Impact of the COVID-19 Pandemic

12 Months Ended

Jan. 30, 2021

Unusual or Infrequent Items, or Both [Abstract]

Impact of the COVID-19 Pandemic

Impact of the COVID-19 Pandemic

After a novel coronavirus disease (“COVID-19”) emerged and spread worldwide, the World Health Organization declared COVID-19 a pandemic in March 2020, and national, state and local governments and private entities began issuing various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories and quarantine or isolation protocols. The Company temporarily closed all of its stores, its online businesses, its distribution centers and its offices in March 2020, with Associates working remotely where possible. During April 2020, the Company temporarily furloughed the majority of the hourly store and distribution center Associates in the U.S. and Canada, with employee benefits coverage for eligible Associates continuing during the temporary furlough at no cost to impacted Associates. The Company also took comparable actions with respect to portions of our European and Australian workforces.

When the Company began to reopen stores and distribution centers in May 2020, it implemented new health and safety practices, including practices related to personal protective equipment and social distancing protocols. Early in the fourth quarter of fiscal 2021, in response to increasing cases of COVID-19, hundreds of stores had additional temporary closures, primarily in Europe and Canada. As of March 30, 2021, the Company has approximately 580 stores, primarily in Europe, that are temporarily closed due to government mandates in response to the COVID-19 global pandemic. All of the Company’s e-commerce businesses remain open, including tkmaxx.com in the U.K.

In fiscal 2021, the Company amended the credit agreements governing its revolving credit facilities and as a result, the Company expects to maintain compliance with its covenants for at least one year from the issuance of these consolidated financial statements. As the COVID-19 pandemic is complex and rapidly evolving, and cases have been rising around the world, the Company cannot reasonably estimate the duration and severity of this pandemic, which has had and may continue to have a material impact on its business, results of operations, financial position and cash flows.

Financial Actions

Balance Sheet, Cash Flow and Liquidity

During fiscal 2021 the Company generated $4.6 billion of operating cash flows and ended the year with $10.5 billion of cash. In addition, the Company increased its borrowing capacity by entering into a $500 million 364 Day Revolving Credit Facility (as defined in Note K—Long-Term Debt and Credit Lines), making a total of $1.5 billion available to the Company under revolving credit facilities. In the first quarter of fiscal 2021, TJX issued $4 billion aggregate principal amount of notes. During the fourth quarter of fiscal 2021, the Company issued $1 billion in notes and accepted $1.12 billion in combined aggregate principal amount of certain of its notes issued in the first quarter of fiscal 2021 pursuant to cash tender offers. The Company paid $1.42 billion aggregate consideration (including transaction costs) and recorded a $0.3 billion pre-tax loss on the early extinguishment for the accepted notes. For additional information on the new credit facility and debt transactions, see Note K—Long-Term Debt and Credit Lines. The Company's Board of Directors suspended its share buyback program and did not declare a dividend in the first nine months of fiscal 2021. The Board of Directors declared a dividend of $0.26 per share in the fourth quarter of fiscal 2021, paid in March 2021.

During fiscal 2021, the Company negotiated rent deferrals (primarily for second quarter lease payments) for a significant number of its stores, with repayment at later dates, primarily in fiscal 2022. Consistent with updated guidance from the FASB in April 2020, the Company elected to treat the COVID-19 pandemic-related rent deferrals as a resolution of a contingency by remeasuring the lease liability, with a corresponding offset to the right-of-use asset, using the remeasured consideration. In addition to negotiating deferral of lease payments, the Company also temporarily extended payment terms on merchandise orders, which increased our accounts payable as of the end of the fiscal year, benefiting operating cash flows. As payment terms are reduced and we make deferred payments, the Company expects our operating cash flows to be negatively impacted.

The Company evaluated the value of its inventory in light of the temporary store closures in the first and fourth quarters of fiscal 2021 due to the COVID-19 pandemic. Permanent markdowns, which had been or will 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 inventory for fiscal 2021. Additional markdowns recorded throughout the year were taken in the ordinary course of business operations.

Given the substantial reduction in the Company’s sales and the reduced cash flow projections as a result of the temporary store closures during fiscal 2021 due to the COVID-19 pandemic, the Company determined that triggering events had occurred and that impairment assessments were warranted for certain stores. This resulted in immaterial impairment charges for fiscal 2021, related to operating lease right of use assets and store fixed assets.

In response to the COVID-19 pandemic, governments in the U.S., United Kingdom (“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. Throughout fiscal 2021, the Company continued to qualify for certain of these provisions, which partially offset related expenses. During fiscal 2021, these programs reduced the Company’s expenses by approximately $0.5 billion on its Consolidated Statements of Income, and increased Accounts receivable, net on its Consolidated Balance Sheets by approximately $0.1 billion. These government programs also provide for the option to defer payroll tax and VAT payments, which has resulted in a combined increase in Accrued expenses and other current liabilities and Other long-term liabilities on our Consolidated Balance Sheets by approximately $0.3 billion.

The Company also incurred incremental costs associated with the COVID-19 pandemic, including primarily from:

–Incremental payroll costs associated with monitoring occupancy limits to comply with social distancing protocols and implementing enhanced cleaning regimens.

–Incremental expense related to the discretionary appreciation bonus for store and distribution center Associates.

–Incremental cleaning supplies and personal protective equipment for our Associates.