UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(mark one)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended July 30, 2022

OR

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     

Commission file number 1-4908 

The TJX Companies, Inc.

(Exact name of registrant as specified in its charter)

Delaware	04-2207613
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
770 Cochituate Road Framingham, Massachusetts	01701
(Address of principal executive offices)	(Zip Code)

(508) 390-1000

(Registrant’s telephone number, including area code)

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

Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	TJX	New York Stock Exchange

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.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

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

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

The number of shares of registrant’s common stock outstanding as of August 19, 2022: 1,161,052,961

The TJX Companies, Inc.

TABLE OF CONTENTS

PART I
ITEM 1. Consolidated Financial Statements	3
Consolidated Statements of Income	3
Consolidated Statements of Comprehensive Income	4
Consolidated Balance Sheets	5
Consolidated Statements of Cash Flows	6
Consolidated Statements of Shareholders' Equity	7
Notes To Consolidated Financial Statements	9
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	21
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk	31
ITEM 4. Controls and Procedures	32
PART II
ITEM 1. Legal Proceedings	32
ITEM 1A. Risk Factors	32
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	32
ITEM 6. Exhibits	33
SIGNATURE	33

2

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

IN THOUSANDS EXCEPT PER SHARE AMOUNTS

 

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021
Net sales	$	11,843,008	$	12,077,063	$	23,249,482	$	22,163,724
Cost of sales, including buying and occupancy costs	8,571,550		8,528,130		16,794,763		15,783,765
Selling, general and administrative expenses	2,174,861		2,223,692		4,269,443		4,288,684
Impairment on equity investment	—		—		217,619		—
Loss on early extinguishment of debt	—		242,248		—		242,248
Interest expense, net	11,007		28,661		29,792		73,349
Income before income taxes	1,085,590		1,054,332		1,937,865		1,775,678
Provision for income taxes	276,250		268,651		541,052		456,067
Net income	$	809,340	$	785,681	$	1,396,813	$	1,319,611
Basic earnings per share	$	0.69	$	0.65	$	1.19	$	1.09
Weighted average common shares – basic	1,167,922		1,205,054		1,172,531		1,205,247
Diluted earnings per share	$	0.69	$	0.64	$	1.18	$	1.08
Weighted average common shares – diluted	1,178,140		1,220,615		1,183,704		1,221,012

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

3

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

IN THOUSANDS

 

	Thirteen Weeks Ended
	July 30, 2022		July 31, 2021
Net income	$	809,340	$	785,681
Additions to other comprehensive (loss) income:
Foreign currency translation adjustments, net of related tax provision of $409 in fiscal 2023 and tax benefit of $1,140 in fiscal 2022	(30,935)		(876)
Reclassifications from other comprehensive (loss) to net income:
Amortization of prior service cost and deferred gains/losses, net of related tax provisions of $1,376 in fiscal 2023 and $1,590 in fiscal 2022	3,778		4,368
Other comprehensive (loss) income, net of tax	(27,157)		3,492
Total comprehensive income	$	782,183	$	789,173

	Twenty-Six Weeks Ended
	July 30, 2022		July 31, 2021
Net income	$	1,396,813	$	1,319,611
Additions to other comprehensive (loss) income:
Foreign currency translation adjustments, net of related tax benefit of $165 in fiscal 2023 and tax provision of $1,758 in fiscal 2022	(88,547)		21,373
Reclassifications from other comprehensive (loss) to net income:
Amortization of prior service cost and deferred gains/losses, net of related tax provisions of $2,751 in fiscal 2023 and $2,646 in fiscal 2022	7,556		7,269
Amortization of loss on cash flow hedge, net of related tax provision of $603 in fiscal 2022	—		(263)
Other comprehensive (loss) income, net of tax	(80,991)		28,379
Total comprehensive income	$	1,315,822	$	1,347,990

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

4

THE TJX COMPANIES, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

IN THOUSANDS, EXCEPT SHARE DATA

 

