TJX Companies 10-Q 2022-10-29

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(mark one)

For the quarterly period ended October 29, 2022

OR

For the transition period from to

Commission file number 1-4908

The TJX Companies, Inc.

(Exact name of registrant as specified in its charter)

(508) 390-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

The number of shares of registrant’s common stock outstanding as of November 18, 2022: 1,155,504,149

The TJX Companies, Inc.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

IN THOUSANDS EXCEPT PER SHARE AMOUNTS

The accompanying notes are an integral part of the unaudited consolidated financial statements.

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

IN THOUSANDS

The accompanying notes are an integral part of the unaudited consolidated financial statements.

THE TJX COMPANIES, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

IN THOUSANDS, EXCEPT SHARE DATA

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The Thirteen Weeks (third quarter) and Thirty-Nine Weeks (nine months) Ended October 29, 2022

Compared to

The Thirteen Weeks (third quarter) and Thirty-Nine Weeks (nine months) Ended October 30, 2021

OVERVIEW

We are the leading off-price apparel and home fashions retailer in the U.S. and worldwide. Our mission is to deliver great value to our customers every day. We do this by selling a rapidly changing assortment of apparel, home fashions and other merchandise at prices generally 20% to 60% below full-price retailers’ (including department, specialty, and major online retailers) regular prices on comparable merchandise, every day through our stores and five distinctive branded e-commerce sites. We operate over 4,700 stores through our four main segments: in the U.S., Marmaxx (which operates T.J. Maxx, Marshalls, tjmaxx.com and marshalls.com) and HomeGoods (which operates HomeGoods, Homesense and homegoods.com); TJX Canada (which operates Winners, HomeSense and Marshalls in Canada); and TJX International (which operates T.K. Maxx, Homesense and tkmaxx.com in Europe, and T.K. Maxx in Australia). In addition to our four main segments, Sierra operates retail stores and sierra.com in the U.S. The results of Sierra are included in the Marmaxx segment.

RESULTS OF OPERATIONS

As an overview of our financial performance, results for the quarter ended October 29, 2022 include the following:

–Net sales decreased 3% to $12.2 billion for the third quarter of fiscal 2023 versus last year’s third quarter sales of $12.5 billion. On a constant currency basis, net sales were flat. As of October 29, 2022, the number of stores in operation increased 2% and selling square footage increased 2% compared to the end of the third quarter of fiscal 2022.

–U.S. comp store sales decreased 2% for the third quarter of fiscal 2023. U.S. open-only comp store sales increased 16% for the third quarter of fiscal 2022. See Net Sales below for definition of both U.S. comp store sales and U.S. open-only comp store sales.

*–*Net sales decreased 1% for TJX Canada and decreased 16% for TJX International for the third quarter of fiscal 2023. On a constant currency basis, net sales increased 4% for TJX Canada and decreased 1% for TJX International.

–Diluted earnings per share for the third quarter of fiscal 2023 were $0.91 versus $0.84 in the third quarter of fiscal 2022. The third quarter of fiscal 2023 included a $0.05 positive impact due to a $54 million tax benefit from the completion of the divestiture of our minority investment in Familia.

–Pre-tax profit margin (the ratio of pre-tax income to net sales) for the third quarter of fiscal 2023 was 11.2%, which was a 0.2 percentage point increase compared with 11.0% in the third quarter of fiscal 2022.

–Our cost of sales ratio, including buying and occupancy costs, for the third quarter of fiscal 2023 was 70.9%, a 0.4 percentage point increase compared with 70.5% in the third quarter of fiscal 2022.

–Our selling, general and administrative (“SG&A”) expense ratio for the third quarter of fiscal 2023 was 18.0%, a 0.3 percentage point decrease compared with 18.3% in the third quarter of fiscal 2022.

–Our consolidated average per store inventories, including inventory on hand at our distribution centers (which excludes inventory in transit) and excluding our e-commerce sites and Sierra stores, were up 27% on a reported basis and 31% on a constant currency basis at the end of the third quarter of fiscal 2023.

–During the third quarter of fiscal 2023, we returned over $0.8 billion to our shareholders through share repurchases and dividends.

Operating Results as a Percentage of Net Sales

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

*Figures may not foot due to rounding.

