10-K 1 tjx-10kx20190202.htm 10-K Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
 Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended February 2, 2019
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)
Registrant’s telephone number, including area code: (508) 390-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock, par value $1.00 per share
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☒  NO ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐  NO ☒
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.☒
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 Act). YES ☐   NO ☒
The aggregate market value of the voting common stock held by non-affiliates of the registrant on August 4, 2018, the last business day of the registrant’s most recently completed second fiscal quarter, was $60.5 billion based on the closing sale price as reported on the New York Stock Exchange.
There were 1,214,588,500 shares of the registrant’s common stock, $1.00 par value, outstanding as of March 2, 2019.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of Shareholders to be held on June 4, 2019 (Part III).




CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-K and our 2018 Annual Report to Shareholders contain “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995, including some of the statements in this Form 10-K under Item 1, “Business,” Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 8, “Financial Statements and Supplementary Data,” and in our 2018 Annual Report to Shareholders under our letter to shareholders and our performance graphs. Forward-looking statements are inherently subject to risks, uncertainties and potentially inaccurate assumptions. Such statements give our current expectations or forecasts of future events; they do not relate strictly to historical or current facts. We have generally identified such statements by using words indicative of the future such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “looking forward,” “may,” “plan,” “potential,” “project,” “should,” “target,” “will” and “would” or any variations of these words or other words with similar meanings. All statements that address activities, events or developments that we intend, expect or believe may occur in the future are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These “forward-looking statements” may relate to such matters as our future actions, future performance or results of current and anticipated sales, expenses, interest rates, foreign exchange rates and results and the outcome of contingencies such as legal proceedings.
We cannot guarantee that the results and other expectations expressed, anticipated or implied in any forward-looking statement will be realized. The risks set forth under Item 1A of this Form 10-K describe major risks to our business. A variety of factors including these risks could cause our actual results and other expectations to differ materially from the anticipated results or other expectations expressed, anticipated or implied in our forward-looking statements. Should known or unknown risks materialize, or should our underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected in the forward-looking statements. You should bear this in mind as you consider forward-looking statements.
Our forward-looking statements speak only as of the dates on which they are made, and we do not undertake any obligation to update any forward-looking statement, whether to reflect new information, future events or otherwise. You are advised, however, to consult any further disclosures we may make in our future reports to the Securities and Exchange Commission (SEC), on our website, or otherwise.

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PART I
ITEM 1. Business
BUSINESS OVERVIEW
The TJX Companies, Inc. (together with its subsidiaries, "TJX", the "Company", "we", or "our") is the leading off-price apparel and home fashions retailer in the United States and worldwide. We have over 4,300 stores that offer a rapidly changing assortment of quality, fashionable, brand name and designer merchandise at prices generally 20% to 60% below full-price retailers’ (including department, specialty, and major online retailers) regular prices on comparable merchandise, every day.
Our stores are known for our value proposition of brand, fashion, price and quality. Our opportunistic buying strategies and flexible business model differentiate us from traditional retailers. We offer a treasure hunt shopping experience and a rapid turn of inventories relative to traditional retailers. Our goal is to create a sense of excitement and urgency for our customers and encourage frequent customer visits. We acquire merchandise in a variety of ways to support that goal. We reach a broad range of customers across income levels with our value proposition. Our strategies and operations are synergistic across our retail chains. As a result, we are able to leverage our expertise throughout our business, sharing information, best practices, initiatives and new ideas, and to develop talent across our Company. Further, we can leverage the substantial buying power of our businesses with our global vendor relationships.
In this report, fiscal 2017 means the fiscal year ended January 28, 2017; fiscal 2018 means the fiscal year ended February 3, 2018; fiscal 2019 means the fiscal year ending February 2, 2019 and fiscal 2020 means the fiscal year ending February 1, 2020. Unless otherwise indicated, all store information in this Item 1 is as of February 2, 2019, and references to store square footage are to gross square feet.
Our Businesses
We operate our business in four main segments: Marmaxx and HomeGoods, both in the U.S., TJX Canada and TJX International.
MARMAXX
Our T.J. Maxx and Marshalls chains in the United States (“Marmaxx”) are collectively the largest off-price retailer in the United States with a total of 2,343 stores. We founded T.J. Maxx in 1976 and acquired Marshalls in 1995. Both chains sell family apparel (including footwear and accessories), home fashions (including home basics, decorative accessories and giftware) and other merchandise. We primarily differentiate T.J. Maxx and Marshalls through different product assortment, including an expanded assortment of fine jewelry and accessories and a high-end designer section called The Runway at T.J. Maxx and a full line of footwear, a broader men’s offering and a juniors’ department called The Cube at Marshalls, as well as varying in-store initiatives. This differentiated shopping experience at T.J. Maxx and Marshalls encourages our customers to shop both chains. Our e-commerce website, tjmaxx.com, was launched in 2013.
HOMEGOODS
Our HomeGoods segment, introduced in 1992, is the leading off-price retailer of home fashions in the U.S. Through its 749 stores, HomeGoods offers an eclectic assortment of home fashions, including furniture, rugs, lighting, soft home, decorative accessories, tabletop and cookware as well as expanded pet, kids and gourmet food departments. In 2017, we launched Homesense in the U.S. Our 16 Homesense stores complement HomeGoods, offering a differentiated mix and expanded departments, such as large furniture, ceiling lighting and rugs, as well as different departments, such as a general store and an entertaining marketplace.
TJX CANADA
Our TJX Canada segment operates the Winners, HomeSense and Marshalls chains in Canada. Acquired in 1990, Winners is the leading off-price apparel and home fashions retailer in Canada. The merchandise offering at its 271 stores across Canada is comparable to T.J. Maxx, with select stores offering fine jewelry, and The Runway, a designer section. We opened our HomeSense chain in 2001, bringing the home fashions off-price concept to Canada. HomeSense has 125 stores with a merchandise mix of home fashions similar to HomeGoods in the U.S. We brought Marshalls to Canada in 2011 and operate 88 Marshalls stores in Canada. As with Marshalls in the U.S., our Canadian Marshalls stores offer an expanded footwear department and The Cube juniors’ department, differentiating them from Winners stores.

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TJX INTERNATIONAL
Our TJX International segment operates the T.K. Maxx and Homesense chains in Europe and the T.K. Maxx chain in Australia. Launched in 1994, T.K. Maxx introduced off-price retail to Europe and remains Europe’s only major brick-and-mortar off-price retailer of apparel and home fashions. With 567 stores, T.K. Maxx operates in the U.K., Ireland, Germany, Poland, Austria and the Netherlands. Through its stores and its e-commerce website for the U.K., tkmaxx.com, T.K. Maxx offers a merchandise mix similar to T.J. Maxx. We brought the off-price home fashions concept to Europe, opening Homesense in the U.K. in 2008 and in Ireland in 2017. Its 68 stores offer a merchandise mix of home fashions similar to that of HomeGoods in the U.S. and HomeSense in Canada. We acquired Trade Secret in Australia in 2015 and re-branded it under the T.K. Maxx name during 2017. The merchandise offering at T.K. Maxx in Australia's 44 stores is comparable to T.J. Maxx.
In addition to our four main segments, we operate Sierra, acquired in 2012 and rebranded from Sierra Trading Post in 2018. Sierra is an off-price retailer of brand name and quality outdoor gear, family apparel and footwear, sporting goods and home fashions. Sierra operates sierra.com and 35 retail stores in the U.S.
Flexible Business Model
Our flexible off-price business model, including our opportunistic buying, inventory management, logistics and flexible store layouts, is designed to deliver our customers a compelling value proposition of fashionable, quality, brand name and designer merchandise at excellent values every day. Our buying and inventory management strategies give us flexibility to adjust our merchandise assortments more frequently than traditional retailers, and the design and operation of our stores and distribution centers support this flexibility. Our buyers have more visibility into consumer, fashion and market trends and pricing when we buy closer to need, which can help us “buy smarter” and reduce our markdown exposure. Our selling floor space is flexible, without walls between departments and largely free of permanent fixtures, so we can easily expand and contract departments to accommodate the merchandise we purchase. Our logistics and distribution operations are designed to support our global buying strategies and to facilitate quick, efficient and differentiated delivery of merchandise to our stores, with a goal of getting the right merchandise to the right stores at the right time.
Opportunistic Buying
As an off-price retailer, our buying practices, which we refer to as opportunistic buying, differentiate us from traditional retailers. Our overall global buying strategy is to acquire merchandise on an ongoing basis that will enable us to offer a desirable and rapidly changing mix of branded, designer and other quality merchandise in our stores at prices below regular prices for comparable merchandise at full-price retailers, including department, specialty, and major online retailers. We seek out and select merchandise from the broad range of opportunities in the market to achieve this end. Our global buying organization, which numbers approximately 1,100 Associates and has offices across 4 continents in 12 countries, executes this opportunistic buying strategy, buying merchandise from more than 100 countries in a variety of ways, depending on market conditions and other factors.
We take advantage of opportunities to acquire merchandise at substantial discounts that regularly arise from the production and flow of inventory in the apparel and home fashions marketplace. These opportunities include, among others, order cancellations, manufacturer overruns, closeouts from brands, manufacturers and other retailers and special production direct from brands and factories. Our global buying strategies are intentionally flexible to allow us to react to frequently changing opportunities and trends in the market and to adjust how and what we source as well as when we source it. Our goal is to operate with lean inventory levels compared to conventional retailers to give us the flexibility to seek out and to take advantage of these opportunities as they arise, close to the time it is needed in our stores and online and when we have more visibility into fashion trends and price. In contrast to traditional retailers, which tend to order most of their goods far in advance of the time the product appears on the selling floor, our merchants generally remain in the marketplace for goods throughout the year, frequently looking for opportunities to buy merchandise. We buy much of our merchandise for the current or immediately upcoming selling season. We also buy some merchandise that is available in the market with the intention of storing it for sale, typically in future selling seasons. We generally make these purchases, referred to as packaway, in response to opportunities to buy merchandise that we believe has the right combination of brand, fashion, price and quality to supplement the product we expect to be available to purchase later for those future seasons. We also acquire some merchandise that we offer under in-house brands or brands that are licensed to us. We develop some of this merchandise ourselves in order to supplement the depth of, or fill gaps in, our expected merchandise assortment.

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Manufacturers, retailers and other vendors make up our expansive universe of more than 21,000 vendors, which provides us substantial and diversified access to merchandise. We have not experienced difficulty in obtaining sufficient quality merchandise for our business in either favorable or difficult retail environments and expect this will continue as we continue to grow. We believe a number of factors provide us excellent access on an ongoing basis to leading branded merchandise and make us an attractive channel for many vendors in the market. We are typically willing to purchase less-than-full assortments of items, styles and sizes as well as quantities ranging from small to very large; we are able to disperse merchandise across our geographically diverse network of stores and to target specific markets; we pay promptly; we generally do not ask for typical retail concessions (such as advertising, promotional and markdown allowances), delivery concessions (such as drop shipments to stores or delayed deliveries) or return privileges; and we have financial strength and an excellent credit rating.
Inventory Management
We offer our customers a rapidly changing selection of merchandise to create a treasure hunt experience in our stores and to spur frequent customer visits. To achieve this, we seek to turn the inventory in our stores rapidly, regularly offering fresh selections of apparel and home fashions at excellent values. Our specialized inventory planning, purchasing, monitoring and markdown systems, coupled with distribution center storage, processing, handling and shipping systems, enable us to tailor the merchandise in our stores to local preferences and demographics, achieve rapid in-store inventory turnover on a vast array of products and generally sell through most merchandise within the period we planned. We make pricing and markdown decisions and store inventory replenishment determinations centrally, using information provided by specialized computer systems designed to move inventory through our stores in a timely and disciplined manner. We continue to invest in our supply chain with the goal of continuing to operate with low inventory levels, to ship more efficiently and quickly, and to more precisely and effectively allocate merchandise to each store.
Pricing
Our mission is to deliver great value to our customers every day. We do this by offering quality, fashionable, brand name and designer merchandise in our stores with retail prices that are generally 20% to 60% below full-price retailers’ (including department, specialty, and major online retailers) regular prices on comparable merchandise, every day. We do not generally engage in promotional pricing activity such as sales or coupons. We have generally been able to react to price fluctuations in the wholesale market to maintain our pricing gap relative to prices offered by traditional retailers as well as our merchandise margins through various economic cycles.
Low Cost Operations
We operate with a low cost structure compared to many traditional retailers. We focus aggressively on expenses throughout our business. Our advertising is generally focused on promoting our retail banners rather than individual products, including at times promoting multiple banners together, which contributes to our advertising budget (as a percentage of sales) remaining low compared to many traditional retailers. We design our stores to provide a pleasant, convenient shopping environment but, relative to other retailers, do not spend heavily on store fixtures. Additionally, our distribution network is designed to run cost effectively.
Customer Service/Shopping Experience
We continue to renovate and upgrade our stores across our retail banners to enhance our customers’ shopping experience and help drive sales. Although we offer a self-service format, we train our store Associates to provide friendly and helpful customer service and seek to staff our stores to deliver a positive shopping experience. We typically offer customer-friendly return policies. We accept a variety of payment methods including cash, credit cards and debit cards. We also offer TJX-branded credit cards in the U.S. through a bank, but do not own the customer receivables.
Distribution
We operate distribution centers encompassing approximately 19 million square feet in six countries. These centers are generally large, and built to suit our specific, off-price business model, with a combination of automated systems and manual processes to manage the variety of merchandise we acquire. We ship substantially all of our merchandise to our stores through a network of distribution centers, warehouses and shipping centers operated by third parties.