	July 30, 2022		January 29, 2022		July 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	3,531,212	$	6,226,765	$	7,106,016
Accounts receivable, net	555,691		517,623		615,634
Merchandise inventories	7,083,260		5,961,573		5,086,631
Prepaid expenses and other current assets	552,480		438,099		459,046
Federal, state and foreign income taxes recoverable	112,122		114,537		121,703
Total current assets	11,834,765		13,258,597		13,389,030
Net property at cost	5,389,735		5,270,827		5,107,346
Non-current deferred income taxes, net	171,723		184,971		127,483
Operating lease right of use assets	8,986,682		8,853,934		9,183,258
Goodwill	96,648		96,662		97,972
Other assets	611,053		796,467		878,357
Total assets	$	27,090,606	$	28,461,458	$	28,783,446
Liabilities
Current liabilities:
Accounts payable	$	4,085,478	$	4,465,427	$	4,413,316
Accrued expenses and other current liabilities	3,928,610		4,244,997		3,968,968
Current portion of operating lease liabilities	1,571,508		1,576,561		1,612,603
Current portion of long-term debt	499,646		—		—
Federal, state and foreign income taxes payable	61,877		181,155		47,171
Total current liabilities	10,147,119		10,468,140		10,042,058
Other long-term liabilities	916,663		1,015,720		1,072,847
Non-current deferred income taxes, net	67,030		44,175		3,451
Long-term operating lease liabilities	7,706,002		7,575,590		7,905,814
Long-term debt	2,857,143		3,354,841		3,352,892
Commitments and contingencies (See Note K)
Shareholders’ equity
Preferred stock, authorized 5,000,000 shares, par value $1, no shares issued	—		—		—
Common stock, authorized 1,800,000,000 shares, par value $1, issued and outstanding 1,161,886,769; 1,181,188,731 and 1,202,980,524 respectively	1,161,887		1,181,189		1,202,981
Additional paid-in capital	—		—		117,603
Accumulated other comprehensive loss	(768,141)		(687,150)		(577,692)
Retained earnings	5,002,903		5,508,953		5,663,492
Total shareholders’ equity	5,396,649		6,002,992		6,406,384
Total liabilities and shareholders’ equity	$	27,090,606	$	28,461,458	$	28,783,446

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

5

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

IN THOUSANDS

 

	Twenty-Six Weeks Ended
	July 30, 2022		July 31, 2021
Cash flows from operating activities:
Net income	$	1,396,813	$	1,319,611
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	437,733		430,561
Loss on early extinguishment of debt	—		242,248
Impairment on equity investment	217,619		—
Loss on property disposals and impairment charges	5,232		482
Deferred income tax provision (benefit)	25,867		(39,258)
Share-based compensation	58,186		114,121
Changes in assets and liabilities:
(Increase) in accounts receivable	(47,758)		(154,350)
(Increase) in merchandise inventories	(1,206,761)		(733,035)
Decrease (increase) in income taxes recoverable	2,415		(85,441)
(Increase) decrease in prepaid expenses and other current assets	(49,755)		19,738
(Decrease) in accounts payable	(311,338)		(425,274)
(Decrease) increase in accrued expenses and other liabilities	(392,606)		468,039
(Decrease) in income taxes payable	(122,617)		(34,819)
Increase (decrease) in net operating lease liabilities	5,771		(96,648)
Other, net	(12,564)		(79,096)
Net cash provided by operating activities	6,237		946,879
Cash flows from investing activities:
Property additions	(693,495)		(444,944)
Purchases of investments	(20,901)		(12,182)
Sales and maturities of investments	11,013		14,365
Net cash (used in) investing activities	(703,383)		(442,761)
Cash flows from financing activities:
Payments on debt	—		(2,975,518)
Payments for repurchase of common stock	(1,307,202)		(297,099)
Cash dividends paid	(655,213)		(628,859)
Proceeds from issuance of common stock	49,982		62,510
Payments of employee tax withholdings for stock awards	(32,454)		(24,478)
Net cash (used in) financing activities	(1,944,887)		(3,863,444)
Effect of exchange rate changes on cash	(53,520)		(4,228)
Net (decrease) in cash and cash equivalents	(2,695,553)		(3,363,554)
Cash and cash equivalents at beginning of year	6,226,765		10,469,570
Cash and cash equivalents at end of period	$	3,531,212	$	7,106,016

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

6

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

IN THOUSANDS

	Thirteen Weeks Ended
	Common Stock
	Shares	Par Value $1		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance, April 30, 2022	1,172,711	$	1,172,711	$	—	$	(740,984)	$	5,163,713	$	5,595,440
Net income	—	—		—		—		809,340		809,340
Other comprehensive (loss), net of tax	—	—		—		(27,157)		—		(27,157)
Cash dividends declared on common stock	—	—		—		—		(343,280)		(343,280)
Recognition of share-based compensation	—	—		30,850		—		—		30,850
Issuance of common stock under stock incentive plan, and related tax effect	1,022	1,022		31,034		—		(599)		31,457
Common stock repurchased	(11,846)	(11,846)		(61,884)		—		(626,271)		(700,001)
Balance, July 30, 2022	1,161,887	$	1,161,887	$	—	$	(768,141)	$	5,002,903	$	5,396,649

