TJX COMPANIES INC /DE/ (TJX)

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

TJX provides projections and other forward-looking statements in the following discussions particularly relating to our future financial performance. These forward-looking statements are estimates based on information currently available to us and subject to the cautionary statements set forth on page 3 of this Form 10-K. Our results are subject to risks, uncertainties and potentially inaccurate assumptions that could cause actual results to differ materially from those expressed or implied by any such forward-looking statements. Applicable risks and uncertainties include, among others, those described in Part I, Item 1A, Risk Factors, as well as other information we file with the SEC. TJX undertakes no obligation to update or revise any 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.

The discussion that follows relates to our 52-week fiscal year ended February 1, 2025 (fiscal 2025) and our 53-week fiscal year ended February 3, 2024 (fiscal 2024) and our 52-week fiscal year ended January 31, 2026 (fiscal 2026).

The following is a discussion of our consolidated operating results, followed by a discussion of our segment operating results. Discussions of fiscal 2023 items and year-to-year comparisons between fiscal 2024 and fiscal 2023 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our annual report on Form 10-K for the fiscal year ended February 3, 2024.

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 six e-commerce sites. We operate over 5,000 stores through our four segments: in the U.S., Marmaxx (which operates TJ Maxx, Marshalls, tjmaxx.com and marshalls.com) and HomeGoods (which operates HomeGoods and Homesense); TJX Canada (which operates Winners, HomeSense and Marshalls in Canada); and TJX International (which operates TK Maxx, Homesense, tkmaxx.com, tkmaxx.de, and tkmaxx.at in Europe, and TK Maxx in Australia). In addition to our four segments, Sierra operates retail stores and sierra.com in the U.S. The results of Sierra are included in the Marmaxx segment.

RESULTS OF OPERATIONS

Highlights of our financial performance for fiscal 2025 include the following:

–Net sales increased 4% to $56.4 billion for fiscal 2025 versus $54.2 billion for fiscal 2024. As of February 1, 2025, the number of stores in operation increased approximately 3% and selling square footage increased approximately 2% compared to the end of fiscal 2024.

–Consolidated comp store sales increased 4% in fiscal 2025. See Net Sales below for the definition of comp store sales.

–Diluted earnings per share were $4.26 for fiscal 2025, compared to $3.86 for fiscal 2024, which included an estimated benefit of $0.10 from the 53rd week in fiscal 2024.

–Pre-tax profit margin (the ratio of pre-tax income to net sales) for fiscal 2025 was 11.5%. This was a 0.5 percentage point increase compared to 11.0% for fiscal 2024, which included an estimated 0.1 percentage point benefit from the 53rd week in fiscal 2024.

–Our cost of sales, including buying and occupancy costs, ratio for fiscal 2025 was 69.4%, a 0.6 percentage point decrease compared to 70.0% for fiscal 2024.

–Our selling, general and administrative (“SG&A”) expense ratio for fiscal 2025 was 19.4%, a 0.1 percentage point increase compared to 19.3% for fiscal 2024.

–Our consolidated average per store inventories, including inventory on hand at our distribution centers (which excludes inventory in transit) and excluding our e-commerce sites and Sierra stores, were up 1% at the end of fiscal 2025 as compared to the prior year.

–During fiscal 2025, we returned $4.1 billion to our shareholders through share repurchases and dividends. A dividend of $0.375 per share was declared in the fourth quarter of fiscal 2025 and paid in March 2025.

–We announced that we plan to enter Spain with our TK Maxx banner in fiscal 2027.

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Equity Investments

During fiscal 2025, we entered into a definitive agreement for a joint venture with Grupo Axo, S.A.P.I de C.V. (“Axo”) to hold a 49% ownership stake in Multibrand Outlet Stores S.A.P.I. de C.V. (“MOS”) which operates off-price, physical store businesses in Mexico and includes a total of over 200 stores for its Promoda, Reduced, and Urban Store banners. We have the option to increase our ownership interest in the joint venture over the long term. During the third quarter of fiscal 2025, we completed this investment for $193 million, which includes a purchase price of $179 million and acquisition costs of $14 million. This investment is accounted for under the equity method of accounting.

During fiscal 2025, we entered into a definitive agreement to acquire a 35% ownership stake in privately held Brands for Less (“BFL”), representing a non-controlling, minority position. BFL currently operates over 100 stores, primarily in the UAE and Saudi Arabia, as well as an e-commerce business, and is the region’s only major off-price branded apparel, toys and home fashions retailer. During the fourth quarter of fiscal 2025, we completed this investment for $358 million, which includes a purchase price of $344 million and acquisition costs of $14 million. This investment is accounted for under the equity method of accounting.

The results of our share of both of these investments are recorded on a one-quarter lag as their results are not expected to be available in time to be recorded in the concurrent period. These investments did not have a material impact on our fiscal 2025 results and we do not expect them to have a material impact on our fiscal 2026 results.

Recent Events and Trends

Global Economic Conditions and Industry Trends

We continue to closely monitor changes in international trade relations, economic and monetary policies, or legislation and regulations including those related to tariffs on imports from China and other countries, which could adversely impact the global economy and our operating results. In particular, uncertainty remains regarding the potential impact on our direct imports, (with typically less than 10% of the merchandise that we purchase for our U.S. businesses directly imported from China), vendor and competitor pricing, consumer demand, tariff pass-throughs, and reciprocal or retaliatory tariffs.

Operating Results as a Percentage of Net Sales

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

*Figures may not foot due to rounding.

Net Sales

Net sales for fiscal 2025 totaled $56.4 billion, a 4% increase versus net sales of $54.2 billion for fiscal 2024. The increase includes a 4% increase in comp store sales, a 2% increase from non-comp store sales, a neutral impact from foreign currency exchange rates, partially offset by a negative 2% estimated year-over-year impact from the 53rd week in fiscal 2024. Net sales from our e-commerce sites combined amounted to less than 2% of total sales for both fiscal 2025 and fiscal 2024.

Comp store sales increased 4% for fiscal 2025 and increased 5% for fiscal 2024. Comp store sales for fiscal 2025 was driven by an increase in customer transactions. Both home comp store sales growth (as defined below) and apparel comp store sales growth (as defined below) generally performed in line with the overall comp store sales increase for fiscal 2025.

As of February 1, 2025, our store count increased approximately 3% and selling square footage increased approximately 2% compared to the same period last year.

Definition of Comparable Store Sales

We define comparable store sales, or comp store sales, to be sales of stores that have been in operation for all or a portion of two consecutive fiscal years, or, in other words, stores that are starting their third fiscal year of operation. In any given fiscal year, we calculate comp store sales on a 52-week basis by comparing the current and prior year weekly periods that are most closely aligned. Relocated stores and stores that have changed in size are generally classified in the same way as the original store, and we believe that the impact of these stores on the consolidated comp store sales percentage is immaterial.

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

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

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

–Sales from our e-commerce sites (starting with the first quarter of fiscal 2026, we will no longer exclude sales from our e-commerce sites from comp store sales, which we do not expect to have a material impact on such figures).

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

Comp store sales of our foreign segments are calculated on a constant currency basis. We define constant currency basis as translating the current year’s results using the prior year’s exchange rates. This removes the effect of changes in currency exchange rates, which we believe is a more appropriate measure of performance.

Comp store sales may be referred to as “same store” sales by other retail companies. The method for calculating comp store sales varies across the retail industry; therefore, our measure of comp store sales may not be comparable to that of other retail companies. Comparable store sales for a category such as home or apparel include sales from merchandise within such category combined across all divisions at the stores that fall within the Company’s definition of comparable stores for such period.

We define customer transactions to be the number of transactions in stores included in the comp store sales calculation. We define average ticket to be the average retail price of the units sold. We define average basket to be the average dollar value of transactions.

Revenues by Geography

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

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 is 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 as well as the net sales and operating results of these segments. Currency translation generally does not affect operating margins, or affects them only slightly, as sales and expenses of the foreign operations are translated at approximately the same rates within a given period.

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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 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 69.4% for fiscal 2025, a decrease of 0.6 percentage points compared to 70.0% of net sales for fiscal 2024.

The decrease in the cost of sales ratio, including buying and occupancy costs, was attributable to higher merchandise margin due to higher markon, lower freight costs and lower inventory shrink expense, partially offset by higher supply chain costs.

Selling, General and Administrative Expenses

SG&A expenses, as a percentage of net sales, was 19.4% for fiscal 2025, an increase of 0.1 percentage points compared to 19.3% for fiscal 2024.

The increase in SG&A ratio for fiscal 2025 was due to incremental store wage and payroll costs, partially offset by a favorable year-over-year impact from a prior year reserve related to a German COVID program receivable and the year-over-year benefit from closing HomeGoods’ e-commerce business last year.

Interest (Income) Expense, net

The components of interest (income) expense, net for the last two fiscal years are summarized below:

Interest (income) expense, net increased for fiscal 2025 compared to fiscal 2024 due to an increase in interest income driven by a higher average cash balance.

Provision for Income Taxes

In 2021, the Organization for Economic Co-operation and Development announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15%. Subsequently multiple sets of administrative guidance have been issued. Many non-US tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 with the adoption of additional components in later years or announced their plans to enact legislation in future years. These rules did not have a material impact on our financial statements for fiscal 2025 and did not materially increase our global tax costs on our fiscal 2025 financial statements. There remains uncertainty as to the final Pillar Two model rules. We are continuing to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-US tax jurisdictions in which we operate.

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The effective income tax rate was 25.0% for fiscal 2025 and fiscal 2024. There were no significant changes to our effective income tax rate for fiscal 2025, compared to fiscal 2024.

Net Income and Diluted Earnings Per Share

Net income was $4.9 billion in fiscal 2025 compared to $4.5 billion in fiscal 2024. Diluted earnings per share in fiscal 2025 were $4.26 compared to $3.86 in fiscal 2024, which included an estimated benefit of $0.10 per share from the 53rd week in fiscal 2024. Foreign currency had a $0.01 positive impact on diluted earnings per share in fiscal 2025 compared to a neutral impact on diluted earnings per share in fiscal 2024.

Segment Information

We operate four segments. In the United States, our Marmaxx segment operates TJ Maxx, Marshalls, tjmaxx.com and marshalls.com and our HomeGoods segment operates HomeGoods and Homesense. Our TJX Canada segment operates Winners, HomeSense and Marshalls in Canada, and our TJX International segment operates TK Maxx, Homesense, tkmaxx.com, tkmaxx.de, and tkmaxx.at in Europe and TK Maxx in Australia. In addition to our four segments, Sierra operates retail stores and sierra.com 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 (income) 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 segments.

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U.S. SEGMENTS

Marmaxx

Net Sales

Net sales for Marmaxx were $34.6 billion for fiscal 2025, an increase of 4% compared to $33.4 billion for fiscal 2024. The increase in net sales reflects a 4% increase from comp store sales and a 2% increase from non-comp store sales, partially offset by a negative 2% estimated year-over-year impact of the 53rd week in fiscal 2024.

The increase in comp store sales for fiscal 2025 was driven by an increase in customer transactions. While both Marmaxx home and apparel comp store sales growth were positive, home comp store sales growth outperformed apparel comp store sales growth for fiscal 2025. Geographically, comp store sales growth was positive across all regions.

Segment Profit Margin

Segment profit margin increased to 14.1% for fiscal 2025 compared to a segment profit margin of 13.8% for fiscal 2024. The increase in segment profit margin was primarily driven by higher merchandise margin, partially offset by incremental store wage and payroll costs and higher occupancy and administrative costs. Merchandise margin reflects higher markon and lower inventory shrink expense.

Our Marmaxx e-commerce sites, tjmaxx.com and marshalls.com, together with sierra.com, represented less than 3% of Marmaxx’s net sales for fiscal 2025 and fiscal 2024, and did not have a significant impact on year-over-year segment margin comparisons.

In fiscal 2026, we expect to open 40 Marmaxx net new stores and approximately 20 new Sierra stores, which would increase selling square footage by approximately 2%.