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Store Growth
Expansion of our business through the addition of new stores continues to be an important part of our global growth strategy. The following table provides store growth information for our four major segments for the two most recently completed fiscal years, as well as our growth estimates for fiscal 2020 and our estimates of the long-term store growth potential of these segments in their current geographies:
  
Approximate
Average Store
Size (square feet)
Number of Stores at Year End
 
Estimated Store
Growth
Potential
 
  
Fiscal 2018

 
Fiscal 2019

 
Fiscal 2020
(estimated)

 
Marmaxx
 
 
 
 
 
 
 
 
 
T.J. Maxx
28,000
1,223

 
1,252

 
 
 
 
 
Marshalls
29,000
1,062

 
1,091

 
 
 
 
 
 
 
2,285

 
2,343

 
2,403

 
3,000

 
HomeGoods
 
 
 
 
 
 
 
 
 
HomeGoods
23,000
667

 
749

 
 
 
 
 
Homesense
27,000
4

 
16

 
 
 
 
 
 
 
671

 
765

 
845

(1) 
1,400

(1) 
TJX Canada
 
 
 
 
 
 
 
 
 
Winners
28,000
264

 
271

 
 
 
 
 
HomeSense
23,000
117

 
125

 
 
 
 
 
Marshalls
27,000
73

 
88

 
 
 
 
 
 
 
454

 
484

 
514

 
600

 
TJX International
 
 
 
 
 
 
 
 
 
T.K. Maxx (Europe)
29,000
540

 
567

 
 
 
 
 
Homesense (Europe)
20,000
55

 
68

 
 
 
 
 
T.K. Maxx (Australia)
22,000
38

 
44

 
 
 
 
 
 
 
633

 
679

 
729

 
1,100

(2) 
TJX Total (3)
 
4,070

 
4,306

 
4,536

(1) 
6,100

(1) 
(1)
HomeGoods and TJX total includes 31 Homesense stores in the U.S. estimated for fiscal 2020 and store growth potential includes 400 Homesense stores.
(2)
Reflects store growth potential for T.K. Maxx in current geographies and for Homesense in the United Kingdom and Ireland.
(3)
Includes 27 Sierra stores in fiscal 2018, 35 Sierra stores for fiscal 2019, and 45 Sierra stores estimated for fiscal 2020. Sierra stores are not included in estimated store growth potential.
Some of our home fashion stores are co-located with one of our apparel stores in a combo or superstore format. We count each of the stores in the combo or superstore format as a separate store.
Competition
The retail apparel and home fashion business is highly competitive. We compete on the basis of numerous factors including brand, fashion, price, quality, selection and freshness; in-store and online service and shopping experience; reputation and store location. We compete with local, regional, national and international department, specialty, off-price, discount, warehouse and outlet stores as well as other retailers that sell apparel, home fashions and other merchandise that we sell, whether in stores, online, through catalogs, or other media channels.
Employees
As of February 2, 2019, we had approximately 270,000 employees, many of whom work less than 40 hours per week. In addition, we hire temporary employees, particularly during the peak back-to-school and holiday seasons. Our full-time, part-time, temporary, and seasonal workforce supports the execution of our flexible off-price business model, including the timing and frequency of store deliveries and the management of a rapidly changing mix of store inventory in over 4,300 retail stores in nine countries.

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Trademarks
We have the right to use our principal trademarks and service marks, which are T.J. Maxx, Marshalls, HomeGoods, Winners, Homesense/HomeSense, T.K. Maxx, Sierra and Sierra Trading Post, in relevant countries. We expect our rights in these trademarks and service marks to endure in locations where we use them for as long as we continue to do so.
Seasonality
Our business is subject to seasonal influences. In the second half of the year, which includes the back-to-school and year-end holiday seasons, we generally realize higher levels of sales and income.
SEC Filings and Certifications
Copies of our annual reports on Form 10-K, proxy statements, quarterly reports on Form 10-Q and current reports on Form 8-K filed with or furnished to the SEC, and any amendments to those documents, are available free of charge on our website, tjx.com, under “SEC Filings,” as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. They are also available free of charge from TJX Global Communications, 770 Cochituate Road, Framingham, Massachusetts 01701. The SEC maintains a website containing all reports, proxies, information statements, and all other information (www.sec.gov).
Information appearing on tjx.com is not a part of, and is not incorporated by reference in, this Form 10-K.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the executive officers of TJX as of April 3, 2019:
Name
Age
Office and Business Experience
Kenneth Canestrari
57
Senior Executive Vice President, Group President since September 2014. President, HomeGoods from 2012 to September 2014. Executive Vice President, Chief Operating Officer, HomeGoods from 2008 until 2012. Various financial positions with TJX from 1988 to 2008.
Scott Goldenberg
65
Senior Executive Vice President and Chief Financial Officer since April 2014; Executive Vice President and Chief Financial Officer from January 2012 to April 2014. Executive Vice President, Finance from June 2009 to January 2012. Senior Vice President, Corporate Controller from 2007 to 2009 and Senior Vice President, Director of Finance, Marmaxx, from 2000 to 2007. Various financial positions with TJX from 1983 to 1988 and 1997 to 2000.
Ernie Herrman
58
Chief Executive Officer since January 2016. Director since October 2015. President since January 2011. Senior Executive Vice President, Group President from August 2008 to January 2011. President, Marmaxx from 2005 to 2008. Senior Executive Vice President, Chief Operating Officer, Marmaxx from 2004 to 2005. Executive Vice President, Merchandising, Marmaxx from 2001 to 2004. Various merchandising positions with TJX since joining in 1989.
Carol Meyrowitz
65
Executive Chairman of the Board since January 2016. Chairman of the Board from June 2015 to January 2016. Chief Executive Officer from January 2007 to January 2016. Director since 2006 and President from 2005 to January 2011. Consultant to TJX from January 2005 to October 2005. Senior Executive Vice President from March 2004 to January 2005. President, Marmaxx from 2001 to January 2005. Executive Vice President of TJX from 2001 to 2004. Various senior management and merchandising positions with Marmaxx and with Chadwick’s of Boston and Hit or Miss, former divisions of TJX, from 1983 to 2001.
Douglas Mizzi
59
Senior Executive Vice President, Group President since February 2018. President, TJX Canada from October 2011 to February 2018. Managing Director T.K. Maxx, UK from April 2010 to October 2011. Executive Vice President, Chief Operating Officer, WMI from February 2006 to April 2010. Senior Vice President, Director of Store Operations, WMI from 2004 to 2006. Various store operations positions with TJX from 1988 to 2004.
Richard Sherr
62
Senior Executive Vice President, Group President since January 2012. President, HomeGoods from 2010 to 2012. Chief Operating Officer, Marmaxx from 2007 until 2010. Various merchandising positions at TJX from 1992 to 2007.
The executive officers hold office until the next annual meeting of the Board in June 2019 and until their successors are elected and qualified.

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ITEM 1A. Risk Factors
The statements in this section describe the major risks to our business and should be considered carefully, in connection with all of the other information set forth in this annual report on Form 10-K. The risks that follow are those that we think, individually or in the aggregate, could cause our actual results to differ materially from those stated or implied in forward-looking statements.
Failure to execute our opportunistic buying strategy and inventory management could adversely affect our results.
Opportunistic buying, operating with lean inventory levels and frequent inventory turns are key elements of our off-price business strategy but subject us to risks related to the pricing, quantity, mix, nature, and timing of inventory flowing to our stores. Our merchants are in the marketplace frequently, as much of our merchandise is purchased for the current or immediately upcoming season, and our focus on buying opportunistically places considerable discretion with them. Our business model expects our merchants to effectively react to frequently changing opportunities and trends in the market, assess the desirability and value of merchandise and generally make determinations of how and what we source as well as when we source it. If we do not obtain the right merchandise at the right times, in the right quantities, at the right prices and in the right mix, our customer traffic, as well as our sales and margins, could be adversely affected.
We base our purchases of inventory, in part, on our sales forecasts. If our sales forecasts do not match customer demand, we may experience higher inventory levels and need to take markdowns on excess or slow-moving inventory or we may have insufficient inventory to meet customer demand, either of which could adversely affect our financial performance.
If we are unable to generally purchase inventory at prices sufficiently below prices paid by conventional retailers, we may not be able to maintain a sufficient overall pricing differential to full-price retailers, including department, specialty, and major online retailers, and our ability to attract customers or sustain our margins may be adversely affected. We may not achieve this pricing differential at various times or in some reporting segments, chains or geographies, which could adversely affect our results.
To respond to customer demand and effectively manage pricing and markdowns, we need to appropriately allocate and deliver merchandise to our stores, maintain an appropriate mix and level of inventory in each store, and be flexible in our allocation of floor space at our stores among product categories. If we are not able to do so, our ability to attract and retain customers and our results could be adversely affected.
Failure to continue to expand our business and operations successfully or to manage our substantial size and scale effectively could adversely affect our financial results.
Our growth strategy includes successfully expanding within our current markets and into new geographic regions, product lines, and channels and, as appropriate, adding new businesses, whether by development, investment or acquisition. Managing growth effectively can be difficult. If any aspect of our expansion strategy does not achieve the success we expect, in whole or in part, we may fail to meet our financial performance expectations and/or may be required to increase investments, slow our planned growth or close stores or operations. Various circumstances could adversely affect our expansion plans. For example, if we are not able to find and lease appropriate real estate on attractive terms in the locations where we seek to open stores, we may need to change our planned growth in those areas. Similarly, new stores may not achieve the same sales or profit levels as our existing stores, whether in current or new markets; our financial performance in new markets may not be the same as in existing markets; and adding stores or banners to existing markets may otherwise adversely affect our sales and profitability in those markets.
Further, our substantial size can make it challenging to manage our complex operations effectively and to maintain appropriate internal resources and third party providers to support our business effectively. These challenges increase as we grow our business, and may add pressure to management and to various functions across our business, including administration, systems, including information technology systems, merchandising, store operations, distribution, logistics, and compliance. Increasing our size and complexity may also put additional pressure on appropriately staffing and training Associates in these areas and/or managing appropriate third party providers that support these areas. The large size and scale of our operations, our multiple banners and locations across the U.S., Canada, Europe and Australia and the autonomy afforded to the banners in some aspects of the business also increases the risk that our systems, controls, practices and policies may not be implemented effectively or consistently throughout our Company and that information may not be appropriately shared across our operations. These risks may increase as we continue to grow, particularly if we expand into additional countries. If business information is not shared effectively, or if we are otherwise unable to manage our size or growth effectively, our business may be adversely affected or we may need to reduce the rate of expansion or otherwise curtail growth, which may adversely affect our business plans, sales and results.

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Failure to identify consumer trends and preferences to meet customer demand in new or existing markets or channels could negatively impact our performance.
As our success depends on our ability to meet customer demand and expectations, we work to identify consumer trends and preferences on an ongoing basis and to offer inventory and shopping experiences that meet those trends and preferences. However, we may not do so effectively and on a timely basis across our diverse merchandise categories and in each of the many markets in the U.S., Canada, Europe and Australia in which we do business. Trends and preferences in markets may differ from what we anticipate. Although our business model allows us greater flexibility than many traditional retailers to meet consumer preferences and trends (for example, by expanding and contracting merchandise categories in response to consumers’ changing tastes), we may not successfully do so, which could add difficulty in attracting new customers, retaining existing customers and encouraging frequent customer visits and could adversely affect our results.
Customers may also have expectations about how they shop in stores or through e-commerce or more generally engage with businesses across different channels (for example, through various digital platforms), which expectations may vary across demographics and may evolve rapidly. Meeting these expectations effectively involves identifying the right opportunities and making the right investments at the right time and with the right speed, among other things, and failure to do so may impact our financial results.
If we fail to successfully implement our various marketing efforts or if our competitors’ programs are more effective than ours, our revenue or results of operations may be adversely affected.
Customer traffic and demand for our merchandise may be influenced by our marketing efforts. Although we use marketing to drive customer traffic through various media including television, radio, print, outdoor, digital/social media, email, mobile and direct mail, some of our competitors expend more for their programs than we do, or use different approaches than we do, which may provide them with a competitive advantage. Further, we may not effectively implement strategies with respect to rapidly evolving digital communication channels. Our programs may not be or remain effective or could require increased expenditures, which could have a significant adverse effect on our revenue and results of operations.
We operate in highly competitive markets, and we may not be able to compete effectively.
The retail apparel and home fashion businesses are highly competitive. We compete with local, regional, national and international retailers that sell apparel, home fashions and other merchandise that we sell, including retailers that operate through stores, e-commerce, catalogues and/or other media or channels. Some of our competitors are larger than we are or have more experience in selling certain product lines or through certain channels than we do. New competitors frequently enter the market. Existing competitors enter or increase their presence in markets in which we operate and may expand their merchandise offerings, add new sales channels or change their pricing strategies, all of which affect the competitive landscape. Consumer spending online has increased and may continue to increase, while our business is primarily in stores. We compete on the basis of various factors affecting value, meaning the combination of brand, fashion, price, and quality as well as merchandise selection and freshness; banner name recognition and appeal; both in-store and online service and shopping experience; convenience and store location. If we fail to compete effectively, our sales and results of operations could be adversely affected.
Failure to employ quality Associates in appropriate numbers and to retain key Associates and management could adversely affect our performance.
Our performance depends on recruiting, hiring, developing, training and retaining talented Associates in key areas such as buying and management. We also need to hire capable, engaged Associates in large numbers for our stores and distribution centers and for other areas of our business, including information technology functions. We must constantly recruit new Associates to fill entry level and part-time positions with historically high rates of turnover and at times find seasonal talent in sufficient numbers. Availability and skill of Associates may differ across markets in which we do business and in new markets we enter, and we may be unable to manage our labor needs effectively. In addition, because of the distinctive nature of our off-price model, we must provide significant internal training and development for key Associates across the Company, including within our buying organization. Similar to other retailers, we face challenges in securing and retaining sufficient talent in management and other key areas for many reasons, including competition for talent in the retail industry and in various geographic markets. If we do not effectively attract qualified individuals, train them in our business model, support their development and retain them in sufficient numbers and at appropriate levels of the organization, our growth could be limited and our performance could be adversely affected.