Net Sales

Net sales for the quarter ended October 29, 2022 totaled $12.2 billion, a 3% decrease versus third quarter fiscal 2022 net sales of $12.5 billion. The decrease reflects a 3% negative impact from foreign currency exchange rates and a 2% decrease in U.S. comp store sales, partially offset by a 2% increase from non-comp store sales. Net sales from our e-commerce sites combined amounted to less than 3% of total sales for each of the third quarters of fiscal 2023 and fiscal 2022.

Net sales for the nine months ended October 29, 2022 totaled $35.4 billion, a 2% increase versus the first nine months of fiscal 2022 net sales of $34.7 billion. The increase includes a 6% increase in non-comp store sales, which reflects a fully open store base for the nine-month period compared to temporary store closures of 6% for the first nine months of fiscal 2022. This was partially offset by a 2% decrease in U.S. comp store sales and a 2% negative impact from foreign currency exchange rates. Net sales from our e-commerce sites combined amounted to less than 3% of total sales for the first nine months of both fiscal 2023 and fiscal 2022.

For fiscal 2023, we returned to our historical definition of comparable store sales. While stores in the U.S. were open for all of fiscal 2022, a significant number of stores in TJX Canada and TJX International experienced COVID-19 related temporary store closures and government-mandated shopping restrictions during fiscal 2022. Therefore, we cannot measure year-over-year comparable store sales with fiscal 2022 in these geographies in a meaningful way. As a result, the comparable stores included in the fiscal 2023 measure consist of U.S. stores only, which we refer to as U.S. comparable store sales (“U.S. comp store sales”), and are calculated against sales for the comparable periods in fiscal 2022.

U.S. comp store sales decreased 2% for the third quarter and 2% for the first nine months of fiscal 2023 compared to a 16% U.S. open-only comp store sales increase in the third quarter and an 18% open-only comp store increase in the first nine months of fiscal 2022. U.S. comp store sales for both periods reflect a decrease in customer traffic partially offset by an increase in average basket driven by higher average ticket. Strong apparel comp sales outperformed a decline in home fashions sales for the third quarter and first nine months ended October 29, 2022.

There remains significant uncertainty in the current macro-economic environment, driven by inflationary pressures, as well as ongoing industry-wide supply chain issues. These factors have impacted, and are expected to continue to impact, consumer discretionary spending and many of the costs in our business.

As of October 29, 2022, our store count increased 2% and selling square footage increased 2% compared to the end of the third quarter last year.

Definition of Comp Store Sales

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

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

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

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

–Sales from our e-commerce sites

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

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

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

We define customer traffic to be the number of transactions in stores and average ticket to be the average retail price of the units sold. We define average transaction or average basket to be the average dollar value of transactions.

Open-Only Comp Store Sales

Due to the temporary closing of stores as a result of the COVID-19 pandemic, our historical definition of comp store sales was not applicable for fiscal 2022. In order to provide a performance indicator for its stores, during fiscal 2022, we temporarily reported open-only comp store sales. Open-only comp store sales included stores initially classified as comp stores at the beginning of fiscal 2021. This measure reported the sales increase or decrease of these stores for the days the stores were open in fiscal 2022 against sales for the same days in fiscal 2020, prior to the emergence of the global pandemic.

Impact of Foreign Currency Exchange Rates

Our operating results are affected by foreign currency exchange rates as a result of changes in the value of the U.S. dollar or a division’s local currency in relation to other currencies. We specifically refer to “foreign currency” as the impact of translational foreign currency exchange and mark-to-market of inventory derivatives, as described in detail below. This does not include the impact foreign currency exchange rates can have on various transactions that are denominated in a currency other than an operating division's local currency, which is referred to as “transactional foreign exchange,” and also described below.

Translation Foreign Exchange

In our consolidated financial statements, we translate the operations of TJX Canada and TJX International from local currencies into U.S. dollars using currency rates in effect at different points in time. Significant changes in foreign exchange rates between comparable prior periods can result in meaningful variations in assets, liabilities, net sales, net income and earnings per share growth as well as the net sales and operating results of these segments. Currency translation generally does not affect operating margins, or affects them only slightly, as sales and expenses of the foreign operations are translated at approximately the same rates within a given period.