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HomeGoods

Net Sales

Net sales for HomeGoods were $9.4 billion for fiscal 2025, an increase of 4%, compared to $9.0 billion for fiscal 2024. The increase in net sales reflects a 4% increase from comp store sales and a 2% increase from non-comp store sales, partially offset by a negative 2% estimated year-over-year impact of the 53rd week in fiscal 2024.

The increase in comp store sales for fiscal 2025 reflected an increase in customer transactions, partially offset by a decrease in average basket. Geographically, comp store sales growth was strongest in the West and Midwest regions.

Segment Profit Margin

Segment profit margin increased to 10.9% for fiscal 2025 compared to a segment profit margin of 9.6% for fiscal 2024. The increase in segment profit margin for fiscal 2025 was primarily driven by higher merchandise margin and the year-over-year benefit from closing HomeGoods’ e-commerce business last year, partially offset by incremental store wage and payroll costs. Merchandise margin reflects lower freight costs and higher markon.

In fiscal 2026, we expect to open 30 new HomeGoods stores, of which 9 are expected to be Homesense stores. This would increase selling square footage by approximately 3%.

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FOREIGN SEGMENTS

TJX Canada

Net Sales

Net sales for TJX Canada were $5.2 billion for fiscal 2025, an increase of 3% compared to $5.0 billion for fiscal 2024. The increase in net sales reflects a 5% increase in comp store sales and a 2% increase in non-comp store sales, partially offset by a negative foreign currency exchange rate impact of 2% and a negative 2% estimated year-over-year impact of the 53rd week in fiscal 2024. The increase in comp store sales was driven by an increase in customer transactions.

Segment Profit Margin

Segment profit margin decreased to 13.5% for fiscal 2025 compared to a segment profit margin of 14.2% for fiscal 2024. The decrease for fiscal 2025 was primarily driven by incremental store wage and payroll costs, third-party supply chain exit costs this year, and the unfavorable year-over-year impact related to an insurance claim recovery last year.

In fiscal 2026, we expect to open 12 new stores in Canada, which would increase selling square footage by approximately 2%.

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TJX International

Net Sales

Net sales for TJX International were $7.2 billion for fiscal 2025, an increase of 6% compared to $6.8 billion for fiscal 2024. The increase in net sales reflects a 4% increase in comp store sales, a 3% increase from non-comp store sales and a positive foreign currency exchange rate impact of 1%, partially offset by a negative 2% estimated year-over-year impact of the 53rd week in fiscal 2024. The increase in comp store sales was driven by an increase in customer transactions.

E-commerce sales represented less than 4% of TJX International’s net sales for both fiscal 2025 and fiscal 2024.

Segment Profit Margin

Segment profit margin increased to 5.9% for fiscal 2025 compared to a segment profit margin of 4.9% for fiscal 2024. This increase was due to higher merchandise margin, a favorable year-over-year impact from a prior year reserve related to a German COVID program receivable, partially offset by incremental store wage costs. Merchandise margin reflects higher markon and lower markdowns.

In fiscal 2026, we expect to open 22 net new stores in Europe and 6 new stores in Australia, which would increase selling square footage by approximately 3%.

GENERAL CORPORATE EXPENSE

General corporate expense for segment reporting purposes represents those costs not specifically related to the operations of our 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 increase in general corporate expense for fiscal 2025 was primarily driven by other administrative costs and share-based compensation costs, partially offset by the favorable year-over-year impacts related to the mark-to-market adjustments on inventory hedges.

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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 February 1, 2025, 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 February 1, 2025, as described in Note J—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements, are adequate to meet our operating needs for the foreseeable future.

As of February 1, 2025, we held $5.3 billion in cash. Approximately $1.4 billion of our cash was held by our foreign subsidiaries with $875 million 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 February 1, 2025. 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. Periodically, we have used, and in the future we may again 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

Net cash provided by operating activities was $6.1 billion in both fiscal 2025 and fiscal 2024. Our operating cash flows increased by $59 million compared to fiscal 2024 primarily due to a $390 million increase in net income, partially offset by a $215 million decrease in accrued expenses reflecting lower incentive compensation costs.

Investing Activities

Investing activities resulted in net cash outflows of $2.5 billion in fiscal 2025 and $1.7 billion in fiscal 2024. The cash outflows for both periods were primarily driven by capital expenditures. In addition, fiscal 2025 cash outflows include the purchase of our equity method investments related to our joint venture with Grupo Axo and a minority ownership position in BFL.

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

We expect our capital expenditures in fiscal 2026 will be in the range of approximately $2.1 billion to $2.2 billion, including approximately $1.0 billion to $1.1 billion for our offices and distribution centers (including information technology systems) to support growth, approximately $0.9 billion for store renovations and approximately $0.2 billion for new stores. We plan to fund these expenditures with our existing cash balances and through internally generated funds.

During fiscal 2025, we entered into a definitive agreement for a joint venture with Axo to hold a 49% ownership stake in MOS, Axo’s off-price, physical store business in Mexico. We have the option to increase our ownership interest in the joint venture over the long term. During the third quarter of fiscal 2025, we completed this investment for $193 million, which includes a purchase price of $179 million and acquisition costs of $14 million. We and Axo both expect to make additional future investments in the joint venture to support the expected growth of the business.

During fiscal 2025, we entered into a definitive agreement to make an investment for a 35% ownership stake in privately held BFL, representing a non-controlling, minority position. During the fourth quarter of fiscal 2025, we completed this investment for $358 million, which includes a purchase price of $344 million and acquisition costs of $14 million.

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We funded these expenditures and investments with our existing cash balances and through internally generated funds.

Financing Activities

Net cash used in financing activities resulted in net cash outflows of $3.8 billion in fiscal 2025 compared to net cash outflows of $4.2 billion in fiscal 2024. The cash outflows for both periods were primarily driven by equity repurchases and dividend payments.

Debt

The cash outflows in fiscal 2024 were due to the repayment of our $500 million 2.500% ten-year Notes due May 2023 during the second quarter of fiscal 2024. For further information regarding long-term debt, see Note J—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements.

Equity

Under our stock repurchase program, we paid $2.5 billion to repurchase and retire 22.3 million shares of our stock in fiscal 2025. We paid $2.5 billion to repurchase and retire 29 million shares of our stock in fiscal 2024.

In February 2025, we announced that our Board of Directors had approved a new stock repurchase program that authorizes the repurchase of up to an additional $2.5 billion of our common stock from time to time. We currently plan to repurchase approximately $2 billion to $2.5 billion of stock under our stock repurchase programs in fiscal 2026. We determine the timing and amount of repurchases based on our assessment of various factors including excess cash flow, liquidity, economic and market conditions, our assessment of prospects for our business, legal requirements, and other factors. The timing and amount of these purchases may change. As of February 1, 2025, approximately $3.6 billion remained available under our existing stock repurchase programs. For further information regarding equity repurchases, see Note D—Capital Stock and Earnings Per Share of Notes to Consolidated Financial Statements.

Dividends

We declared quarterly dividends on our common stock which totaled $1.50 per share in fiscal 2025 and $1.33 per share in fiscal 2024. Cash payments for dividends on our common stock totaled $1.6 billion for fiscal 2025 and $1.5 billion for fiscal 2024. We expect to pay quarterly dividends for fiscal 2026 of $0.425 per share, or an annual dividend of $1.70 per share, subject to the declaration and approval by our Board of Directors. This would represent a 13% increase over the per share dividends declared and paid in fiscal 2025.

Contractual Obligations

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

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

–See Note L—Leases of Notes to Consolidated Financial Statements. Operating lease liabilities exclude legally binding minimum lease payments for approximately 150 leases signed but not yet commenced and include options to extend lease terms that are now deemed reasonably certain of being exercised according to our Lease Accounting Policy. The balances do not include variable costs for insurance, real estate taxes, other operating expenses and, in some cases, rent payments based on a percentage of sales; these items totaled approximately one-third of the total minimum rent for fiscal 2025.

–See Note M—Accrued Expenses and Other Liabilities, Current and Long Term of Notes to Consolidated Financial Statements for long-term liabilities for which it is not reasonably possible for us to predict when they may be paid, which includes $0.7 billion for employee compensation and benefits and $0.2 billion for uncertain tax positions.

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

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CRITICAL ACCOUNTING ESTIMATES

We prepare our Consolidated Financial Statements in accordance with GAAP which requires us to make certain estimates and judgments that impact our reported results. These judgments and estimates are based on historical experience and other factors which we continually review and believe are reasonable. We consider our most critical accounting estimates, involving uncertainty requiring management estimates and judgments, to be those relating to the areas described below.

Inventory Valuation

We use the retail method for valuing inventory for all our businesses except TK Maxx in Australia. The businesses that utilize the retail method have some inventory that is initially valued at cost before the retail method is applied as it has not been fully processed for sale (i.e. inventory in transit and unprocessed inventory in our distribution centers). Under the retail method, the cost value of inventory and gross margins are determined by calculating a cost-to-retail ratio and applying it to the retail value of inventory. It involves management estimates with regard to markdowns and inventory shrinkage. Under the retail method, permanent markdowns are reflected in inventory valuation when the price of an item is reduced. We have a specific policy as to when and how markdowns are to be taken, greatly reducing management’s discretion and the need for management estimates as to markdowns. Inventory shrinkage requires estimating a shrinkage rate for interim periods; however, we take a full physical inventory near the fiscal year-end to determine shrinkage at year-end. We do not generally enter into arrangements with vendors that provide for rebates and allowances that could ultimately affect the value of inventory.

Reserves for Uncertain Tax Positions

Similar to many large corporations, our income and other tax returns and reports are regularly audited by federal, state and local tax authorities in the United States and in foreign jurisdictions where we operate, and such authorities may challenge positions we take. We are engaged in various administrative and judicial proceedings in multiple jurisdictions with respect to assessments, claims, deficiencies and refunds and other tax matters, which proceedings are in various stages of negotiation, assessment, examination, litigation and settlement. The outcomes of these proceedings are uncertain. In accordance with GAAP, we evaluate our uncertain tax positions based on our understanding of the facts, circumstances and information available at the reporting date, and we accrue for exposure when we believe that it is more likely than not, based on the technical merits, that the positions we have taken will not be sustained. However, in the next twelve months and in future periods, the amounts we accrue for uncertain tax positions from time to time or ultimately pay, as the result of the final resolutions of examinations, judicial or administrative proceedings, changes in facts, law, or legal interpretations, expiration of applicable statute of limitations or other resolutions of, or changes in, tax positions may differ either positively or negatively from the amounts we have accrued, and may result in reductions to or additions to accruals, refund claims or payments for periods not currently under examination or for which no claims have been made. Final resolutions of our tax positions or changes in accruals for uncertain tax positions could result in additional tax expense or benefit and could have a material impact on our results of operations of the period in which an examination or proceeding is resolved or in the period in which a changed outcome becomes probable and reasonably estimable.

Loss Contingencies

Certain conditions may exist as of the date the Consolidated Financial Statements are issued that may result in a loss to us but will not be resolved until one or more future events occur or fail to occur. Our management, with the assistance of our legal counsel, assesses such contingent liabilities. Such assessments inherently involve the exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us or claims that may result in such proceedings, our legal counsel assists us in evaluating the perceived merits of any legal proceedings or claims as well as the perceived merits of the relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be reasonably estimated, we will accrue for the estimated liability in the Consolidated Financial Statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be reasonably estimated, we will disclose the nature of the contingent liability, together with an estimate of the range of the possible loss or a statement that such loss is not reasonably estimable.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of any new accounting pronouncements, see Note A—Basis of Presentation and Summary of Accounting Policies of Notes to Consolidated Financial Statements included in this annual report on Form 10-K, including the dates of adoption and estimated effects on our results of operations, financial position or cash flows. We do not expect any other recently issued accounting pronouncements will have a material effect on our Consolidated Financial Statements.

