filings.toolsTJX Companies 10-K 2018-02-03
Filed 2018-04-04. 19 sections, 355K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
10-K 1 d518812d10k.htm 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended February 3, 2018
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number 1-4908
The TJX Companies, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 04-2207613 | |
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |
| 770 Cochituate Road | ||
| Framingham, Massachusetts | 01701 | |
| (Address of principal executive offices) | (Zip Code) | |
| Registrant’s telephone number, including area code (508) 390-1000 |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Name of each exchange on which registered | |
| Common Stock, par value $1.00 per share | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES [ X ] NO [ ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES [ ] NO [ X ]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ X ] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [ X ] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.[ X ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer [ X ] | Accelerated Filer [ ] | Non-Accelerated Filer [ ] | (Do not check if a smaller reporting company) | |||
| Smaller Reporting Company [ ] | Emerging Growth Company [ ] |
If an emerging growth company indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES [ ] NO [ X ]
The aggregate market value of the voting common stock held by non-affiliates of the registrant on July 29, 2017, the last business day of the registrant’s most recently completed second fiscal quarter, was $44,235,895,555 based on the closing sale price as reported on the New York Stock Exchange.
There were 627,072,378 shares of the registrant’s common stock, $1.00 par value, outstanding as of March 3, 2018.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of Stockholders to be held on June 5, 2018 (Part III).
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-K and our 2017 Annual Report to Shareholders contain “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995, including some of the statements in this Form 10-K under Item 1, “Business,” Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 8, “Financial Statements and Supplementary Data,” and in our 2017 Annual Report to Shareholders under our letter to shareholders and our performance graphs. Forward-looking statements are inherently subject to risks, uncertainties and potentially inaccurate assumptions. Such statements give our current expectations or forecasts of future events; they do not relate strictly to historical or current facts. We have generally identified such statements by using words indicative of the future such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “looking forward,” “may,” “plan,” “potential,” “project,” “should,” “target,” “will” and “would” or any variations of these words or other words with similar meanings. All statements that address activities, events or developments that we intend, expect or believe may occur in the future are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These “forward-looking statements” may relate to such matters as our future actions, future performance or results of current and anticipated sales, expenses, interest rates, foreign exchange rates and results and the outcome of contingencies such as legal proceedings.
We cannot guarantee that the results and other expectations expressed, anticipated or implied in any forward-looking statement will be realized. The risks set forth under Item 1A of this Form 10-K describe major risks to our business. A variety of factors including these risks could cause our actual results and other expectations to differ materially from the anticipated results or other expectations expressed, anticipated or implied in our forward-looking statements. Should known or unknown risks materialize, or should our underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected in the forward-looking statements. You should bear this in mind as you consider forward-looking statements.
Our forward-looking statements speak only as of the dates on which they are made, and we do not undertake any obligation to update any forward-looking statement, whether to reflect new information, future events or otherwise. You are advised, however, to consult any further disclosures we may make in our future reports to the Securities and Exchange Commission (SEC), on our website, or otherwise.
PART I
Item 1. Business
BUSINESS OVERVIEW
The TJX Companies, Inc. (TJX) is the leading off-price apparel and home fashions retailer in the United States and worldwide. We have over 4,000 stores that offer a rapidly changing assortment of quality, fashionable, brand name and designer 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.
Our stores are known for our value proposition of brand, fashion, price and quality. Our opportunistic buying strategies and flexible business model differentiate us from traditional retailers. We offer a treasure hunt shopping experience and a rapid turn of inventories relative to traditional retailers. Our goal is to create a sense of excitement and urgency for our customers and encourage frequent customer visits. We acquire merchandise in a variety of ways to support that goal. We reach a broad range of customers across many income levels and across other demographic groups with our value proposition. Our strategies and operations are synergistic across our retail chains. As a result, we are able to leverage our expertise throughout our business, sharing information, best practices, initiatives and new ideas, and to develop talent across our Company. We also leverage the substantial buying power of our businesses in our global relationships with vendors.
Our Businesses. We operate our business in four main segments: Marmaxx and HomeGoods, both in the U.S., TJX Canada and TJX International.
MARMAXX:
Our T.J. Maxx and Marshalls chains in the United States (“Marmaxx”) are collectively the largest off-price retailer in the United States with a total of 2,285 stores. We founded T.J. Maxx in 1976 and acquired Marshalls in 1995. Both chains sell family apparel (including footwear and accessories), home fashions (including home basics, accent furniture, lamps, rugs, wall décor, decorative accessories and giftware) and other merchandise. We primarily differentiate T.J. Maxx and Marshalls through different product assortment, including an expanded assortment of fine jewelry and accessories and a designer section called The Runway at T.J. Maxx and a full line of footwear, a broader men’s offering and a juniors’ department called The Cube at Marshalls, as well as varying in-store initiatives. This differentiated shopping experience at T.J. Maxx and Marshalls encourages our customers to shop both chains. Our e-commerce website, tjmaxx.com, was launched in 2013.
HOMEGOODS:
Our HomeGoods segment, introduced in 1992, is the leading off-price retailer of home fashions in the U.S. Through its 667 stores, HomeGoods offers an eclectic assortment of home fashions, including furniture, rugs, lighting, soft home, decorative accessories, tabletop and cookware as well as expanded pet, kids and gourmet food departments. In 2017, we launched Homesense in the U.S. with 4 stores. Homesense complements HomeGoods, offering a differentiated mix and expanded departments, such as large-scale furniture, lighting and rugs, as well as new departments, such as a general store and an entertaining marketplace.