	Thirteen Weeks Ended
	Common Stock
	Shares	Par Value $1		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance, May 1, 2021	1,206,387	$	1,206,387	$	321,475	$	(581,184)	$	5,192,536	$	6,139,214
Net income	—	—		—		—		785,681		785,681
Other comprehensive income, net of tax	—	—		—		3,492		—		3,492
Cash dividends declared on common stock	—	—		—		—		(314,378)		(314,378)
Recognition of share-based compensation	—	—		63,585		—		—		63,585
Issuance of common stock under stock incentive plan, and related tax effect	1,105	1,105		25,131		—		(347)		25,889
Common stock repurchased and retired	(4,511)	(4,511)		(292,588)		—		—		(297,099)
Balance, July 31, 2021	1,202,981	$	1,202,981	$	117,603	$	(577,692)	$	5,663,492	$	6,406,384

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

7

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

IN THOUSANDS

	Twenty-Six Weeks Ended
	Common Stock
	Shares	Par Value $1		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance, January 29, 2022	1,181,189	$	1,181,189	$	—	$	(687,150)	$	5,508,953	$	6,002,992
Net income								1,396,813		1,396,813
Other comprehensive (loss), net of tax	—	—		—		(80,991)				(80,991)
Cash dividends declared on common stock	—	—		—		—		(690,202)		(690,202)
Recognition of share-based compensation	—	—		58,186		—		—		58,186
Issuance of common stock under stock incentive plan, net of shares used to pay tax withholdings	2,167	2,167		15,485		—		(599)		17,053
Common stock repurchased and retired	(21,469)	(21,469)		(73,671)		—		(1,212,062)		(1,307,202)
Balance, July 30, 2022	1,161,887	$	1,161,887	$	—	$	(768,141)	$	5,002,903	$	5,396,649

	Twenty-Six Weeks Ended
	Common Stock
	Shares	Par Value $1		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance, January 30, 2021	1,204,698	$	1,204,698	$	260,515	$	(606,071)	$	4,973,542	$	5,832,684
Net income	—	—		—		—		1,319,611		1,319,611
Other comprehensive income, net of tax	—	—		—		28,379				28,379
Cash dividends declared on common stock	—	—		—		—		(629,314)		(629,314)
Recognition of share-based compensation	—	—		114,121		—		—		114,121
Issuance of common stock under stock incentive plan, net of shares used to pay tax withholdings	2,794	2,794		35,555		—		(347)		38,002
Common stock repurchased	(4,511)	(4,511)		(292,588)		—		—		(297,099)
Balance, July 31, 2021	1,202,981	$	1,202,981	$	117,603	$	(577,692)	$	5,663,492	$	6,406,384

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

8

THE TJX COMPANIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note A. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The Consolidated Financial Statements and Notes thereto have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. These Consolidated Financial Statements and Notes thereto are unaudited and, in the opinion of management, reflect all normal recurring adjustments, accruals and deferrals among periods required to match costs properly with the related revenue or activity, considered necessary by The TJX Companies, Inc. (together with its subsidiaries, “TJX”) for a fair statement of its Consolidated Financial Statements for the periods reported, all in conformity with GAAP consistently applied. Investments for which the Company exercises significant influence but does not have control are accounted for under the equity method. The Consolidated Financial Statements and Notes thereto should be read in conjunction with the audited Consolidated Financial Statements, including the related notes, contained in TJX’s Annual Report on Form 10-K for the fiscal year ended January 29, 2022 (“fiscal 2022”).

These interim results are not necessarily indicative of results for the full fiscal year. TJX’s business, in common with the businesses of retailers generally, is subject to seasonal influences, with higher levels of sales and income generally realized in the second half of the year.

The January 29, 2022 balance sheet data was derived from audited Consolidated Financial Statements and does not include all disclosures required by GAAP.

Fiscal Year

TJX’s fiscal year ends on the Saturday nearest to the last day of January of each year. The current fiscal year ends January 28, 2023 (“fiscal 2023”) and is a 52-week fiscal year. Fiscal 2022 was also a 52-week fiscal year. Fiscal 2024 will be a 53-week fiscal year and will end February 3, 2024.