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

TJX provides projections and other forward-looking statements in the following discussions particularly relating to our future financial performance. These forward-looking statements are estimates based on information currently available to us and subject to the cautionary statements set forth on page 2 of this Form 10-K. Our results are subject to risks, uncertainties and potentially inaccurate assumptions that could cause actual results to differ materially from those expressed or implied by any such forward-looking statements. Applicable risks and uncertainties include, among others, those described in Part I, Item 1A, Risk Factors, as well as other information we file with the SEC. TJX undertakes no obligation to update or revise any 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.

The discussion that follows relates to our 53-week fiscal year ended February 3, 2024 (fiscal 2024) and our 52-week fiscal years ended January 28, 2023 (fiscal 2023) and February 1, 2025 (fiscal 2025).

The following is a discussion of our consolidated operating results, followed by a discussion of our segment operating results. Discussions of fiscal 2022 items and year-to-year comparisons between fiscal 2023 and fiscal 2022 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our annual report on Form 10-K for the fiscal year ended January 28, 2023.

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 six e-commerce sites. We operate over 4,900 stores through our four main segments: in the U.S., Marmaxx (which operates TJ Maxx, Marshalls, tjmaxx.com and marshalls.com) and HomeGoods (which operates HomeGoods, and Homesense); TJX Canada (which operates Winners, HomeSense and Marshalls in Canada); and TJX International (which operates TK Maxx, Homesense, tkmaxx.com, tkmaxx.de, and tkmaxx.at in Europe, and TK Maxx in Australia). In addition to our four main segments, Sierra operates retail stores and sierra.com in the U.S. The results of Sierra are included in the Marmaxx segment.

RESULTS OF OPERATIONS

Highlights of our financial performance for fiscal 2024 include the following:

–Net sales increased 9% to $54.2 billion for fiscal 2024 versus $49.9 billion for fiscal 2023. The 53rd week in fiscal 2024 increased net sales by an estimated 2%. As of February 3, 2024, the number of stores in operation increased approximately 2% and selling square footage increased approximately 3% compared to the end of fiscal 2023.

–Consolidated comp store sales increased 5% in fiscal 2024. See Net Sales below for the definition of comp store sales.

–Diluted earnings per share were $3.86 for fiscal 2024, which included an estimated benefit of $0.10 from the 53rd week in fiscal 2024, compared to $2.97 for fiscal 2023, which included a $0.14 net of tax charge related to the write-down and the divestiture of our minority investment in Familia.

–Pre-tax profit margin (the ratio of pre-tax income to net sales) for fiscal 2024 was 11.0%, which included an estimated 0.1 percentage point benefit from the 53rd week in fiscal 2024. This was a 1.7 percentage point increase compared to 9.3% for fiscal 2023, which included a 0.4 percentage point charge related to the write-down of our minority investment in Familia.

–Our cost of sales, including buying and occupancy costs, ratio for fiscal 2024 was 70.0%, a 2.4 percentage point decrease compared to 72.4% for fiscal 2023.

–Our selling, general and administrative (“SG&A”) expense ratio for fiscal 2024 was 19.3%, a 1.4 percentage point increase compared to 17.9% for fiscal 2023.

–Our consolidated average per store inventories, including inventory on hand at our distribution centers (which excludes inventory in transit) and excluding our e-commerce sites and Sierra stores, were up 1% on both a reported basis and constant currency basis at the end of fiscal 2024 as compared to the prior year.

–During fiscal 2024, we returned $4.0 billion to our shareholders through share repurchases and dividends. A dividend of $0.3325 per share was declared in the fourth quarter of fiscal 2024 and paid in March 2024.

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Operating Results as a Percentage of Net Sales

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

Net Sales

Net sales for fiscal 2024 totaled $54.2 billion, a 9% increase versus net sales of $49.9 billion for fiscal 2023. The increase includes a 5% increase in comp store sales, a 2% increase from the estimated impact of the 53rd week in fiscal 2024, a 2% increase from non-comp store sales and a neutral impact from foreign currency exchange rates. Net sales from our e-commerce sites combined amounted to less than 2% of total sales for both fiscal 2024 and fiscal 2023.

For fiscal 2023 and fiscal 2024, we have 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-related temporary store closures and government-mandated shopping restrictions during fiscal 2022. Therefore, in fiscal 2023, we could not 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 consisted of U.S. stores only, which, for clarity, we referred to as U.S. comparable store sales (“U.S. comp store sales”), and were calculated against sales for the comparable period in fiscal 2022.

Comp store sales increased 5% for fiscal 2024. U.S. comp store sales were flat for fiscal 2023. Comp store sales for fiscal 2024 was driven by an increase in customer transactions. Apparel comp store sales growth (as defined below) outperformed home comp store sales growth (as defined below) for fiscal 2024.

As of February 3, 2024, our store count increased approximately 2% and selling square footage increased approximately 3% compared to the same period last year.

Definition of Comparable Store Sales

We define comparable store sales, or comp store sales, to be sales of stores that have been in operation for all or a portion of two consecutive fiscal years, or in other words, stores that are starting their third fiscal year of operation. We calculate comp store sales on a 52-week basis by comparing the current and prior year weekly periods that are most closely aligned. Relocated stores and stores that have changed in size are generally classified in the same way as the original store, and we believe that the impact of these stores on the consolidated comp store sales percentage is immaterial.

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

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

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

–Sales from our e-commerce sites

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

Comp store sales of our foreign segments are calculated by translating the current year’s comp store sales using the prior year’s exchange rates. This removes the effect of changes in currency exchange rates, which we believe is a more accurate measure of segment operating performance.

Comp store sales may be referred to as “same store” sales by other retail companies. The method for calculating comp store sales varies across the retail industry; therefore, our measure of comp store sales may not be comparable to that of other retail companies. Comparable store sales for a category such as home or apparel include sales from merchandise within such category combined across all divisions at the stores that fall within the Company’s definition of comparable stores for such period.

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Historically, we defined customer traffic to be the number of transactions in stores included in the comp store sales calculation; going forward we refer to this as customer transactions. We define average ticket to be the average retail price of the units sold. We define average basket to be the average dollar value of transactions.

Revenues by Geography

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

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 is 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 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 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 70.0% for fiscal 2024, a decrease of 2.4 percentage points compared to 72.4% of net sales for fiscal 2023.

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The decrease in the cost of sales ratio, including buying and occupancy costs, was primarily attributable to higher merchandise margin due to lower freight costs.

Selling, General and Administrative Expenses

SG&A expenses, as a percentage of net sales, were 19.3% for fiscal 2024, an increase of 1.4 percentage points compared to 17.9% for fiscal 2023.

The increase in SG&A ratio for fiscal 2024 was attributable to higher incentive compensation costs and incremental store wage and payroll costs. In addition, this increase reflects a reserve related to a German government COVID program receivable, costs related to the closing of our HomeGoods e-commerce business and a contribution to our U.S. charitable foundation.

Impairment on Equity Investment

During fiscal 2023, we announced and completed the divestiture of our minority investment in Familia. As a result, we recorded an impairment charge of $218 million in the first quarter of fiscal 2023 representing the entire carrying value of the investment. Additionally, we realized a $54 million tax benefit when we completed the divestiture of this investment during the third quarter of fiscal 2023.

Interest (Income) Expense, net

The components of interest (income) expense, net for the last two fiscal years are summarized below:

The change in interest (income) expense, net for fiscal 2024 compared to fiscal 2023 was due to an increase in interest income driven by an increase in prevailing rates and a higher average cash balance.

Provision for Income Taxes

In 2021, the Organization for Economic Co-operation and Development announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15%. Subsequently multiple sets of administrative guidance have been issued. Many non-US tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 with the adoption of additional components in later years or announced their plans to enact legislation in future years. Considering we do not have material operations in jurisdictions with tax rates lower than the Pillar Two minimum, these rules are not expected to materially increase our global tax costs. There remains uncertainty as to the final Pillar Two model rules. We are continuing to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-US tax jurisdictions we operate in.

In August 2022, the Inflation Reduction Act of 2022 (“IRA”), was signed into law. Among other things, the IRA imposes a 15% corporate alternative minimum tax (the “Corporate AMT”) for tax years beginning after December 31, 2022 and levies a 1% excise tax on net stock repurchases after December 31, 2022. The excise tax on the net stock repurchase, Corporate AMT, or other provisions of the IRA did not have a material impact on our results of operations or financial position in fiscal 2024 or fiscal 2023.

The effective income tax rate was 25.0% for fiscal 2024 compared to 24.5% for fiscal 2023. The increase in the fiscal 2024 effective income tax rate is primarily due to an increase of nondeductible items and a reduction of excess tax benefits from share-based compensation.

Net Income and Diluted Earnings Per Share

Net income was $4.5 billion in fiscal 2024 compared to $3.5 billion in fiscal 2023. Diluted earnings per share in fiscal 2024 were $3.86 compared to $2.97 in fiscal 2023. The 53rd week in fiscal 2024 provided an estimated benefit of $0.10 per share. The $218 million impairment on our previously-held minority investment in Familia, net of the $54 million tax benefit, had a $0.14 negative impact on diluted earnings per share for fiscal 2023. Foreign currency had a neutral impact on diluted earnings per share in fiscal 2024 compared to a 0.06 negative impact on diluted earnings per share in fiscal 2023.

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Segment Information

We operate four main business segments. In the United States, our Marmaxx segment operates TJ Maxx, Marshalls, tjmaxx.com and marshalls.com and our HomeGoods segment operates HomeGoods and Homesense. Our TJX Canada segment operates Winners, HomeSense and Marshalls in Canada, and our TJX International segment operates TK Maxx, Homesense, tkmaxx.com, tkmaxx.de, and tkmaxx.at in Europe and TK Maxx in Australia. In addition to our four main segments, Sierra operates retail stores and sierra.com in the U.S. The results of Sierra are included in the Marmaxx segment.

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 (income) 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.

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U.S. SEGMENTS

Marmaxx

Net Sales

Net sales for Marmaxx were $33.4 billion for fiscal 2024, an increase of 9% compared to $30.5 billion for fiscal 2023. The increase in net sales reflects a 6% increase from comp store sales, a 2% increase from the estimated impact of the 53rd week and a 1% increase from non-comp store sales.

The increase in comp store sales for fiscal 2024 was driven by an increase in customer transactions. For fiscal 2024, Marmaxx had strong home and apparel comp store sales growth. All geographies generally performed in line with the overall comp store sales increase.

Segment Profit Margin

Segment profit margin increased to 13.8% for fiscal 2024 compared to a segment profit margin of 12.7% for fiscal 2023. The increase in segment profit margin was primarily driven by higher merchandise margin, partially offset by incremental store wage and payroll costs and higher incentive compensation costs. Merchandise margin reflects lower freight costs and higher markon.

Our Marmaxx e-commerce sites, tjmaxx.com and marshalls.com, together with sierra.com, represented less than 3% of Marmaxx’s net sales for fiscal 2024 and fiscal 2023 and did not have a significant impact on year-over-year segment margin comparisons.

In fiscal 2025, we expect to add approximately 45 Marmaxx net new stores and 26 new Sierra stores, which would increase selling square footage by approximately 2%.

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HomeGoods

Net Sales

Net sales for HomeGoods were $9.0 billion for fiscal 2024, an increase of 9%, compared to $8.3 billion for fiscal 2023. The increase in net sales reflects a 4% increase from non-comp store sales, a 3% increase from comp store sales and a 2% increase from the estimated impact of the 53rd week.

The increase in comp store sales for fiscal 2024 reflected an increase in customer transactions, partially offset by a decrease in average basket. All geographies performed in line with the overall comp store sales increase.

Segment Profit Margin

Segment profit margin increased to 9.6% for fiscal 2024 compared to a segment profit margin of 6.3% for fiscal 2023. The increase in segment profit margin for fiscal 2024 was primarily driven by higher merchandise margin, due to lower freight costs, partially offset by incremental store wage and payroll costs, costs related to the closing of our HomeGoods e-commerce business and higher incentive compensation costs.