TJX CANADA:
Our TJX Canada segment operates the Winners, HomeSense and Marshalls chains in Canada. Acquired in 1990, Winners is the leading off-price apparel and home fashions retailer in Canada. The merchandise offering at its 264 stores across Canada is comparable to T.J. Maxx, with select stores offering fine jewelry, and The Runway, a designer section. We opened our HomeSense chain in 2001, bringing the home fashions off-price concept to Canada. HomeSense has 117 stores with a merchandise mix of home fashions similar
to HomeGoods in the U.S. We brought Marshalls to Canada in 2011 and operate 73 Marshalls stores in Canada. As with Marshalls in the U.S., our Canadian Marshalls stores offer an expanded footwear department and The Cube juniors’ department, differentiating them from Winners stores.
TJX INTERNATIONAL:
Our TJX International segment operates the T.K. Maxx and Homesense chains in Europe and starting in late 2015, the T.K. Maxx chain in Australia. Launched in 1994, T.K. Maxx introduced off-price retail to Europe and remains Europe’s only major brick-and-mortar off-price retailer of apparel and home fashions. With 540 stores, T.K. Maxx operates in the U.K., Ireland, Germany, Poland, Austria and the Netherlands. Through its stores and its e-commerce website for the U.K., tkmaxx.com, T.K. Maxx offers a merchandise mix similar to T.J. Maxx. We brought the off-price home fashions concept to Europe, opening Homesense in the U.K. in 2008. In fiscal 2018, we opened 2 Homesense stores in Ireland. Its 55 stores offer a merchandise mix of home fashions similar to that of HomeGoods in the U.S. and HomeSense in Canada. We acquired Trade Secret in Australia in fiscal 2016 and re-branded it under the T.K. Maxx name during fiscal 2018. The merchandise offering at its 38 stores is comparable to T.J. Maxx.
In addition to our four main segments, we operate Sierra Trading Post (“STP”), an off-price Internet retailer of brand name and quality outdoor gear, family apparel and footwear, sporting goods and home fashions. Sierra Trading Post launched its e-commerce site, sierratradingpost.com, in 1998 and operates 27 retail stores in the U.S.
Flexible Business Model. Our flexible off-price business model, including our opportunistic buying, inventory management, logistics and flexible store layouts, is designed to deliver our customers a compelling value proposition of fashionable, quality, brand name and designer merchandise at excellent values every day. Our buying and inventory management strategies give us flexibility to adjust our merchandise assortments more frequently than traditional retailers, and the design and operation of our stores and distribution centers support this flexibility. Our buyers have more visibility into consumer, fashion and market trends and pricing when we buy closer to need, which can help us “buy smarter” and reduce our markdown exposure. Our selling floor space is flexible, without walls between departments and largely free of permanent fixtures, so we can easily expand and contract departments to accommodate the merchandise we purchase. Our logistics and distribution operations are designed to support our global buying strategies and to facilitate quick, efficient and differentiated delivery of merchandise to our stores, with a goal of getting the right merchandise to the right stores at the right time.
Opportunistic Buying. As an off-price retailer, our buying practices, which we refer to as opportunistic buying, differentiate us from traditional retailers. Our overall global buying strategy is to acquire merchandise on an ongoing basis that will enable us to offer a desirable and rapidly changing mix of branded, designer and other quality merchandise in our stores at prices below regular prices for comparable merchandise at full-price retailers, including department, specialty, and major online retailers. We seek out and select merchandise from the broad range of opportunities in the marketplace to achieve this end. Our global buying organization, which numbers more than 1,000 Associates in 16 buying offices in 12 countries, executes this opportunistic buying strategy, buying merchandise from more than 100 countries in a variety of ways, depending on market conditions and other factors.
We take advantage of opportunities to acquire merchandise at substantial discounts that regularly arise from the production and flow of inventory in the apparel and home fashions marketplace. These opportunities include, among others, order cancellations, manufacturer overruns, closeouts from brands, manufacturers and other retailers and special production direct from brands and factories. Our global buying strategies are intentionally flexible to allow us to react to frequently c
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Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We lease virtually all of our store locations. Leases in the U.S. and Canada are generally for an initial term of 10 years with options to extend the lease term for one or more 5-year periods. Leases in Europe generally have an initial term of 10 to 15 years and in Australia the initial lease term is primarily 7 to 10 years. Some of the leases in Europe and Australia have options to extend. We have the right to terminate some of these leases before the expiration date under specified circumstances and some with specified payments.
The following is a summary of our primary owned and leased distribution centers and primary administrative office locations as of February 3, 2018. Square footage information for the distribution centers represents total “ground cover” of the facility. Square footage information for office space represents total space occupied.