Mark-to-Market Inventory Derivatives

We routinely enter into inventory-related hedging instruments to mitigate the impact on earnings of changes in foreign currency exchange rates on merchandise purchases denominated in currencies other than the local currencies of our divisions, principally TJX Canada and TJX International. As we have not elected “hedge accounting” for these instruments, as defined by U.S. generally accepted accounting principles (“GAAP”), we record a mark-to-market gain or loss on the derivative instruments in our results of operations at the end of each reporting period. In subsequent periods, the income statement impact of the mark-to-market adjustment is effectively offset when the inventory being hedged is received and paid for. While these effects occur every reporting period, they are of much greater magnitude when there are sudden and significant changes in currency exchange rates during a short period of time. The mark-to-market adjustment on these derivatives does not affect net sales, but it does affect the cost of sales, operating margins and earnings we report.

Transactional Foreign Exchange

When discussing the impact on our results of the effect of foreign currency exchange rates on certain transactions, we refer to it as “transactional foreign exchange”. This primarily includes the impact that foreign currency exchange rates may have on the year-over-year comparison of merchandise margin as well as “foreign currency gains and losses” on transactions that are denominated in a currency other than the operating division's local currency. These two items can impact segment margin comparison of our foreign divisions and we have highlighted them when they are meaningful to understanding operating trends.

Cost of Sales, Including Buying and Occupancy Costs

Cost of sales, including buying and occupancy costs, as a percentage of net sales was 70.9% for the third quarter of fiscal 2023, an increase of 0.4 percentage points over 70.5% for the third quarter of fiscal of 2022.

Cost of sales, including buying and occupancy costs, as a percentage of net sales was 71.8% for the first nine months of fiscal 2023, an increase of 0.8 percentage points over 71.0% for the first nine months of fiscal of 2022.

The increase in the cost of sales ratio, including buying and occupancy costs, for the third quarter of fiscal 2023 was primarily attributable to deleverage on occupancy costs and investments in supply chain. Merchandise margin was flat as strong markon was fully offset by approximately 1.2 percentage points of incremental freight costs for the third quarter and higher markdowns.

The increase in the cost of sales ratio, including buying and occupancy costs, for the first nine months of fiscal 2023 was primarily attributable to lower merchandise margin and investments in supply chain. Within merchandise margin, strong markon was more than offset by approximately 1.8 percentage points of incremental freight costs as well as higher markdowns.

Selling, General and Administrative Expenses

SG&A expenses, as a percentage of net sales, were 18.0% for the third quarter of fiscal 2023, a decrease of 0.3 percentage points from last year’s third quarter ratio of 18.3%.

SG&A expenses, as a percentage of net sales, were 18.2% for the first nine months of fiscal 2023, a decrease of 0.8 percentage points from last year’s first nine months ratio of 19.0%.

The decrease in the SG&A ratio for the third quarter of fiscal 2023 was primarily driven by lower store payroll costs due to a reduction in COVID-related costs as well as lower incentive compensation costs, partially offset by higher store wages. The decrease in the SG&A ratio for the first nine months of fiscal 2023 was primarily driven by store payroll due to a reduction of COVID-related costs.

Impairment on Equity Investment

During the first quarter ended April 30, 2022, due to the Russian invasion of Ukraine, we announced that we had committed to divesting our minority investment in Familia, an off-price retailer of apparel and home fashions domiciled in Luxembourg that operates stores in Russia. As a result, we performed an impairment analysis and concluded that there was an other-than-temporary impairment of this investment. We recorded an impairment charge of $218 million representing the entire carrying value of the investment in the first quarter of fiscal 2023. We completed the divestiture of this investment during the quarter ended October 29, 2022, resulting in a $54 million tax benefit.

Interest Expense, net

The components of interest expense, net are summarized below:

Net interest expense decreased for both the third quarter of fiscal 2023 and the nine months ended October 29, 2022 compared to the same periods in fiscal 2022, primarily due to the $2.75 billion pay down of outstanding debt during fiscal 2022 as well as an increase in interest income over the same periods.

Provision for Income Taxes

The effective income tax rate was 21.8% for the third quarter of fiscal 2023 compared to 25.8% for the third quarter of fiscal 2022. The effective income tax rate was 25.4% and 25.7% for the first nine months of fiscal 2023 and fiscal 2022, respectively.