In the third quarter of fiscal 2024, we closed our HomeGoods e-commerce business on homegoods.com, which represented less than 1% of HomeGoods net sales for both fiscal 2024 and fiscal 2023.

In fiscal 2025, we expect to add approximately 40 HomeGoods stores, of which 17 are expected to be Homesense stores. This would increase selling square footage by approximately 4%.

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FOREIGN SEGMENTS

TJX Canada

(a)Comp store sales reported for fiscal 2024 and was not applicable for fiscal 2023.

Net Sales

Net sales for TJX Canada were $5.0 billion for fiscal 2024, an increase of 3% compared to $4.9 billion for fiscal 2023. The increase in net sales reflects a 3% increase in comp store sales, a 2% increase from the estimated impact of the 53rd week and a 1% increase in non-comp store sales, partially offset by a negative foreign currency exchange rate impact of 3%. The increase in comp store sales was driven by an increase in customer transactions, partially offset by a decrease in average basket.

Segment Profit Margin

Segment profit margin increased to 14.2% for fiscal 2024 compared to a segment profit margin of 14.0% for fiscal 2023. The increase for fiscal 2024 was primarily driven by favorable supply chain costs and higher merchandise margin, partially offset by a prior year release of a COVID wage subsidy reserve, higher incentive compensation and administrative costs. Merchandise margin reflects lower freight costs, partially offset by lower markon and higher markdowns.

In fiscal 2025, we expect to add approximately 10 stores in Canada, which would increase selling square footage by approximately 2%.

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TJX International

(a)Comp store sales reported for fiscal 2024 and was not applicable for fiscal 2023.

Net Sales

Net sales for TJX International were $6.8 billion for fiscal 2024, an increase of 9% compared to $6.2 billion for fiscal 2023. The increase in net sales reflects a 3% increase in comp store sales, a positive foreign currency exchange rate impact of 3%, a 2% increase from the estimated impact of the 53rd week and a 1% increase from non-comp store sales. The increase in comp store sales was driven by an increase in customer transactions.

E-commerce sales were approximately 3% of TJX International’s net sales for both fiscal 2024 and fiscal 2023. In addition to tkmaxx.com, during the second quarter of fiscal 2024, TJX International made online shopping available in Germany at tkmaxx.de and in Austria at tkmaxx.at.

Segment Profit Margin

Segment profit margin decreased to 4.9% for fiscal 2024 compared to a segment profit margin of 5.6% for fiscal 2023. This decrease was due to a reserve related to a German government COVID program receivable, higher incentive compensation and administrative costs and incremental store wage, partially offset by higher merchandise margin. Merchandise margin reflects lower freight costs and higher markon.

In fiscal 2025, we expect to add approximately 15 net new stores in Europe and approximately 5 net new stores in Australia, which would increase selling square footage by approximately 2%.

GENERAL CORPORATE EXPENSE

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 increase in general corporate expense for fiscal 2024 was primarily driven by higher incentive and share-based compensation costs and a contribution to TJX’s U.S. charitable foundation.

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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 February 3, 2024, 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 February 3, 2024, as described in Note J—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements, are adequate to meet our operating needs for the foreseeable future.

As of February 3, 2024, we held $5.6 billion in cash. Approximately $1.4 billion of our cash was held by our foreign subsidiaries with $804 million 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 February 3, 2024. 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 2024, we have used, and in the future we may continue to use, operating cash flow and cash on hand to repay portions of our indebtedness, depending on prevailing market conditions, liquidity requirements, existing economic conditions, contractual restrictions and other factors. As such, we may, from time to time, seek to retire, redeem, prepay or purchase our outstanding debt through redemptions, cash purchases, prepayments, refinancings and/or exchanges, in open market purchases, privately negotiated transactions, by tender offer or otherwise. If we use our operating cash flow and/or cash on hand to repay our debt, it will reduce the amount of cash available for additional capital expenditures.

Operating Activities

Net cash provided by operating activities was $6.1 billion in fiscal 2024 and $4.1 billion in fiscal 2023. Our operating cash flows increased by $2 billion compared to fiscal 2023 primarily due to a $1 billion increase in net income, a $466 million increase in accrued expenses reflecting higher incentive compensation costs and a $461 million change in merchandise inventories net of accounts payable.

Investing Activities

Investing activities resulted in net cash outflows of $1.7 billion in fiscal 2024 and $1.5 billion in fiscal 2023. The cash outflows for both periods were primarily driven by capital expenditures.

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

We expect our capital expenditures in fiscal 2025 will be in the range of approximately $2.0 billion to $2.1 billion, including approximately $1.0 billion to $1.1 billion for our offices and distribution centers (including buying and merchandising systems and other information systems) to support growth, approximately $0.8 billion for store renovations and approximately $0.2 billion for new stores. We plan to fund these expenditures with our existing cash balances and through internally generated funds.

Financing Activities

Net cash used in financing activities resulted in net cash outflows of $4.2 billion in fiscal 2024 compared to net cash outflows of $3.3 billion in fiscal 2023. The cash outflows for both periods were primarily driven by equity repurchases and dividend payments. Additionally, fiscal 2024 included a $500 million debt repayment upon maturity.

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Debt

The cash outflows in fiscal 2024 were due to the repayment of our $500 million 2.500% ten-year Notes due May 2023 during the second quarter of fiscal 2024, upon maturity. See Note J—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements for additional information.

Equity

Under our stock repurchase program, we paid $2.5 billion to repurchase and retire 29.0 million shares of our stock in fiscal 2024. We paid $2.3 billion to repurchase and retire 34.9 million shares of our stock in fiscal 2023.

In February 2024, we announced that our Board of Directors had approved a new stock repurchase program that authorizes the repurchase of up to an additional $2.5 billion of our common stock from time to time. We currently plan to repurchase approximately $2 billion to $2.5 billion of stock under our stock repurchase programs in fiscal 2025. We determine the timing and amount of repurchases based on our assessment of various factors including excess cash flow, liquidity, economic and market conditions, our assessment of prospects for our business, legal requirements, and other factors. The timing and amount of these purchases may change. As of February 3, 2024, approximately $3.5 billion remained available under our existing stock repurchase programs. For further information regarding equity repurchases, see Note D—Capital Stock and Earnings Per Share of Notes to Consolidated Financial Statements.

The IRA levies a 1% excise tax on net stock repurchases after December 31, 2022. Beginning on January 1, 2023, these purchases are subject to the excise tax. The excise tax on the net stock repurchase portion of the IRA did not have a material impact on our results of operations or financial position in fiscal 2024 or fiscal 2023. See Note K—Income Taxes of Notes to Consolidated Financial Statements for additional information.

Dividends

We declared quarterly dividends on our common stock which totaled $1.33 per share in fiscal 2024 and $1.18 per share in fiscal 2023. Cash payments for dividends on our common stock totaled $1.5 billion for fiscal 2024 and $1.3 billion for fiscal 2023. We expect to pay quarterly dividends for fiscal 2025 of $0.375 per share, or an annual dividend of $1.50 per share, subject to the declaration and approval by our Board of Directors. This would represent a 13% increase over the per share dividends declared and paid in fiscal 2024.

Contractual Obligations

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

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

–See Note L—Leases of Notes to Consolidated Financial Statements. Operating lease liabilities exclude legally binding minimum lease payments for approximately 170 leases signed but not yet commenced and include options to extend lease terms that are now deemed reasonably certain of being exercised according to our Lease Accounting Policy. The balances do not include variable costs for insurance, real estate taxes, other operating expenses and, in some cases, rent payments based on a percentage of sales; these items totaled approximately one-third of the total minimum rent for fiscal 2024.

–See Note M—Accrued Expenses and Other Liabilities, Current and Long Term of Notes to Consolidated Financial Statements for long-term liabilities for which it is not reasonably possible for us to predict when they may be paid, which includes $0.6 billion for employee compensation and benefits and $0.2 billion for uncertain tax positions.

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

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CRITICAL ACCOUNTING ESTIMATES

We prepare our consolidated financial statements in accordance with GAAP which requires us to make certain estimates and judgments that impact our reported results. These judgments and estimates are based on historical experience and other factors which we continually review and believe are reasonable. We consider our most critical accounting estimates, involving uncertainty requiring management estimates and judgments, to be those relating to the areas described below.

Inventory Valuation

We use the retail method for valuing inventory for all our businesses except TK Maxx in Australia. The businesses that utilize the retail method have some inventory that is initially valued at cost before the retail method is applied as it has not been fully processed for sale (i.e. inventory in transit and unprocessed inventory in our distribution centers). Under the retail method, the cost value of inventory and gross margins are determined by calculating a cost-to-retail ratio and applying it to the retail value of inventory. It involves management estimates with regard to markdowns and inventory shrinkage. Under the retail method, permanent markdowns are reflected in inventory valuation when the price of an item is reduced. We have a specific policy as to when and how markdowns are to be taken, greatly reducing management’s discretion and the need for management estimates as to markdowns. Inventory shrinkage requires estimating a shrinkage rate for interim periods; however, we take a full physical inventory near the fiscal year-end to determine shrinkage at year-end. We do not generally enter into arrangements with vendors that provide for rebates and allowances that could ultimately affect the value of inventory.

Reserves for Uncertain Tax Positions

Similar to many large corporations, our income and other tax returns and reports are regularly audited by federal, state and local tax authorities in the United States and in foreign jurisdictions where we operate, and such authorities may challenge positions we take. We are engaged in various administrative and judicial proceedings in multiple jurisdictions with respect to assessments, claims, deficiencies and refunds and other tax matters, which proceedings are in various stages of negotiation, assessment, examination, litigation and settlement. The outcomes of these proceedings are uncertain. In accordance with GAAP, we evaluate our uncertain tax positions based on our understanding of the facts, circumstances and information available at the reporting date, and we accrue for exposure when we believe that it is more likely than not, based on the technical merits, that the positions we have taken will not be sustained. However, in the next twelve months and in future periods, the amounts we accrue for uncertain tax positions from time to time or ultimately pay, as the result of the final resolutions of examinations, judicial or administrative proceedings, changes in facts, law, or legal interpretations, expiration of applicable statute of limitations or other resolutions of, or changes in, tax positions may differ either positively or negatively from the amounts we have accrued, and may result in reductions to or additions to accruals, refund claims or payments for periods not currently under examination or for which no claims have been made. Final resolutions of our tax positions or changes in accruals for uncertain tax positions could result in additional tax expense or benefit and could have a material impact on our results of operations of the period in which an examination or proceeding is resolved or in the period in which a changed outcome becomes probable and reasonably estimable.

Loss Contingencies

Certain conditions may exist as of the date the consolidated financial statements are issued that may result in a loss to us but will not be resolved until one or more future events occur or fail to occur. Our management, with the assistance of our legal counsel, assesses such contingent liabilities. Such assessments inherently involve the exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us or claims that may result in such proceedings, our legal counsel assists us in evaluating the perceived merits of any legal proceedings or claims as well as the perceived merits of the relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be reasonably estimated, we will accrue for the estimated liability in the consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be reasonably estimated, we will disclose the nature of the contingent liability, together with an estimate of the range of the possible loss or a statement that such loss is not reasonably estimable.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of any new accounting pronouncements, see Note A—Basis of Presentation and Summary of Accounting Policies of Notes to Consolidated Financial Statements included in this annual report on Form 10-K, including the dates of adoption and estimated effects on our results of operations, financial position or cash flows. We do not expect any other recently issued accounting pronouncements will have a material effect on our consolidated financial statements.

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

TJX provides projections and other forward-looking statements in the following discussions particularly relating to our future financial performance. These forward-looking statements are estimates based on information currently available to us, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and subject to the cautionary statements set forth on page 2 of this Form 10-K. Our results are subject to risks and uncertainties including, but not limited to, those described in Part I, Item 1A, Risk Factors, and those identified from time to time in our other filings with the Securities and Exchange Commission. TJX undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise.

