THE TJX COMPANIES 
The Thirteen Weeks (first quarter) Ended
Compared to
The Thirteen Weeks (first quarter) Ended May 4, 2019 OVERVIEW
We are the leading off-price apparel and home fashions retailer in theU.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 4,500 stores through our four main segments: in theU.S. , Marmaxx (which operates T.J. Maxx, Marshalls, tjmaxx.com and marshalls.com) andHomeGoods (which operatesHomeGoods and Homesense); TJX Canada (which operates Winners, HomeSense and Marshalls inCanada ); andTJX International (which operatesT.K. Maxx , Homesense and tkmaxx.com inEurope , andT.K. Maxx inAustralia ). In addition to our four main segments, Sierra operates sierra.com and retail stores in theU.S. The results of Sierra are included in the Marmaxx segment. Impact of the COVID-19 Pandemic InDecember 2019 , COVID-19 emerged and spread worldwide. TheWorld Health Organization declared COVID-19 a pandemic inMarch 2020 , resulting in federal, state and local governments and private entities mandating various restrictions, including travel restrictions, restrictions on public gatherings, stay-at-home orders and advisories and quarantining of people who may have been exposed to the virus. As the ongoing public health impact and the associated containment and remediation efforts related to the COVID-19 pandemic are complex and rapidly evolving, the Company's plans as described below may change. The continuation of the outbreak may cause prolonged or additional intermittent periods of store closures and modified operating schedules which may further increase operating costs for health and safety protocols and may result in changes in customer behaviors, including a potential reduction in consumer discretionary spending in our stores. These potential impacts may lead to increased asset recovery and valuation risks, such as impairment of our stores and other assets and an inability to realize deferred tax assets due to sustaining losses in certain jurisdictions. The uncertainties in the global economy will likely impact the financial viability of some number of our suppliers, which may interrupt our supply chain, and require other changes to our operations. These and other factors have had and may continue to have a material impact on our business, results of operations, financial position and cash flows. At this point, we cannot reasonably estimate the duration and severity of this pandemic or the associated remediation and containment efforts and, therefore, the Company is not providing an updated financial outlook at this time. Store and Associate Actions We have taken numerous steps to protect the health and well-being of our Associates, customers and communities, while also focusing on further strengthening our financial liquidity and flexibility. After closely monitoring and taking into consideration the guidance from federal, state and local governments, inMarch 2020 , the Company temporarily closed all of its stores, distribution centers and offices, and online businesses, with Associates working remotely where possible. The Company continued to pay all activeTJX Associates through the week endedApril 11, 2020 . EffectiveApril 12, 2020 , the Company temporarily furloughed the majority of its hourly store and distribution center Associates in theU.S. andCanada , with employee benefits for eligible Associates continuing through the temporary furlough at no cost to impacted Associates. The Company also took comparable actions with respect to portions of its European and Australian workforces. We have been highly focused on the changes we are making to operate more safely in light of the pandemic. The Company has established several global task force teams focused on a broad range of aspects of navigating the Company through this global health crisis. We intend to follow newly established health protocols, provide personal protective equipment to our Associates, and implement social distancing working practices. In our stores prior to reopening, we are implementing occupancy limits, installing protective shields at each register, encouraging social distancing through regular in-store announcements, signage, and markers in our queue lines, implementing new processes for handling merchandise returns, and instituting new cleaning regimens, including enhanced cleaning of high-touch surfaces throughout the day. 23
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BeginningMay 2, 2020 the Company started to reopen stores in select states and countries. As we reopen stores, we are doing so in accordance with local government guidelines. As ofMay 21, 2020 , the Company has reopened more than 1,600 of its stores worldwide. Inthe United States , the Company has fully or partially reopened in 25 states. Internationally, TJX Canada has begun to open stores in some provinces, and the Company's stores inGermany ,Poland ,Austria ,the Netherlands , andAustralia are fully open. The Company has also reopened itsU.K. andU.S. e-commerce businesses. The Company expects to continue reopening stores and other facilities around the world in a phased approach as more states and countries reopen for retail. Globally, the Company reopened stores only when it had additional health and wellness practices in place, such as access to personal protective equipment, enhanced cleaning efforts and social