TJX COMPANIES INC /DE/ (TJX) FY 2025 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
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.
| Percentage of Net Sales | ||||
|---|---|---|---|---|
| Fiscal 2025 | Fiscal 2024 | |||
| Net sales | 100.0 | % | 100.0 | % |
| Cost of sales, including buying and occupancy costs | 69.4 | 70.0 | ||
| Selling, general and administrative expenses | 19.4 | 19.3 | ||
| Interest (income) expense, net | (0.3) | (0.3) | ||
| Income before income taxes* | 11.5 | % | 11.0 | % |
*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:
| Fiscal 2025 | Fiscal 2024 | |||
|---|---|---|---|---|
| United States: | ||||
| Northeast | 21 | % | 22 | % |
| Midwest | 13 | 13 | ||
| South (including Puerto Rico) | 28 | 28 | ||
| West | 16 | 15 | ||
| Total United States | 78 | % | 78 | % |
| Canada | 9 | 9 | ||
| Europe | 12 | 12 | ||
| Australia | 1 | 1 | ||
| Total TJX | 100 | % | 100 | % |
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:
| Fiscal Year Ended | |||||
|---|---|---|---|---|---|
| In millions | February 1, 2025 | February 3, 2024 | |||
| (53 weeks) | |||||
| Interest expense | $ | 78 | $ | 82 | |
| Capitalized interest | (2) | (3) | |||
| Interest (income) | (257) | (249) | |||
| Interest (income) expense, net | $ | (181) | $ | (170) |
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
| Fiscal Year Ended | |||||
|---|---|---|---|---|---|
| U.S. dollars in millions | February 1, 2025 | February 3, 2024 | |||
| (53 weeks) | |||||
| Net sales | $ | 34,604 | $ | 33,413 | |
| Segment profit | $ | 4,895 | $ | 4,597 | |
| Segment profit margin | 14.1 | % | 13.8 | % | |
| Comp store sales | 4 | % | 6 | % | |
| Stores in operation at end of period: | |||||
| TJ Maxx | 1,333 | 1,319 | |||
| Marshalls | 1,230 | 1,197 | |||
| Sierra | 117 | 95 | |||
| Total | 2,680 | 2,611 | |||
| Selling square footage at end of period (in millions): | |||||
| TJ Maxx | 30 | 29 | |||
| Marshalls | 27 | 27 | |||
| Sierra | 1 | 1 | |||
| Total | 58 | 57 |
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
| Fiscal Year Ended | |||||
|---|---|---|---|---|---|
| U.S. dollars in millions | February 1, 2025 | February 3, 2024 | |||
| (53 weeks) | |||||
| Net sales | $ | 9,386 | $ | 8,990 | |
| Segment profit | $ | 1,021 | $ | 861 | |
| Segment profit margin | 10.9 | % | 9.6 | % | |
| Comp store sales | 4 | % | 3 | % | |
| Stores in operation at end of period: | |||||
| HomeGoods | 943 | 919 | |||
| Homesense | 72 | 55 | |||
| Total | 1,015 | 974 | |||
| Selling square footage at end of period (in millions): | |||||
| HomeGoods | 17 | 17 | |||
| Homesense | 2 | 1 | |||
| Total | 19 | 18 |
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
| Fiscal Year Ended | |||||
|---|---|---|---|---|---|
| U.S. dollars in millions | February 1, 2025 | February 3, 2024 | |||
| (53 weeks) | |||||
| Net sales | $ | 5,189 | $ | 5,046 | |
| Segment profit | $ | 703 | $ | 715 | |
| Segment profit margin | 13.5 | % | 14.2 | % | |
| Comp store sales | 5 | % | 3 | % | |
| Stores in operation at end of period: | |||||
| Winners | 307 | 302 | |||
| HomeSense | 160 | 158 | |||
| Marshalls | 109 | 106 | |||
| Total | 576 | 566 | |||
| Selling square footage at end of period (in millions): | |||||
| Winners | 7 | 7 | |||
| HomeSense | 3 | 3 | |||
| Marshalls | 2 | 2 | |||
| Total | 12 | 12 |
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
| Fiscal Year Ended | |||||
|---|---|---|---|---|---|
| U.S. dollars in millions | February 1, 2025 | February 3, 2024 | |||
| (53 weeks) | |||||
| Net sales | $ | 7,181 | $ | 6,768 | |
| Segment profit | $ | 422 | $ | 332 | |
| Segment profit margin | 5.9 | % | 4.9 | % | |
| Comp store sales | 4 | % | 3 | % | |
| Stores in operation at end of period: | |||||
| TK Maxx | 655 | 644 | |||
| Homesense | 75 | 79 | |||
| TK Maxx Australia | 84 | 80 | |||
| Total | 814 | 803 | |||
| Selling square footage at end of period (in millions): | |||||
| TK Maxx | 13 | 13 | |||
| Homesense | 1 | 1 | |||
| TK Maxx Australia | 1 | 1 | |||
| Total | 15 | 15 |
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
| Fiscal Year Ended | |||||
|---|---|---|---|---|---|
| In millions | February 1, 2025 | February 3, 2024 | |||
| (53 weeks) | |||||
| General corporate expense | $ | 739 | $ | 708 |
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:
| Fiscal Year Ended | |||||
|---|---|---|---|---|---|
| In millions | February 1, 2025 | February 3, 2024 | |||
| New stores | $ | 176 | $ | 153 | |
| Store renovations and improvements | 788 | 725 | |||
| Office and distribution centers | 954 | 844 | |||
| Total capital expenditures | $ | 1,918 | $ | 1,722 |
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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