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

The following is a discussion of our consolidated operating results, followed by a discussion of our segment operating results. Discussions of fiscal 2021 items and year-to-year comparisons between fiscal 2022 and fiscal 2021 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our annual report on Form 10-K for the fiscal year ended January 29, 2022.

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 4,800 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 retail stores and sierra.com in the U.S. The results of Sierra are included in the Marmaxx segment.

RESULTS OF OPERATIONS

Highlights of our financial performance for fiscal 2023 include the following:

–Net sales increased 3% to $49.9 billion for fiscal 2023 versus $48.5 billion for fiscal 2022. As of January 28, 2023, both the number of stores in operation and selling square footage increased approximately 3% compared to the end of fiscal 2022.

–U.S. comp store sales were flat in fiscal 2023. U.S. open-only comp store sales increased 17% for fiscal 2022. See Net Sales below for definitions of both U.S. comp store sales and U.S. open-only comp store sales.

–Net sales increased 13% for TJX Canada and increased 8% for TJX International in fiscal 2023. On a constant currency basis, net sales increased 18% for TJX Canada and increased 22% for TJX International.

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

–Pre-tax margin (the ratio of pre-tax income to net sales) for fiscal 2023 was 9.3%, which included a 0.4 percentage point charge related to the write-down of our minority investment in Familia. This was a 0.2 percentage point increase compared to 9.1% for fiscal 2022, which included a 0.5 percentage point debt extinguishment charge.

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

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

–Our consolidated average per store inventories, including inventory on hand at our distribution centers (which excludes inventory in transit) and excluding our e-commerce sites and Sierra stores, were up 1% on a reported basis and up 2% on a constant currency basis at the end of fiscal 2023 as compared to the prior year.

–During fiscal 2023, we returned $3.6 billion to our shareholders through share repurchases and dividends. A dividend of $0.295 per share was declared in the fourth quarter of fiscal 2023 and paid in March 2023.

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Operating Results as a Percentage of Net Sales

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

*Figures may not foot due to rounding.

Net Sales

Net sales for fiscal 2023 totaled $49.9 billion, a 3% increase versus net sales of $48.5 billion for fiscal 2022. The increase includes a 5% increase in non-comp store sales, partially offset by a 2% negative impact from foreign currency exchange rates. The non-comp store sales increase reflects a fully open store base for fiscal 2023 compared to temporary store closures in fiscal 2022. Net sales from our e-commerce sites combined amounted to less than 3% of total sales for each of fiscal 2023 and fiscal 2022.

For fiscal 2023, we returned to our historical definition of comparable store sales (as defined below). While stores in the U.S. 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. We expect all geographies to return to the historical definition of comparable store sales in fiscal 2024.

U.S. comp store sales were flat for fiscal 2023 compared to a 17% U.S. open-only comp store sales (as defined below) increase for fiscal 2022. U.S. comp store sales for fiscal 2023 reflect an increase in average basket driven by higher average ticket offset by a decrease in customer traffic. Strong apparel sales offset a decline in home fashions sales for fiscal 2023.

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

Definition of Comparable Store Sales

We define comparable store sales, or comp store sales, to be sales of stores that have been in operation for all or a portion of two consecutive fiscal years, or in other words, stores that are starting their third fiscal year of operation. We calculate comp store sales on a 52-week basis by comparing the current and prior year weekly periods that are most closely aligned. Relocated stores and stores that have changed in size are generally classified in the same way as the original store, and we believe that the impact of these stores on the consolidated comp percentage is immaterial.

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

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

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

–Sales from our e-commerce sites

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

Comp store sales of our foreign segments are calculated by translating the current year’s comp store sales using the prior year’s exchange rates. This removes the effect of changes in currency exchange rates, which we believe is a more accurate measure of segment operating performance.

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Comp store sales may be referred to as “same store” sales by other retail companies. The method for calculating comp store sales varies across the retail industry, therefore our measure of comp store sales may not be comparable to that of other retail companies.

We define customer traffic to be the number of transactions in stores and average ticket to be the average retail price of the units sold. 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. U.S. open-only comp store sales reports the open-only comp store sales for our Marmaxx and HomeGoods segments.

Revenues by Geography

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

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 is 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.

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

The increase in the total cost of sales, including buying and occupancy costs, was primarily attributable to lower merchandise margin and investments in supply chain. Merchandise margin reflected approximately 1.2 percentage points of incremental freight costs as well as higher markdowns and shrink expense, partially offset by strong markon.

Cost of sales, including buying and occupancy costs, was favorably impacted by approximately $9 million and $27 million of government programs for fiscal 2023 and fiscal 2022, respectively, in regions where we had temporary store closures.

Selling, General and Administrative Expenses

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

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

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

Impairment on Equity Investment

During fiscal 2023, we announced and completed the divestiture of our minority investment in Familia. As a result, we recorded an impairment charge of $218 million in the first quarter of fiscal 2023 representing the entire carrying value of the investment. Additionally, we realized a $54 million tax benefit when we completed the divestiture of this investment during the third quarter of fiscal 2023.

Interest Expense, net

The components of interest expense, net for the last two fiscal years are summarized below:

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

Provision for Income Taxes

In August 2022, the Inflation Reduction Act of 2022 (“IRA”), was signed into law. Among other things, the IRA imposes a 15% corporate alternative minimum tax (the “Corporate AMT”) for tax years beginning after December 31, 2022 and levies a 1% excise tax on net stock repurchases after December 31, 2022. The excise tax on the net repurchase portion of the IRA did not have an impact on our results of operations or financial position in fiscal 2023 and we do not expect the Corporate AMT, excise tax, or other provisions of the IRA to have a material impact on our consolidated financial statements.

The effective income tax rate was 24.5% for fiscal 2023 compared to 25.4% for fiscal 2022. The decrease in the fiscal 2023 effective income tax rate was primarily due to the lapse of statutes of limitations and resolution of various tax matters, and the change of jurisdictional mix of profits and losses, partially offset by a reduction of excess tax benefits from share-based compensation.

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Net Income and Diluted Earnings Per Share

Net income was $3.5 billion in fiscal 2023 compared to $3.3 billion in fiscal 2022. Diluted earnings per share in fiscal 2023 were $2.97 compared to $2.70 in fiscal 2022. The $218 million impairment on our previously-held minority investment in Familia, net of the $54 million tax benefit, had a $0.14 negative impact on earnings per share for fiscal 2023. Foreign currency had a $0.06 negative impact on earnings per share in fiscal 2023 compared to a neutral impact on earnings per share in fiscal 2022. A $242 million debt extinguishment charge in fiscal 2022 had a $0.15 negative impact on earnings per share for fiscal 2022.

Segment Information

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 retail stores and sierra.com 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.

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U.S. SEGMENTS

Marmaxx

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

Net Sales

Net sales for Marmaxx were $30.5 billion for fiscal 2023, an increase of 4% compared to $29.5 billion for fiscal 2022. The increase in net sales reflects a 3% increase from comp store sales and a 1% increase from non-comp store sales.

Comp sales growth at Marmaxx was primarily attributable to an increase in average basket driven by higher average ticket. For fiscal 2023, positive apparel sales outperformed a decline in home fashion sales. All geographies generally performed in line with the overall comp store sales increase.

Segment Profit Margin

Segment profit margin decreased to 12.7% for fiscal 2023 compared to a segment profit margin of 12.9% for fiscal 2022. The decrease in segment profit margin was driven by lower merchandise margin and higher store wages, partially offset by store payroll reflecting lower COVID-related expenses. Within merchandise margin, incremental freight costs, higher markdowns and shrink expense were partially offset by strong markon.

Our Marmaxx e-commerce sites, tjmaxx.com and marshalls.com, together with sierra.com, represented less than 3% of Marmaxx’s net sales for fiscal 2023 and fiscal 2022 and did not have a significant impact on year-over-year segment margin comparisons.

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

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HomeGoods

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

Net Sales

Net sales for HomeGoods were $8.3 billion for fiscal 2023, a decrease of 8%, compared to $9.0 billion for fiscal 2022. The decrease in net sales reflects an 11% decrease from comp store sales, partially offset by a 3% increase from non-comp store sales.

Comp store sales decline for HomeGoods for fiscal 2023 reflected a decrease in customer traffic, partially offset by an increase in average basket driven by higher average ticket. All geographies performed in line with the overall comp store sales decline.

Segment Profit Margin

Segment profit margin decreased to 6.3% for fiscal 2023 compared to a segment profit margin of 10.1% for fiscal 2022. The decrease in segment profit margin for fiscal 2023 was driven by deleverage on lower comp store sales, primarily in occupancy and administrative costs, lower merchandise margin and higher store and distribution wages, partially offset by store payroll reflecting lower COVID-related expenses. Merchandise margin included incremental freight costs of approximately 3 percentage points as well as higher markdowns, partially offset by strong markon.

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

In fiscal 2024, we expect to add up to approximately 50 HomeGoods stores, of which 18 are Homesense stores. This would increase selling square footage by approximately 6%.

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FOREIGN SEGMENTS

TJX Canada

Net Sales

Net sales for TJX Canada were $4.9 billion for fiscal 2023, an increase of 13% compared to $4.3 billion for fiscal 2022. The increase in net sales reflected having a fully open store base for fiscal 2023, compared to temporary store closures in fiscal 2022, as a result of the COVID-19 pandemic. Within net sales, an increase in average basket driven by higher average ticket was partially offset by the negative foreign currency exchange rate impact of 5% for fiscal 2023.

Segment Profit Margin

Segment profit margin increased to 14.0% for fiscal 2023 compared to a segment profit margin of 11.2% for fiscal 2022. The increase for fiscal 2023 was primarily driven by leverage on increased sales, primarily in occupancy and administrative costs, and higher merchandise margin as well as lower store payroll reflecting lower COVID-related expenses, and lower incentive compensation costs. Merchandise margin reflects strong markon partially offset by incremental freight costs for fiscal 2023.

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

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TJX International

Net Sales

Net sales for TJX International were $6.2 billion for fiscal 2023, an increase of 8% compared to $5.7 billion for fiscal 2022. The increase in net sales reflects having a fully open store base, compared to temporary store closures in fiscal 2022 as a result of the COVID-19 pandemic, which was partially offset by the negative foreign currency exchange rate impact of 14%.

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

Segment Profit Margin

Segment profit margin increased to 5.6% for fiscal 2023 compared to a segment profit margin of 2.8% for fiscal 2022. This increase was primarily driven by leverage on increased sales, primarily in occupancy and administrative costs as well as higher merchandise margin, lower COVID-related expenses in stores and distribution centers and lower incentive compensation costs. Within merchandise margin, strong markon was partially offset by incremental freight costs and higher markdowns. Fiscal 2022 also reflected $157 million from government programs received in regions where we had temporary store closures.

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

GENERAL CORPORATE EXPENSE

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

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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 January 28, 2023, there were no short-term bank borrowings or commercial paper outstanding. We believe our existing cash and cash equivalents, internally generated funds and our credit facilities, under which facilities we had $1.5 billion available as of the period ended January 28, 2023, as described in Note J—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements, are adequate to meet our operating needs for the foreseeable future.

As of January 28, 2023, we held $5.5 billion in cash. Approximately $1.2 billion of our cash was held by our foreign subsidiaries with $0.7 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 January 28, 2023. 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 2024, we intend to use and in the future we may continue to use, operating cash flow and cash on hand to repay portions of our indebtedness, depending on prevailing market conditions, liquidity requirements, existing economic conditions, contractual restrictions and other factors. As such, we may, from time to time, seek to retire, redeem, prepay or purchase our outstanding debt through redemptions, cash purchases, prepayments, refinancings and/or exchanges, in open market purchases, privately negotiated transactions, by tender offer or otherwise. If we use our operating cash flow and/or cash on hand to repay our debt, it will reduce the amount of cash available for additional capital expenditures.