Use of Estimates

The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. TJX considers its accounting policies relating to inventory valuation, reserves for uncertain tax positions and loss contingencies to be the most significant accounting policies that involve management estimates and judgments. Actual amounts could differ from these estimates, and such differences could be material.

Equity Investment

In fiscal 2020, the Company acquired a minority ownership stake in privately held Familia, an off-price retailer of apparel and home fashions domiciled in Luxembourg that operates stores throughout Russia. During the quarter ended April 30, 2022, the Company announced that it had committed to divesting its minority investment and as a result, the Company performed an impairment analysis of this investment. Based on this analysis the Company concluded that there was an other-than-temporary impairment of this investment and recorded an impairment charge of $218 million representing the entirety of the Company’s investment. See Note F—Fair Value Measurements for additional information.

Deferred Gift Card Revenue

The following table presents deferred gift card revenue activity:

In thousands	July 30, 2022		July 31, 2021
Balance, beginning of year	$	685,202	$	576,187
Deferred revenue	852,192		769,970
Effect of exchange rates changes on deferred revenue	(3,288)		2,041
Revenue recognized	(905,519)		(802,194)
Balance, end of period	$	628,587	$	546,004

9

TJX recognized $462 million in gift card revenue for the three months ended July 30, 2022 and $436 million in gift card revenue for the three months ended July 31, 2021. Gift cards are combined in one homogeneous pool and are not separately identifiable. As such, the revenue recognized consists of gift cards that were part of the deferred revenue balance at the beginning of the period as well as gift cards that were issued during the period.

Leases

Supplemental cash flow information related to leases is as follows:

	Twenty-Six Weeks Ended
In thousands	July 30, 2022		July 31, 2021
Operating cash flows paid for operating leases	$	972,062	$	1,061,163
Lease liabilities arising from obtaining right of use assets	$	1,151,045	$	1,016,813

Future Adoption of New Accounting Standards

From time to time, the Financial Accounting Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”). The Company has reviewed the new guidance and has determined that it will either not apply to TJX or is not expected to be material to its Consolidated Financial Statements upon adoption and therefore, the guidance is not disclosed.

Note B. Property at Cost

The following table presents the components of property at cost:

In thousands	July 30, 2022		January 29, 2022		July 31, 2021
Land and buildings	$	1,960,479	$	1,911,569	$	1,771,907
Leasehold costs and improvements	3,666,573		3,652,280		3,634,959
Furniture, fixtures and equipment	7,080,322		6,871,777		6,692,117
Total property at cost	$	12,707,374	$	12,435,626	$	12,098,983
Less: accumulated depreciation and amortization	7,317,639		7,164,799		6,991,637
Net property at cost	$	5,389,735	$	5,270,827	$	5,107,346

Depreciation expense was $216 million for the three months ended July 30, 2022 and $213 million for the three months ended July 31, 2021. Depreciation expense was $434 million for the six months ended July 30, 2022 and $425 million for the six months ended July 31, 2021.

Non-cash investing activities in the cash flows consist of accrued capital additions of $145 million and $126 million as of the periods ended July 30, 2022 and July 31, 2021, respectively.

10

Note C. Accumulated Other Comprehensive (Loss) Income

Amounts included in Accumulated other comprehensive loss are recorded net of taxes. The following table details the changes in Accumulated other comprehensive loss for the twelve months ended January 29, 2022 and the six months ended July 30, 2022:

In thousands	Foreign Currency Translation		Deferred Benefit Costs		Cash Flow Hedge on Debt		Accumulated Other Comprehensive (Loss) Income
Balance, January 30, 2021	$	(441,532)	$	(164,802)	$	263	$	(606,071)
Additions to other comprehensive loss:
Foreign currency translation adjustments (net of taxes of $207)	(46,715)		—		—		(46,715)
Recognition of net gains/losses on benefit obligations (net of taxes of $17,659)	—		(48,504)		—		(48,504)
Reclassifications from other comprehensive loss to net income:
Amortization of loss on cash flow hedge (net of taxes of $603)	—		—		(263)		(263)
Amortization of prior service cost and deferred gains/losses (net of taxes of $4,588)	—		14,403		—		14,403
Balance, January 29, 2022	$	(488,247)	$	(198,903)	$	—	$	(687,150)
Additions to other comprehensive loss:
Foreign currency translation adjustments (net of taxes of $165)	(88,547)						(88,547)
Reclassifications from other comprehensive loss to net income:
Amortization of prior service cost and deferred gains/losses (net of taxes of $2,751)	—		7,556		—		7,556
Balance, July 30, 2022	$	(576,794)	$	(191,347)	$	—	$	(768,141)