The decrease in the third quarter and first nine months of fiscal 2023 effective income tax rate is primarily due to the benefit from the completion of the divestiture of our minority investment in Familia, the change of jurisdictional mix of profits and losses and the resolution of various tax matters, partially offset by a reduction of excess tax benefits from share-based compensation.

Net Income and Diluted Earnings Per Share

Net income for the third quarter of fiscal 2023 was $1.1 billion, or $0.91 per diluted share compared with $1.0 billion, or $0.84 per diluted share for the third quarter of fiscal 2022. The $54 million tax benefit on the divestiture of our minority investment in Familia had a $0.05 positive impact on earnings per share for the third quarter of fiscal 2023. Foreign currency had a $0.01 negative impact on earnings per share for the third quarter of fiscal 2023 compared to a $0.01 negative impact on earnings per share for the third quarter of fiscal 2022.

Net income for the first nine months of fiscal 2023 was $2.5 billion, or $2.08 per diluted share compared with $2.3 billion, or $1.92 per diluted share for the first nine months of fiscal 2022. The $218 million impairment on our previously-held minority investment in Familia, net of the $54 million tax benefit, had a $0.14 negative impact on earnings per share for the first nine months of fiscal 2023. Foreign currency had a $0.02 negative impact on earnings per share for the first nine months of fiscal 2023 compared to a neutral impact on earnings per share for the first nine months of fiscal 2022. The $242 million debt extinguishment charge in fiscal 2022 had a $0.15 negative impact on earnings per share for the first nine months of fiscal 2022.

Segment Information

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

We evaluate the performance of our segments based on “segment profit or loss,” which we define as pre-tax income or loss before general corporate expense and interest expense, net, and certain separately disclosed unusual or infrequent items. “Segment profit or loss,” as we define the term, may not be comparable to similarly titled measures used by other companies. The terms “segment margin” or “segment profit margin” are used to describe segment profit or loss as a percentage of net sales. These measures of performance should not be considered an alternative to net income or cash flows from operating activities as an indicator of our performance or as a measure of liquidity.

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

U.S. SEGMENTS

Marmaxx

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

Net Sales

Net sales for Marmaxx were $7.5 billion for the third quarter of fiscal 2023, an increase of 3% compared to $7.2 billion for the third quarter of fiscal 2022. The increase in the third quarter was driven by a 3% increase from comp store sales. The increase in comp store sales was primarily attributable to an increase in average basket driven by higher average ticket, partially offset by a decrease in customer traffic. Net sales for Marmaxx were $21.6 billion for the first nine months of fiscal 2023, an increase of 2% compared to $21.2 billion for the first nine months of fiscal 2022 due to a 1% increase from comp stores sales and a 1% increase from non-comp store sales. For both the three and nine months ended October 29, 2022, positive apparel sales outperformed a decline in home fashions sales.

Segment Profit Margin

Segment profit margin decreased to 13.5% for the third quarter of fiscal 2023 compared to 13.7% for the same period last year. The decrease in segment profit margin for the third quarter of fiscal 2023 was driven by lower merchandise margin, higher store and distribution center wages and investments in supply chain, partially offset by lower store payroll reflecting lower COVID-related expenses and lower incentive compensation costs. Within merchandise margin, incremental freight costs and higher markdowns were partially offset by strong markon.

Segment profit margin decreased to 13.2% for the first nine months of fiscal 2023 compared to 13.3% for the same period last year. The decrease in segment profit margin for this period was driven by lower merchandise margin, higher store and distribution center wages and deleverage on administrative and occupancy costs, partially offset by store payroll reflecting lower COVID-related expenses. Within merchandise margin, incremental freight costs and higher markdowns were partially offset by strong markon.

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

HomeGoods

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

Net Sales

Net sales for HomeGoods were $1.9 billion for the third quarter of fiscal 2023, a decrease of 14%, compared to $2.3 billion for the third quarter of fiscal 2022. The decrease in the third quarter reflects a 16% decrease from comp store sales, partially offset by a 2% increase from non-comp store sales. The decrease in comp store sales for the third quarter was primarily driven by a decrease in customer traffic. Net sales for HomeGoods were $5.8 billion for the first nine months of fiscal 2023, a decrease of 10%, compared to $6.5 billion for the first nine months of fiscal 2022. The decrease in the first nine months reflects a 12% decrease from comp store sales, partially offset by a 2% increase from non-comp store sales. The decreases in comp store sales for the first nine months of fiscal 2023 reflected a decrease in customer traffic, partially offset by an increase in average basket driven by higher average ticket.

