiscal 2022. The increase in net sales reflects having a fully open store base for all of the first quarter of fiscal 2023, compared to temporary store closures for 25% of the first quarter of fiscal 2022 as a result of the COVID-19 pandemic. In addition to stores being open for more days in the first quarter of fiscal 2023, net sales further increased due to an increase in average basket driven by a higher average ticket.
Segment Profit
Segment profit margin increased to 11.7% for the first quarter of fiscal 2023 compared to 9.3% for the same period last year. The increase for the first quarter of fiscal 2023 was primarily driven by increased sales due to having a fully open store base for all of the first quarter of fiscal 2023 compared to the temporary store closures in the same period in fiscal 2022. This was partially offset by government programs received in the first quarter of fiscal 2022 and lower merchandise margin. Within merchandise margin, strong markon and a benefit from our pricing initiative were more than offset by higher freight costs.
25
TJX International
| Thirteen Weeks Ended | ||||||||
| U.S. dollars in millions |
April 30,
2022 |
May 1,
2021 |
||||||
| Net sales | $ | 1,417 | $ | 539 | ||||
| Segment profit (loss) | $ | 13 | $ | (222) | ||||
| Segment margin | 0.9 | % | (41.1) | % | ||||
| Stores in operation at end of period: | ||||||||
| T.K. Maxx | 623 | 604 | ||||||
| Homesense | 77 | 78 | ||||||
| T.K. Maxx Australia | 70 | 64 | ||||||
| Total | 770 | 746 | ||||||
| Selling square footage at end of period (in thousands): | ||||||||
| T.K. Maxx | 12,501 | 12,160 | ||||||
| Homesense | 1,126 | 1,142 | ||||||
| T.K. Maxx Australia | 1,231 | 1,143 | ||||||
| Total | 14,858 | 14,445 | ||||||
Net Sales
Net sales for TJX International were $1.4 billion for the first quarter of fiscal 2023, an increase of 163% compared to $0.5 billion for the first quarter of fiscal 2022. The increase in net sales reflects having a fully open store base for all of the first quarter of fiscal 2023, compared to temporary store closings for 69% of the first quarter of fiscal 2022 as a result of the COVID-19 pandemic. In addition to stores being open for more days in the first quarter of fiscal 2023, net sales further increased due to an increase in average basket, partially offset by a negative impact due to exchange rates.
E-commerce sales were approximately 4% and 12% of TJX International’s net sales for the first quarters of fiscal 2023 and fiscal 2022, respectively. Our e-commerce site and stores were fully open for the first quarter of fiscal 2023. For the first quarter of fiscal 2022, while our e-commerce site remained open, there were temporary store closures due to the COVID-19 pandemic resulting in an increased e-commerce contribution.
Segment Profit / (Loss)
Segment profit margin increased to 0.9% for the first quarter of fiscal 2023 compared to loss of (41.1)% for the same period last year. This increase was primarily driven by additional sales due to having a fully open store base for all of the first quarter of fiscal 2023 compared to the temporary store closures in the same period in fiscal 2022. This was partially offset by government programs received in the first quarter of fiscal 2022 and lower merchandise margin in fiscal 2023. Within merchandise margin, strong markon was more than offset by higher markdowns and incremental freight costs.
GENERAL CORPORATE EXPENSE
| Thirteen Weeks Ended | ||||||||
| In millions |
April 30,
2022 |
May 1,
2021 |
||||||
| General corporate expense | $ | 77 | $ | 160 | ||||
General corporate expense for segment reporting purposes represents those costs not specifically related to the operations of our business segments. General corporate expenses are primarily included in SG&A expenses. The mark-to-market adjustment of our fuel and inventory hedges is included in cost of sales, including buying and occupancy costs.
The decrease in general corporate expense for the
first
quarter of fiscal
2023
was primarily driven by favorable mark-to-market adjustments on inventory and fuel hedges, lower share-based and incentive compensation costs and timing of funding to TJX’s charitable foundations.