Note D. Capital Stock and Earnings Per Share

Capital Stock

TJX repurchased and retired 11.8 million shares of its common stock at a cost of approximately $0.7 billion during the quarter ended July 30, 2022, on a “trade date” basis. During the six months ended July 30, 2022, TJX repurchased and retired 21.4 million shares of its common stock at a cost of approximately $1.3 billion, on a “trade date” basis. TJX reflects stock repurchases in its consolidated financial statements on a “settlement date” or cash basis. TJX had cash expenditures under repurchase programs of $1.3 billion for the six months ended July 30, 2022 and $0.3 billion for the six months ended July 31, 2021. These expenditures were funded by cash generated from current and prior period operations.

In February 2022, the Company announced that its Board of Directors had approved a new stock repurchase program that authorizes the repurchase of up to an additional $3.0 billion of TJX common stock from time to time. Under this program TJX had approximately $2.5 billion available for repurchase as of July 30, 2022.

All shares repurchased under the stock repurchase programs have been retired.

11

Earnings Per Share

The following table presents the calculation of basic and diluted earnings per share:

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
Amounts in thousands, except per share amounts	July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021
Basic earnings per share:
Net income	$	809,340	$	785,681	$	1,396,813	$	1,319,611
Weighted average common shares outstanding for basic earnings per share calculation	1,167,922		1,205,054		1,172,531		1,205,247
Basic earnings per share	$	0.69	$	0.65	$	1.19	$	1.09
Diluted earnings per share:
Net income	$	809,340	$	785,681	$	1,396,813	$	1,319,611
Weighted average common shares outstanding for basic earnings per share calculation	1,167,922		1,205,054		1,172,531		1,205,247
Assumed exercise / vesting of stock options and awards	10,218		15,561		11,173		15,765
Weighted average common shares outstanding for diluted earnings per share calculation	1,178,140		1,220,615		1,183,704		1,221,012
Diluted earnings per share	$	0.69	$	0.64	$	1.18	$	1.08
Cash dividends declared per share	$	0.295	$	0.26	$	0.59	$	0.52

The weighted average common shares for the diluted earnings per share calculation excludes the impact of outstanding stock options if the assumed proceeds per share of the option is in excess of the average price of TJX’s common stock for the related fiscal period. Such options are excluded because they would have an antidilutive effect. There were 5.1 million such options excluded for the thirteen weeks and twenty-six weeks ended July 30, 2022. There were no such options excluded for the thirteen weeks and twenty-six weeks ended July 31, 2021.

Note E. Financial Instruments

As a result of its operating and financing activities, TJX is exposed to market risks from changes in interest and foreign currency exchange rates and fuel costs. These market risks may adversely affect TJX’s operating results and financial position. TJX seeks to minimize risk from changes in interest and foreign currency exchange rates and fuel costs through the use of derivative financial instruments when and to the extent deemed appropriate. TJX does not use derivative financial instruments for trading or other speculative purposes and does not use any leveraged derivative financial instruments. TJX recognizes all derivative instruments as either assets or liabilities in the Consolidated Balance Sheet and measures those instruments at fair value. The fair values of the derivatives are classified as assets or liabilities, current or non-current, based upon valuation results and settlement dates of the individual contracts. Changes to the fair value of derivative contracts that do not qualify for hedge accounting are reported in earnings in the period of the change. For derivatives that qualify for hedge accounting, changes in the fair value of the derivatives are either recorded in shareholders’ equity as a component of Accumulated other comprehensive loss or are recognized currently in earnings, along with an offsetting adjustment against the basis of the item being hedged.

Diesel Fuel Contracts

TJX hedges portions of its estimated notional diesel requirements based on the diesel fuel expected to be consumed by independent freight carriers transporting TJX’s inventory. Independent freight carriers transporting TJX’s inventory charge TJX a mileage surcharge based on the price of diesel fuel. The hedge agreements are designed to mitigate the volatility of diesel fuel pricing, and the resulting per mile surcharges payable by TJX, by setting a fixed price per gallon for the period being hedged. During fiscal 2022, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2023, and during the first six months of fiscal 2023, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for the first six months of fiscal 2024. The hedge agreements outstanding at July 30, 2022 relate to approximately 54% of TJX’s estimated notional diesel requirements for the remainder of fiscal 2023 and approximately 47% of TJX’s estimated notional diesel requirements for the first six months of fiscal 2024. These diesel fuel hedge agreements will settle throughout fiscal 2023 and throughout the first seven months of fiscal 2024. TJX elected not to apply hedge accounting to these contracts.