distancing protocols for its Associates and customers. Financial Actions Balance Sheet, Cash Flow and Liquidity The temporary closure of our stores has had an unprecedented and material impact on our results of operations, financial position and liquidity. As further detailed below in Results of Operations, this impact included a 52% decrease in net sales for the first quarter of fiscal 2021 compared to the same period last year, resulting in a net operating loss which includes a significant inventory write-down. We have taken steps to strengthen our financial position and balance sheet, and to maintain financial liquidity and flexibility, including suspending our share repurchase program, reviewing and reducing operating expenses, reducing the fiscal 2021 capital expenditure plan to a range of$0.4 billion to$0.6 billion , lowering fiscal 2021 store openings to approximately 50 stores, pausing a majority of our planned store remodels, and delaying a majority of distribution center, home office and IT capital spending. In addition, the Company drew down the entire$1.0 billion on our revolving credit facilities and issued$4.0 billion in aggregate principal long-term debt. For additional information on the new debt issuances, see Note J-Long-Term Debt and Credit Lines. The Company did not declare a dividend for the first quarter of 2021, and at this time does not expect to declare a dividend in the second quarter of fiscal 2021. The Company is committed to resuming dividend payments for the long term whenever the environment and its business stabilize. During the first quarter of fiscal 2021, we negotiated rent deferrals (primarily for second quarter lease payments) for a significant number of our stores, with repayment at later dates, primarily in fiscal 2022. Consistent with updated guidance from the FASB inApril 2020 , we have elected to treat the COVID-19 pandemic-related rent deferrals as a resolution of a contingency by remeasuring the remaining consideration in the contract, with a corresponding adjustment to the right-of-use asset, using the remeasured consideration. The Company did not reassess the lease classification and did not update the discount rate used to measure the lease liability. For the first quarter of fiscal 2021, as a result of the COVID-19 pandemic and store closures, the Company evaluated the value of its inventory. Permanent markdowns, which have been or are expected to be taken upon reopening of the stores, on transitional or out of season merchandise and merchandise that was already in markdown status, combined with the write-off of perishable goods, resulted in a reduction of approximately$0.5 billion in inventory atMay 2, 2020 . While the Company recognized these markdowns in the first quarter of fiscal 2021, the non-perishable inventory is expected to be sold in the second quarter of fiscal 2021. Given the substantial reduction in our sales and the reduced cash flow projections as a result of the store closures due to the COVID-19 pandemic, we determined that a triggering event occurred and that an impairment assessment was warranted for certain stores. This analysis resulted in an immaterial amount of impairment charges related to long-lived assets and operating lease right of use assets in the first quarter of fiscal 2021. Operating Expenses We have implemented, and plan to continue to implement, cost saving initiatives to reduce some ongoing variable and discretionary spending, including substantially reducing expenses such as advertising and other non-essential expenses in the short term. The Company is planning on incurring incremental costs going forward for personal protective equipment, including masks and gloves for Associates, as well as additional cleaning supplies. In addition, the Company is expecting to have additional payroll and supply costs associated with social distancing protocols and cleaning regimens we are putting in place in our stores, distribution centers, and offices. As a result of the global COVID-19 pandemic, governments in theU.S. ,U.K. ,Canada and various other jurisdictions have implemented programs to encourage companies to retain and pay employees who are unable to work or are limited in the work that they can perform in light of closures or a significant decline in sales. TJX continued to pay all employees through at leastApril 11, 2020 and continues to provide benefits for furloughed eligible impacted employees that are unable to work. As such, we qualify for certain of these provisions, which will partially offset related expenses. During the quarter endedMay 2, 2020 , these programs reduced our expenses by approximately$0.2 billion on our Consolidated Statements of (Loss) Income. We expect that these programs will continue to provide additional liquidity through the second quarter of fiscal 2021. 24