9



Labor costs, including wage, pension and healthcare costs, and other challenges from our large workforce may adversely affect our results and profitability.
We have a large workforce, and our ability to meet our labor needs and control labor costs is subject to various factors such as minimum wage laws and benefits requirements; market pressures, including prevailing wage rates and benefit levels and unemployment levels; changing demographics; economic conditions; interest rate changes; actuarial assumptions and methods; the costs of providing and managing retirement, health and other employee benefits, including health and insurance costs; and a dynamic regulatory and policy environment, including with respect to health care, immigration, labor, employment, pension and other employee benefits, and taxes. Any of these factors could increase our labor costs.
Increased labor costs may adversely affect our results of operations. In addition, when wage rates or benefit levels increase in a market, increasing our wages or benefits may negatively impact our earnings (as they did during the past several fiscal years). Conversely, failing to offer competitive wages or benefits could adversely affect our ability to attract or retain sufficient or quality Associates, causing our customer service or performance to suffer, which could impact our results.
Many Associates in our distribution centers are members of unions, and therefore we are subject to the risk of labor actions of various kinds as well as risks and potential material expenses associated with multiemployer plans, including from pension plan underfunding, benefit cuts, increased contribution requirements, changes in plan terms, withdrawal liability, increased premium costs, or insolvency of other participating employers or governmental insurance programs. Other Associates in Europe are members of works councils, which may subject us to additional requirements, actions or expense.
Compromises of our data security, disruptions in our information technology systems, or failure to satisfy the information technology needs of our business could result in material loss or liability, materially impact our operating results or materially harm our reputation.
Our business depends on our information technology systems, which collect and process information of customers, Associates and other persons, as well as information of our business and of our suppliers and service providers. We rely heavily on information technology systems, including those of suppliers and service providers, to manage all key aspects of our business, including planning, purchasing, sales, supply chain management, inventory management, point-of-sale processing, e-commerce, human resources, financial management, communications, safeguarding information, and compliance with legal obligations. This reliance requires us to accurately anticipate our current and future information technology needs and successfully develop and implement appropriate systems that can provide the right support at the right time. Our ongoing operations and successful growth are dependent on the doing so, as well as the ongoing integrity, security and consistent operations of these systems, including related back-up systems.
As is common in the retail industry, our information technology systems, as well as those of our suppliers and service providers, are targeted by attempts to access personal or sensitive information, attempts to steal money, and attempts to disrupt business. These attempts could include use of malware, ransomware, phishing, social engineering, denial-of-service attacks, exploitation of software or product vulnerabilities, employee malfeasance, skimmers and shimmers, and other forms of cyber attacks. These attempts are becoming increasingly sophisticated, heightening the risk of compromise or disruption. Our and our suppliers’ and service providers’ information technology systems also may be damaged or disrupted, or personal or sensitive information compromised, from a number of other causes, including power outages, system failures, catastrophic events, or employee inadvertence. Such damage or interruption could materially impair our ability to operate our business or otherwise result in material impacts on our operating results. In addition, the global regulatory environment surrounding information security and privacy is increasingly demanding, and unauthorized access of personal or sensitive information could result in regulatory enforcement actions, class actions, contract liability, or other forms of material legal liability. Any successful compromise or disruption of our information technology systems could result in material reputational harm and impact our customers’ willingness to shop in our stores or online and/or our suppliers’ willingness to do business with us.
We maintain policies, procedures, and controls designed to reduce the risk of data security compromises and information technology failures or disruptions. While we have implemented measures designed to further strengthen these policies, procedures and controls since the unauthorized intrusions into our network discovered late in 2006, we may suffer a similar event in the future. These measures also require costly and ongoing investment in technologies, hiring, training, and compliance.
There is a risk of material business disruption, liability and reputational damage associated with ongoing actions intended to update, enhance, modify or replace our systems and infrastructure, including from not accurately capturing and maintaining data, efficiently testing and implementing changes, realizing the expected benefit of the change and managing the potential disruption of the actions and diversion of internal teams’ attention as the changes are implemented.

10



Economic conditions, on a global level or in particular markets, may adversely affect our financial performance.
Global financial markets can experience volatility, disruption and credit contraction, which could adversely affect global economic conditions. Turmoil in the financial, equity and credit markets or other changes in economic conditions could adversely affect sources of liquidity available to us or our costs of capital and could adversely affect plan asset values and investment performance, and increase our pension liabilities, expenses and funding requirements and other related financial exposure with respect to company-sponsored and multiemployer pension plans. Our strategies for managing these financial risks and exposures may not be effective or sufficient. Economic conditions, both on a global level and in particular markets, including unemployment levels; availability of disposable income and actual and perceived wealth; energy and health care costs; costs of oil, gas and other commodities; interest and tax rates and policies; weakness in the housing market; volatility in capital markets; credit availability; inflation and deflation, as well as political or other factors beyond our control such as threats or possibilities of war, terrorism, global or national unrest; actual or threatened epidemics; geopolitical instability or uncertainty; and regulatory volatility or uncertainty, including in areas such as international trade (for example, the ongoing discussions and uncertainty related to Brexit, the U.K.’s decision to withdraw from the European Union) may also have significant effects on consumer confidence and spending that would, in turn, affect our business or the retail industry generally. These conditions and factors could adversely affect discretionary consumer spending or shift trends in consumer spending and, although we believe our flexible off-price model helps us react, they may adversely affect our sales, cash flows and results of operations and performance.
Damage to our corporate reputation or those of our retail banners could adversely affect our sales and operating results.
We believe that building the brand reputation of our company and our retail banners is important to our continuing success. In the many different markets in which we do business, we work to build relationships with our customers through our various marketing campaigns and other activities. These relationships and our reputation are based, in part, on perceptions of subjective qualities. Incidents involving us, our retail banners, our executives or other Associates, our policies and practices, our third party providers, our vendors, the merchandise and brands (including our licensed or owned brands) that we carry or our industry more generally that erode trust or confidence could adversely affect our reputation and our business, particularly if the incidents result in rapid or significant adverse publicity, litigation or governmental inquiry. Information about us, our retail banners, our executives and other Associates, our board of directors, our policies and practices, our third party providers, our vendors, and the merchandise and brands we sell, including our licensed or owned brands, that is publicized through traditional or digital media platforms, including blogs, websites and other forums that facilitate rapid, broad communications to an audience of consumers and other interested persons, may adversely affect our reputation and brand, even if the information is inaccurate, incomplete or unverified. The reputation of our company and our retail banners may be damaged in a market or markets in which we do business by adverse events at the corporate level or at our retail banners, or by a director or an executive or other Associate acting outside of company policies and practices. Similarly, challenges or reactions to action (or inaction), perceived action (or inaction), by our company on issues like social policies, privacy, merchandising, compensation, compliance related to social, product, labor and environmental standards or other sensitive topics, and any perceived lack of transparency about such matters, could harm our reputation, particularly as expectations of companies and of companies’ corporate responsibility obligations may continue to change. Damage to the reputation of our company and our banners could result in declines in customer loyalty and sales; affect our vendor relationships, business development opportunities and our ability to attract and retain quality Associates; divert attention and resources from management, including to respond to inquiries or additional regulatory scrutiny; and otherwise adversely affect our results.

11



Quality, safety or other issues with merchandise we sell could damage our reputation, sales and financial results.
Various governmental authorities in the jurisdictions where we do business regulate the quality and safety of the merchandise we sell to consumers. Regulations and standards in this area, including federal regulations related to the U.S. Consumer Product Safety Improvement Act of 2008 and the U.S. Food Safety Modernization Act, state regulations like California’s Proposition 65, and similar legislation in other countries in which we operate, impose restrictions and requirements on the merchandise we sell in our stores and through e-commerce. These regulations change from time to time and new federal, state, provincial or local regulations in the U.S. and other countries that may affect our business are contemplated and enacted with some regularity. If we or our merchandise vendors are unable to comply with regulatory requirements on a timely basis or at all, or to adequately monitor new regulations that may apply to existing or new merchandise categories or in new geographies, we could incur significant fines or penalties or we could have to curtail some aspects of our sales or operations, which could have an adverse effect on our financial results. We rely on our vendors to provide quality merchandise that complies with applicable product safety laws, labeling requirements and other applicable laws, but they may not comply with their obligations to do so. Although our arrangements with our vendors frequently provide for indemnification for product liabilities, the vendors may fail to honor those obligations to an extent we consider sufficient or at all. Concerns or issues with the quality and safety of merchandise raised publicly, particularly with products subject to increased levels of regulation, or the genuineness of merchandise, regardless of whether verified or our fault, could cause damage to our reputation and could result in lost sales; uninsured claims or losses; merchandise recalls and increased costs; and regulatory, civil or criminal fines or penalties, any of which could have an adverse effect on our financial results.
Failure to comply with laws, rules, regulations and orders and applicable accounting principles and interpretations could negatively affect our business operations and financial performance.
We are subject to federal, state, provincial, regional and local laws, rules and regulations as well as government orders in various countries in which we operate. These legal, regulatory and administrative requirements collectively affect multiple aspects of our business, including the cost of providing health care and retirement benefits, workforce management, logistics, marketing, import/export, sourcing and manufacturing, tax, data protection and others. If we, or third parties that perform services on our behalf, fail to comply with applicable laws, rules, regulations and orders, we may be subject to judgments, fines or other costs or penalties, which could adversely affect our operations and our financial results and condition.
Complying with applicable laws, rules, regulations, orders and our own internal policies may also require us to spend additional time and resources to implement new procedures and financial and other controls, conduct audits, train Associates and third parties on our compliance methods or take other actions, particularly as we continue to grow globally and enter new markets or countries, any of which could adversely impact our results.
We must also comply with new and changing laws, rules and regulations, evolving interpretations of existing laws by judicial and regulatory authorities, and reforms in jurisdictions where we do business. These changes could increase our costs of compliance or of doing business and could adversely affect our operating results, including such changes involving:
labor and employment practices and benefits, including for labor unions and works councils;
climate change, energy and waste;
supply chain, trade restrictions and logistics, including resulting from changes to requirements or policies from the outcome of Brexit discussions;
health and welfare regulations;
consumer protection and product safety;
financial regulations;
data protection and privacy, such as to comply with, or fines and penalties related to, the General Data Protection Regulation in Europe;
Internet regulations, including e-commerce, electronic communications and privacy; and
protection of intellectual property rights.
 
Particularly in a dynamic regulatory environment, anticipated changes to laws and regulations may require us to invest in compliance efforts or otherwise expend resources before changes are certain. For example, the ongoing uncertainty around Brexit, including relating to timing and the range of possible outcomes, has required us to consider and in some cases implement strategies for mitigating potential disruptions to our supply chain.
Further, applicable accounting principles and interpretations may change from time to time, and the changes could have material effects on our future or previously reported financial results.

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Our results may be adversely affected by serious disruptions or catastrophic events, as well as adverse or unseasonable weather.
Natural or other disasters, such as hurricanes, tornadoes, floods, earthquakes and other extreme weather; climate conditions; unforeseen public health issues, such as pandemics and epidemics; or fires, explosions and acts of war or terrorism could disrupt our operations in a number of ways, including severely damaging or destroying one or more of our stores, distribution facilities or data centers, or could disrupt the operations of one or more of our vendors or other parts of our supply chain located in the affected areas. Day-to-day operations, including our ability to receive products from our vendors or third party service providers or transport products to our stores or to our e-commerce customers could be adversely affected, transportation to and from our stores (by customers or Associates) could be limited, or we could be required to close stores or distribution centers in the affected areas or in areas served by affected distribution centers for a short or extended period of time (as we did in areas of the U.S., including Puerto Rico, after severe hurricanes during fiscal 2018).
Adverse weather can similarly affect our operations in impacted areas. Adverse or unseasonable weather, such as storms, severe cold or heat or unseasonable temperatures (even if not extreme) may also affect customers’ buying patterns and willingness to shop certain categories we offer or at all, and accordingly, can adversely affect the demand for the merchandise in our stores, particularly in apparel and seasonal merchandise, possibly impacting our sales, customer satisfaction with our stores and increasing markdowns. As a result, our business could be adversely affected.
Our expanding international operations expose us to risks inherent in operating in new countries.
We have a significant retail presence in Canada and in countries in Europe, and have expanded our retail operations into Australia. We also operate buying offices around the world. Our goal is to continue to expand our operations into other countries in the future. It can be costly and complex to establish, develop and maintain international operations and promote business in new international jurisdictions, which may differ significantly from other countries in which we currently operate.
 
Just as with our current operations, there are risks inherent in opening and developing operations in new countries, such those related to compliance under the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act. Additional risks include, among others, understanding the local retail climate and trends, local customs and cultures, seasonal differences, business practices and competitive conditions; complying with relevant laws, rules and regulations; developing the appropriate infrastructure; identifying suitable partners for local operations and for integration with our global operations and effectively communicating and implementing company policies and practices in new, possibly remote, jurisdictions. There are also financial, regulatory and other risks associated with international operations, including currency exchange fluctuations; potentially adverse tax consequences; limitations on the repatriation and investment of funds outside of the country where earned; trade regulations; the risk of sudden policy or regulatory changes; the risk of political, economic and civil instability and labor unrest; and uncertainties regarding interpretation, application and enforceability of laws and agreements. Any of these risks could adversely impact our operations, profitability or liquidity.
We are subject to risks associated with sourcing merchandise from others, particularly where sourcing from other countries and moving merchandise internationally.
We are subject to various risks of sourcing merchandise from others, particularly other countries, including risks related to moving merchandise internationally. Many of the products sold in our stores are sourced by our vendors and, to a lesser extent, by us, in locations, particularly southeastern Asia, which are outside of the country where they will be sold. Where we are the importer of record, we may be subject to regulatory or other requirements, including those similar to requirements imposed upon the manufacturer of such products. These risk include:
potential disruptions in manufacturing and supply;
changes in duties, tariffs, trade restrictions, sanctions, quotas and voluntary export restrictions on imported merchandise, including, for example, tariffs and border adjustment taxes; changes to the North American Free Trade Agreement or successor or other trade agreements; or changes to trade requirements resulting from Brexit;
transport capacity and costs;
information technology challenges;
problems in third-party distribution and warehousing, logistics, transportation and other supply chain interruptions;
strikes, threats of strikes and other events affecting delivery;
consumer perceptions of the safety or quality of imported merchandise;
product and international trade compliance with laws and regulations of the destination country;

13



compliance with laws and regulations including changing labor, environmental, international trade and other laws in those countries and those concerning ethical business practices, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act;
product liability claims from customers or penalties from government agencies relating to products that are recalled, defective or otherwise noncompliant or alleged to be harmful;
intellectual property enforcement and infringement issues;
concerns about human rights, working conditions and other labor rights and conditions in countries where merchandise is produced;
concerns about transparent sourcing and supply chains;
currency exchange rates, financial or economic instability; and
political or other disruptions in countries from, to or through which merchandise is imported.