Distribution Centers
| Marmaxx | ||||||
| T.J. Maxx | Worcester, Massachusetts | 494,000 s.f.—owned | ||||
| Evansville, Indiana | 989,000 s.f.—owned | |||||
| Las Vegas, Nevada | 1,110,000 s.f.—owned | |||||
| Charlotte, North Carolina | 595,000 s.f.—owned | |||||
| Pittston Township, Pennsylvania | 1,017,000 s.f.—owned | |||||
| Chickasaw, Tennessee | 415,000 s.f.—leased | |||||
| Memphis, Tennessee | 800,000 s.f.—leased | |||||
| Marshalls | Decatur, Georgia | 780,000 s.f.—owned | ||||
| Woburn, Massachusetts | 472,000 s.f.—leased | |||||
| Bridgewater, Virginia | 562,000 s.f.—leased | |||||
| Philadelphia, Pennsylvania | 1,001,000 s.f.—leased | |||||
| Phoenix, Arizona | 1,139,000 s.f.—owned | |||||
| HomeGoods | Brownsburg, Indiana | 805,000 s.f.—owned | ||||
| Bloomfield, Connecticut | 803,000 s.f.—owned | |||||
| Jefferson, Georgia | 801,000 s.f.—owned | |||||
| Tucson, Arizona | 858,000 s.f.—owned | |||||
| TJX Canada | Brampton, Ontario | 506,000 s.f.—leased | ||||
| Mississauga, Ontario | 679,000 s.f.—leased | |||||
| Torbram, Ontario | 445,000 s.f.—leased | |||||
| Delta, British Columbia | 432,000 s.f.—leased | |||||
| TJX International | Wakefield, England | 641,000 s.f.—leased | ||||
| Stoke, England | 261,000 s.f.—leased | |||||
| Walsall, England | 277,000 s.f.—leased | |||||
| Bergheim, Germany | 322,000 s.f.—leased | |||||
| Wroclaw, Poland | 303,000 s.f.—leased |
Office Space
| Corporate, Marmaxx, HomeGoods | Framingham and Marlborough, Massachusetts | 1,958,000 s.f.—owned and leased in several buildings | ||
| TJX Canada | Mississauga, Ontario | 434,000 s.f.—leased | ||
| TJX International | Watford, England | 286,000 s.f.—owned and leased | ||
| Dusseldorf, Germany | 45,000 s. f.—leased |
Sierra Trading Post owns a 900,000 square foot facility in Cheyenne, Wyoming which houses administrative offices and fulfillment center operations. T.K. Maxx in Australia, part of TJX International, leases office space and maintains third-party arrangements for a distribution center in Australia totaling approximately 173,000 square feet. In addition to the office space listed above, we also occupy smaller buying office locations in various countries.
Item 3. Legal Proceedings
TJX is subject to certain legal proceedings, lawsuits, disputes and claims that arise from time to time in the ordinary course of our business. In addition, TJX is a defendant in several lawsuits filed in federal and state courts brought as putative class or collective actions on behalf of various groups of current and former salaried and hourly Associates in the U.S. The lawsuits allege violations of the Fair Labor Standards Act and of state wage and hour and other labor statutes. We are also defending putative class action claims on behalf of
customers relating to TJX’s compare at pricing. The lawsuits are in various procedural stages and seek monetary damages, injunctive relief and attorneys’ fees. In connection with ongoing litigation, an immaterial amount has been accrued in the accompanying financial statements.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for the Registrant’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities
Price Range of Common Stock
Our common stock is listed on the New York Stock Exchange (Symbol: TJX). The quarterly high and low sale prices for our common stock for fiscal 2018 and fiscal 2017 are as follows:
| Fiscal 2018 | Fiscal 2017 | |||||||||||||||
| Quarter | High | Low | High | Low | ||||||||||||
| First | $ | 79.97 | $ | 73.25 | $ | 79.20 | $ | 66.82 | ||||||||
| Second | $ | 80.92 | $ | 66.66 | $ | 81.88 | $ | 72.43 | ||||||||
| Third | $ | 74.38 | $ | 68.89 | $ | 83.64 | $ | 72.51 | ||||||||
| Fourth | $ | 81.46 | $ | 66.44 | $ | 79.79 | $ | 71.50 |
The approximate number of common shareholders of record at February 3, 2018 was 2,260.
Our Board of Directors declared four quarterly dividends of $0.3125 per share for fiscal 2018 and $0.26 per share for fiscal 2017. While our dividend policy is subject to periodic review by our Board of Directors, we are currently planning to pay a $0.39 per share quarterly dividend in fiscal 2019, subject to declaration and approval by our Board of Directors, and currently intend to continue to pay comparable dividends in the future.