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RESULTS OF OPERATIONS Matters Affecting Comparability As a result of the COVID-19 pandemic, our stores, e-commerce businesses and distribution centers were closed for nearly half of the first quarter of fiscal 2021. In addition to lost revenues, we continued to pay wages and provide benefits to our Associates, and we also incurred higher expenses due to inventory write-down costs and fulfillment of certain vendor commitments. This resulted in operating losses at each of our divisions. As a result, comparisons of expense ratios and year-over-year trends are not a meaningful way to discuss our operating results this quarter. Overview of our financial performance for the quarter endedMay 2, 2020 : -Net sales decreased 52% to$4.4 billion for the first quarter of fiscal 2021 versus last year's first quarter of fiscal 2020 sales of$9.3 billion . As ofMay 2, 2020 , the number of stores in operation increased 4% (including stores that were temporarily closed due to COVID-19) and selling square footage increased 3% compared to the end of the fiscal 2020 first quarter. -Diluted (loss) earnings per share for the first quarter of fiscal 2021 were$(0.74) versus$0.57 in the first quarter of fiscal 2020. -Pre-tax margin (the ratio of pre-tax (loss) income to net sales) for the first quarter of fiscal 2021 was (30.5)%, a 40.6 percentage point decrease compared with 10.1% in the first quarter of fiscal 2020. -Our cost of sales, including buying and occupancy costs, ratio for the first quarter of fiscal 2021 was 100.1%, a 28.6 percentage point increase compared with 71.5% in the first quarter of fiscal 2020. -Our selling, general and administrative ("SG&A") expense ratio for the first quarter of fiscal 2021 was 29.8%, an 11.5 percentage point increase compared with 18.3% in the first quarter of fiscal 2020. -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 down 7% on a reported basis and down 6% on a constant currency basis at the end of the first quarter of fiscal 2021 as compared to a 6% increase in average per store inventories on a reported basis and a 7% increase on a constant currency basis in the first quarter of fiscal 2020. -During the first quarter of fiscal 2021, we returned approximately$0.5 billion to our shareholders through payment of the dividend declared in the fourth quarter of fiscal 2020 and share repurchases. See the Impact of the COVID-19 Pandemic section above for the actions taken regarding the Company's share repurchase and dividend programs. Recent Events and Trends COVID-19 See discussion above in the Impact of the COVID-19 Pandemic section. Impact of Brexit OnJanuary 31, 2020 , theUnited Kingdom ("U.K.") left theEuropean Union ("EU"), commonly referred to as "Brexit" , and entered an 11-month transition period (the "Transition Period"), during which theU.K. continues to be treated as an EU member for most purposes. This Transition Period is due to end onDecember 31, 2020 , and theU.K. and EU are currently negotiating the terms of their future relationship that will apply after this date. The terms of the future EU/U.K. trading relationship remain uncertain. OurTJX Europe management team has evaluated a range of possible outcomes, identified areas of concerns, and implemented strategies to help mitigate them. We expect the future EU/U.K. trading relationship will subject the movement of goods between theU.K. and EU to additional regulatory and compliance requirements, which is likely to have a negative impact on our ability to efficiently move merchandise in the region. We have realigned our European division's supply chain to reduce the volume of merchandise flowing between theU.K. and the EU and have established resources and systems to support this plan. There are also likely to be additional customs duty costs on EU/U.K. trade, the extent of which remains uncertain. Any customs duties may also impact the profitability of our European division, at least in the short term. New immigration requirements between theU.K. and EU countries may also have a negative impact on our ability to recruit and retain current and future talent in the region. We continue to communicate with our Associates about the new immigration requirements. 25
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In addition to these operational impacts, factors including changes in consumer confidence and behavior, economic conditions, interest rates and foreign currency exchange rates could result in a significant financial impact to our European operations, particularly in the short term. We believe the steps we have taken and plan to take will help us mitigate the effects when the Transition Period ends. TariffsThe U.S. Administration has imposed tariffs on imports fromChina . We continue to monitor the developments very closely and have started to see margin pressure based on the tariffs currently in place on the goods sourced directly fromChina . The impact on vendor and competitor pricing, consumer demand, potential tariff pass-throughs and the fluctuation of the Chinese currency remains uncertain.Net Sales Net sales for the quarter endedMay 2, 2020 totaled$4.4 billion , a 52% decrease versus last year's first quarter fiscal 2020 net sales of$9.3 billion . The decrease in net sales is driven by temporary closures of all stores as ofMarch 19, 2020 , and earlier in certain markets as well as the temporary closure of our online businesses as a result of the COVID-19 pandemic. Prior to these temporary closures, the Company's sales trends remained strong across all four major divisions inFebruary 2020 . For the month of February, which was the month prior to the pandemic having an impact on our operations, consolidated comp sales were 5% primarily driven by customer traffic, with all four major divisions having a February comp sales increase of 5% or