These and other factors relating to sourcing, international trade and imported merchandise could affect the availability and the price of our inventory and our operating costs. Furthermore, although we have implemented policies and procedures designed to facilitate compliance with laws and regulations relating to production of merchandise, international operations and importing merchandise, there can be no assurance that our Associates and our contractors, agents, vendors or other third parties with whom we do business or to whom we outsource business operations will not violate such laws and regulations or our policies, which could subject us to liability and could adversely affect our reputation, operations or operating results.
Our results may be adversely affected by reduced availability of, or increases in, the price of oil or other fuels, increased costs of other commodities, or other increases in utility, transportation or logistics costs.
Energy and fuel costs can fluctuate dramatically and, at times, have resulted in significant cost increases, particularly for the price of oil and gasoline. An increase in the price of oil increases our transportation costs for distribution, utility costs for our retail stores and costs to purchase our products from suppliers. Although we typically enter into derivative instruments designed to manage a portion of our transportation costs (a hedging strategy), any such strategy may not be effective or sufficient and could result in increased operating costs. Increased regulation related to environmental costs, including cap and trade, carbon taxes or other emissions management systems could also adversely affect our costs of doing business, including utility, transportation and logistics costs, as could other shortages or disruptions impacting transportation, such as those relating to trucking and freight hauling. For example, in recent years, increased freight cost related to labor and equipment shortages, as well as other factors, had an impact on our margins. Similarly, other commodity prices can fluctuate dramatically. Such increases can increase the cost of merchandise, which could adversely affect our performance through potentially reduced consumer demand or reduced margins.
Fluctuations in currency exchange rates may lead to lower revenues and earnings.
Sales made by our stores outside the United States are denominated in the currency of the country in which the store is located, and changes in currency exchange rates affect the translation of the sales and earnings of these businesses into U.S. dollars for financial reporting purposes. Because of this, movements in currency exchange rates have had and are expected to continue to have a significant impact on our consolidated and segment results from time to time. Changes in currency exchange rates can also increase the cost of inventory purchases that are denominated in a currency other than the local currency of the business buying the merchandise. When exchange rates change significantly in a short period or move unfavorably over an extended period, as in recent years, it can be difficult for us to adjust retail prices accordingly, and gross margin can be adversely affected. In addition, a significant amount of merchandise we offer for sale is made in China and accordingly, a revaluation of Chinese currency, or increased market flexibility in the exchange rate for that currency, increasing its value relative to the U.S. dollar or currencies in which our stores are located, could be significant.
Additionally, we routinely enter into inventory-related derivative instruments (a hedging strategy) to mitigate the impact of currency exchange rates on merchandise margins of merchandise purchases by our segments denominated in currencies other than their local currencies. In accordance with GAAP, we evaluate the fair value of these derivative instruments and make mark-to-market adjustments at the end of each accounting period. These adjustments are of a much greater magnitude when there is significant volatility in currency exchange rates and may have a significant impact on our earnings.
Although we implement foreign currency hedging and risk management strategies to reduce our exposure to fluctuations in earnings and cash flows associated with changes in currency exchange rates, we expect that currency exchange rate fluctuations could have a material adverse effect on our sales and results of operations from time to time. In addition, fluctuations in currency exchange rates may have a greater impact on our earnings and operating results if a counterparty to one of our hedging arrangements fails to perform.

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Our quarterly operating results fluctuate and may fall short of prior periods, our projections or the expectations of securities analysts or investors, which could adversely affect our stock price.
Our operating results have fluctuated from quarter to quarter at points in the past, and they may do so in the future. If we fail to increase our results over prior periods, to achieve our projected results or to meet the expectations of securities analysts or investors, our stock price may decline, and the decrease in the stock price may be disproportionate to the shortfall in our financial performance. Results may be affected by various factors, including those described in these risk factors. We maintain a forecasting process that seeks to plan sales and align expenses. If we do not control costs or appropriately adjust costs to actual results, or if actual results differ significantly from our forecast, our financial performance could be adversely affected. In addition, if we do not repurchase the number of shares we contemplated pursuant to our stock repurchase programs, our earnings per share may be adversely affected.
If we engage in mergers or acquisitions or investments in new businesses, or divest, close or consolidate any of our current businesses, our business will be subject to additional risks.
We may acquire new businesses (as we did with our Australia business in fiscal 2016 and Sierra in fiscal 2013), invest in or enter into joint ventures with other businesses, develop new businesses internally (as with Homesense, our U.S. home store concept launched in fiscal 2018) and divest, close or consolidate businesses. Failure to execute on mergers, acquisitions, investments, divestitures, closings and consolidations in a satisfactory manner could adversely affect our future results of operations and financial condition. Acquisition, investment or divestiture activities may divert attention of management from operating the existing businesses, and we may not effectively evaluate target companies, investments or investment partners or assess the risks, benefits and costs of buying, investing in or closing businesses or of the integration of acquired businesses, all of which can be difficult, time-consuming and dilutive. These activities may not meet our performance and other expectations and may expose us to unexpected or greater-than-expected costs, liabilities and risks. In addition, we recorded intangible assets and goodwill and the value of the tradenames in connection with our last acquisitions and may similarly do so in the future in connection with other acquisitions. If we are unable to realize the anticipated benefits from acquisitions, we may be required to impair some or all of the goodwill associated with an acquisition, which would adversely impact our results of operations and balance sheet, such as with the impairment charge related to Sierra taken during fiscal 2018. Divestitures, closings and consolidations could involve risks such as significant costs and obligations of closure, including exposure on leases, owned real estate and other contractual, employment, pension and severance obligations, and potential liabilities that may arise under law as a result of the disposition or the subsequent failure of an acquirer.
Our results may be materially adversely affected by the outcomes of litigation, legal proceedings and other legal or regulatory matters.
We are involved, or may in the future become involved, in legal proceedings, regulatory reviews, audits and other legal matters. These may involve inquiries, investigations, lawsuits and other proceedings by local, provincial, state and federal governmental entities (in the United States and other countries) and private plaintiffs, including with respect to employment and employee benefits (such as classification, employment rights, discrimination, wage and hour and retaliation); whistle blower claims; tax; securities; disclosure; real estate; environmental matters; tort; business practices; consumer protection; privacy/data security; product safety and compliance; advertising; and intellectual property. There continue to be employment-related and consumer protection lawsuits, including putative class actions, in the United States, and we are subject to these types of suits. We cannot predict the results of legal and regulatory proceedings with certainty, and actual results may differ from any reserves we establish estimating the probable outcome. Regardless of merit or outcome, these proceedings can be both time-consuming and disruptive to our operations and may cause significant expense and diversion of management attention. Legal, regulatory and other proceedings could expose us to significant defense costs, fines, penalties and liability to private parties and governmental entities for monetary recoveries and other amounts and attorneys’ fees and/or require us to change aspects of our operations, any of which could have a material adverse effect on our business and results of operations.

15



Tax matters could adversely affect our results of operations and financial condition.
We are subject to income and other taxes in the United States and numerous foreign jurisdictions. Our effective income tax rate and future tax liability could be adversely affected by numerous factors including the results of tax audits and examinations, income before taxes being lower than anticipated in countries with lower statutory income tax rates and higher than anticipated in countries with higher statutory income tax rates, changes in income tax rates, changes in transfer pricing, changes in the valuation of deferred tax assets and liabilities, changes in applicable tax legislation, regulations, treaties and other guidance, and changes in accounting principles and interpretations relating to tax matters, any of which could adversely impact our results of operations and financial condition in future periods. The U.S. Tax Cut and Jobs Act of 2017 (the “2017 Tax Act”) significantly revised the previous federal income tax code. It is expected that additional interpretive guidance will be issued with respect to the 2017 Tax Act and such guidance may be different from our interpretation and thus adversely affect our results. In addition, it is uncertain if and to what extent various states will conform to the newly enacted federal tax law, which could also impact our tax obligations. Significant judgment is required in evaluating and estimating our worldwide provision and accruals for taxes, and actual results may differ from our estimations.
In addition, we are subject to the continuous examination of our tax returns and reports by federal, state, provincial and local tax authorities in the U.S. and foreign countries, and the examining authorities may challenge positions we take. We are engaged in various proceedings, which are at various stages, with such authorities with respect to assessments, claims, deficiencies and refunds. We regularly assess the likely outcomes of these proceedings to determine the adequacy and appropriateness of our provision for income taxes, and increase and decrease our provision as a result of these assessments. However, the developments in and actual results of proceedings or the result of rulings by or settlements with tax authorities and courts or due to changes in facts, law or legal interpretations, expiration of applicable statutes of limitations or other resolutions of tax positions could differ from the amounts we have accrued for such proceedings in either a positive or a negative manner, which could materially affect our effective income tax rate in a given financial period, the amount of taxes we are required to pay and our results of operations. In addition, we are subject to tax audits and examinations for payroll, value added, sales-based and other taxes relating to our businesses.
As our business is subject to seasonal influences, a decrease in sales or margins, a severe disruption or other significant event that impacts our business during the second half of the year could have a disproportionately adverse effect on our operating results.
Our business is subject to seasonal influences; we generally realize higher levels of sales and earnings in the second half of the year, which includes the back-to-school and year-end holiday seasons. Any decrease in sales or margins or any significant adverse event during this period including those described in the factors in this section, could have a disproportionately adverse effect on our results of operations.
Our real estate leases generally obligate us for long periods, which subjects us to financial risks.
We lease virtually all of our store locations and either own or lease for long periods our primary distribution centers and administrative offices. Accordingly, we are subject to the risks associated with leasing and owning real estate, which can adversely affect our results. While we have the right to terminate some of our leases under specified conditions, including by making specified payments, we may not be able to terminate a particular lease if or when we would like to do so. If we decide to close stores, we are generally required to continue to perform obligations under the applicable leases, which generally include, among other things, paying rent and operating expenses for the balance of the lease term, or paying to exercise rights to terminate, and the performance of any of these obligations may be expensive. When we assign leases or sublease space to third parties, or if we sell a business, we can remain liable on the lease obligations if the assignee or sublessee does not perform (as was the case with some of our former operations). In addition, when the lease terms for the stores in our ongoing operations expire, we may be unable to negotiate renewals, either on commercially reasonable terms or at all, which could cause us to close stores or to relocate stores within a market on less favorable terms or in a less favorable location.
Failure to protect our inventory or other assets from loss and theft may impact our financial results.
Risk of loss or theft of assets, including inventory shrinkage, is inherent in the retail business. Loss may be caused by error or misconduct of Associates, customers, vendors or third parties. Our inability to effectively combat and/or minimize the loss or theft of assets, or to effectively reduce the impact of those losses, could adversely affect our financial performance.

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We depend upon strong cash flows from our operations to supply capital to fund our operations, growth, stock repurchases and dividends and interest and debt repayment.
Our business depends upon our operations to continue to generate strong cash flow to supply capital to support our general operating activities, to fund our growth and our return of cash to stockholders through our stock repurchase programs and dividends, and to pay our interest and debt repayments. Our inability to continue to generate sufficient cash flows to support these activities or to repatriate cash from our international operations in a manner that is cost effective could adversely affect our growth plans and financial performance including our earnings per share. We borrow on occasion to finance our activities and if financing were not available to us in adequate amounts and on appropriate terms when needed, it could also adversely affect our financial performance.
ITEM 1B. Unresolved Staff Comments
None.
ITEM 2. Properties
We lease virtually all of our store locations. Leases in the U.S. and Canada are generally for an initial term of ten years with options to extend the lease term for one or more five year periods. Leases in Europe generally have an initial term of ten to fifteen years and leases in Australia generally have an initial lease term of seven to ten years. Some of the leases in Europe and Australia have options to extend. We have the right to terminate some of these leases before the expiration date under specified circumstances and some with specified payments.

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STORE LOCATIONS
Our chains operated stores in the following locations at the end of fiscal 2019; store counts below include both banners within a combo or a superstore:
United States
 
T.J. Maxx

Marshalls

HomeGoods

Homesense

Sierra

Alabama
25

6

6



Arizona
17

18

14



Arkansas
14

4

5



California
121

145

89



Colorado
17

11

10


5

Connecticut
28

24

18


1

Delaware
3

5

4



District of Columbia
4

4




Florida
95

94

67



Georgia
50

34

27



Hawaii
6





Idaho
7

2

2


1

Illinois
51

45

31


3

Indiana
23

14

8



Iowa
11

7

5



Kansas
9

6

7



Kentucky
16

5

5



Louisiana
15

12

8



Maine
9

3

3



Maryland
25

29

20

2


Massachusetts
52

57

37

4

2

Michigan
41

27

19


3

Minnesota
17

16

12


2

Mississippi
10

5

4



Missouri
19

17

10



Montana
6


1



Nebraska
5

4

4


1

Nevada
9

11

7


1

New Hampshire
16

10

10


1

New Jersey
40

51

42

4

2

New Mexico
5

4

2



New York
80

83

49

3

2

North Carolina
37

27

18



North Dakota
5

1

1



Ohio
47

35

22


1

Oklahoma
12

6

3



Oregon
12

9

8


3

Pennsylvania
51

40

32

2


Puerto Rico
8

21

6



Rhode Island
6

6

6



South Carolina
22

12

9



South Dakota
2

1

1



Tennessee
26

18

9



Texas
70

91

50



Utah
14

4

7


1

Vermont
5

1

1


1

Virginia
37

30

23

1


Washington
19

21

13


2

West Virginia
7

3

2



Wisconsin
23

11

12


1

Wyoming
3

1



2

Total Stores
1,252

1,091

749

16

35


18



Canada
 
Winners

HomeSense

Marshalls

Alberta
34

20

15

British Columbia
36

18

7

Manitoba
9

3

3

New Brunswick
4

3

2

Newfoundland
3

1

1

Nova Scotia
11

2

2

Ontario
118

55

42

Prince Edward Island
1

1


Quebec
49

19

14

Saskatchewan
6

3

2

Total Stores
271

125

88

Europe
 
T.K. Maxx

Homesense

United Kingdom
345

66

Republic of Ireland
26

2

Germany
131


Poland
43


Austria
12


The Netherlands
10


Total Stores
567

68

Australia
  
T.K. Maxx

Australian Capital Territory
2

New South Wales
15

Queensland
18

Victoria
9

Total Stores
44



19



DISTRIBUTION CENTERS
The following is a summary of our primary owned and leased distribution and fulfillment centers and primary administrative office locations as of February 2, 2019. Square footage information for the distribution and fulfillment centers represents total “ground cover” of the facility. Square footage information for office space represents total space owned or leased.
 