Information on Share Repurchases
The number of shares of common stock repurchased by TJX during the fourth quarter of fiscal 2018 and the average price paid per share are as follows:
| Total Number of Shares Repurchased(1) | Average Price Paid Per Share(2) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(3) | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs(4) | |||||||||||
| October 29, 2017 through November 25, 2017 | 1,412,273 | $ | 69.39 | 1,412,273 | $ | 1,442,780,056 | ||||||||
| November 26, 2017 through December 30, 2017 | 2,114,512 | $ | 74.72 | 2,114,512 | $ | 1,284,779,833 | ||||||||
| December 31, 2017 through February 3, 2018 | 1,944,055 | $ | 77.90 | 1,912,816 | $ | 4,135,779,792 | ||||||||
| Total: | 5,470,840 | 5,439,601 |
| (1) | Consists of shares repurchased under publicly announced stock repurchase programs and 31,239 shares surrendered to satisfy tax withholding obligations in connection with the vesting of restricted stock awards. |
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| (2) | Includes commissions for the shares repurchased under stock repurchase programs. |
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| (3) | Consists of shares repurchased under publicly announced stock repurchase programs. |
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| (4) | In February 2018, the Company announced that its Board of Directors had approved a new stock repurchase program that authorizes the repurchase of up to an additional $3.0 billion of TJX common stock from time to time. In February 2016 and 2017, TJX announced stock repurchase programs authorizing an additional $2.0 billion and $1.0 billion in repurchases, respectively, from time to time, under which $1.1 billion remained available as of February 3, 2018. |
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Item 6. Selected Financial Data
| Fiscal Year Ended | ||||||||||||||||||||
| Dollars in millions, except per share amounts | February 3, 2018(1) | January 28, 2017(2) | January 30, 2016 | January 31, 2015 | February 1, 2014 | |||||||||||||||
| (53 Weeks) | ||||||||||||||||||||
| Income statement and per share data: | ||||||||||||||||||||
| Net sales | $ | 35,865 | $ | 33,184 | $ | 30,945 | $ | 29,078 | $ | 27,423 | ||||||||||
| Income from continuing operations | $ | 2,608 | $ | 2,298 | $ | 2,278 | $ | 2,215 | $ | 2,137 | ||||||||||
| Weighted average common shares for diluted earnings per share calculation (in thousands) | 646,105 | 664,432 | 683,251 | 703,545 | 726,376 | |||||||||||||||
| Diluted earnings per share from continuing operations | $ | 4.04 | $ | 3.46 | $ | 3.33 | $ | 3.15 | $ | 2.94 | ||||||||||
| Cash dividends declared per share | $ | 1.25 | $ | 1.04 | $ | 0.84 | $ | 0.70 | $ | 0.58 | ||||||||||
| Balance sheet data: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 2,758 | $ | 2,930 | $ | 2,095 | $ | 2,494 | $ | 2,150 | ||||||||||
| Working capital | $ | 3,360 | $ | 2,993 | $ | 2,370 | $ | 2,648 | $ | 2,449 | ||||||||||
| Total assets(3) | $ | 14,058 | $ | 12,884 | $ | 11,490 | $ | 10,978 | $ | 10,091 | ||||||||||
| Capital expenditures | $ | 1,058 | $ | 1,025 | $ | 889 | $ | 912 | $ | 947 | ||||||||||
| Long-term obligations(4) | $ | 2,231 | $ | 2,228 | $ | 1,615 | $ | 1,613 | $ | 1,267 | ||||||||||
| Shareholders’ equity | $ | 5,148 | $ | 4,511 | $ | 4,307 | $ | 4,264 | $ | 4,230 | ||||||||||
| Other financial data: | ||||||||||||||||||||
| After-tax return on average shareholders’ equity | 54.0 | % | 52.1 | % | 53.1 | % | 52.2 | % | 54.1 | % | ||||||||||
| Total debt as a percentage of total capitalization(5) | 30.2 | % | 33.1 | % | 27.3 | % | 27.4 | % | 23.1 | % | ||||||||||
| Stores in operation: | 4,070 | 3,812 | 3,614 | 3,395 | 3,219 | |||||||||||||||
| Selling square footage (in thousands): | 87,548 | 83,798 | 80,480 | 76,537 | 73,209 |
| (1) | Fiscal 2018 includes an impairment charge of $99.3 million and a net benefit from the enactment of the 2017 Tax Act described in Item 7 under “Tax Cuts and Jobs Act of 2017.” |
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| (2) | Fiscal 2017 includes a loss on early extinguishment of debt and a pension settlement charge. |
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| (3) | Amounts adjusted to reflect the reclassification of debt issuance cost in accordance with ASU 2015-03. We reclassified $9 million, $11 million and $7 million of debt issuance cost from other assets to long-term obligations at January 30, 2016, January 31, 2015 and February 1, 2014, respectively. See Note A- Basis of Presentation and Summary of Accounting Policies of Notes to Consolidated Financial Statements for additional information. |
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| (4) | Defined as long-term debt, exclusive of current installments and capital lease obligations, less the portion due within one year. |
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| (5) | Defined as shareholders’ equity, short-term debt, long-term debt and capital lease obligations, including current maturities. |
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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 the Company’s future financial performance. These forward-looking statements are estimates based on information currently available to the Company, 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. The Company’s 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 53-week fiscal year ended February 3, 2018 (fiscal 2018) and our 52-week fiscal years ended January 28, 2017 (fiscal 2017) and January 30, 2016 (fiscal 2016).
OVERVIEW
We are the leading off-price apparel and home fashions retailer in the U.S. and worldwide. We sell a rapidly changing assortment of apparel, home fashions and other merchandise at prices generally 20% to 60% below full-price retailers’ (including department, specialty, and major online retailers) regular prices on comparable merchandise, every day. We operate over 4,000 stores through our four main segments: in the U.S., Marmaxx
(which operates T.J. Maxx, Marshalls and tjmaxx.com) and HomeGoods (which operates HomeGoods and Homesense); 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). We also operate Sierra Trading Post (“STP”), an off-price Internet retailer that operates sierratradingpost.com and retail stores in the U.S. The results of STP are reported in our Marmaxx segment.
During the fourth quarter, the Tax Cuts and Jobs Act of 2017 referred to as “tax reform” or the “2017 Tax Act” was enacted. The 2017 Tax Act, along with the related reinvestments made by the Company, had a significant impact on our fiscal 2018 results (see “Tax Cuts and Jobs Act of 2017” below).