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Foreign Currency Contracts

TJX enters into forward foreign currency exchange contracts to obtain economic hedges on portions of merchandise purchases made and anticipated to be made by the Company’s operations in currencies other than their respective functional currencies. The contracts outstanding at July 30, 2022 cover merchandise purchases the Company is committed to over the next several months. Additionally, TJX’s operations in Europe are subject to foreign currency exposure as a result of their buying function being centralized in the U.K. All merchandise is purchased centrally in the U.K. and then shipped and billed to the retail entities in other countries. This intercompany billing to TJX’s European businesses’ Euro denominated operations creates exposure to the central buying entity for changes in the exchange rate between the Euro and British Pound. A portion of the inflows of Euros to the central buying entity provides a natural hedge for merchandise purchased from third-party vendors that is denominated in Euros. TJX calculates any excess Euro exposure each month and enters into forward contracts of approximately 30 days' duration to mitigate this exposure.

TJX also enters into derivative contracts, generally designated as fair value hedges, to hedge intercompany debt. The changes in fair value of these contracts are recorded in Selling, general and administrative expenses and are offset by marking the underlying item to fair value in the same period. Upon settlement, the realized gains and losses on these contracts are offset by the realized gains and losses of the underlying item in Selling, general and administrative expenses.

The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at July 30, 2022:

In thousands		Pay	Receive		Blended Contract Rate	Balance Sheet Location	Current Asset U.S.$		Current (Liability) U.S.$		Net Fair Value in U.S.$ at July 30, 2022
Fair value hedges:
Intercompany balances, primarily debt related:
	€	60,000	£	50,568	0.8428	Prepaid Exp	$	343	$	—	$	343
	A$	170,000	U.S.$	119,579	0.7034	Prepaid Exp / (Accrued Exp)	810		(1,040)		(230)
	U.S.$	74,646	£	55,000	0.7368	(Accrued Exp)	—		(6,831)		(6,831)
	£	150,000	U.S.$	203,667	1.3578	Prepaid Exp	19,059		—		19,059
	€	200,000	U.S.$	223,126	1.1156	Prepaid Exp / (Accrued Exp)	14,663		(117)		14,546
Economic hedges for which hedge accounting was not elected:
	Diesel fuel contracts	Fixed on 2.6M – 3.9M gal per month		Float on 2.6M – 3.9M gal per month	N/A	Prepaid Exp	38,234		—		38,234
Intercompany billings in TJX International, primarily merchandise related:
	€	205,500	£	173,888	0.8462	Prepaid Exp	2,145		—		2,145
Merchandise purchase commitments:
	C$	807,155	U.S.$	635,000	0.7867	Prepaid Exp / (Accrued Exp)	6,657		(984)		5,673
	C$	25,978	€	19,000	0.7314	(Accrued Exp)	—		(685)		(685)
	£	439,682	U.S.$	569,000	1.2941	Prepaid Exp / (Accrued Exp)	29,989		(2,151)		27,838
	A$	71,070	U.S.$	50,750	0.7141	Prepaid Exp / (Accrued Exp)	1,055		(364)		691
	zł	701,000	£	124,092	0.1770	Prepaid Exp / (Accrued Exp)	2,215		(34)		2,181
	U.S.$	113,734	€	104,500	0.9188	Prepaid Exp / (Accrued Exp)	110		(5,970)		(5,860)
Total fair value of derivative financial instruments							$	115,280	$	(18,176)	$	97,104

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The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at January 29, 2022:

In thousands		Pay	Receive		Blended Contract Rate	Balance Sheet Location	Current Asset U.S.$		Current (Liability) U.S.$		Net Fair Value in U.S.$ at January 29, 2022
Fair value hedges:
Intercompany balances, primarily debt related:
	zł	25,000	£	4,541	0.1816	Prepaid Exp	$	72	$	—	$	72
	€	60,000	£	50,568	0.8428	Prepaid Exp	111		—		111
	A$	170,000	U.S.$	122,061	0.7180	Prepaid Exp	2,047		—		2,047
	U.S.$	74,646	£	55,000	0.7368	(Accrued Exp)	—		(918)		(918)
	€	200,000	U.S.$	230,319	1.1516	Prepaid Exp	4,535