Operating Activities

Net cash provided by operating activities was $4.1 billion in fiscal 2023 and $3.1 billion in fiscal 2022. Our operating cash flows increased by $1 billion compared to fiscal 2022 primarily due to the $1.5 billion change in merchandise inventories net of accounts payable. The change in inventory was primarily driven by the fiscal 2022 rebuilding of inventory levels. The increase in operating cash flows was partially offset by a $0.7 billion decrease in accrued expenses, the largest component of which was lower incentive compensation costs.

Investing Activities

Investing activities resulted in net cash outflows of $1.5 billion in fiscal 2023 and $1 billion in fiscal 2022. The cash outflows for both periods were primarily driven by capital expenditures.

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

We expect our capital expenditures in fiscal 2024 will be in the range of approximately $1.7 billion to $1.9 billion, including approximately $0.9 billion to $1 billion for our offices and distribution centers (including buying and merchandising systems and other information systems) to support growth, approximately $0.6 billion to $0.7 billion for store renovations and approximately $0.2 billion for new stores. We plan to fund these expenditures with our existing cash balances and through internally generated funds.

Financing Activities

Net cash used in financing activities resulted in net cash outflows of $3.3 billion in fiscal 2023 compared to net cash outflows of $6.2 billion in fiscal 2022. In fiscal 2023 the cash outflows were primarily driven by equity repurchases and dividend payments. In fiscal 2022 the cash outflows were primarily driven by equity repurchases, dividend payments and $3 billion of debt repayments.

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Debt

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

Our 2.50% ten-year Notes due May 2023 will mature during the second quarter of fiscal 2024 and are included within our current maturities of long-term debt. See Note J—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements for additional information.

Equity

Under our stock repurchase program, we paid $2.3 billion to repurchase and retire 34.9 million shares of our stock on a settlement basis in fiscal 2023. We paid $2.2 billion to repurchase and retire 31.3 million shares of our stock on a settlement basis in fiscal 2022. These outflows for both periods were partially offset by proceeds from the exercise of employee stock options of $0.3 billion in fiscal 2023 and $0.2 billion in fiscal 2022.

In February 2023, the Board of Directors announced a new stock repurchase program that authorizes the repurchase of up to an additional $2 billion of our common stock from time to time. We currently plan to repurchase approximately $2 billion to $2.5 billion of stock under our stock repurchase programs in fiscal 2024. We determine the timing and amount of repurchases based on our assessment of various factors including excess cash flow, liquidity, economic and market conditions, our assessment of prospects for our business, legal requirements, and other factors. The timing and amount of these purchases may change. As of January 28, 2023, approximately $3.5 billion remained available under our existing stock repurchase programs. For further information regarding equity repurchases, see Note D—Capital Stock and Earnings Per Share of Notes to Consolidated Financial Statements.

The Inflation Reduction Act of 2022, which became law in August 2022, levies a 1% excise tax on net stock repurchases after December 31, 2022. Historically, during the year we have made discretionary share repurchases. Beginning on January 1, 2023, these purchases are subject to the excise tax. The excise tax on the net stock repurchase portion of the IRA did not have an impact on our results of operations or financial position in fiscal 2023, and based on historical net repurchase activity, we do not expect it to have a material impact in future years. See Note K—Income Taxes of Notes to Consolidated Financial Statements for additional information.

Dividends

We declared quarterly dividends on our common stock of $0.295 per share for each of the quarters in fiscal 2023 which totaled $1.18 per share in fiscal 2023. We declared quarterly dividends on our common stock of $0.26 per share for each of the quarters in fiscal 2022, which totaled $1.04 per share in fiscal 2022. Cash payments for dividends on our common stock totaled $1.3 billion for both fiscal 2023 and fiscal 2022. We expect to pay quarterly dividends for fiscal 2024 of $0.3325 per share, or an annual dividend of $1.33 per share, subject to the declaration and approval by our Board of Directors. This would represent a 13% increase over the per share dividends declared and paid in fiscal 2023.

Contractual Obligations

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

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

–See Note L—Leases of Notes to Consolidated Financial Statements. Operating lease liabilities exclude legally binding minimum lease payments for approximately 180 leases signed but not yet commenced and include options to extend lease terms that are now deemed reasonably certain of being exercised according to our Lease Accounting Policy. The balances do not include variable costs for insurance, real estate taxes, other operating expenses and, in some cases, rentals based on a percentage of sales; these items totaled approximately one-third of the total minimum rent for fiscal 2023.

–See Note M—Accrued Expenses and Other Liabilities, Current and Long Term of Notes to Consolidated Financial Statements for long-term liabilities for which it is not reasonably possible for us to predict when they may be paid, which includes $0.6 billion for employee compensation and benefits and $0.2 billion for uncertain tax positions.

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

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CRITICAL ACCOUNTING ESTIMATES

We prepare our consolidated financial statements in accordance with GAAP which requires us to make certain estimates and judgments that impact our reported results. These judgments and estimates are based on historical experience and other factors which we continually review and believe are reasonable. We consider our most critical accounting estimates, involving uncertainty requiring management estimates and judgments, to be those relating to the areas described below.

Inventory Valuation

We use the retail method for valuing inventory for all our businesses except T.K. Maxx in Australia. The businesses that utilize the retail method have some inventory that is initially valued at cost before the retail method is applied as it has not been fully processed for sale (i.e. inventory in transit and unprocessed inventory in our distribution centers). Under the retail method, the cost value of inventory and gross margins are determined by calculating a cost-to-retail ratio and applying it to the retail value of inventory. It involves management estimates with regard to markdowns and inventory shrinkage. Under the retail method, permanent markdowns are reflected in inventory valuation when the price of an item is reduced. We have a specific policy as to when and how markdowns are to be taken, greatly reducing management’s discretion and the need for management estimates as to markdowns. Inventory shrinkage requires estimating a shrinkage rate for interim periods; however, we take a full physical inventory near the fiscal year end to determine shrinkage at year end. We do not generally enter into arrangements with vendors that provide for rebates and allowances that could ultimately affect the value of inventory.

Reserves for Uncertain Tax Positions

Similar to many large corporations, our income and other tax returns and reports are regularly audited by federal, state and local tax authorities in the United States and in foreign jurisdictions where we operate, and such authorities may challenge positions we take. We are engaged in various administrative and judicial proceedings in multiple jurisdictions with respect to assessments, claims, deficiencies and refunds and other tax matters, which proceedings are in various stages of negotiation, assessment, examination, litigation and settlement. The outcomes of these proceedings are uncertain. In accordance with GAAP, we evaluate our uncertain tax positions based on our understanding of the facts, circumstances and information available at the reporting date, and we accrue for exposure when we believe that it is more likely than not, based on the technical merits, that the positions we have taken will not be sustained. However, in the next twelve months and in future periods, the amounts we accrue for uncertain tax positions from time to time or ultimately pay, as the result of the final resolutions of examinations, judicial or administrative proceedings, changes in facts, law, or legal interpretations, expiration of applicable statute of limitations or other resolutions of, or changes in, tax positions may differ either positively or negatively from the amounts we have accrued, and may result in reductions to or additions to accruals, refund claims or payments for periods not currently under examination or for which no claims have been made. Final resolutions of our tax positions or changes in accruals for uncertain tax positions could result in additional tax expense or benefit and could have a material impact on our results of operations of the period in which an examination or proceeding is resolved or in the period in which a changed outcome becomes probable and reasonably estimable.

Loss Contingencies

Certain conditions may exist as of the date the consolidated financial statements are issued that may result in a loss to us but will not be resolved until one or more future events occur or fail to occur. Our management, with the assistance of our legal counsel, assesses such contingent liabilities. Such assessments inherently involve the exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us or claims that may result in such proceedings, our legal counsel assists us in evaluating the perceived merits of any legal proceedings or claims as well as the perceived merits of the relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be reasonably estimated, we will accrue for the estimated liability in the consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be reasonably estimated, we will disclose the nature of the contingent liability, together with an estimate of the range of the possible loss or a statement that such loss is not reasonably estimable.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of any new accounting pronouncements, see Note A—Basis of Presentation and Summary of Accounting Policies of Notes to Consolidated Financial Statements included in this annual report on Form 10-K. We do not expect any recently issued accounting pronouncements will have a material effect on our consolidated financial statements.

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

TJX provides projections and other forward-looking statements in the following discussions particularly relating to our future financial performance. These forward-looking statements are estimates based on information currently available to us, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and subject to the cautionary statements set forth on page 2 of this Form 10-K. Our results are subject to risks and uncertainties including, but not limited to, those described in Part I, Item 1A, Risk Factors, and those identified from time to time in our other filings with the Securities and Exchange Commission. TJX undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise.

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

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

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 nearly 4,700 stores through our four main segments: in the U.S., Marmaxx (which operates T.J. Maxx, Marshalls, tjmaxx.com and marshalls.com) and HomeGoods (which operates HomeGoods, 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

Matters Affecting Comparability

The COVID-19 pandemic continued to impact the U.S. and other countries around the world in fiscal 2022. During fiscal 2022, while our stores in the U.S. and all of our e-commerce businesses remained open for the entire period, we did have government-mandated temporary store closures in Europe, Canada and Australia, resulting in our stores being closed in the aggregate for approximately 4% of fiscal 2022. Additionally, intermittently throughout the year, we operated under government-mandated shopping restrictions, including capacity limitations. Stores were temporarily closed for approximately 24% of fiscal 2021 due to temporary closures across all geographies. Overall, our fiscal 2022 results were significantly better than our fiscal 2021 results.

In addition to comparing current year results to fiscal 2021, we may, where meaningful, also compare these results to a comparable period in the fiscal year ended February 1, 2020, prior to the emergence of the pandemic. We believe this additional comparison provides insight into how we are managing the business and performing as compared to our pre-pandemic results.

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

–Net sales were $48.5 billion, $32.1 billion, and $41.7 billion for fiscal 2022, fiscal 2021, and fiscal 2020, respectively. As of January 29, 2022, the number of stores in operation increased approximately 3% and selling square footage increased 2% compared to the end of fiscal 2021.

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

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

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

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

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

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

–During fiscal 2022, we returned $3.4 billion to our shareholders through share repurchases and dividends. A dividend of $0.26 per share was declared in the fourth quarter of fiscal 2022 and paid in March of 2022.

Operating Results as a Percentage of Net Sales

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

*Figures may not foot due to rounding.

Recent Events and Trends

Divestiture of Equity Investment

Subsequent to the fiscal year ended January 29, 2022, given the recent Russian invasion of Ukraine, we committed to divesting our equity ownership in Familia. As of March 2, 2022, Douglas Mizzi and Scott Goldenberg have resigned from their director and observer positions, respectively, on Familia’s board of directors, effective immediately. As a result of this commitment to divest, we may recognize an investment loss of up to $225 million. Prior to divestiture, we may be required to record an impairment charge if the fair value of our investment in Familia declines below its carrying value on our Consolidated Balance Sheets.

In fiscal 2020, we invested $225 million for a 25% non-controlling, minority interest in privately held Familia. Familia, domiciled in Luxembourg, is an off-price retailer of apparel and home fashions with more than 400 stores in Russia. We account for our investment in Familia using the equity method of accounting. As of January 29, 2022, the carrying value of our investment in Familia was $186 million, which reflects the revaluing of the investment from Russian rubles to the U.S. dollar, resulting in a cumulative translation loss and reducing the carrying value of our investment by approximately $40 million. See additional information on the Equity Investment in Note A—Basis of Presentation and Summary of Accounting Policies of Notes to Consolidated Financial Statements.

COVID-19

The significant impact of the COVID-19 pandemic on our global retail operations that began during fiscal 2021 continued to impact our business in fiscal 2022. We entered fiscal 2022 with significant ongoing global uncertainty related to the pandemic. The health and safety of our Associates and customers remained a top priority during fiscal 2022, and we continue to monitor developments, including government requirements and recommendations that could result in possible additional impacts to our operations.

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

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Net Sales

Net sales totaled $48.5 billion, $32.1 billion, and $41.7 billion for fiscal 2022, fiscal 2021 and fiscal 2020, respectively. Net sales from our e-commerce sites combined amounted to less than 3% of total sales for each of fiscal 2022, fiscal 2021 and fiscal 2020.