Highlights of our financial performance for fiscal 2018 include the following:
| — | Net sales increased to $35.9 billion for fiscal 2018, up 8% over the same period last year. The 53rd week in fiscal 2018 increased net sales by 2%. At February 3, 2018, the number of stores in operation increased 7% and selling square footage increased 4% over the end of fiscal 2017. |
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| — | Comp sales on a 52-week basis increased 2% in fiscal 2018 over an increase of 5% in fiscal 2017 and an increase of 5% in fiscal 2016. The fiscal 2018 increase was driven primarily by an increase in customer traffic at each of our four segments. |
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| — | Diluted earnings per share for fiscal 2018 were $4.04 compared to $3.46 per share in fiscal 2017. Fiscal 2018 earnings per share includes a $0.17 net benefit from tax reform along with the related investments made by the Company, an $0.11 benefit from the 53rd week in the Company’s fiscal 2018 calendar partially offset by a $0.10 impairment charge related to STP. Fiscal 2017 earnings per share includes a $0.07 reduction due to a loss on the early extinguishment of debt and a pension settlement charge during the third quarter. |
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| — | Our fiscal 2018 pre-tax margin (the ratio of pre-tax income to net sales) was 10.8%, a 0.4 percentage point decrease compared to 11.2% in fiscal 2017. The impairment charge relating to STP and the cost of incremental investments we made in connection with the 2017 Tax Act collectively reduced pre-tax margin by 0.6 percentage points while the 53rd week in the fiscal 2018 calendar lifted pretax margin by approximately 0.1 percentage point. Fiscal 2017 pre-tax margin was reduced by 0.3 percentage points due to the two third quarter charges referred to above. |
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| — | Our cost of sales, including buying and occupancy costs, ratio for fiscal 2018 was 71.1%, a 0.1 percentage point increase compared to 71.0% in fiscal 2017. This increase was driven by higher supply chain costs partially offset by the favorable impact of mark-to-market of inventory derivatives and a benefit from the 53rd week in the fiscal 2018 calendar. Merchandise margins were flat compared to fiscal 2017. |
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| — | Our selling, general and administrative (“SG&A”) expense ratio for fiscal 2018 was 17.8%, a 0.4 percentage point increase from 17.4% in fiscal 2017. The incremental investments described below related to the 2017 Tax Act increased the fiscal 2018 expense ratio by 0.3 percentage points. The remaining increase is primarily due to higher store payroll costs due to wage increases. |
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| — | Our consolidated average per store inventories, including inventory on hand at our distribution centers (which excludes inventory in transit) and excluding our e-commerce businesses, increased 6% on a reported basis and increased 4% on a constant currency basis at the end of fiscal 2018 as compared to the prior year. |
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| — | During fiscal 2018, we repurchased 22.3 million shares of our common stock for $1.7 billion, on a “trade date basis”. Earnings per share reflect the benefit of the stock repurchase program. With $1.1 billion remaining under previously announced stock repurchase programs, our Board of Directors approved our 19th stock repurchase program that authorizes the repurchase of up to an additional $3.0 billion. |
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The following is a discussion of our consolidated operating results, followed by a discussion of our segment operating results.
Tax Cuts and Jobs Act of 2017: On December 22, 2017, the 2017 Tax Act was enacted into law which, among other things, includes a one-time mandatory transition tax on accumulated foreign undistributed earnings and a reduction of the U.S. corporate income tax rate to 21 percent, effective January 1, 2018. The change in the U.S. income tax rate also requires us to revalue our deferred tax assets and liabilities. Although we are still evaluating the impact of the 2017 Tax Act on TJX, the Company has estimated the impact of the 2017 Tax Act which resulted in a reduction of the full year tax provision. The Company has reinvested a portion of these tax benefits by approving a discretionary bonus to eligible non-bonus plan Associates globally, providing an incremental contribution to the Company’s defined contribution retirement plans for eligible Associates in the U.S. and internationally, as well as making contributions to the Company’s charitable foundations, collectively referred to as “incremental investments related to the 2017 Tax Act.” The tax benefits recognized due to the 2017 Tax Act, offset by the after-tax impact of incremental investments we made related to the 2017 Tax Act, resulted in a net benefit to net income of $0.17 per share for the fiscal 2018 fourth quarter and full year.
Net sales: Consolidated net sales for fiscal 2018 totaled $35.9 billion, an 8% increase over $33.2 billion in fiscal 2017. The increase reflected a 4% increase from new stores, a 2% increase from comp sales, and a 2% increase from the impact of the 53rd week in the fiscal 2018 calendar. Foreign currency had a neutral impact in fiscal 2018. Net sales from our e-commerce businesses amounted to approximately 2% of total sales and had an immaterial impact on fiscal 2018 sales growth. Consolidated net sales for fiscal 2017 totaled $33.2 billion, a 7% increase over $30.9 billion in fiscal 2016. The increase reflected a 5% increase from comp sales and a 4% increase from new stores, offset by a 2% nega
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Item 8. Financial Statements and Supplementary Data
The information required by this item may be found on pages F-1 through F-36 of this annual report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
| ITEM 9A. | Controls and Procedures |
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(a) Evaluation of Disclosure Controls and Procedures
We have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report pursuant to Rules 13a-15 and 15d-15 of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at a reasonable assurance level in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of implementing controls and procedures.