Segment Profit Margin

Segment profit margin decreased to 8.9% for the third quarter of fiscal 2023 compared to 11.7% for the same period last year. The decrease in segment profit margin for the third quarter was driven by deleverage on lower comp store sales, primarily in occupancy and administration costs and higher store and distribution wages, partially offset by store payroll reflecting lower COVID-related expenses. Within merchandise margin, strong markon was mostly offset by 1.6 percentage points of incremental freight as well as higher markdowns.

Segment profit margin decreased to 5.9% for the first nine months of fiscal 2023 compared to 10.8% for the same period last year. The decrease in segment profit margin for the first nine months of fiscal 2023 was driven by deleverage on lower comp store sales, primarily in occupancy and administrative costs, lower merchandise margin and higher store and distribution wages, partially offset by store payroll reflecting lower COVID-related expenses. Merchandise margin includes incremental freight costs of approximately 5.2 percentage points as well as higher markdowns. These costs were partially offset by strong markon and the benefits from our pricing initiative.

Our HomeGoods e-commerce website, homegoods.com, represented less than 1% of HomeGoods net sales for the third quarter and the first nine months of fiscal 2023, and did not have a significant impact on year-over-year segment margin comparisons.

FOREIGN SEGMENTS

TJX Canada

Net Sales

Net sales for TJX Canada were $1.3 billion for the third quarter of fiscal 2023 compared to $1.3 billion for the third quarter of fiscal 2022. The negative foreign currency exchange rate impact of 5% in the third quarter of fiscal 2023 was offset by an increase in average basket, primarily due to higher average ticket. Net sales for TJX Canada were $3.6 billion for the first nine months of fiscal 2023, an increase of 17% compared to $3.1 billion for the first nine months of fiscal 2022. The increase in net sales reflects having a fully open store base for the first nine months of fiscal 2023, compared to temporary store closures for 16% of the first nine months of fiscal 2022 as a result of the COVID-19 pandemic. The negative foreign currency exchange rate impact of 5% in the first nine months of fiscal 2023 was more than offset by an increase in average basket driven by higher average ticket.

Segment Profit Margin

Segment profit margin increased to 15.8% for the third quarter of fiscal 2023 compared to 13.0% for the same period last year. The increase for the third quarter of fiscal 2023 was driven by higher merchandise margin, a benefit from prior year mark-to-market adjustments on derivatives, lower store payroll reflecting lower COVID-related expenses, and lower incentive compensation costs. This was partially offset by higher store and distribution wages. Merchandise margin reflects a favorable year-over-year comparison related to freight costs, strong markon and the benefits from our pricing initiative which were partially offset by higher markdowns.

Segment profit margin increased to 14.6% for the first nine months of fiscal 2023 compared to 11.6% for the same period last year. The increase for the first nine months of fiscal 2023 was primarily driven by leverage on increased sales, primarily in occupancy and administrative costs. Within merchandise margin, strong markon and the benefits from our pricing initiative more than offset incremental freight costs for the first nine months of fiscal 2023.

TJX International

Net Sales

Net sales for TJX International were $1.5 billion for the third quarter of fiscal 2023, a decrease of 16% compared to $1.8 billion for the third quarter of fiscal 2022. The decrease in net sales was primarily due to a negative foreign currency exchange rate impact of 15% in the third quarter of fiscal 2023. Net sales for TJX International were $4.4 billion for the first nine months of fiscal 2023, an increase of 12% compared to $3.9 billion for the first nine months of fiscal 2022. The increase in net sales for the first nine months of fiscal 2023 reflects having a fully open store base, compared to temporary store closings for 26% of the first nine months of fiscal 2022 as a result of the COVID-19 pandemic, which was partially offset by the negative foreign currency exchange rate impact of 15%.