26
ANALYSIS OF FINANCIAL CONDITION
Liquidity and Capital Resources
Our liquidity requirements have traditionally been funded through cash generated from operations, supplemented, as needed, by short-term bank borrowings and the issuance of commercial paper. As of April 30, 2022, 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 April 30, 2022, as described in Note I—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 April 30, 2022, we held $4.3 billion in cash. Approximately $1.1 billion of our cash was held by our foreign subsidiaries with $0.4 billion held in countries where we intend to indefinitely reinvest any undistributed earnings. 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 April 30, 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. In fiscal 2022 we had used, and in the future we may use, operating cash flow and cash on hand to repay portions of our indebtedness, depending on prevailing market conditions, liquidity requirements, existing economic conditions, contractual restrictions and other factors. As such, we may, from time to time, seek to retire, redeem, prepay or purchase our outstanding debt through redemptions, cash purchases, prepayments, refinancings and/or exchanges, in open market purchases, privately negotiated transactions, by tender offer or otherwise. If we use our operating cash flow and/or cash on hand to repay our debt, it will reduce the amount of cash available for additional capital expenditures.
Operating Activities
Operating activities resulted in net cash outflows of $0.6 billion for the three months ended April 30, 2022 and $0.4 billion for the three months ended May 1, 2021.
Operating cash flows decreased compared to fiscal 2022, primarily due to a $0.6 billion decrease in accrued expenses, which was mostly attributable to lower incentive compensation costs and the repayment of previously deferred COVID taxes. This decrease was partially offset by net income, excluding the non-cash charges, which increased operating cashflows by $0.3 billion as compared to the first quarter of fiscal 2022 and a $0.1 billion decrease in accounts receivables for the receipt of COVID related government incentives.
Investing Activities
Investing activities resulted in net cash outflows of $0.3 billion for the three months ended April 30, 2022 and $0.2 billion for the three months ended May 1, 2021. The cash outflows for both periods were driven by capital expenditures.
Investing activities in the first three months of fiscal 2023 primarily reflected property additions for investments in our distribution centers, new stores, store improvements and renovations as well as investments in our offices, including buying and merchandising systems and other information systems. We anticipate that capital spending for the full
fiscal year 2023 will be approximately $1.7 billion to $1.9 billion
. We plan to fund these expenditures through cash flows from operations.
Financing Activities
Financing activities resulted in net cash outflows of $0.9 billion for the first three months of fiscal 2023 and net cash outflows of $1.1 billion for the three months ended May 1, 2021. The cash outflows for fiscal 2023 were primarily driven by equity repurchases and dividend payments.
Debt
The cash outflows in the first three months of fiscal 2022 were due to the redemption at par of $750 million principal notes.
Equity
Under our stock repurchase programs, we paid $0.6 billion to repurchase and retire 9.6 million shares of our stock on a settlement basis in the first three months of fiscal 2023. As of April 30, 2022, approximately $3.2 billion remained available under our existing stock repurchase programs. In the first three months of fiscal 2022 there were no stock repurchases due to the temporary suspension of our share repurchase program, which was lifted during the second quarter of fiscal 2022. For further information regarding equity repurchases, see Note D – Capital Stock and Earnings Per Share of Notes to Consolidated Financial Statements.
27
Dividends
We declared quarterly dividends on our common stock of $0.295 per share in the first three months of fiscal 2023 and $0.26 per share in the first three months of fiscal 2022. Cash payments for dividends on our common stock totaled $0.3 billion for each of the first three months of fiscal 2023 and fiscal 2022.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
There have been no material changes to the critical accounting estimates as discussed in TJX's Annual Report on Form 10-K for the fiscal year ended January 29, 2022. For a discussion of accounting standards, see Note A—Basis of Presentation and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements included in TJX’s Annual Report on Form 10-K for the fiscal year ended January 29, 2022 and Note A—Basis of Presentation and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
FORWARD-LOOKING STATEMENTS
Various statements made in this Quarterly Report on Form 10-Q are forward-looking and involve a number of risks and uncertainties. All statements that address activities, events or developments that we intend, expect or believe may occur in the future are forward-looking statements. The following are some of the factors that could cause actual results to differ materially from the forward-looking statements: the ongoing COVID-19 pandemic and associated containment and remediation efforts; execution of buying strategy and inventory management; various marketing efforts; customer trends and preferences; competition; operational and business expansion; management of large size and scale; merchandise sourcing and transport; labor costs and workforce challenges; personnel recruitment, training and retention; data security and maintenance and development of information technology systems; corporate and retail banner reputation; cash flow; expanding international operations; fluctuations in quarterly operating results and market expectations; mergers, acquisitions, or business investments and divestitures, closings or business consolidations; real estate activities; inventory or asset loss; economic conditions and consumer spending; market instability; serious disruptions or catastrophic events; disproportionate impact of disruptions in the first half of the fiscal year; commodity availability and pricing; adverse or unseasonable weather; fluctuations in currency exchange rates; compliance with laws, regulations and orders and changes in laws, regulations and applicable accounting standards; outcomes of litigation, legal proceedings and other legal or regulatory matters; quality, safety and other issues with our merchandise; tax matters; and other factors that may be described in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission. We do not undertake to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied in such statements will not be realized.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Annual Report on Form 10-K for the
fiscal year ended January 29, 2022
.