(b) Changes in Internal Control Over Financial Reporting
Effective January 26, 2018, we implemented a new merchandise accounting system at TJX Europe that resulted in material changes to our process and procedures affecting internal control over financial reporting. Otherwise, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of fiscal 2018 identified in connection with our Chief Executive Officer’s and Chief Financial Officer’s evaluation that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
(c) Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:
| — | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of TJX; |
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| — | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of TJX are being made only in accordance with authorizations of management and directors of TJX; and |
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| — | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of TJX’s assets that could have a material effect on the financial statements. |
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of February 3, 2018 based on criteria established in Internal Control—Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, management concluded that its internal control over financial reporting was effective as of February 3, 2018.
(d) Attestation Report of the Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited and reported on our consolidated financial statements contained herein, has audited the effectiveness of our internal control over financial reporting as of February 3, 2018, and has issued an attestation report on the effectiveness of our internal control over financial reporting included herein.
Item 9B. Other Information
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information concerning our executive officers is set forth under the heading “Executive Officers of the Registrant” in Part I of this report. TJX will file with the Securities and Exchange Commission (SEC) a definitive proxy statement no later than 120 days after the close of its fiscal year ended February 3, 2018 (Proxy Statement). The other information required by this Item and not given in this Item will appear under the headings “Election of Directors” and “Corporate Governance,” including in “Board Committees and Meetings,” and “Audit Committee Report” and in “Beneficial Ownership” in “Section 16(a) Beneficial Ownership Reporting Compliance” in our Proxy Statement, which sections are incorporated herein by reference.
In addition to our Global Code of Conduct, TJX has a Code of Ethics for TJX Executives governing its Executive Chairman, Chief Executive Officer and President, Chief Financial Officer, Principal Accounting Officer and other senior operating, financial and legal executives. The Code of Ethics for TJX Executives is designed to ensure integrity in TJX’s financial reports and public disclosures. TJX also has a Directors Code of Business Conduct and Ethics which promotes honest and ethical conduct, compliance with applicable laws, rules and regulations and the avoidance of conflicts of interest. Both of these codes of conduct are published at tjx.com. We intend to disclose any future amendments to, or waivers from, the Code of Ethics for TJX Executives or the Directors Code of Business Conduct and Ethics within four business days of the waiver or amendment through a website posting or by filing a Current Report on Form 8-K with the SEC.
Item 11. Executive Compensation
The information required by this Item will appear under the headings “Compensation Discussion and Analysis,” “Compensation Tables,” “Director Compensation” and “Compensation Program Risk Assessment” in our Proxy Statement, which sections are incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item will appear under the headings “Equity Compensation Plan Information” and “Beneficial Ownership” in our Proxy Statement, which sections are incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item will appear under the heading “Corporate Governance,” including in “Transactions with Related Persons” and “Board Independence,” in our Proxy Statement, which section is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item will appear under the headings “Audit Committee Report” and “Auditor Fees” in our Proxy Statement, which sections are incorporated herein by reference.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) Financial Statement Schedules
For a list of the consolidated financial information included herein, see Index to the Consolidated Financial Statements on page F-1.
Schedule II – Valuation and Qualifying Accounts
| In thousands | Balance Beginning of Period | Amounts Charged to Net Income | Write-Offs Against Reserve | Balance End of Period | ||||||||||||
| Sales Return Reserve: | ||||||||||||||||
| Fiscal Year Ended February 3, 2018 | $ | 43,236 | $ | 1,539,854 | $ | 1,537,945 | $ | 45,145 | ||||||||
| Fiscal Year Ended January 28, 2017 | $ | 41,723 | $ | 1,483,146 | $ | 1,481,633 | $ | 43,236 | ||||||||
| Fiscal Year Ended January 30, 2016 | $ | 35,476 | $ | 1,497,963 | $ | 1,491,716 | $ | 41,723 | ||||||||
| Casualty Insurance Reserve: | ||||||||||||||||
| Fiscal Year Ended February 3, 2018 | $ | 30,810 | $ | 96,975 | $ | 88,214 | $ | 39,571 | ||||||||
| Fiscal Year Ended January 28, 2017 | $ | 19,686 | $ | 87,110 | $ | 75,986 | $ | 30,810 | ||||||||
| Fiscal Year Ended January 30, 2016 | $ | 14,303 | $ | 80,738 | $ | 75,355 | $ | 19,686 |
b) Exhibits
Listed below are all exhibits filed as part of this report. Some exhibits are filed by the Registrant with the Securities and Exchange Commission pursuant to Rule 12b-32 under the Exchange Act.