better. As a result of the extended store closures, due to the pandemic and our policy relating to store closures for a period of time, we have no stores classified as comparable at the end of the first quarter of fiscal 2021. As ofMay 2, 2020 , our store count increased 4% and selling square footage increased 3% compared to the end of the first quarter last year. As a result of the extended store closures due to the pandemic and our policy relating to extended store closures on comp store status for a period of time, we have no stores classified as comp stores at the end of the first quarter fiscal 2021. As a result of the pandemic, we intend to reevaluate comp sales reporting going forward as stores start to reopen. The following reflects the way that we have historically classified and reported comp sales results. We define comparable store sales, or comp sales, to be sales of stores that have been in operation for all or a portion of two consecutive fiscal years, or in other words, stores that are starting their third fiscal year of operation. We calculate comp sales on a 52-week basis by comparing the current and prior year weekly periods that are most closely aligned. Relocated stores and stores that have changed in size are generally classified in the same way as the original store, and we believe that the impact of these stores on the consolidated comp percentage is immaterial. We define customer traffic to be the number of transactions in stores included in the comp sales 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 included in the comp sales. Sales excluded from comp sales ("non-comp sales") consist of sales from: -New stores - stores that have not yet met the comp sales criteria, which represents a substantial majority of non-comp sales -Stores that are closed permanently or for an extended period of time -Sales from our e-commerce sites, meaning sierra.com, tjmaxx.com, marshalls.com and tkmaxx.com We determine which stores are included in the comp sales calculation at the beginning of a fiscal year and the classification remains constant throughout that year unless a store is closed permanently or for an extended period during that fiscal year. In fiscal 2020, Sierra stores that otherwise fit the comp store definition were included in comp stores in our Marmaxx segment. Comp sales of our foreign segments are calculated by translating the current year's comp sales of our foreign segments at the same exchange rates used in the prior year. This removes the effect of changes in currency exchange rates, which we believe is a more accurate measure of segment operating performance. Comp sales may be referred to as "same store" sales by other retail companies. The method for calculating comp sales varies across the retail industry, therefore our measure of comp sales may not be comparable to that of other retail companies. 26
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The following table sets forth certain information about our operating results as a percentage of net sales for the following periods:
Thirteen Weeks Ended
May 2, May 4,
2020 2019
Net sales 100.0 % 100.0 %
Cost of sales, including buying and occupancy costs 100.1 71.5
Selling, general and administrative expenses 29.8 18.3
Interest expense, net 0.5 -
(Loss) income before provision for income taxes* (30.5) % 10.1 %
*Figures may not foot due to rounding.
Impact of foreign currency exchange rates
Our operating results are affected by foreign currency exchange rates as a
result of changes in the value of the U.S. dollar or a division's local currency
in relation to other currencies. We specifically refer to "foreign currency" as
the impact of translational foreign currency exchange and mark-to-market of
inventory derivatives, as described in detail below. This does not include the
impact foreign currency exchange rates can have on various transactions that are
denominated in a currency other than an operating division's local currency
referred to as "transactional foreign exchange", also described below.
Translation Foreign Exchange
In our 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
net sales, net (loss) income and (loss) 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 (loss) income statement impact of the
mark-to-market adjustment is effectively offset when the inventory being hedged
is received and paid for. While these effects occur every reporting period, they
are of much greater magnitude when there are sudden and significant changes in
currency exchange rates during a short period of time. The mark-to-market
adjustment on these derivatives does not affect net sales, but it does affect
the cost of sales, operating margins and earnings we report.
Transactional Foreign Exchange
When discussing the impact on our results of the effect of foreign currency
exchange rates on certain transactions, we refer to it as "transactional foreign
exchange". This primarily includes the impact that foreign currency exchange
rates may have on the year-over-year comparison of merchandise margin as well as
"foreign currency gains and losses" on transactions that are denominated in a
currency other than the operating division's local currency. These two items can
impact segment margin comparison of our foreign divisions and we have
highlighted them when they are meaningful to understanding operating trends.