Marmaxx
 
 
T.J. Maxx
Worcester, Massachusetts
494,000 s.f.—owned
 
Evansville, Indiana
989,000 s.f.—owned
 
Las Vegas, Nevada
1,110,000 s.f.—owned
 
Charlotte, North Carolina
595,000 s.f.—owned
 
Pittston Township, Pennsylvania
1,017,000 s.f.—owned
 
Memphis, Tennessee
800,000 s.f.—leased
 
San Antonio, Texas
1,215,000 s.f.—owned
 
 
 
Marshalls
Atlanta, Georgia
780,000 s.f.—owned
 
Woburn, Massachusetts
472,000 s.f.—leased
 
Bridgewater, Virginia
562,000 s.f.—leased
 
Philadelphia, Pennsylvania
1,001,000 s.f.—leased
 
Phoenix, Arizona
1,139,000 s.f.—owned
 
 
 
Sierra
Cheyenne, Wyoming
780,000 s.f.—owned
 
 
 
HomeGoods
Brownsburg, Indiana
805,000 s.f.—owned
 
Bloomfield, Connecticut
803,000 s.f.—owned
 
Jefferson, Georgia
801,000 s.f.—owned
 
Tucson, Arizona
858,000 s.f.—owned
 
Carteret, New Jersey
460,000 s.f.—leased
 
 
 
TJX Canada
Brampton, Ontario
506,000 s.f.—leased
 
Mississauga, Ontario
679,000 s.f.—leased
 
Torbram, Ontario
445,000 s.f.—leased
 
Delta, British Columbia
432,000 s.f.—leased
 
 
 
TJX International
Wakefield, England
641,000 s.f.—leased
 
Stoke, England
261,000 s.f.—leased
 
Walsall, England
277,000 s.f.—leased
 
Bergheim, Germany
322,000 s.f.—leased
 
Wroclaw, Poland
303,000 s.f.—leased
 
Chullora, Australia
154,000 s.f.—leased

20



OFFICE SPACE
Corporate, Marmaxx, HomeGoods, Sierra
Framingham and Marlborough, Massachusetts
1,958,000 s.f.—owned and
leased in several buildings
Sierra
Cheyenne, Wyoming
120,000 s.f. —owned
TJX Canada
Mississauga, Ontario
434,000 s.f.—leased
TJX International
Watford, England
282,000 s.f.—owned and leased
 
Dusseldorf, Germany
46,000 s. f.—leased
 
Mascot, Australia
44,000 s. f.—leased
In addition to the office space listed above, we also occupy smaller office locations in various countries.
ITEM 3. Legal Proceedings
TJX is subject to certain legal proceedings, lawsuits, disputes and claims that arise from time to time in the ordinary course of our business. In addition, TJX is a defendant in several lawsuits filed in federal and state courts brought as putative class or collective actions on behalf of various groups of current and former salaried and hourly Associates in the U.S. The lawsuits allege violations of the Fair Labor Standards Act and of state wage and hour and other labor statutes. TJX is also a defendant in a putative class action on behalf of customers relating to compare at pricing. The lawsuits are in various procedural stages and seek monetary damages, injunctive relief and attorneys’ fees.
ITEM 4. Mine Safety Disclosures
Not applicable.

21



PART II
ITEM 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
During fiscal 2019, we completed a two-for-one stock split in the form of a stock dividend, paid on November 6, 2018 to the shareholders of record at the close of business on October 30, 2018. All historical share and per share information, as well as basic and diluted earnings per share amounts, have been retroactively adjusted to reflect the two-for-one stock split. Our common stock is listed on the New York Stock Exchange (Symbol: TJX).
The approximate number of common shareholders of record at February 2, 2019 was 2,196.
Information on Share Repurchases
The number of shares of common stock repurchased by TJX during the fourth quarter of fiscal 2019 and the average price paid per share are as follows:
 
Total Number of Shares
Repurchased(1)
Average Price Paid Per Share(2)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)
Approximate Dollar Value of Shares that
May Yet be Purchased Under the Plans or
Programs(3)
November 4, 2018 through December 1, 2018
2,629,102
$51.35
2,629,102
$2,400,789,659
December 2, 2018 through January 5, 2019
3,594,376
$45.91
3,594,376
$2,235,789,672
January 6, 2019 through February 2, 2019
11,544,855
$48.07
11,544,855
$3,180,789,706
Total:
17,768,333
 
17,768,333
 
(1)
Consists of shares repurchased under publicly announced stock repurchase programs.
(2)
Includes commissions for the shares repurchased under stock repurchase programs.
(3)
In February 2018, TJX announced a stock repurchase program authorizing an additional $3.0 billion in repurchases, from time to time, under which approximately $1.7 billion remained available as of February 2, 2019. In February 2019, the Company 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.

22



ITEM 6. Selected Financial Data
 
  
Fiscal Year Ended
Amounts in millions, except per share amounts
February 2, 2019(1)
February 3,
2018(2)
January 28,
2017(1)
January 30,
2016
January 31,
2015
 
 
(53 Weeks)
 
 
 
Income statement and per share data:
 
 
 
 
 
Net sales
$
38,973

$
35,865

$
33,184

$
30,945

$
29,078

Net income
$
3,060

$
2,608

$
2,298

$
2,278

$
2,215

Weighted average common shares for diluted earnings per share calculation (in thousands) (3)
1,259,252

1,292,209

1,328,864

1,366,502

1,407,090

Diluted earnings per share(3)
$
2.43

$
2.02

$
1.73

$
1.67

$
1.57

Cash dividends declared per share(3)
$
0.78

$
0.625

$
0.52

$
0.42

$
0.35

Balance sheet data:
 
 
 
 
 
Cash and cash equivalents
$
3,030

$
2,758

$
2,930

$
2,095

$
2,494

Working capital
$
2,938

$
3,360

$
2,993

$
2,370

$
2,648

Total assets
$
14,326

$
14,058

$
12,884

$
11,490

$
10,978

Capital expenditures
$
1,125

$
1,058

$
1,025

$
889

$
912

Long-term obligations(4)
$
2,234

$
2,231

$
2,228

$
1,615

$
1,613

Shareholders’ equity
$
5,049

$
5,148

$
4,511

$
4,307

$
4,264

Other financial data:
 
 
 
 
 
After-tax return on average shareholders’ equity
60.1
%
54.0
%
52.1
%
53.1
%
52.2
%
Total debt as a percentage of total capitalization(5)
30.7
%
30.2
%
33.1
%
27.3
%
27.4
%
Stores in operation
4,306

4,070

3,812

3,614

3,395

Selling square footage (in thousands)
91,075

87,548

83,798

80,480

76,537

(1)
Fiscal 2019 and Fiscal 2017 include a pension settlement charge and Fiscal 2017 includes a loss on early extinguishment of debt.
(2)
Fiscal 2018 includes an impairment charge of $99.3 million and a net benefit from the enactment of the 2017 Tax Act described in Item 7 under “Tax Cuts and Jobs Act of 2017.”
(3)
Fiscal 2018 and prior periods have been restated to reflect the two-for-one stock split completed in November 2018.
(4)
Defined as long-term debt, exclusive of current installments.
(5)
Defined as shareholders’ equity, short-term debt, and long-term debt including current maturities.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
TJX provides projections and other forward-looking statements in the following discussions particularly relating to the Company’s future financial performance. These forward-looking statements are estimates based on information currently available to the Company, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and subject to the cautionary statements set forth on page 2 of this Form 10-K. The Company’s results are subject to risks and uncertainties including, but not limited to, those described in Part I, Item 1A, Risk Factors, and those identified from time to time in our other filings with the Securities and Exchange Commission. TJX undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise.
The discussion that follows relates to our 52-week fiscal year ended February 2, 2019 (fiscal 2019), our 53-week fiscal year ended February 3, 2018 (fiscal 2018), and our 52-week fiscal year ended January 28, 2017 (fiscal 2017).


23



OVERVIEW
We are the leading off-price apparel and home fashions retailer in the U.S. and worldwide. We sell a rapidly changing assortment of apparel, home fashions and other merchandise at prices generally 20% to 60% below full-price retailers’ (including department, specialty, and major online retailers) regular prices on comparable merchandise, every day. We operate over 4,300 stores through our four main segments: in the U.S., Marmaxx (which operates T.J. Maxx, Marshalls and tjmaxx.com) and HomeGoods (which operates HomeGoods and Homesense); TJX Canada (which operates Winners, HomeSense and Marshalls in Canada); and TJX International (which operates T.K. Maxx, Homesense and tkmaxx.com in Europe, and T.K. Maxx in Australia). We also operate Sierra, formerly known as Sierra Trading Post that operates sierra.com and retail stores in the U.S. The results of Sierra are reported in our Marmaxx segment.
During the fourth quarter of fiscal 2018, the Tax Cuts and Jobs Act of 2017 referred to as “tax reform” or the “2017 Tax Act” was enacted. The 2017 Tax Act, along with the related reinvestments made by the Company, had a significant impact on our fiscal 2019 and fiscal 2018 results (see “Tax Cuts and Jobs Act of 2017 below).
During fiscal 2019, we completed a two-for-one stock split of our common stock; as such, all share and related data, as well as basic and diluted earnings per share amounts have been adjusted to reflect the split.
Highlights of our financial performance for fiscal 2019 include the following:
Net sales increased to $39 billion for fiscal 2019, up 9% over fiscal 2018. At February 2, 2019, the number of stores in operation increased 6% and selling square footage increased 4% over the end of fiscal 2018.
Comp sales increased 6% in fiscal 2019 over an increase of 2% in fiscal 2018 and an increase of 5% in fiscal 2017. The fiscal 2019 increase was driven primarily by an increase in customer traffic at each of our four segments.
Diluted earnings per share for fiscal 2019 were $2.43 compared to $2.02 per share in fiscal 2018.
Our fiscal 2019 pre-tax margin (the ratio of pre-tax income to net sales) was 10.7%, a 0.1 percentage point decrease compared to 10.8% in fiscal 2018.
Our cost of sales, including buying and occupancy costs, ratio for fiscal 2019 was 71.4% a 0.3 percentage point increase compared to 71.1% in fiscal 2018.
Our selling, general and administrative (“SG&A”) expense ratio for fiscal 2019 was 17.8%, which was flat to fiscal 2018.
Our consolidated average per store inventories, including inventory on hand at our distribution centers (which excludes inventory in transit) and excluding our e-commerce businesses, increased 1% on a reported basis and increased 3% on a constant currency basis at the end of fiscal 2019 as compared to the prior year.
During fiscal 2019, we repurchased 51.8 million shares of our common stock for $2.5 billion, on a “trade date basis”. Earnings per share reflect the benefit of our stock repurchase programs. In February 2019, our Board of Directors approved a repurchase program that authorizes the repurchase of up to an additional $1.5 billion of TJX common stock.

The following is a discussion of our consolidated operating results, followed by a discussion of our segment operating results.
Tax Cuts and Jobs Act of 2017
On December 22, 2017, the 2017 Tax Act was enacted into law which included a reduction of the U.S. corporate income tax rate to 21 percent, effective January 1, 2018 and had a significant impact on our fiscal 2019 and fiscal 2018 operating results. The tax benefits recognized due to the 2017 Tax Act resulted in a net benefit to net income of $0.34 per share for fiscal 2019. In fiscal 2018, the Company reinvested a portion of the tax benefits through a discretionary bonus to eligible non-bonus plan Associates globally and an incremental contribution to the Company’s defined contribution retirement plans for eligible Associates in the U.S. and internationally, as well as making contributions to the Company’s charitable foundations, collectively referred to as “incremental investments related to the 2017 Tax Act.” The tax benefits recognized due to the 2017 Tax Act, offset by the after-tax impact of incremental investments we made related to the 2017 Tax Act, resulted in a net benefit to net income of $0.09 per share for fiscal 2018.

24



Impact of Brexit
The U.K’s decision to leave the European Union (“EU”), commonly referred to as “Brexit”, remains unsettled. Should the U.K. exit the EU, there are several possible outcomes each of which creates risks for TJX, especially in our European operations. Our TJX Europe management team has evaluated a range of possible outcomes, sought to identify areas of concern and implemented strategies to mitigate them. Our current European operations benefit from the free movement of goods and labor between the U.K. and EU. As a result, we believe Brexit could have a negative impact on our ability to efficiently move merchandise between the U.K. and the EU. Brexit could also have a negative impact on our talent in the region, both by impacting current Associates, who are either EU citizens working in the U.K. or U.K. citizens working in the EU, and potentially impacting recruitment and retention for our European operations in the future.
If the U.K. does exit the EU, this would require additional regulatory and compliance requirements for merchandise that flows between the U.K. and the EU. We have developed a plan to realign our European division’s supply chain to reduce the volume of merchandise flowing between the U.K. and the EU and have established resources and systems to support this plan. In addition, we continue to communicate with our Associates about Brexit including by providing relevant information about additional procedures that may be required post-Brexit.
We believe these steps will help us mitigate the operational risks that we expect could result from Brexit. If, however, Brexit happens without a comprehensive withdrawal agreement between the U.K. and the EU and therefore, without a longer transitional period, our European operations could be significantly impacted, particularly in the short term. We believe that over time we would implement appropriate strategies to address that outcome.
Net Sales
Consolidated net sales for fiscal 2019 totaled $39 billion, a 9% increase over $35.9 billion in fiscal 2018. The increase reflected a 6% increase from comp stores and a 3% increase from non-comp sales. Foreign currency had a neutral impact in fiscal 2019. Net sales from our e-commerce businesses combined amounted to approximately 2% of total sales and had an immaterial impact on fiscal 2019 sales growth.
Consolidated net sales for fiscal 2018 totaled $35.9 billion, an 8% increase over $33.2 billion in fiscal 2017. The increase reflected a 4% increase from non-comp sales, a 2% increase from comp sales, and a 2% increase from the impact of the 53rd week in the fiscal 2018 calendar. Foreign currency had a neutral impact in fiscal 2018.
Revenues by Geography
The percentages of our consolidated revenues by geography for the last three fiscal years are as follows:
 
Fiscal 2019
 
Fiscal 2018
 
Fiscal 2017
 
United States
 
 
 
 
 
 
Northeast
23
%
 
24
%
 
24
%
 
Midwest
13

 
12

 
12

 
South (including Puerto Rico)
25

 
25

 
25

 
West
15

 
15

 
16

 
Subtotal
76

 
76

 
77

 
Canada
10

 
10

 
10

 
Europe
13

 
13

 
13

 
Australia
1

 
1

 
             *
 
Total
100
%
 
100
%
 
100
%
 
*
Revenue from Australia was less than one percent during fiscal 2017.
Comparable Store Sales
We define comparable store sales (“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 calculation 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 calculation.

25



Sales excluded from comp sales (“non-comp sales”) consists of
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 businesses, meaning Sierra (including stores), tjmaxx.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 the third quarter of fiscal 2018, 37 stores were significantly impacted by hurricanes, mostly in Puerto Rico, and were excluded from comp sales. These stores will be included in the comp sales measures once they again meet the comp sales criteria.
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 other retail companies.
Comp sales increases across all of our segments for fiscal 2019 were primarily due to an increase in customer traffic. In fiscal 2019, home fashions and apparel both grew, with apparel outperforming home fashions. Geographically, in the U.S., the Southeast, Great Lakes and the Southwest regions reported the highest comp sales increases, and the Mid Atlantic was below the consolidated average. Comp sales increases for TJX Canada and TJX International were below the consolidated average.
Comp sales increases across all of our segments for fiscal 2018 were primarily due to an increase in customer traffic. We also had an increase in the number of units sold, which was more than offset by a reduction in the average ticket. In fiscal 2018, home fashions and apparel both grew, with home fashions performing better than apparel. Geographically, in the U.S., the Southeast and the Southwest regions reported the highest comp sales increases, and the Northeast was below the consolidated average. In Canada, comp sales increases were well above the consolidated average and TJX International was at the consolidated average.
The following table sets forth our consolidated operating results as a percentage of net sales.
  