| 10.9 | The Stock Incentive Plan Rules for U.K. Employees, as amended April 7, 2009, incorporated herein by reference to Exhibit 10.3 to the Form 10-Q filed for the quarter ended July 31, 2010.* | |
| 10.10 | The Form of Non-Qualified Stock Option Certificate granted under the Stock Incentive Plan as amended and restated through June 1, 2004, incorporated herein by reference to Exhibit 10.2 to the Form 10-Q filed for the quarter ended July 31, 2004.* | |
| 10.11 | The Form of Non-Qualified Stock Option Certificate granted under the Stock Incentive Plan as of September 17, 2009, incorporated herein by reference to Exhibit 12.1 to the Form 10-Q filed for the quarter ended October 31, 2009. The Form of Non-Qualified Stock Option Terms and Conditions granted under the Stock Incentive Plan as of September 17, 2009, incorporated herein by reference to Exhibit 12.2 to the Form 10-Q filed for the quarter ended October 31, 2009.* | |
| 10.12 | The Form of Non-Qualified Stock Option Certificate granted under the Stock Incentive Plan as of September 9, 2010, incorporated herein by reference to Exhibit 10.2 to the Form 10-Q filed for the quarter ended October 30, 2010. The Form of Non-Qualified Stock Option Terms and Conditions granted under the Stock Incentive Plan as of September 9, 2010, incorporated herein by reference to Exhibit 10.19 to the Form 10-K filed for the fiscal year ended January 28, 2012.* | |
| 10.13 | The Form of Non-Qualified Stock Option Certificate granted under the Stock Incentive Plan as of September 20, 2012, incorporated herein by reference to Exhibit 10.1 to the Form 10-Q filed for the quarter ended October 27, 2012. The Form of Non-Qualified Stock Option Terms and Conditions granted under the Stock Incentive Plan as of September 20, 2012, incorporated herein by reference to Exhibit 10.2 to the Form 10-Q filed for the quarter ended October 27, 2012.* | |
| 10.14 | The Form of Non-Qualified Stock Option Certificate granted under the Stock Incentive Plan as of September 19, 2013, incorporated herein by reference to Exhibit 10.1 to the Form 10-Q filed for the quarter ended November 2, 2013. The Form of Non-Qualified Stock Option Terms and Conditions granted under the Stock Incentive Plan as of September 19, 2013, incorporated herein by reference to Exhibit 10.2 to the Form 10-Q filed for the quarter ended November 2, 2013.* | |
| 10.15 | The Form of Non-Qualified Stock Option Certificate granted under the Stock Incentive Plan as of September 10, 2014, incorporated herein by reference to Exhibit 10.4 to the Form 10-Q filed for the quarter ended November 1, 2014. The Form of Non-Qualified Stock Option Terms and Conditions granted under the Stock Incentive Plan as of September 10, 2014, incorporated herein by reference to Exhibit 10.5 to the Form 10-Q filed for the quarter ended November 1, 2014.* | |
| 10.16 | The Form of Non-Qualified Stock Option Certificate granted under the Stock Incentive Plan as of September 17, 2015, incorporated herein by reference to Exhibit 10.1 to the Form 10-Q filed for the quarter ended October 31, 2015. The Form of Non-Qualified Stock Option Terms and Conditions granted under the Stock Incentive Plan as of September 17, 2015, incorporated herein by reference to Exhibit 10.2 to the Form 10-Q filed for the quarter ended October 31, 2015.* | |
| 10.17 | The Form of Performance-Based Restricted Stock Award granted under the Stock Incentive Plan as of February 1, 2013, incorporated herein by reference to Exhibit 10.16 to the Form 10-K filed for the fiscal year ended February 2, 2013. The Form of Performance-Based Restricted Stock Award granted under the Stock Incentive Plan as of September 19, 2013, incorporated herein by reference to Exhibit 10.3 to the Form 10-Q filed for the quarter ended November 2, 2013.* | |
| 10.18 | The Form of Performance-Based Deferred Stock Award granted under the Stock Incentive Plan as of April 2, 2013, incorporated herein by reference to Exhibit 10.2 to the Form 10-Q filed for the quarter ended May 4, 2013.* | |
| 10.19 | The Form of Performance-Based Deferred Stock Award granted under the Stock Incentive Plan as of March 29, 2016, incorporated herein by reference to Exhibit 10.1 to the Form 10-Q filed for the quarter ended April 30, 2016.* | |
| 10.20 | The Form of Performance-Based Deferred Stock award granted under the Stock Incentive Plan as of April 4, 2017, incorporated herein by reference to Exhibit 10.1 to the Form 10-Q filed for the quarter ended April 29, 2017.* |
| 10.21 | The Performance-Based Restricted Stock Award granted under the Stock Incentive Plan on January 29, 2016 to Carol Meyrowitz, incorporated herein by reference to Exhibit 10.18 to the Form 10-K filed for the fiscal year ended January 30, 2016.* | |
| 10.22 | The Restricted Stock Unit Award granted under the Stock Incentive Plan on January 29, 2016 to Ernie Herrman, incorporated herein by reference to Exhibit 10.19 to the Form 10-K filed for the fiscal year ended January 30, 2016.* | |
| 10.23 | The Form of Deferred Stock Award for Directors granted under the Stock Incentive Plan, incorporated herein by reference to Exhibit 10.20 to the Form 10-K filed for the fiscal year ended January 31, 2015. The Form of Deferred Stock Award for Directors granted under the Stock Incentive Plan as of June 7, 2016, incorporated herein by reference to Exhibit 10.2 to the Form 10-Q filed for the quarter ended July 30, 2016.* | |
| 10.24 | Description of Director Compensation Arrangements, filed herewith.* | |
| 10.25 | The Management Incentive Plan and Long Range Performance Incentive Plan (2013 Restatement), incorporated herein by reference to Exhibit 10.22 to the Form 10-K filed for the fiscal year ended February 2, 2013.* | |