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Cost of Sales, Including Buying and Occupancy Costs Cost of sales, including buying and occupancy costs, was$4.4 billion for the first quarter of fiscal 2021, a decrease of$2.2 billion , compared to$6.6 billion for the first quarter of fiscal 2020. The most significant factor in this decline was the cost of merchandise on lost sales, which were approximately$5 billion less than last year's sales for the first quarter of fiscal 2020. Inventory write down costs of approximately$0.5 billion reflect markdowns we estimate would be needed on transitional, perishable or out of season merchandise upon the reopening of our stores, partially offset the significant decline in the cost of merchandise sold. Our occupancy costs are fixed and although rent deferrals were negotiated to help with our liquidity, our year over year costs were comparable. There was some reduction in our payroll costs, primarily hourly associates as many were furloughed in early April. We continued to pay these associates through at leastApril 11, 2020 after we closed the distribution centers. These payroll costs were partially offset by approximately$35 million from government programs available in theU.S. and inCanada , theU.K. and various other jurisdictions. There were smaller reductions in costs due to the store closures, such as store repairs and maintenance. Selling, General and Administrative Expenses SG&A expenses were$1.3 billion for the first quarter of fiscal 2021, a decrease of$0.4 billion , compared to$1.7 billion for the first quarter of fiscal 2020. This was primarily driven by lower store payroll costs. The change in store payroll includes the additional payroll we paid our hourly associates after the store closures, which was more than offset by the savings from subsequently furloughing these Associates and$152 million from government programs available in theU.S. and inCanada , theU.K. and various other jurisdictions. Additionally, other variable store costs such as credit processing fees and advertising spend were lower as a result of the temporary store closures due to the COVID-19 pandemic. The decrease also reflects lower share-based compensation costs and incentive compensation accruals. Interest Expense, net The components of interest expense, net are summarized below: Thirteen Weeks Ended May 2, May 4, In millions 2020 2019 Interest expense$ 32.6 $ 15.3 Capitalized interest (1.0) (0.7) Interest (income) (8.2) (13.8) Interest expense, net$ 23.4 $ 0.8 Net interest expense increased for the three months endedMay 2, 2020 compared to the same period in fiscal 2020, primarily driven by the issuance of additional debt and the draw down on our revolving credit facilities due to the COVID-19 pandemic. Provision for Income Taxes The effective income tax rate was 33.9% for the first quarter of fiscal 2021 and 25.2% for the first quarter of fiscal 2020. The increase in the effective income tax rate is primarily due to the anticipated benefit from the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") enacted onMarch 27, 2020 . The CARES Act provides for net operating losses in fiscal 2021 to be carried back to earlier tax years with higher tax rates than the current year. Net (Loss) / Income and Diluted (Loss) Earnings Per Share Net (loss) income for the first quarter of fiscal 2021 was$(887) million , or$(0.74) per diluted share compared to$700 million , or$0.57 per diluted share for the first quarter of fiscal 2020. 28
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Segment Information We operate four main business segments. Our Marmaxx segment (T.J. Maxx, Marshalls, tjmaxx.com and marshalls.com) and theHomeGoods segment (HomeGoods and Homesense) both operate inthe United States . Our TJX Canada segment operates Winners, HomeSense and Marshalls inCanada , and ourTJX International segment operatesT.K. Maxx , Homesense and tkmaxx.com inEurope andT.K. Maxx inAustralia . In addition to our four main segments, Sierra operates sierra.com and retail stores in theU.S. The results of Sierra are included in the Marmaxx segment. We evaluate the performance of our segments based on "segment profit or loss," which we define as pre-tax income or loss before general corporate expense and interest expense, net, and certain separately disclosed unusual or infrequent items. "Segment profit or loss," as we define the term, may not be comparable to similarly titled measures used by other entities. The terms "segment margin" or "segment profit margin" are used to describe segment profit or loss as a percentage of net sales. These measures of performance should not be considered an alternative to net (loss) income or cash flows from operating activities as an indicator of our performance or as a measure of liquidity. Presented below is selected financial information related to our business segments.U.S. SEGMENTS Marmaxx Thirteen Weeks Ended May 2, May 4, U.S. dollars in millions 2020 2019 Net sales$ 2,698 $ 5,802 Segment (loss) profit$ (710) $ 796 Segment margin (26.3) % 13.7 % Stores in operation at end of period: T.J. Maxx 1,273 1,257 Marshalls 1,130 1,102 Sierra 46 39 Total 2,449 2,398 Selling square footage at end of period (in thousands): T.J. Maxx 27,776 27,532 Marshalls 25,907 25,460 Sierra 766 654 Total 54,449 53,646 Net Sales Net sales for Marmaxx decreased 54% for the first quarter of fiscal 2021 as compared to the same period last year. The decrease in net sales for the first quarter is due to the temporary closures of all stores during nearly half of the quarter as a result of the COVID-19 pandemic. Segment (Loss) / Profit Segment loss was$(710) million for the first quarter of fiscal 2021, a decrease of$1.5 billion , compared to a segment profit of$796 million for the same period last year. This decrease was primarily driven by a reduction in sales due to the temporary store closures and increased markdowns on merchandise that was primarily transitional, perishable or out of season. Additionally, this decrease was partially offset by a reduction in payroll, incentive compensation accruals and other variable store expenses. The reduction in payroll reflects approximately$88 million from government programs as described in the Impacts of the COVID-19 Pandemic section above. OurU.S. e-commerce businesses, which represent approximately 3% of Marmaxx's net sales for the first quarter of fiscal 2021 and fiscal 2020, did not have a significant impact on year-over-year segment margin comparisons for the first quarter of fiscal 2021. Along with our stores, we temporarily closed our online businesses as a result of the COVID-19 pandemic. 29