E-commerce sales were approximately 3% and 4% of TJX International’s net sales for the third quarters of fiscal 2023 and fiscal 2022, respectively, and 3% and 5% for the first nine months of the same periods.

Segment Profit Margin

Segment profit margin decreased to 6.7% for the third quarter of fiscal 2023 compared to 7.2% for the same period last year. This decrease primarily reflects expense deleverage on occupancy and administrative costs and higher store and distribution wages, partially offset by higher merchandise margin. Within merchandise margin, strong markon was partially offset by incremental freight costs and higher markdowns.

Segment profit margin increased to 4.9% for the first nine months of fiscal 2023 compared to 2.0% for the same period last year. This increase was primarily driven by leverage on increased sales, primarily in occupancy and administrative costs, as well as lower COVID-related expenses in stores and distribution centers, lower incentive compensation costs and higher merchandise margin. This was partially offset by government programs received in fiscal 2022 that did not continue into fiscal 2023. Within merchandise margin, strong markon was partially offset by incremental freight costs and higher markdowns.

GENERAL CORPORATE EXPENSE

General corporate expense for segment reporting purposes represents those costs not specifically related to the operations of our business segments. General corporate expenses are primarily included in SG&A expenses. The mark-to-market adjustment of our fuel and inventory hedges is included in cost of sales, including buying and occupancy costs.

The decrease in general corporate expense for the third quarter of fiscal 2023 was primarily driven by lower share-based and incentive compensation costs.

The decrease in general corporate expense for the first nine months of fiscal 2023 was primarily driven by lower share-based and incentive compensation costs and the timing of contributions to TJX’s charitable foundations.

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 October 29, 2022, there were no short-term bank borrowings or commercial paper outstanding. We have current maturities of long-term debt which will mature in the first half of fiscal 2024. 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 October 29, 2022, as described in Note I—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements, are adequate to meet our operating needs for the foreseeable future.

As of October 29, 2022, we held $3.4 billion in cash. Approximately $1.0 billion of our cash was held by our foreign subsidiaries with $0.5 billion held in countries where we intend to indefinitely reinvest any undistributed earnings. We have provided for all applicable state and foreign withholding taxes on all undistributed earnings of our foreign subsidiaries in Canada, Puerto Rico, Italy, India, Hong Kong and Vietnam through October 29, 2022. If we repatriate cash from such subsidiaries, we should not incur additional tax expense and our cash would be reduced by the amount of withholding taxes paid.

We monitor debt financing markets on an ongoing basis and from time to time may incur additional long-term indebtedness depending on prevailing market conditions, liquidity requirements, existing economic conditions and other factors. In fiscal 2022 we 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

Operating activities resulted in net cash inflows of $1.1 billion for the nine months ended October 29, 2022 and $1.9 billion for the nine months ended October 30, 2021.

Operating cash flows decreased compared to fiscal 2022, with the primary driver being a $0.8 billion decrease in accrued expenses, the largest component of which was lower incentive compensation costs.

Investing Activities

Investing activities resulted in net cash outflows of $1.1 billion for the nine months ended October 29, 2022 and $0.7 billion for the nine months ended October 30, 2021. The cash outflows for both periods were driven by capital expenditures.

Investing activities in the first nine months of fiscal 2023 primarily reflected property additions for investments in our new stores, store improvements and renovations, as well as investments in our distribution centers and offices, including buying and merchandising systems and other information systems. We anticipate that capital spending for the full fiscal year 2023 will be approximately $1.7 billion to $1.9 billion. We plan to fund these expenditures through cash flows from operations.

Financing Activities

Financing activities resulted in net cash outflows of $2.7 billion for the first nine months of fiscal 2023 and net cash outflows of $4.9 billion for the nine months ended October 30, 2021. The cash outflows for fiscal 2023 were primarily driven by equity repurchases and dividend payments.

Debt

Cash outflows of $3.0 billion in the first nine months of fiscal 2022 were due to the completion of make-whole calls and the redemption at par of certain of our notes.

Our 2.50% ten-year Notes due May 2023 will mature during our second quarter of fiscal 2024 and are included within our current maturities of long-term debt, see Note I—Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements. We plan to repay this debt using cash generated from operations.