Percentage of Net Sales
  
Fiscal Year 2019
Fiscal Year 2018
Fiscal Year 2017
Net sales
100.0
%
100.0
%
100.0
%
Cost of sales, including buying and occupancy costs
71.4

71.1

71.0

Selling, general and administrative expenses
17.8

17.8

17.4

Impairment of goodwill and other long-lived assets

0.3


Loss on early extinguishment of debt


0.2

Pension settlement charge
0.1


0.1

Interest expense, net

0.1

0.1

Income before provision for income taxes*
10.7
%
10.8
%
11.2
%
*
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. Two ways in which foreign currency exchange rates affect our reported results are as follows:
Translation of foreign operating results into U.S. dollars: 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 consolidated 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.

26



Inventory-related 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.
We refer to the impact of the above two items throughout our discussion as “foreign currency.” This does not include the impact currency exchange rates can have on various transactions that are denominated in a currency other than an operating division’s local currency. When discussing the impact on our results of the effect of currency exchange rates on such transactions we refer to it as “transactional foreign exchange.”
Cost of Sales, Including Buying and Occupancy Costs
Cost of sales, including buying and occupancy costs, as a percentage of net sales was 71.4% in fiscal 2019 compared to 71.1% in fiscal 2018 and 71.0% in fiscal 2017. The increase in this expense ratio during fiscal 2019 was driven by higher supply chain costs as we continue to invest in existing and open new distribution centers as well as the absence of the benefit of the 53rd week reflected in last year's expense ratio. Merchandise margin was essentially flat compared to fiscal 2018 despite significantly higher freight costs.
The increase in the fiscal 2018 expense ratio was driven by higher supply chain costs as we continue to invest and open new distribution centers. This was offset by the favorable impact of mark-to-market of inventory derivatives that benefited the expense ratio by approximately 0.1 percentage point as well as an estimated 0.1 percentage point benefit from the 53rd week in the Company’s fiscal 2018 calendar. Fiscal 2018 merchandise margin was essentially flat to fiscal 2017.
Selling, General and Administrative Expenses
SG&A expenses as a percentage of net sales were 17.8% in fiscal 2019 and fiscal 2018, and 17.4% in fiscal 2017. The fiscal 2019 expense ratio reflects an increase in incentive compensation accruals due to a stronger than expected operating performance as well as store wage increases, partially offset by leverage on strong comp sales. The fiscal 2018 expense ratio reflects the impact of the incremental investments related to the 2017 Tax Act and higher employee payroll costs due to wage increases.
Impairment of Goodwill and Other Long-lived Assets, Related to Sierra
During the fourth quarter of fiscal 2018, we recorded a $99.3 million impairment charge, primarily related to goodwill, as the estimated fair value of Sierra fell below the carrying value due to a decrease in projected revenue growth rates. The impairment charge is included in the Marmaxx segment.
Loss on Early Extinguishment of Debt
During the third quarter of fiscal 2017, we issued $1.0 billion of 2.25% ten-year notes. We used a portion of the proceeds to redeem our $375 million 6.95% notes on October 12, 2016, prior to their scheduled maturity of April 15, 2019 and we recorded a pre-tax loss on the early extinguishment of debt of $51.8 million.
Pension Settlement Charge
During the third quarter of fiscal 2019, we annuitized and transferred current pension obligations for certain U.S. retirees and beneficiaries under the qualified pension plan through the purchase of a group annuity contract with an insurance company. We transferred $207.4 million of pension plan assets to the insurance company, thereby reducing our pension benefit obligations. The transaction had no cash impact to TJX but did result in a non-cash pre-tax pension settlement charge of $36.1 million.
During the third quarter of fiscal 2017, we offered eligible former TJX Associates, who had not yet commenced receiving their qualified pension plan benefit, an opportunity to receive a lump sum payout of their vested pension benefit. As a result, TJX’s qualified pension plan paid $103.2 million from pension plan assets to those who accepted this offer. This transaction had no cash impact to TJX, but did result in a non-cash pre-tax pension settlement charge of $31.2 million.

27



Interest Expense, net
The components of interest expense, net for the last three fiscal years are summarized below:
  
Fiscal Year Ended
In thousands
February 2,
2019
February 3,
2018
January 28,
2017
 
 
(53 weeks)
 
Interest expense
$
69,102

$
69,237

$
69,219

Capitalized interest
(4,263
)
(4,942
)
(7,548
)
Interest (income)
(55,979
)
(32,707
)
(18,137
)
Interest expense, net
$
8,860

$
31,588

$
43,534

The decrease in interest expense, net for fiscal 2019 and fiscal 2018 was driven by additional interest income, primarily due to higher return rates.
Provision for Income Taxes
Our effective annual income tax rate was 26.7% in fiscal 2019, 32.4% in fiscal 2018 and 38.3% in fiscal 2017. The decrease in the fiscal 2019 effective income tax rate is primarily driven by the reduction of the U.S. federal statutory rate from 35% to 21%. The decrease in the effective income tax rate in fiscal 2018 was primarily due to the favorable effect of the 2017 Tax Act, excess tax benefit from share-based compensation attributable to the adoption of ASU 2016-09- Compensation- Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, and the jurisdictional mix of income.
The 2017 Tax Act made broad and complex changes to the U.S. tax code which impacted fiscal 2019 and fiscal 2018 including, but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21%. In December 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118, which allows a measurement period, not to exceed one year, to finalize the accounting for the income tax impacts of the 2017 Tax Act. We completed our analysis in the fourth quarter of fiscal 2019 and determined there was no material adjustment to the income tax expense.
Net Income and Diluted Earnings Per Share
Net income was $3.1 billion in fiscal 2019 compared to $2.6 billion in fiscal 2018 and $2.3 billion in fiscal 2017. Diluted earnings per share were $2.43 in fiscal 2019, $2.02 in fiscal 2018 and $1.73 in fiscal 2017. Year over year results are impacted by numerous items that impact comparability as summarized below.
 
Fiscal Year Ended
 
February 2,
2019
February 3,
2018
January 28,
2017
 
 
(53 weeks)
 
Net benefit of 2017 Tax Act items(1)
$
(0.34
)
$
(0.09
)
$

Benefit of 53rd week in FY18
$

$
(0.06
)
$

Sierra impairment charge
$

$
0.05

$

Pension settlement charge
$
0.02

$

$
0.01

Loss on early extinguishment of debt
$

$

$
0.02

(1)
Refer to the Tax Cuts and Jobs Act of 2017 section within this MD&A for further details on the net benefit of 2017 Tax Act items.

In addition, foreign currency exchange rates had a neutral impact on earnings per share in fiscal 2019 when compared to fiscal 2018, and a $0.02 positive impact in fiscal 2018 when compared to fiscal 2017.
Our stock repurchase programs, which reduce our weighted average diluted shares outstanding, benefited our earnings per share growth by approximately 3% in each fiscal year presented.

28



Segment Information
We operate four main business segments. Our Marmaxx segment (T.J. Maxx, Marshalls and tjmaxx.com) and the HomeGoods segment (HomeGoods and Homesense) 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. We also operate Sierra, formerly Sierra Trading Post that operates sierra.com and retail stores in the U.S. The results of Sierra are included in our 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, loss on early extinguishment of debt, the pension settlement charge and interest expense, net. “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 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.

29



U.S. SEGMENTS
Marmaxx
  
Fiscal Year Ended
In millions
February 2,
2019
February 3,
2018
January 28,
2017
 
 
(53 weeks)
 
Net sales
$
24,058.0

$
22,249.1

$
21,246.0

Segment profit
$
3,253.9

$
2,949.4

$
2,995.0

Segment profit as a percentage of net sales
13.5
%
13.3
%
14.1
%
Increase in comp sales
7
%
1
%
5
%
Stores in operation at end of period
 
 
 
T.J. Maxx
1,252

1,223

1,186

Marshalls
1,091

1,062

1,035

Sierra
35

27

12

Total
2,378

2,312

2,233

Selling square footage at end of period (in thousands)
 
 
 
T.J. Maxx
27,484

27,077

26,614

Marshalls
25,269

24,916

24,750

Sierra
598

470

227

Total
53,351

52,463

51,591

Net sales for Marmaxx increased 8% in fiscal 2019 on top of a 5% increase in fiscal 2018. The fiscal 2019 increase reflects a 7% increase from comp sales and a 1% increase from non-comp sales. The sales increase of 5% in fiscal 2018 reflects a 2% increase from non-comp sales, a 2% increase from the 53rd week and a 1% increase from comp sales. Comp sales growth at Marmaxx for fiscal 2019 was primarily due to a 5% increase in customer traffic on top of a 3% increase in customer traffic in fiscal 2018. Geographically, comp sales were strong throughout most of the country as all regions posted a 5% comp or greater. Apparel outperformed home fashions in fiscal 2019 with both categories posting solid comp sales growth. Sales of our U.S. e-commerce businesses represented approximately 3% of Marmaxx’s net sales.
Segment margin increased to 13.5% in fiscal 2019 compared to 13.3% in fiscal 2018. This comparison is impacted by items impacting the fiscal 2018 segment margin, primarily the Sierra impairment charge which reduced last year’s segment margin by 0.4 percentage points. Marmaxx results for fiscal 2019 reflect an improvement due to expense leverage on the strong comp sales which was more than offset by higher incentive compensation accruals due to the stronger than expected operating performance and an increase in distribution costs and store wages. Collectively these items reduced the fiscal 2019 segment margin by 0.7 percentage points. Merchandise margin was essentially flat for fiscal 2019 compared to fiscal 2018 despite a significant increase in freight costs. Our U.S. e-commerce businesses, excluding the fiscal 2018 impairment charge, did not have a significant impact on year-over-year segment margin comparisons.
Segment margin in fiscal 2018 was 13.3% compared to 14.1% in fiscal 2017. Marmaxx results for fiscal 2018 reflect a 0.4 percentage point negative impact from the Sierra impairment charge. In addition, higher store payroll costs, primarily due to wage increases, and higher distribution costs, primarily due to processing more units, collectively reduced segment margin by approximately 0.5 percentage points. The fiscal 2018 segment margin was also negatively impacted by expense deleverage on the 1% comp sales but was favorably impacted by approximately 0.1 percentage point due to the 53rd week. Merchandise margin was flat for fiscal 2018 compared to fiscal 2017. Our U.S. e-commerce businesses, excluding the impairment charge, did not have a significant impact on year-over-year segment margin comparisons.
In fiscal 2020, we expect to open approximately 60 Marmaxx stores and 10 Sierra stores, which would increase selling square footage by approximately 2%.


30



HomeGoods
  
Fiscal Year Ended
In millions
February 2,
2019
February 3,
2018
January 28,
2017
 
 
(53 weeks)
 
Net sales
$
5,787.4

$
5,116.3

$
4,404.6

Segment profit
$
671.9

$
674.5

$
613.8

Segment profit as a percentage of net sales
11.6
%
13.2
%
13.9
%
Increase in comp sales
4
%
4
%
6
%
Stores in operation at end of period
 
 
 
HomeGoods
749

667

579

Homesense
16

4


Total
765

671

579

Selling square footage at end of period (in thousands)
 
 
 
HomeGoods
13,775

12,448

11,119

Homesense
343

81


Total
14,118

12,529

11,119

HomeGoods’ net sales increased 13% in fiscal 2019, on top of a 16% increase in fiscal 2018. The increase in fiscal 2019 reflects a 9% increase from non-comp sales and a 4% increase from comp sales. The sales increase of 16% in fiscal 2018 reflects a 10% increase from non-comp sales, a 4% increase from comp sales and a 2% increase due to the 53rd week. Comp sales growth at HomeGoods for fiscal 2019 was due to a 5% increase in customer traffic on top of a 4% increase in customer traffic in fiscal 2018.
Segment profit margin decreased to 11.6% for fiscal 2019 compared to 13.2% for fiscal 2018. The decrease in segment margin for fiscal 2019 includes a decline in merchandise margin due to increased freight costs. In addition, higher distribution center costs and higher store wage costs as well as costs in connection with investing in more stores, collectively reduced segment margin by approximately 1.1 percentage points.
Segment profit margin for fiscal 2018 was 13.2% compared to 13.9% for fiscal 2017. The decrease in segment margin for fiscal 2018 includes a decline in merchandise margin of 0.5 percentage points, primarily as a result of increased freight costs. In addition, higher distribution center costs primarily due to opening a new distribution center, higher store payroll costs, primarily due to wage increases, as well as costs in connection with opening more stores as compared to fiscal 2017, including our first Homesense stores, collectively reduced segment margin by approximately 0.8 percentage points. These costs were partially offset by expense leverage on comp sales growth as well as the benefit of the 53rd week which lifted segment margin by approximately 0.2 percentage points.
In fiscal 2020, we plan an increase of approximately 65 HomeGoods stores and 15 Homesense stores, which would increase selling square footage by approximately 11%.


31



FOREIGN SEGMENTS
TJX Canada
  
Fiscal Year Ended
U.S. dollars in millions
February 2,
2019
February 3,
2018
January 28,
2017
 
 
(53 weeks)
 
Net sales
$
3,869.8

$
3,642.3

$
3,171.1

Segment profit
$
551.6

$
530.1

$
413.4

Segment profit as a percentage of net sales
14.3
%
14.6
%
13.0
%
Increase in comp sales
4
%
5
%
8
%
Stores in operation at end of period
 
 
 
Winners
271

264

255

HomeSense
125

117

106

Marshalls
88

73

57

Total
484

454

418

Selling square footage at end of period (in thousands)
 
 
 
Winners
5,862

5,780

5,629

HomeSense
2,323

2,179

1,984

Marshalls
1,885

1,621

1,307

Total
10,070

9,580

8,920

Net sales for TJX Canada increased 6% in fiscal 2019, on top of a 15% increase in fiscal 2018. The increase in sales for fiscal 2019 reflects comp sales growth of 4% and a 4% increase from non-comp sales, offset by a 2% negative impact of foreign currency translation. The increase in sales for fiscal 2018 reflects comp sales growth of 5%, a 5% increase from non-comp stores, a 3% positive impact of foreign currency translation and a 2% impact of the 53rd week. The comp sales increase in fiscal 2019 was due to a 5% increase in customer traffic on top of a 5% increase in customer traffic in fiscal 2018.
Segment profit margin decreased to 14.3% in fiscal 2019 compared to 14.6% in fiscal 2018. The decrease in segment margin was primarily due to the combination of a higher store wage and freight costs, partially offset by expense leverage on the strong comp sales.
Segment profit margin increased 1.6 percentage points to 14.6% in fiscal 2018. The increase in segment margin was primarily due to the combination of an increase in merchandise margin of 0.6 percentage points, which benefited from the year-over-year increase in the Canadian dollar, and expense leverage on the strong comp sales. The increase in the segment margin also included a favorable impact of 0.3 percentage points due to foreign currency, primarily the mark-to-market impact of the inventory derivatives. The fiscal 2018 segment margin also benefited from the 53rd week, which lifted the segment margin by approximately 0.1 percentage point.
In fiscal 2020, we plan an increase of approximately 30 stores in Canada, which would increase selling square footage by approximately 5%.