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

For fiscal 2022, we temporarily reported open-only comp store sales, as described below. For fiscal 2023, we intend to return to our historical definition of comparable store sales. While stores in the U.S. were open for all of fiscal 2022, a significant number of stores in TJX Canada and TJX International experienced COVID-19 related temporary store closures and government-mandated shopping restrictions during fiscal 2022. Therefore, we cannot measure year-over-year comparable store sales with fiscal 2022 in these geographies in a meaningful way. As a result, the comparable stores included in the fiscal 2023 measure will consist of U.S. stores only, which, we intend to refer to as U.S. comparable store sales and will be calculated against sales for the comparable periods in fiscal 2022. Our historical definition of comp store sales is also presented below for reference.

Fiscal 2022 vs Fiscal 2021

Net sales increased 51% in fiscal 2022 compared to fiscal 2021. Our stores in the U.S. and all of our e-commerce businesses remained open for the entire period, while we had temporary closures in Europe, Canada, and Australia resulting in our stores being closed in the aggregate for approximately 4% of fiscal 2022, as compared to stores across all geographies being temporarily closed for approximately 24% for fiscal 2021. In addition to stores being open for more days in fiscal 2022, net sales further increased due to higher customer traffic and increased average basket.

Fiscal 2022 vs Fiscal 2020

Net sales increased 16% and open-only comp store sales were up 15% for fiscal 2022 compared to fiscal 2020. U.S. open-only comp store sales were up 17% for fiscal 2022 compared to fiscal 2020. This reflects an increase in average basket across all divisions. Customer traffic was up in the U.S., where stores were open for all of fiscal 2022, and was down in geographies where we had COVID-19 related temporary store closures and government-mandated shopping restrictions. Our open-only comp store sales increase in home fashions was significantly above our overall open-only comp increase. In apparel, we had strong open-only comp store sales growth during fiscal 2022 compared to the same period in fiscal 2020.

Historical Comparable Store Sales

Historically, we defined comparable store sales, or comp sales, to be sales of stores that have been in operation for all or a portion of two consecutive fiscal years, or in other words, stores that are starting their third fiscal year of operation. We calculated comp sales on a 52-week basis by comparing the current and prior year weekly periods that are most closely aligned. 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, meaning sierra.com, tjmaxx.com, marshalls.com, homegoods.com and tkmaxx.com

We determine which stores are included in the comp sales calculation at the beginning of a fiscal year and the classification remains constant throughout that year unless a store is closed permanently or for an extended period during that fiscal year. Beginning in fiscal 2020, Sierra stores that fit the comp store definition were included in comp stores in our Marmaxx segment.

Comp sales of our foreign segments are calculated by translating the current year’s comp sales using the prior year’s exchange rates. This removes the effect of changes in currency exchange rates, which we believe is a more accurate measure of segment operating performance.

Comp sales may be referred to as “same store” sales by other retail companies. The method for calculating comp sales varies across the retail industry, therefore our measure of comp sales may not be comparable to that of other retail companies.

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.

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Open-Only Comp Store Sales

Due to the temporary closing of stores as a result of the COVID-19 pandemic, our historical definition of comp store sales is not applicable for the reported periods. Since the second quarter of fiscal 2021, we temporarily reported open-only comp store sales. Open-only comp store sales includes stores initially classified as comp stores at the beginning of fiscal 2021 that had to temporarily close due to the COVID-19 pandemic. This measure reports the sales increase or decrease of these stores for the days the stores were open in the current period against sales for the same days in fiscal 2020, prior to the pandemic. Open-only comp store sales of our foreign segments are calculated by translating the current year using fiscal 2020’s exchange rates.

Revenues by Geography

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

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 referred to as “transactional foreign exchange,” 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.

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Cost of Sales, Including Buying and Occupancy Costs

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

Fiscal 2022 vs Fiscal 2021

The increase in the total cost of sales, including buying and occupancy costs, was primarily due to the additional cost of merchandise sold due to a higher level of sales in fiscal 2022 compared to fiscal 2021. Our stores were temporarily closed in the aggregate for approximately 4% of fiscal 2022 and approximately 24% of fiscal 2021. Merchandise margin improved during fiscal 2022, primarily driven by favorable markdowns, offset by increased freight costs. In addition, supply chain costs increased due to additional investments in distribution capacity and higher wages, which, along with freight costs, are expected to continue into the next fiscal year.

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

Fiscal 2022 vs Fiscal 2020

The expense ratio was flat for fiscal 2022 compared to the fiscal 2020. The ratio reflects the leverage on our occupancy costs due to the strong open-only comp store sales growth. Within merchandise margin, strong markon and lower markdowns more than offset approximately 200 basis points of incremental freight costs in fiscal 2022. The occupancy and merchandise margin improvements were offset by higher supply chain costs primarily due to additional investments to expand distribution capacity and higher wage costs.

Selling, General and Administrative Expenses

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

Fiscal 2022 vs Fiscal 2021

The increase in SG&A expense for fiscal 2022 was primarily driven by higher store payroll costs to support a higher sales volume. In addition to these costs, incentive compensation costs and other variable store costs, such as advertising spend and credit processing fees, were higher in fiscal 2022 as compared to fiscal 2021.

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

Fiscal 2022 vs Fiscal 2020

The expense ratio increased 0.8% for fiscal 2022 compared to fiscal 2020. The increase was driven by higher store payroll costs, primarily due to incremental COVID-19 related payroll costs.

Loss on Early Extinguishment of Debt

On June 4, 2021, we completed make-whole calls for our $1.25 billion aggregate principal amount of 3.50% Notes maturing in 2025 and our $750 million aggregate principal amount of 3.75% Notes maturing in 2027. As a result of these redemptions prior to their scheduled maturities, we recorded a pre-tax debt extinguishment charge of $242 million in the second quarter of fiscal 2022. For additional information on the debt transactions, see Note J—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements.

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

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Interest Expense, net

The components of interest expense, net for the last two fiscal years are summarized below:

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

Provision (Benefit) for Income Taxes

The effective income tax rate was 25.4%, (1.4)%, and 25.7% for fiscal 2022, fiscal 2021, and fiscal 2020, respectively. The increase in the fiscal 2022 effective income tax rate was primarily due to the significant increase in profit in fiscal 2022 as compared to the mix of income and losses by jurisdictions in fiscal 2021.

Net Income and Diluted Earnings Per Share

Net income was $3.3 billion, $0.1 billion, and $3.3 billion in fiscal 2022, fiscal 2021, and fiscal 2020, respectively. Diluted earnings per share in fiscal 2022 were $2.70, which included a second quarter debt extinguishment charge of $0.15, $0.07 in fiscal 2021, which included a debt extinguishment charge of $0.19, and $2.67 in fiscal 2020.

Segment Information

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.

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

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

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U.S. SEGMENTS

Marmaxx

Net Sales

Net sales for Marmaxx were $29.5 billion for fiscal 2022, an increase of 52% compared to $19.4 billion for fiscal 2021. The increase in net sales reflects stores remaining open for all of fiscal 2022. Stores were closed for approximately 20% of fiscal 2021 as a result of the COVID-19 pandemic. In addition to stores being open for more days in fiscal 2022, net sales further increased due to higher customer traffic and increased average basket.

Net sales increased 15% compared to $25.7 billion for fiscal 2020. Open-only comp store sales were up 13% compared to fiscal 2020. The increase in open-only comp store sales for fiscal 2022 was primarily driven by an increase in average basket. In addition, customer traffic was up slightly. While our open-only comp store sales increase in home fashions continued to significantly exceed those of apparel, we had strong open-only comp store sales growth in apparel for fiscal 2022. During fiscal 2022, we had strong sales at Marmaxx across all geographic regions.

Segment Profit

Fiscal 2022 vs Fiscal 2021

Segment profit was $3.8 billion for fiscal 2022, an increase of $2.9 billion, compared to a segment profit of $0.9 billion for fiscal 2021. The increase was primarily driven by increased sales due to stores remaining open for all of fiscal 2022. Merchandise margin improved primarily due to lower markdowns, partially offset by incremental freight costs. Fiscal 2021 also benefited $171 million from government programs.

Fiscal 2022 vs Fiscal 2020

Segment profit increased by $0.3 billion compared to a segment profit of $3.5 billion for fiscal 2020, primarily due to the increase in sales. Segment profit margin decreased to 12.9% for fiscal 2022 compared to 13.5% for fiscal 2020. The decrease was primarily driven by incremental COVID-19 related store payroll costs and higher supply chain costs, partially offset by leverage on occupancy costs due to the strong open-only comp store sales growth and improved merchandise margin. Within merchandise margin, strong markon and lower markdowns collectively more than offset incremental freight costs.

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

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

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HomeGoods

Net Sales

Net sales for HomeGoods were $9.0 billion for fiscal 2022, an increase of 48%, compared to $6.1 billion for fiscal 2021. The increase in net sales reflects stores remaining open for all of fiscal 2022. Stores were temporarily closed for approximately 20% of fiscal 2021 as a result of the COVID-19 pandemic. In addition to stores being open for more days in fiscal 2022, net sales further increased due to higher customer traffic and increased average basket.

Net sales increased 42% compared to $6.4 billion for fiscal 2020. Open-only comp store sales were up 32% for fiscal 2022 compared to fiscal 2020. The increase in open-only comp store sales was driven by an increase in average basket and customer traffic. During fiscal 2022, we had strong sales at HomeGoods and Homesense across all major categories and geographic regions.

Segment Profit

Fiscal 2022 vs Fiscal 2021

Segment profit was $0.9 billion for fiscal 2022, an increase of $0.4 billion, compared to a segment profit of $0.5 billion for fiscal 2021. The increase was primarily driven by increased sales due to stores remaining open for all of fiscal 2022, partially offset by lower merchandise margin due to increased freight costs. Fiscal 2021 also benefited $46 million from government programs.

Fiscal 2022 vs Fiscal 2020

Segment profit increased by $0.2 billion compared to a segment profit of $0.7 billion for fiscal 2020, primarily due to the increase in sales. Segment profit margin decreased to 10.1% for fiscal 2022 compared to 10.7% for fiscal 2020. The decrease in segment profit margin was primarily driven by higher supply chain costs, lower merchandise margin, and incremental COVID-19 related store payroll costs and higher store wages, partially offset by the expense leverage on our occupancy and administrative costs due to the strong open-only comp store sales growth. Within merchandise margin, incremental freight costs more than offset strong markon and lower markdowns.

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

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

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FOREIGN SEGMENTS

TJX Canada

Net Sales

Net sales for TJX Canada were $4.3 billion for fiscal 2022, an increase of 53% compared to $2.8 billion for fiscal 2021. The increase in net sales reflected temporary store closures, which were closed for approximately 12% of fiscal 2022 and 29% of fiscal 2021, as a result of the COVID-19 pandemic. In addition to stores being open for more days in fiscal 2022, net sales further increased due to higher customer traffic and increased average basket.

Net sales for TJX Canada increased 8% compared to $4.0 billion for fiscal 2020. On a constant currency basis, net sales increased 2% for fiscal 2022. Open-only comp store sales were up 8% for fiscal 2022 compared to fiscal 2020 and were negatively impacted by significant government-mandated shopping restrictions. The increase in open-only comp store sales was driven by an increase in average basket, partially offset by reduced customer traffic.

Segment Profit

Fiscal 2022 vs Fiscal 2021

Segment profit was $0.5 billion for fiscal 2022, an increase of $0.4 billion, compared to a segment profit of $0.1 billion for fiscal 2021. The increase for fiscal 2022 was primarily driven by increased sales due to having fewer temporary store closures in fiscal 2022 compared to fiscal 2021. Within merchandise margin, lower markdowns and higher markon were partially offset by increased freight costs. Fiscal 2022 also reflected $84 million of government programs compared to $148 million for fiscal 2021.