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HomeGoods Thirteen Weeks Ended May 2, May 4, U.S. dollars in millions 2020 2019 Net sales$ 760 $ 1,397 Segment (loss) profit$ (154) $ 137 Segment margin (20.2) % 9.8 % Stores in operation at end of period: HomeGoods 814 770 Homesense 34 22 Total 848 792 Selling square footage at end of period (in thousands): HomeGoods 14,915 14,152 Homesense 733 470 Total 15,648 14,622 Net Sales Net sales forHomeGoods decreased 46% in the first quarter compared to the same period last year. The decrease in net sales for the first quarter is due to the temporary closures of all stores during nearly half of the quarter as a result of the COVID-19 pandemic. Segment (Loss) / Profit Segment loss was$(154) million for the first quarter of fiscal 2021, a decrease of$291 million , compared to a segment profit of$137 million for the same period last year. The decrease was primarily driven by a reduction in sales due to the store closures and increased markdowns on merchandise that was primarily transitional, perishable or out of season. Additionally, this decrease was partially offset by a reduction in payroll, incentive compensation accruals and other variable store expenses. The reduction in payroll reflects approximately$22 million from government programs as described in the Impacts of the COVID-19 Pandemic section above. 30
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FOREIGN SEGMENTS
TJX Canada
Thirteen Weeks Ended
May 2, May 4,
U.S. dollars in millions 2020 2019
Net sales $ 380 $ 848
Segment (loss) profit $ (97) $ 97
Segment margin (25.6) % 11.4 %
Stores in operation at end of period:
Winners 279 273
HomeSense 139 132
Marshalls 100 91
Total 518 496
Selling square footage at end of period (in thousands):
Winners 6,003 5,865
HomeSense 2,553 2,425
Marshalls 2,102 1,929
Total 10,658 10,219
Net Sales
Net sales for TJX Canada decreased 55% during the first quarter ended May 2,
2020 compared to the same period last year. The decrease in the net sales for
the first quarter is due to the temporary closures of all stores during nearly
half of the quarter as a result of the COVID-19 pandemic.
Segment (Loss) / Profit
Segment loss was $(97) million for the first quarter of fiscal 2021, a decrease
of $194 million , compared to a segment profit of $97 million for the same period
last year. The decrease was primarily driven by a reduction in sales due to the
store closures and increased markdowns on merchandise that was primarily
transitional, perishable or out of season. Additionally, this decrease was
partially offset by a reduction in payroll, incentive compensation accruals and
other variable store expenses. The reduction in payroll reflects approximately
$31 million from government programs as described in the Impacts of the COVID-19
Pandemic section above.
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TJX International Thirteen Weeks Ended May 2, May 4, U.S. dollars in millions 2020 2019 Net sales$ 572 $ 1,231 Segment (loss) profit$ (259) $ 28 Segment margin (45.2) % 2.3 % Stores in operation at end of period: T.K. Maxx 596 575 Homesense 78 72 T.K. Maxx Australia 56 48 Total 730 695 Selling square footage at end of period (in thousands): T.K. Maxx 12,019 11,787 Homesense 1,142 1,074 T.K. Maxx Australia 1,019 885 Total 14,180 13,746 Net Sales Net sales forTJX International decreased 54% for the first quarter compared to the same period last year. The decrease in net sales for the first quarter is due to the temporary closures of all stores during nearly half of the quarter as a result of the COVID-19 pandemic. E-commerce sales represent approximately 4% ofTJX International's net sales for the first quarter of fiscal 2021 and less than 3% in fiscal 2020. Along with our stores, we temporarily closed our online businesses due to the COVID-19 pandemic. Segment (Loss) / Profit Segment loss was$(259) million for the first quarter of fiscal 2021, a decrease of$287 million , compared to a segment profit of$28 million for the same period last year. The decrease was primarily driven by a reduction in sales due to the store closures and increased markdowns on merchandise that was primarily transitional, perishable or out of season. Additionally, this decrease was partially offset by a reduction in payroll, incentive compensation accruals and other variable store expenses. The reduction in payroll reflects approximately$46 million from government programs as described in the Impacts of the COVID-19 Pandemic section above. GENERAL CORPORATE EXPENSE Thirteen Weeks Ended May 2, May 4, In millions 2020 2019
General corporate expense
General corporate expense for segment reporting purposes represents those costs not specifically related to the operations of our business segments. General corporate expenses are primarily included in SG&A expenses. The mark-to-market adjustment of our fuel hedges is included in cost of sales, including buying and occupancy costs. The decrease in general corporate expense for the first quarter of fiscal 2021 was primarily driven by lower share-based compensation costs and incentive compensation accruals partially offset by the mark-to-market adjustment on the fuel hedge.