32



TJX International
  
Fiscal Year Ended
U.S. dollars in millions
February 2,
2019
February 3,
2018
January 28,
2017
 
 
(53 weeks)
 
Net sales
$
5,257.8

$
4,856.9

$
4,362.0

Segment profit
$
285.8

$
249.2

$
235.5

Segment profit as a percentage of net sales
5.4
%
5.1
%
5.4
%
Increase in comp sales
3
%
2
%
2
%
Stores in operation at end of period
 
 
 
T.K. Maxx
567

540

503

Homesense
68

55

44

T.K. Maxx Australia
44

38

35

Total
679

633

582

Selling square footage at end of period (in thousands)
 
 
 
T.K. Maxx
11,693

11,379

10,787

Homesense
1,029

883

714

T.K. Maxx Australia
814

714

667

Total
13,536

12,976

12,168

Net sales for TJX International increased 8% in fiscal 2019 on top of an 11% increase in fiscal 2018. The increase in sales for fiscal 2019 reflects a 4% increase from non-comp sales, comp sales growth of 3%, and a 1% positive impact from foreign currency translation. The increase in comp sales for fiscal 2019 was driven by a 4% increase in customer traffic. E-commerce sales represent less than 3% of TJX International’s net sales in fiscal 2019 and fiscal 2018. The increase in fiscal 2018 reflects a 7% increase from non-comp sales, comp sales growth of 2% and a 2% benefit from the 53rd week. Foreign currency translation had a neutral impact on fiscal 2018 sales growth. The increase in comp sales for fiscal 2018 was primarily driven by an increase in customer traffic.
Segment profit margin increased to 5.4% for fiscal 2019 compared to 5.1% for fiscal 2018. The increase in segment margin was driven by favorable merchandise margins of 0.4 percentage points, primarily due to lower markdowns, along with the favorable reserve adjustment relating to a wage audit and expense leverage on occupancy costs. These improvements were partially offset by higher supply chain costs associated with the opening of a new distribution center in fiscal 2018 and higher store payroll, which collectively reduced segment margin by approximately 0.4 percentage points.
Segment profit margin decreased 0.3 percentage points to 5.1% in fiscal 2018 compared to 5.4% in fiscal 2017. The decrease in segment margin was driven by higher supply chain costs associated with the opening of a new distribution center and higher store payroll, which collectively reduced segment margin by approximately 0.7 percentage points. Segment margin was also negatively impacted by expense deleverage on the 2% comp sales growth. These declines in segment margin were partially offset by a favorable impact of 0.4 percentage points due to foreign currency, primarily the mark-to-market impact of the inventory derivatives as well as the benefit of the 53rd week, which lifted the segment margin by approximately 0.2 percentage points.
We expect to add approximately 50 stores to TJX International in fiscal 2020, which would increase selling square footage by approximately 5%.


33



GENERAL CORPORATE EXPENSE
  
Fiscal Year Ended
In millions
February 2,
2019
February 3,
2018
January 28,
2017
 
 
(53 weeks)
 
General corporate expense
$
545.0

$
515.0

$
408.2

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 increase in general corporate expense for fiscal 2019 was primarily driven by incremental systems and technology costs, global IT restructuring costs, and higher incentive compensation accruals. Collectively these items increased general corporate expense by approximately $100 million. These increases were partially offset by the absence in fiscal 2019 of the Associate related investments of approximately $70 million incurred in fiscal 2018 associated with the 2017 Tax Act.
The increase in general corporate expense for fiscal 2018 was primarily driven by the incremental investments related to the 2017 Tax Act. These investments include a discretionary bonus to eligible non-bonus plan Associates, additional retirement plan contributions and contributions to TJX’s charitable foundations, which totaled $100 million in fiscal 2018.
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 February 2, 2019, there were no short-term bank borrowings or commercial paper outstanding.
We believe our existing cash and cash equivalents, internally generated funds and our credit facilities, described in Note J – Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements, are more than adequate to meet our operating needs over the next fiscal year.
As of February 2, 2019, TJX held $3.0 billion in cash. Approximately $1.2 billion of our cash was held by our foreign subsidiaries with $420.6 million held in countries where we provisionally intend to indefinitely reinvest any undistributed earnings. TJX has provided for all applicable state and foreign withholding taxes on all undistributed earnings of its foreign subsidiaries in Canada, Puerto Rico, Italy, India, Hong Kong and Vietnam through February 2, 2019. 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 provided by operating activities was $4.1 billion in fiscal 2019, $3.0 billion in fiscal 2018 and $3.6 billion in fiscal 2017. The cash generated from operating activities in each of these fiscal years was largely due to operating earnings.
Operating cash flows for fiscal 2019 increased by $1.1 billion compared to fiscal 2018. Net income, adjusted for non-cash items increased operating cash flows in fiscal 2019 as compared to fiscal 2018 by $0.5 billion. In addition there was a $0.6 billion increase in cash flows related to prepaid expenses and other current assets largely due to the prefunding of certain service contracts in fiscal 2018.
Operating cash flows for fiscal 2018 decreased by $0.6 billion compared to fiscal 2017. Net income, adjusted for non-cash items increased operating cash flows in fiscal 2018 as compared to fiscal 2017 by $0.3 billion. This increase in cash flows was more than offset by a $0.3 billion decrease in cash flows related to merchandise inventories, net of related accounts payable, a $0.3 billion decrease in cash flows related to accounts receivable and prepaid expenses and a $0.3 billion decrease in cash flows related to accrued expenses and other liabilities. Merchandise inventories, net of related accounts payable increased in fiscal 2018 due in part to the lower inventory levels we carried at fiscal 2017 year end. The increase in accounts receivable was driven by credit card receivables. The increase in prepaid expenses and other current assets was primarily due to the prefunding of certain service contracts as well as the timing of rent payments which was impacted by the timing in our fiscal year end dates. The change in accrued expenses and other liabilities was driven by a reduction in sales taxes and income taxes payable, primarily due to timing of payments and benefits associated with the 2017 Tax Act, as well as a contribution of $100 million to the Company’s defined benefit pension plan in fiscal 2018, as compared to $50 million in fiscal 2017.

34



Investing Activities
Net cash used in investing activities resulted in net cash outflows of $0.6 billion in fiscal 2019, $1.0 billion in fiscal 2018 and $1.2 billion in fiscal 2017. The cash outflows were primarily driven by capital expenditures and, in addition, the activity in fiscal 2019 reflects the liquidation of short-term investments by TJX Canada as a result of a repatriation of earnings completed during the second quarter.
Net cash used in investing activities include capital expenditures for the last three fiscal years as set forth in the table below.
  
Fiscal Year Ended
In millions
February 2,
2019
February 3,
2018
January 28,
2017
New stores
$
201.2

$
226.0

$
191.2

Store renovations and improvements
347.2

335.2

274.8

Office and distribution centers
576.7

496.4

558.7

Total capital expenditures
$
1,125.1

$
1,057.6

$
1,024.7

We expect our capital expenditures in fiscal 2020 will be approximately $1.5 billion, including approximately $900 million for our offices and distribution centers (including buying and merchandising systems and other information systems) to support growth, approximately $400 million for store renovations and approximately $200 million for new stores. We plan to fund these expenditures through internally generated funds.
In fiscal 2019, we purchased $0.2 billion of investments, compared to $0.9 billion in fiscal 2018. Additionally, $0.6 billion of investments were sold or matured during fiscal 2019 compared to $0.9 billion in the prior year. This activity primarily relates to short-term investments which had initial maturities in excess of 90 days and, per our policy, are not classified as cash on the consolidated balance sheets presented.
Financing Activities
Net cash used in financing activities resulted in net cash outflows of $3.1 billion in fiscal 2019, $2.3 billion in fiscal 2018 and $1.6 billion in fiscal 2017. These cash outflows were primarily driven by equity repurchases partially offset by issuances, dividend payments and debt transactions.
Equity
TJX repurchased and retired 51.8 million shares of its common stock at a cost of $2.5 billion during fiscal 2019, on a “trade date basis.” TJX reflects stock repurchases in its financial statements on a “settlement date” or cash basis. Under our stock repurchase programs, we spent $2.4 billion to repurchase 50.8 million shares of our stock in fiscal 2019, $1.6 billion to repurchase 44.4 million shares of our stock in fiscal 2018 and $1.7 billion to repurchase 44.6 million shares of our stock in fiscal 2017.
For further information regarding equity repurchases, see Note D – Capital Stock and Earnings Per Share of Notes to Consolidated Financial Statements.
In February 2019, our Board of Directors approved an additional repurchase program authorizing the repurchase of up to an additional $1.5 billion of TJX stock. We currently plan to repurchase approximately $1.75 billion to $2.25 billion of stock under our stock repurchase programs in fiscal 2020. We determine the timing and amount of repurchases based on our assessment of various factors including excess cash flow, liquidity, economic and market conditions, our assessment of prospects for our business, legal requirements and other factors. The timing and amount of these purchases may change.
Dividends
We declared quarterly dividends on our common stock which totaled $0.78 per share in fiscal 2019, $0.625 per share in fiscal 2018 and $0.52 per share in fiscal 2017. Cash payments for dividends on our common stock totaled $923 million in fiscal 2019, $764 million in fiscal 2018 and $651 million in fiscal 2017. We also received proceeds from the exercise of employee stock options of $255 million in fiscal 2019, $134 million in fiscal 2018 and $164 million in fiscal 2017. We expect to pay quarterly dividends for fiscal 2020 of $0.23 per share, or an annual dividend of $0.92 per share, subject to the declaration and approval of our Board of Directors. This would represent an 18% increase over the per share dividends declared and paid in fiscal 2019.

35



Debt
During the fiscal 2017 third quarter we received net proceeds of $992.5 million from the issuance of $1 billion of 2.25% ten-year notes. A portion of the proceeds were used to redeem our $375 million 6.95% notes prior to their scheduled maturity. The redemption of the notes, including the prepayment penalty, resulted in cash outflows of $426 million.
For further information regarding debt, see Note J – Long-Term Debt and Credit Lines of Notes to Consolidated Financial Statements.
Contractual Obligations
As of February 2, 2019, we had known contractual obligations under long-term debt arrangements (including current installments), other long-term obligations, operating leases for property and equipment and purchase obligations as follows:
In thousands
Payments Due by Period
Tabular Disclosure of Contractual Obligations
Total
Less Than 1 Year
1-3 Years
3-5 Years
More Than 5 Years
Long-term debt and other long-term obligations (1)
$
2,537,813

$
55,625

$
850,938

$
563,750

$
1,067,500

Operating lease commitments (2)
9,791,971

1,676,700

3,044,822

2,295,604

2,774,845

Purchase obligations (3)
3,843,184

3,666,288

155,963

20,933


Total obligations
$
16,172,968

$
5,398,613

$
4,051,723

$
2,880,287

$
3,842,345

(1)
Includes estimated interest costs.
(2)
Reflects minimum rent. Does not include costs for insurance, real estate taxes, other operating expenses and, in some cases, rentals based on a percentage of sales; these items totaled approximately one-third of the total minimum rent for fiscal 2019.
(3)
Includes estimated obligations under purchase orders for merchandise and under agreements for capital items, products and services used in our business, including executive employment and other agreements. Excludes agreements that can be canceled without penalty.
We also have long-term liabilities for which it is not reasonably possible for us to predict when they may be paid which include $449.1 million for employee compensation and benefits and $235.5 million for uncertain tax positions.

CRITICAL ACCOUNTING POLICIES
We prepare our consolidated financial statements in accordance with GAAP which require us to make certain estimates and judgments that impact our reported results. These judgments and estimates are based on historical experience and other factors which we continually review and believe are reasonable. We consider our most critical accounting policies, involving management estimates and judgments, to be those relating to the areas described below.
Inventory Valuation
We use the retail method for valuing inventory for all our businesses except T.K. Maxx in Australia. The businesses that utilize the retail method have some inventory that is initially valued at cost before the retail method is applied as it has not been fully processed for sale (i.e. inventory in transit and unprocessed inventory in our distribution centers). Under the retail method, the cost value of inventory and gross margins are determined by calculating a cost-to-retail ratio and applying it to the retail value of inventory. It involves management estimates with regard to markdowns and inventory shrinkage. Under the retail method, permanent markdowns are reflected in inventory valuation when the price of an item is reduced. Typically, a significant area of judgment in the retail method is the amount and timing of permanent markdowns. However, as a normal business practice, we have a specific policy as to when and how markdowns are to be taken, greatly reducing management’s discretion and the need for management estimates as to markdowns. Inventory shrinkage requires estimating a shrinkage rate for interim periods, but we take a full physical inventory near the fiscal year end to determine shrinkage at year end. Historically, the variance between estimated shrinkage and actual shrinkage has not been material to our annual financial results. We do not generally enter into arrangements with vendors that provide for rebates and allowances that could ultimately affect the value of inventory.