Fiscal 2022 vs Fiscal 2020

Segment profit decreased $31 million compared to a segment profit of $516 million for fiscal 2020. Segment profit margin decreased to 11.2% for fiscal 2022 compared to 12.8% for fiscal 2020. The decrease in segment profit margin was primarily driven by higher supply chain costs and higher store payroll, including incremental COVID-19 related costs, net of government programs. This was partially offset by improved merchandise margin. Within merchandise margin, strong markon and lower markdowns collectively more than offset incremental freight costs.

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

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TJX International

Net Sales

Net sales for TJX International were $5.7 billion for fiscal 2022, an increase of 49% compared to $3.8 billion for fiscal 2021. The increase in net sales reflected temporary store closures, which were closed for approximately 19% of fiscal 2022 and 36% of fiscal 2021, as a result of the COVID-19 pandemic. In addition to stores being open for more days in fiscal 2022, net sales further increased due to higher customer traffic and increased average basket.

Net sales for TJX International increased 1% compared to $5.7 billion for fiscal 2020. On a constant currency basis, net sales decreased 5% for fiscal 2022 compared to fiscal 2020. Open-only comp store sales were up 6% for fiscal 2022 compared to fiscal 2020 and were negatively impacted by significant government-mandated shopping restrictions. The increase in open-only comp store sales was driven by an increase in average basket, partially offset by reduced customer traffic.

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

Segment Profit/(Loss)

Fiscal 2022 vs Fiscal 2021

Segment profit was $0.2 billion for fiscal 2022, an increase of $0.7 billion, compared to a segment loss of $(0.5) billion for fiscal 2021. The increase for fiscal 2022 was primarily driven by increased sales due to having fewer temporary store closures in fiscal 2022 compared to fiscal 2021. The increase in segment profit includes improved merchandise margin primarily due to lower markdowns. Fiscal 2022 also reflected $157 million of government programs compared to $140 million for fiscal 2021.

Fiscal 2022 vs Fiscal 2020

Segment profit decreased $0.1 billion compared to a segment profit of $0.3 billion for fiscal 2020. Segment profit margin decreased to 2.8% for fiscal 2022 compared to 5.4% for fiscal 2020. The decrease in segment profit was primarily driven by incremental store payroll, higher supply chain costs and reduced merchandise margin. Within merchandise margin, increased freight expense was partially offset by lower markdowns. Segment profit was favorably impacted by the government programs received in fiscal 2022.

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

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GENERAL CORPORATE EXPENSE

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 hedges is included in cost of sales, including buying and occupancy costs.

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

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 January 29, 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 January 29, 2022, as described in Note J—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements, are adequate to meet our operating needs for the foreseeable future.

As of January 29, 2022, we held $6.2 billion in cash. Approximately $1.4 billion of our cash was held by our foreign subsidiaries with $0.6 billion held in countries where we intend to indefinitely reinvest any undistributed earnings. We have provided for all applicable state and foreign withholding taxes on all undistributed earnings of our foreign subsidiaries in Canada, Puerto Rico, Italy, India, Hong Kong and Vietnam through January 29, 2022. If we repatriate cash from such subsidiaries, we should not incur additional tax expense and our cash would be reduced by the amount of withholding taxes paid.

We monitor debt financing markets on an ongoing basis and from time to time may incur additional long-term indebtedness depending on prevailing market conditions, liquidity requirements, existing economic conditions and other factors. During fiscal 2022 we have used, and in the future we may use, operating cash flow and cash on hand to repay portions of our indebtedness, depending on prevailing market conditions, liquidity requirements, existing economic conditions, contractual restrictions and other factors. 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

Net cash provided by operating activities was $3.1 billion in fiscal 2022 and $4.6 billion in fiscal 2021. Our operating cash flows decreased by $1.5 billion compared to fiscal 2021 due to the $4.7 billion change in merchandise inventories net of accounts payable, driven by rebuilding inventory levels in fiscal 2022 as well as the timing of merchandise payments in fiscal 2021. In addition, operating cash flows were negatively impacted by the $0.3 billion decrease in net operating lease liabilities due to the repayment of many of the rent deferrals negotiated in fiscal 2021. The decrease in operating cash flows was partially offset by a $3.2 billion increase in net income. Temporary store closures in fiscal 2021 resulted in net income of $0.1 billion in fiscal 2021 compared to net income of $3.3 billion in fiscal 2022.

Investing Activities

Net cash used in investing activities resulted in net cash outflows of $1.0 billion in fiscal 2022 and $0.6 billion in fiscal 2021. The cash outflows for both periods were primarily driven by capital expenditures and were lower in fiscal 2021 due to the COVID-19 pandemic.

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

We expect our capital expenditures in fiscal 2023 will be in the range of approximately $1.7 billion to $1.9 billion, including approximately $1.0 billion to $1.1 billion for our offices and distribution centers (including buying and merchandising systems and other information systems) to support growth, approximately $0.5 billion to $0.6 billion for store renovations and approximately $0.2 billion for new stores. We plan to fund these expenditures with our existing cash balances and through internally generated funds.

Financing Activities

Net cash used in financing activities resulted in net cash outflows of $6.2 billion in fiscal 2022 compared to net cash inflows of $3.2 billion in fiscal 2021. In fiscal 2022, the cash outflows were primarily driven by debt repayments, equity repurchases and dividend payments. In fiscal 2021, the cash inflows were primarily driven by debt transactions.

Debt

The cash outflows in fiscal 2022 were due to the completion of make-whole calls and the redemption at par of certain of our notes. The notes redeemed via make-whole calls were issued in the first quarter of fiscal 2021 in response to the COVID-19 pandemic. As a result of these redemptions prior to their scheduled maturities, we recorded a pre-tax debt extinguishment charge of $242 million in fiscal 2022. Additionally, in fiscal 2022 we redeemed at par $750 million principal outstanding, 2.75% Notes due June 15, 2021. The result of these debt redemptions resulted in a $2.75 billion reduction of outstanding debt since the beginning of fiscal 2022 and will result in more than $90 million of annualized interest expense savings. The cash inflows in fiscal 2021 were a result of completing the issuance and sale of $4 billion aggregate principal amount of notes. See Note J—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements for additional information.

Equity

In fiscal 2022, we lifted the temporary suspension of our repurchase program and we paid $2.2 billion to repurchase and retire 31.3 million shares of our stock on a settlement basis under our previously authorized stock repurchase programs. Prior to the temporary suspension of our share repurchase program, we paid $0.2 billion to repurchase and retire 3.4 million shares on a settlement basis in fiscal 2021. These outflows for both periods were partially offset by proceeds from the exercise of employee stock options, net of shares withheld for taxes, of $0.2 billion in both fiscal 2022 and fiscal 2021.

In January 2022, the Board of Directors approved a new stock repurchase program that authorizes the repurchase of up to an additional $3.0 billion of our common stock from time to time. We currently plan to repurchase approximately $2.25 billion to $2.5 billion of stock under our stock repurchase programs in fiscal 2023. We determine the timing and amount of repurchases based on our assessment of various factors including excess cash flow, liquidity, economic and market conditions, our assessment of prospects for our business, legal requirements, and other factors. The timing and amount of these purchases may change. As of January 29, 2022, approximately $3.8 billion remained available under our existing stock repurchase programs. For further information regarding equity repurchases, see Note D—Capital Stock and Earnings Per Share of Notes to Consolidated Financial Statements.

Dividends

We declared quarterly dividends on our common stock of $0.26 per share for each of the quarters in fiscal 2022 which totaled $1.04 per share in fiscal 2022. As a result of the uncertainty surrounding the COVID-19 pandemic, no dividends were declared in the first nine months of fiscal 2021. Cash payments for dividends on our common stock totaled $1.3 billion for fiscal 2022 and $0.3 billion for fiscal 2021. We expect to pay quarterly dividends for fiscal 2023 of $0.295 per share, or an annual dividend of $1.18 per share, subject to the declaration and approval by our Board of Directors. This would represent a 13% increase over the per share dividends declared and paid in fiscal 2022.

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Contractual Obligations

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

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

–See Note L—Leases of Notes to Consolidated Financial Statements. Operating lease liabilities exclude legally binding minimum lease payments for approximately 170 leases signed but not yet commenced and include options to extend lease terms that are now deemed reasonably certain of being exercised according to our Lease Accounting Policy. The balances do not include variable costs for insurance, real estate taxes, other operating expenses and, in some cases, rentals based on a percentage of sales; these items totaled approximately one-third of the total minimum rent for fiscal 2022.

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

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

CRITICAL ACCOUNTING ESTIMATES

We prepare our consolidated financial statements in accordance with GAAP which requires us to make certain estimates and judgments that impact our reported results. These judgments and estimates are based on historical experience and other factors which we continually review and believe are reasonable. We consider our most critical accounting estimates, involving uncertainty requiring management estimates and judgments, to be those relating to the areas described below.

Inventory Valuation

We use the retail method for valuing inventory for all our businesses except T.K. Maxx in Australia. The businesses that utilize the retail method have some inventory that is initially valued at cost before the retail method is applied as it has not been fully processed for sale (i.e. inventory in transit and unprocessed inventory in our distribution centers). Under the retail method, the cost value of inventory and gross margins are determined by calculating a cost-to-retail ratio and applying it to the retail value of inventory. It involves management estimates with regard to markdowns and inventory shrinkage. Under the retail method, permanent markdowns are reflected in inventory valuation when the price of an item is reduced. We have a specific policy as to when and how markdowns are to be taken, greatly reducing management’s discretion and the need for management estimates as to markdowns. Inventory shrinkage requires estimating a shrinkage rate for interim periods; however, we take a full physical inventory near the fiscal year end to determine shrinkage at year end. We do not generally enter into arrangements with vendors that provide for rebates and allowances that could ultimately affect the value of inventory.

Reserves for Uncertain Tax Positions

Similar to many large corporations, our income and other tax returns and reports are regularly audited by federal, state and local tax authorities in the United States and in foreign jurisdictions where we operate, and such authorities may challenge positions we take. We are engaged in various administrative and judicial proceedings in multiple jurisdictions with respect to assessments, claims, deficiencies and refunds and other tax matters, which proceedings are in various stages of negotiation, assessment, examination, litigation and settlement. The outcomes of these proceedings are uncertain. In accordance with GAAP, we evaluate our uncertain tax positions based on our understanding of the facts, circumstances and information available at the reporting date, and we accrue for exposure when we believe that it is more likely than not, based on the technical merits, that the positions we have taken will not be sustained. However, in the next twelve months and in future periods, the amounts we accrue for uncertain tax positions from time to time or ultimately pay, as the result of the final resolutions of examinations, judicial or administrative proceedings, changes in facts, law, or legal interpretations, expiration of applicable statute of limitations or other resolutions of, or changes in, tax positions may differ either positively or negatively from the amounts we have accrued, and may result in reductions to or additions to accruals, refund claims or payments for periods not currently under examination or for which no claims have been made. Final resolutions of our tax positions or changes in accruals for uncertain tax positions could result in additional tax expense or benefit and could have a material impact on our results of operations of the period in which an examination or proceeding is resolved or in the period in which a changed outcome becomes probable and reasonably estimable.

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Loss Contingencies

Certain conditions may exist as of the date the consolidated financial statements are issued that may result in a loss to us but will not be resolved until one or more future events occur or fail to occur. Our management, with the assistance of our legal counsel, assesses such contingent liabilities. Such assessments inherently involve the exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us or claims that may result in such proceedings, our legal counsel assists us in evaluating the perceived merits of any legal proceedings or claims as well as the perceived merits of the relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be reasonably estimated, we will accrue for the estimated liability in the consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be reasonably estimated, we will disclose the nature of the contingent liability, together with an estimate of the range of the possible loss or a statement that such loss is not reasonably estimable.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of any new accounting pronouncements, see Note A—Basis of Presentation and Summary of Accounting Policies of Notes to Consolidated Financial Statements included in this annual report on Form 10-K. We do not expect any recently issued accounting pronouncements will have a material effect on our consolidated financial statements.