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ANALYSIS OF FINANCIAL CONDITION Liquidity and Capital Resources As part of the actions we have taken, and are continuing to take, relating to the COVID-19 pandemic, as described in Impact of the COVID-19 Pandemic above and in Note B-Impact of the COVID-19 Pandemic of Notes to Consolidated Financial Statements, onMarch 20, 2020 , we drew down$1 billion on our revolving credit facilities. In addition, onApril 1, 2020 , TJX issued$4.0 billion aggregate principal amount of notes, and inMay 2020 , the Company amended its revolving credit facilities. See Note J-Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements for additional details of these transactions. The Company suspended its share repurchase program and does not anticipate repurchasing any stock for the remainder of fiscal 2021, did not declare a dividend for the first quarter of fiscal 2021 and at this time does not expect to declare a dividend in the second quarter. The Company also qualified for certain government programs in theU.S. ,U.K. ,Canada and other jurisdictions to support payroll and other operating costs. The Company is also reducing spending more broadly across the Company, evaluating operating expenses and taking actions to reduce ongoing variable and discretionary spending and only incur critical operating and capital spending. The Company also negotiated rent deferrals for a significant amount of our stores, with repayment at later dates, primarily in fiscal 2022. Looking ahead, we have developed contingency plans to reduce costs further if the situation deteriorates. The challenges posed by the COVID-19 pandemic on the Company's business are evolving rapidly. Consequently, the Company will continue to evaluate its financial position in light of future developments, particularly those relating to the COVID-19 pandemic. We believe that our existing cash, internally generated funds and our credit facilities, as amended and described in Note J-Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements will be sufficient to fund necessary operating cash requirements and capital expenditures for at least the next twelve months. As ofMay 2, 2020 , we held$4.3 billion in cash and no short-term investments. Approximately$0.4 billion of our cash was held by our foreign subsidiaries with$0.2 billion held in countries where we provisionally intend to indefinitely reinvest any undistributed earnings. TJX provided for all applicable state and foreign withholding taxes on all undistributed earnings of our foreign subsidiaries inCanada ,Puerto Rico ,Italy ,India ,Hong Kong andVietnam throughMay 2, 2020 . 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. Operating Activities Net cash used in operating activities resulted in net cash outflows of$3.2 billion for the three months endedMay 2, 2020 and net cash inflows of$0.1 billion for the three months endedMay 4, 2019 . The Company's operating cash flows for the three months endedMay 2, 2020 decreased by$3.3 billion compared to the first three months of fiscal 2020. The COVID-19 pandemic had a material impact on the Company's operating cash flows. The loss of sales as a result of temporarily closing our stores and e-commerce businesses during the quarter resulted in a net loss of$0.9 billion for the first quarter of fiscal 2021 compared with net income of$0.7 billion in the first quarter of fiscal 2020. The decrease in operating cash flows was also driven by a decrease in merchandise inventories, net of accounts payable of$1.2 billion and an increase in income taxes recoverable of$0.4 billion . The decrease in merchandise inventories, net of accounts payable was driven by a reduction in accounts payable as the Company continued to pay for merchandise received. Investing Activities Net cash used in investing activities resulted in net cash outflows of$0.2 billion for the three months endedMay 2, 2020 and$0.3 billion for the three months endedMay 4, 2019 . The cash outflows for both periods were driven by capital expenditures. Investing activities in the first three months of fiscal 2021 primarily reflected property additions for new stores, store improvements and renovations as well as investments in our offices and distribution centers, including buying and merchandising systems and other information systems. Cash outflows for property additions were$0.2 billion for the first three months of fiscal 2021 and$0.3 billion for the first three months of fiscal 2020. In order to preserve liquidity throughout the COVID-19 pandemic, we have decreased new store openings to approximately 50 stores and paused most scheduled store remodels, thereby deferring a substantial amount of our previously planned fiscal 2021 capital expenditures. Our expected fiscal 2021 capital investments total$0.4 billion to$0.6 billion , of which$150 million was incurred in February andMarch 2020 before the Company began taking steps to mitigate the impact of the COVID-19 pandemic. Planned investments for the remainder of the year are limited to those critical to our operations. 33