Equity

Under our stock repurchase program, we paid $1.8 billion to repurchase and retire 29.1 million shares of our stock on a settlement basis in the first nine months of fiscal 2023. As of October 29, 2022, approximately $2.0 billion remained available under our existing stock repurchase program. We paid $1.1 billion to repurchase and retire 16.3 million shares of our stock on a settlement basis in the first nine months of fiscal 2022.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”), was signed into law. Among other things, the IRA imposes a 15% corporate alternative minimum tax for tax years beginning after December 31, 2022 and levies a 1% excise tax on net stock repurchases after December 31, 2022. Historically, during the year we have made discretionary share repurchases. Beginning on January 1, 2023, these purchases would be subject to the excise tax. Based on historical net repurchase activity, the excise tax and the other provisions of the IRA are not expected to have a material impact on our results of operations or financial position. However, we are still in the process of analyzing the provisions of the IRA.

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

Dividends

We declared quarterly dividends on our common stock of $0.295 per share for each of the quarters in fiscal 2023 and expect to declare a similar dividend in the fourth quarter of fiscal 2023, subject to approval by the Board of Directors. We declared quarterly dividends on our common stock of $0.26 per share for each of the quarters in fiscal 2022. Cash payments for dividends on our common stock totaled $1.0 billion for the first nine months of fiscal 2023 and $0.9 billion for the first nine months of fiscal 2022.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

There have been no material changes to the critical accounting estimates as discussed in TJX's Annual Report on Form 10-K for the fiscal year ended January 29, 2022. For a discussion of accounting standards, see Note A—Basis of Presentation and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements included in TJX’s Annual Report on Form 10-K for the fiscal year ended January 29, 2022 and Note A—Basis of Presentation and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

FORWARD-LOOKING STATEMENTS

Various statements made in this Quarterly Report on Form 10-Q are forward-looking and involve a number of risks and uncertainties. All statements that address activities, events or developments that we intend, expect or believe may occur in the future are forward-looking statements. The following are some of the factors that could cause actual results to differ materially from the forward-looking statements: the ongoing COVID-19 pandemic and associated containment and remediation efforts; execution of buying strategy and inventory management; various marketing efforts; customer trends and preferences; competition; operational and business expansion; management of large size and scale; merchandise sourcing and transport; labor costs and workforce challenges; personnel recruitment, training and retention; data security and maintenance and development of information technology systems; corporate and retail banner reputation; cash flow; expanding international operations; fluctuations in quarterly operating results and market expectations; mergers, acquisitions, business investments and divestitures, closings or business consolidations; real estate activities; inventory or asset loss; economic conditions and consumer spending; market instability; serious disruptions or catastrophic events; disproportionate impact of disruptions in the final quarter of the fiscal year; commodity availability and pricing; adverse or unseasonable weather; fluctuations in currency exchange rates; compliance with laws, regulations and orders and changes in laws, regulations and applicable accounting standards; outcomes of litigation, legal proceedings and other legal or regulatory matters; quality, safety and other issues with our merchandise; tax matters; and other factors that may be described in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission. We do not undertake to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied in such statements will not be realized.

There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022.

We have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of October 29, 2022 pursuant to Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level in ensuring that information required to be disclosed by us in the reports that we file or submit under the Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms; and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of implementing controls and procedures.

There were no changes in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Act) during the fiscal quarter ended October 29, 2022 identified in connection with the evaluation by our management, including our Chief Executive Officer and Chief Financial Officer, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

See Note K—Contingent Obligations, Contingencies, and Commitments of Notes to Consolidated Financial Statements for information on legal proceedings.

There have been no material changes to the risk factors disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended January 29, 2022, as filed with the Securities Exchange Commission on March 30, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

INFORMATION ON SHARE REPURCHASES

The number of shares of common stock repurchased by TJX during the third quarter of fiscal 2023 and the average price paid per share are as follows:

(a)Consists of shares repurchased under publicly announced stock repurchase programs.

(b)Includes commissions for the shares repurchased under stock repurchase programs.

(c)In February 2022, we announced that our Board of Directors had approved a new stock repurchase program that authorizes the repurchase of up to an additional $3.0 billion of our common stock from time to time. Under this program we had approximately $2.0 billion available for repurchase as of October 29, 2022.

• Management contract or compensatory plan or arrangement.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.