Item 4. Controls and Procedures
We have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of April 30, 2022 pursuant to Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level in ensuring that information required to be disclosed by us in the reports that we file or submit under the Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms; and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of implementing controls and procedures.
There were no changes in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Act) during the fiscal quarter ended April 30, 2022 identified in connection with the evaluation by our management, including our Chief Executive Officer and Chief Financial Officer, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
28
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
See
Note K—Contingent Obligations, Contingencies, and Commitments
of Notes to Consolidated Financial Statements for information on legal proceedings.
Item 1A. Risk Factors
There have been no material changes to the risk factors disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended
January 29, 2022
, as filed with the Securities Exchange Commission on March 30, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
INFORMATION ON SHARE REPURCHASES
The number of shares of common stock repurchased by TJX during the first quarter of fiscal 2023 and the average price paid per share are as follows:
|
Total
Number of Shares
Repurchased
(a)
|
Average Price Paid
Per Share
(b)
|
Total Number of
Shares Purchased as
Part of Publicly
Announced
Plans or Programs
(c)
|
Approximate Dollar
Value of Shares that
May Yet be
Purchased Under
the Plans or
Programs
(c)
|
|||||||||||
| January 30, 2022 through February 26, 2022 | 1,354,555 | $ | 68.18 | 1,354,555 | $ | 3,701,439,223 | ||||||||
| February 27, 2022 through April 2, 2022 | 5,387,551 | $ | 61.74 | 5,387,551 | $ | 3,368,793,365 | ||||||||
| April 3, 2022 through April 30, 2022 | 2,792,993 | $ | 62.66 | 2,792,993 | $ | 3,193,793,453 | ||||||||
| Total | 9,535,099 | 9,535,099 | ||||||||||||
(a)
Consists of shares repurchased under publicly announced stock repurchase programs.
(b)
Includes commissions for the shares repurchased under stock repurchase programs.
(c)
In February 2022, we announced that our Board of Directors had 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 this program and previously announced programs, we had approximately $3.2 billion available for repurchase as of April 30, 2022.
Item 6. Exhibits
| Incorporate by Reference | ||||||||||||||
| Exhibit No. | Description | Form | Exhibit No. |
Filing
Date |
||||||||||
| 10.1 | ||||||||||||||
| 10.2 | ||||||||||||||
| 10.3 | ||||||||||||||
| 31.1 | ||||||||||||||
| 31.2 | ||||||||||||||
| 32.1 | ||||||||||||||
| 32.2 | ||||||||||||||
| 101 |
The following materials from The TJX Companies, Inc.’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2022, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Shareholders’ Equity, and (vi) Notes to Consolidated Financial Statements.
|
|||||||||||||
| 104 |
The cover page from The TJX Companies, Inc.’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2022, formatted in Inline XBRL (included in Exhibit 101)
|
|||||||||||||
* Management contract or compensatory plan or arrangement.
29
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| THE TJX COMPANIES, INC. | ||||||||||||||
| (Registrant) | ||||||||||||||
| Date: May 27, 2022 | ||||||||||||||
| /s/ Scott Goldenberg | ||||||||||||||
| Scott Goldenberg, Chief Financial Officer | ||||||||||||||
| (Principal Financial and Accounting Officer) | ||||||||||||||
30
TABLE OF CONTENTS
Part I - Financial InformationprintItem 1. Consolidated Financial StatementsprintItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsprintItem 3. Quantitative and Qualitative Disclosures About Market RiskprintItem 4. Controls and ProceduresprintPart II Other InformationprintItem 1. Legal ProceedingsprintItem 1A. Risk FactorsprintItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsprintItem 6. Exhibitsprint