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Financing Activities Net cash provided by financing activities resulted in net cash inflows of$4.5 billion in the first three months of fiscal 2021 and net cash outflows of$0.6 billion for the three months endedMay 4, 2019 . Debt The cash inflows in the first three months of fiscal 2021 were a result of drawing down$1.0 billion on our previously undrawn revolving credit facilities onMarch 20, 2020 . In addition, onApril 1, 2020 , the Company completed the issuance and sale of (a)$1.25 billion aggregate principal amount of 3.50% notes due 2025, (b)$750 million aggregate principal amount of 3.75% notes due 2027, (c) $1.25 billion aggregate principal amount of 3.875% notes due 2030 and (d)$750 million aggregate principal amount of 4.50% notes due 2050, all of which was outstanding atMay 2, 2020 . See Note J-Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements for additional information. Equity Under our stock repurchase programs, we paid$0.2 billion to repurchase and retire 3.4 million shares of our stock on a settlement basis in the first three months of fiscal 2021. These outflows were partially offset by proceeds from the exercise of employee stock options, net of shares withheld for taxes in the first three months of fiscal 2021. We paid$0.4 billion to repurchase and retire 7.7 million shares on a settlement basis in the first three months of fiscal 2020. For further information regarding equity repurchases, seeNote E-Capital Stock and (Loss) Earnings Per Share of Notes to Consolidated Financial Statements. InFebruary 2020 , TJX announced that its Board of Directors had approved a new stock repurchase program that authorizes the repurchase of up to an additional$1.5 billion of TJX common stock from time to time. InMarch 2020 , in connection with the actions taken related to the COVID-19 pandemic as described in Impact of the COVID-19 Pandemic above and in Note B-Impact of the COVID-19 Pandemic of Notes to Consolidated Financial Statements, the Company suspended its share repurchase program. Dividends InMarch 2020 , prior to the declaration of the COVID-19 pandemic, we paid our fourth quarter fiscal 2020 quarterly dividend which totaled$0.3 billion . As a result of the uncertainty surrounding the COVID-19 pandemic, the Company did not declare a dividend for the first quarter of 2021 and does not expect to declare a dividend in the second quarter of 2021 at this time. The Company is committed to resuming dividend payments whenever the environment and its business stabilize for the long term. We declared quarterly dividends on our common stock which totaled$0.23 per share in the first three months of fiscal 2020. Cash payments for dividends on our common stock totaled$0.3 billion for the first three months of fiscal 2021 and$0.2 billion for the first three months of fiscal 2020. Contractual Obligations Changes to our aggregate indebtedness, including related interest and terms for new issuances, are described in Note J-Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements. During the first quarter of fiscal 2021, we negotiated rent deferrals for a significant number of our stores, with repayments to later dates, primarily in fiscal 2022. In addition, approximately$1.0 billion of obligations under purchase orders for merchandise were cancelled. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS 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 endedFebruary 1, 2020 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. 34
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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: execution of buying strategy and inventory management; operational and business expansion and management of large size and scale; customer trends and preferences; various marketing efforts; competition; economic conditions and consumer spending; the ongoing COVID-19 pandemic and associated containment and remediation efforts; 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; quality, safety and other issues with our merchandise; compliance with laws, regulations and orders and changes in laws, regulations and applicable accounting standards; serious disruptions or catastrophic events and adverse or unseasonable weather; expanding international operations; merchandise sourcing and transport; commodity availability and pricing; fluctuations in currency exchange rates; fluctuations in quarterly operating results and market expectations; mergers, acquisitions, or business investments and divestitures, closings or business consolidations; outcomes of litigation, legal proceedings and other legal or regulatory matters; disproportionate impact of disruptions in the second half of the fiscal year; cash flow; inventory or asset loss; tax matters; real estate activities; and other factors that may be described in our filings with theSecurities and Exchange Commission , including our most recent Annual Report on Form 10-K filed with theSecurities and Exchange Commission . We do not undertake to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied in such statements will not be realized. Item 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Annual Report on Form 10-K for the fiscal year endedFebruary 1, 2020 . Item 4. Controls and Procedures We have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as ofMay 2, 2020 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 theSecurities 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 endedMay 2, 2020 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. 35
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