| 10.26 | The General Deferred Compensation Plan (1998 Restatement) (the GDCP) and First Amendment to the GDCP, effective January 1, 1999, incorporated herein by reference to Exhibit 10.9 to the Form 10-K for the fiscal year ended January 30, 1999. The Second Amendment to the GDCP, effective January 1, 2000, incorporated herein by reference to Exhibit 10.10 to the Form 10-K filed for the fiscal year ended January 29, 2000. The Third and Fourth Amendments to the GDCP, incorporated herein by reference to Exhibit 10.17 to the Form 10-K for the fiscal year ended January 28, 2006. The Fifth Amendment to the GDCP, effective January 1, 2008, incorporated herein by reference to Exhibit 10.17 to the Form 10-K filed for the fiscal year ended January 31, 2009.* | |
| 10.27 | The Supplemental Executive Retirement Plan (2015 Restatement), incorporated herein by reference to Exhibit 10.3 to the Form 10-Q filed for the quarter ended May 2, 2015.* | |
| 10.28 | The Executive Savings Plan (As Amended and Restated, Effective January 1, 2015) (the ESP), incorporated herein by reference to Exhibit 10.25 to the Form 10-K filed for the fiscal year ended January 31, 2015. The First Amendment to the ESP, dated December 30, 2015, incorporated herein by reference to Exhibit 10.25 to the Form 10-K filed for the fiscal year ended January 30, 2016.* | |
| 10.29 | The Canadian Executive Savings Plan (effective November 1, 1999) of Winners Merchants International, LP (successor to Winners Apparel Ltd.), incorporated herein by reference to Exhibit 10.26 to the Form 10-K filed for the fiscal year ended February 2, 2013. Amendment to The Canadian Executive Savings Plan effective January 1, 2018, filed herewith.* | |
| 10.30 | The Form of TJX Indemnification Agreement for its executive officers and directors, incorporated herein by reference to Exhibit 10(r) to the Form 10-K filed for the fiscal year ended January 27, 1990.*(p) | |
| 10.31 | The Trust Agreement dated as of April 8, 1988 between TJX and State Street Bank and Trust Company, incorporated herein by reference to Exhibit 10(y) to the Form 10-K filed for the fiscal year ended January 30, 1988.*(p) | |
| 10.32 | The Trust Agreement dated as of April 8, 1988 between TJX and Fleet Bank (formerly Shawmut Bank of Boston, N.A.), incorporated herein by reference to Exhibit 10(z) to the Form 10-K filed for the fiscal year ended January 30, 1988.*(p) | |
| 10.33 | The Trust Agreement for Executive Savings Plan dated as of October 23, 2015 between TJX and Vanguard Fiduciary Trust Company, incorporated herein by reference to Exhibit 10.5 to the Form 10-Q filed for the quarter ended October 31, 2015.* | |
| 21 | Subsidiaries of TJX, filed herewith. | |
| 23 | Consent of Independent Registered Public Accounting Firm, filed herewith. | |
| 24 | Power of Attorney given by the Directors and certain Executive Officers of TJX, filed herewith. | |
| 31.1 | Certification Statement of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith. |
| 31.2 | Certification Statement of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith. | |
| 32.1 | Certification Statement of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. | |
| 32.2 | Certification Statement of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. | |
| 101 | The following materials from The TJX Companies, Inc.’s Annual Report on Form 10-K for the fiscal year ended February 3, 2018, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Shareholders’ Equity, and (vi) Notes to Consolidated Financial Statements. |
| * | Management contract or compensatory plan or arrangement. |
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| (p) | Paper filing. |
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Unless otherwise indicated, exhibits incorporated by reference were filed under Commission File Number 001-04908.
Item 16. Form 10-K Summary
Not applicable
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| THE TJX COMPANIES, INC. | ||||||
| /s/ SCOTT GOLDENBERG | ||||||
| Dated: April 4, 2018 | Scott Goldenberg, Chief Financial Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
| /s/ ERNIE HERRMAN Ernie Herrman, Chief Executive Officer, President and Director (Principal Executive Officer) | /s/ SCOTT GOLDENBERG Scott Goldenberg, Chief Financial Officer (Principal Financial and Accounting Officer) | |
| ZEIN ABDALLA* Zein Abdalla, Director | AMY B. LANE* Amy B. Lane, Director | |
| JOSE B. ALVAREZ* José B. Alvarez, Director | CAROL MEYROWITZ* Carol Meyrowitz, Executive Chairman of the Board of Directors | |
| ALAN M. BENNETT* Alan M. Bennett, Director | JACKWYN L. NEMEROV* Jackwyn L. Nemerov, Director | |
| DAVID T. CHING* David T. Ching, Director | JOHN F. O’BRIEN* John F. O’Brien, Director | |
| MICHAEL F. HINES* Michael F. Hines, Director | WILLOW B. SHIRE* Willow B. Shire, Director |
| *BY | /s/ SCOTT GOLDENBERG | |||
| Dated: April 4, 2018 | Scott Goldenberg, as attorney-in-fact |
The TJX Companies, Inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
For Fiscal Years Ended February 3, 2018, January 28, 2017 and January 30, 2016.
F-1
Report of Independent Registered Public Accounting Firm
To The Board of Directors and Shareholders of The TJX Companies, Inc.:
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of The TJX Companies, Inc. and its subsidiaries (the “Company”) as of February 3, 2018 and January 28, 2017, and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended February 3, 2018, including the related notes and financial statement schedule listed in the accompanying index listed within Item 15 (a) (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of February 3, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of February 3, 2018 and January 28, 2017, and the results of their operations and their cash flows for each of the three years in the period ended February 3, 2018 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 3, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
F-2
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the comp
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