36



Impairment of Long-lived Assets, Goodwill and Tradenames
We evaluate our long-lived assets, goodwill and tradenames for indicators of impairment at least annually in the fourth quarter of each fiscal year or whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Significant judgment is involved in projecting the cash flows of individual stores, as well as of our business units, which involve a number of factors including historical trends, recent performance and general economic assumptions. If we determine that an impairment of long-lived assets or tradenames has occurred, we record an impairment charge equal to the excess of the carrying value of those assets over the estimated fair value of the assets. If we determine that an impairment of goodwill has occurred, we record an impairment charge equal to the excess of the carrying value of the applicable reporting unit over the estimated fair value of the reporting unit, but not in excess of the carrying amount of goodwill. We determine the fair value of our business units using the discounted cash flow method which requires assumptions for the weighted average cost of capital (“WACC”) and revenue growth for the related business unit. The fair value of our business units exceeds their carrying value by a significant amount.
Reserves for Uncertain Tax Positions
Like many large corporations, our income and other tax returns and reports are regularly audited by federal, state and local tax authorities in the United States and in foreign jurisdictions where we operate and such authorities may challenge positions we take. We are engaged in various administrative and judicial proceedings in multiple jurisdictions with respect to assessments, claims, deficiencies and refunds and other tax matters, which proceedings are in various stages of negotiation, assessment, examination, litigation and settlement. The outcomes of these proceedings are uncertain. In accordance with GAAP, we evaluate our uncertain tax positions based on our understanding of the facts, circumstances and information available at the reporting date, and we accrue for exposure when we believe that it is more likely than not, based on the technical merits, that the positions we have taken will not be sustained. However, in the next twelve months and in future periods, the amounts we accrue for uncertain tax positions from time to time or ultimately pay, as the result of the final resolutions of examinations, judicial or administrative proceedings, changes in facts, law, or legal interpretations, expirations of applicable statute of limitations or other resolutions of, or changes in, tax positions may differ either positively or negatively from the amounts we have accrued, and may result in reductions to or additions to accruals, refund claims or payments for periods not currently under examination or for which no claims have been made, such as the recently enacted 2017 Tax Act. Final resolutions of our tax positions or changes in accruals for uncertain tax positions could result in additional tax expense or benefit and could have a material impact on our results of operations of the period in which an examination or proceeding is resolved or in the period in which a changed outcome becomes probable and reasonably estimable.
The 2017 Tax Act significantly changes how corporations are taxed, requiring complex computations to be performed that were not previously required in U.S. tax law, significant judgments to be made in interpretation of the provisions and significant estimates in calculations, and the preparation and analysis of information not previously relevant or regularly produced. The U.S. Treasury Department, the IRS, and other standard-setting bodies could interpret or issue guidance on how provisions of the 2017 Tax Act will be applied or otherwise administered that is different from our interpretation. As we continue our analysis of the 2017 Tax Act, collect and prepare necessary data, and interpret any additional guidance, we may make adjustments to amounts that we have recorded that may materially impact our provision for income taxes in the period in which the adjustments are made.
Loss Contingencies
Certain conditions may exist as of the date the financial statements are issued that may result in a loss to us but will not be resolved until one or more future events occur or fail to occur. Our management, with the assistance of our legal counsel, assesses such contingent liabilities. Such assessments inherently involve the exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us or claims that may result in such proceedings, our legal counsel assists us in evaluating the perceived merits of any legal proceedings or claims as well as the perceived merits of the relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be reasonably estimated, we will accrue for the estimated liability in the financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be reasonably estimated, we will disclose the nature of the contingent liability, together with an estimate of the range of the possible loss or a statement that such loss is not reasonably estimable.
RECENT ACCOUNTING PRONOUNCEMENTS
For a discussion of accounting pronouncements, see Note A- Basis of Presentation and Summary of Accounting Policies of Notes to Consolidated Financial Statements included in this annual report on Form 10-K, including the dates of adoption and estimated effects on our results of operations, financial position or cash flows.

37



ITEM 7A. Quantitative and Qualitative Disclosure about Market Risk
TJX is exposed to market risks in the ordinary course of business. Some potential market risks are discussed below:
FOREIGN CURRENCY EXCHANGE RISK
We are exposed to foreign currency exchange rate risk on the translation of our foreign operations into the U.S. dollar and on purchases of goods in currencies that are not the local currencies of stores where the goods are sold and on intercompany debt and interest payable between and among our domestic and international operations. Our currency risk primarily relates to our activity in the Canadian dollar, British pound and Euro. As more fully described in Note E- Financial Instruments of Notes to Consolidated Financial Statements, we use derivative financial instruments to hedge a portion of certain merchandise purchase commitments, primarily at our international operations, and a portion of our intercompany transactions with and within our international operations. We enter into derivative contracts only for the purpose of hedging the underlying economic exposure. We utilize currency forward and swap contracts, designed to offset the gains or losses on the underlying exposures. The contracts are executed with banks we believe are creditworthy and are denominated in currencies of major industrial countries. Our foreign exchange risk management policy prohibits us from using derivative financial instruments for trading or other speculative purposes and we do not use any leveraged derivative financial instruments. We have performed a sensitivity analysis assuming a hypothetical 10% adverse movement in foreign currency exchange rates applied to the hedging contracts and the underlying exposures described above as well as the translation of our foreign operations into our reporting currency. As of February 2, 2019 and February 3, 2018, the analysis indicated that such an adverse movement would not have a material effect on our consolidated financial position but could have reduced our pre-tax income by approximately $84 million and $78 million, in fiscal years 2019 and 2018, respectively.
EQUITY PRICE AND OTHER MARKET RISK
The assets of our funded qualified pension plan, a portion of which are equity securities, are subject to the risks and uncertainties of the financial markets. We invest the pension assets (described further in Note I- Pension Plans and Other Retirement Benefits of Notes to Consolidated Financial Statements) in a manner that attempts to minimize and control our exposure to market uncertainties. Investments, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility risks. A significant decline in the financial markets could adversely affect the value of our pension plan assets and the funded status of our pension plan, resulting in increased required contributions to the plan or other plan-related liabilities. Our pension plan investment policy prohibits the use of derivatives for speculative purposes.
ITEM 8. Financial Statements and Supplementary Data
The information required by this item may be found on pages F-1 through F-38 of this annual report on Form 10-K.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.

38



ITEM 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
We have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report pursuant to Rules 13a-15 and 15d-15 of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at a reasonable assurance level in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of implementing controls and procedures.
(b) Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of fiscal 2019 identified in connection with our Chief Executive Officer’s and Chief Financial Officer’s evaluation that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
(c) Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of TJX;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of TJX are being made only in accordance with authorizations of management and directors of TJX; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of TJX’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of February 2, 2019 based on criteria established in Internal Control—Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, management concluded that its internal control over financial reporting was effective as of February 2, 2019.
(d)    Attestation Report of the Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited and reported on our consolidated financial statements contained herein, has audited the effectiveness of our internal control over financial reporting as of February 2, 2019, and has issued an attestation report on the effectiveness of our internal control over financial reporting included herein.
ITEM 9B. Other Information
Not applicable.

39



PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
The information concerning our executive officers is set forth under the heading “Executive Officers of the Registrant” in Part I of this report. TJX will file with the Securities and Exchange Commission (SEC) a definitive proxy statement no later than 120 days after the close of its fiscal year ended February 2, 2019 (Proxy Statement). The other information required by this Item and not given in this Item will appear under the headings “Election of Directors” and “Corporate Governance,” including in “Board Committees and Meetings,” and “Audit Committee Report” and in “Beneficial Ownership” in “Section 16(a) Beneficial Ownership Reporting Compliance” in our Proxy Statement, which sections are incorporated herein by reference.
In addition to our Global Code of Conduct, TJX has a Code of Ethics for TJX Executives governing its Executive Chairman, Chief Executive Officer and President, Chief Financial Officer, Principal Accounting Officer and other senior operating, financial and legal executives. The Code of Ethics for TJX Executives is designed to ensure integrity in TJX’s financial reports and public disclosures. TJX also has a Directors Code of Business Conduct and Ethics which promotes honest and ethical conduct, compliance with applicable laws, rules and regulations and the avoidance of conflicts of interest. Both of these codes of conduct are published at tjx.com. We intend to disclose any future amendments to, or waivers from, the Code of Ethics for TJX Executives or the Directors Code of Business Conduct and Ethics within four business days of the waiver or amendment through a website posting or by filing a Current Report on Form 8-K with the SEC.
ITEM 11. Executive Compensation
The information required by this Item will appear under the headings “Compensation Discussion and Analysis,” “Compensation Tables,” “Director Compensation” and “Compensation Program Risk Assessment” in our Proxy Statement, which sections are incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item will appear under the headings “Equity Compensation Plan Information” and “Beneficial Ownership” in our Proxy Statement, which sections are incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item will appear under the heading “Corporate Governance,” including in “Transactions with Related Persons” and “Board Independence,” in our Proxy Statement, which section is incorporated herein by reference.
ITEM 14. Principal Accountant Fees and Services
The information required by this Item will appear under the headings “Audit Committee Report” and “Auditor Fees” in our Proxy Statement, which sections are incorporated herein by reference.

40



PART IV
ITEM 15. Exhibits, Financial Statement Schedules
(a) FINANCIAL STATEMENT SCHEDULES
For a list of the consolidated financial information included herein, see Index to the Consolidated Financial Statements on page F-1.
Schedule II – Valuation and Qualifying Accounts
 
In thousands
Balance Beginning of Period
Amounts Charged to Net Income
Write-Offs Against Reserve
Balance End of
Period
Sales Return Reserve:
 
 
 
 
Fiscal Year Ended February 2, 2019(1)
$
103,243

$
4,861,960

$
4,861,703

$
103,500

Fiscal Year Ended February 3, 2018(2)
$
43,236

$
2,073,146

$
2,071,237

$
45,145

Fiscal Year Ended January 28, 2017(2)
$
41,723

$
1,926,489

$
1,924,976

$
43,236

(1)
Upon adoption of Revenue Recognition (Topic 606) in the first quarter of fiscal 2019, the sales return reserve balance now reflects the gross sales amount whereas prior years' reflect the sales net of estimated value of merchandise to be returned.
(2)
During fiscal 2019, the Company identified that while the net sales return reserve balances recorded on our balance sheets and in this schedule for fiscal 2018 and 2017 were properly stated, the amounts disclosed as “Amounts Charged to Net Income” and “Write Offs Against Reserve” were understated by $0.5 billion and $0.4 billion in fiscal 2018 and fiscal 2017, respectively. The Company concluded these errors are not material to prior periods, however, the amounts disclosed in the above schedule have been revised to reflect the correct activity.
(b) EXHIBITS 
Listed below are all exhibits filed as part of this report. Some exhibits are filed by the Registrant with the Securities and Exchange Commission pursuant to Rule 12b-32 under the Exchange Act.
 
 
Incorporate by Reference
Exhibit No.
Description
Form
Exhibit No.
Filing
 Date
3(i).1
 
 
 
3(ii).1
8-K
3.1
2/5/2018
4.01
S-3
4.1
4/2/2009
4.02
8-K
4.2
5/2/2013
4.03
8-K
4.2
6/5/2014
4.04
8-K
4.1
9/12/2016
4.05
8-K
4.2
9/12/2016
10.01
10-Q
10.2
12/4/2018
10.02
10-Q
10.3
12/4/2018
10.03
 
 
 
10.04
10-Q
10.4
12/4/2018
10.05
 
 
 
10.06
10-K
10.4
3/28/2017
10.07
10-K
10.3
4/4/2018

41



 
 
Incorporate by Reference
Exhibit No.
Description
Form
Exhibit No.
Filing
 Date
10.08
10-K
10.4
4/4/2018
10.09
10-Q
10.6
12/4/2018
10.10
 
 
 
10.11
10-K
10.5
4/4/2018
10.12
10-Q
10.5
12/4/2018
10.13
 
 
 
10.14
10-K
10.6
4/4/2018
10.15
10-Q
10.7
12/4/2018
10.16
 
 
 
10.17
10-K
10.7
4/4/2018
10.18
10-Q
10.8
12/4/2018
10.19
 
 
 
10.20
10-Q
10.1
5/31/2013
10.21
10-Q
10.1
8/26/2016
10.22
10-K
10.8
3/28/2017
10.23
 
 
 
10.24
10-Q
10.1
12/4/2018
10.25
10-Q
12.1
12/1/2009
10.26
10-Q
12.2
12/1/2009
10.27
10-Q
10.2
11/24/2010
10.28
10-K
10.19
3/27/2012
10.29
10-Q
10.1
11/29/2012
10.30
10-Q
10.2
11/29/2012
10.31
10-Q
10.1
12/3/2013
10.32
10-Q
10.2
12/3/2013
10.33
10-Q
10.4
12/2/2014
10.34
10-Q
10.5
12/2/2014
10.35
10-Q
10.1
12/1/2015
10.36
10-Q
10.2
12/1/2015
10.37
10-Q
10.1
5/27/2016
10.38
10-Q
10.1
5/26/2017

42



 
 
Incorporate by Reference
Exhibit No.
Description
Form
Exhibit No.
Filing
 Date
10.39
10-K
10.18
3/29/2016
10.40
10-K
10.19
3/29/2016
10.41
10-Q
10.1
6/1/2018
10.42
10-Q
10.2
6/1/2018
10.43
10-K
10.20
3/31/2015
10.44
10-Q
10.2
8/26/2016
10.45
 
 
 
10.46
10-K
10.22
4/2/2013
10.47
10-K
10.9
4/29/1999
10.48
10-K
10.10
4/28/2000
10.49
10-K
10.17
3/29/2006
10.50
10-K
10.17
3/31/2009
10.51
10-Q
10.3
5/29/2015
10.52
10-K
10.25
3/31/2015
10.53
10-K
10.25
3/29/2016
10.54
The Form of TJX Indemnification Agreement for its executive officers and directors*(p)
10-K
10(r)
4/27/1990
10.55
The Trust Agreement dated as of April 8, 1988 between TJX and State Street Bank and Trust Company*(p)
10-K
10(y)
4/28/1988
10.56
The Trust Agreement dated as of April 8, 1988 between TJX and Fleet Bank (formerly Shawmut Bank of Boston, N.A.)*(p)
10-K
10(z)
4/28/1988
10.57
10-Q
10.5
10/31/2015
21
 
 
 
23
 
 
 
24
 
 
 
31.1
 
 
 
31.2
 
 
 
32.1
 
 
 
32.2
 
 
 
101
The following materials from The TJX Companies, Inc.’s Annual Report on Form 10-K for the fiscal year ended February 2, 2019, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Shareholders’ Equity, and (vi) Notes to Consolidated Financial Statements
 
 
 
 * Management contract or compensatory plan or arrangement.
(p)
Paper filing.
Unless otherwise indicated, exhibits incorporated by reference were filed under Commission File Number 001-04908.
ITEM 16. Form 10-K Summary
Not applicable.

43



SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
 
THE TJX COMPANIES, INC.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
/s/ SCOTT GOLDENBERG
Dated:
April 3, 2019
 
 
 
 
Scott Goldenberg, Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
/s/ ERNIE HERRMAN
  
/s/ SCOTT GOLDENBERG
Ernie Herrman, Chief Executive Officer, President and Director (Principal Executive Officer)
 
Scott Goldenberg, Chief Financial Officer
(Principal Financial and Accounting Officer)
 
 
 
ZEIN ABDALLA*
  
AMY B. LANE*
Zein Abdalla, Director
 
Amy B. Lane, Director
 
 
 
ALAN M. BENNETT*
  
CAROL MEYROWITZ*
Alan M. Bennett, Director
 
Carol Meyrowitz, Executive Chairman of the Board of Directors
 
 
 
ROSEMARY T. BERKERY*
  
JACKWYN L. NEMEROV*
Rosemary T. Berkery, Director
 
Jackwyn L. Nemerov, Director
 
 
 
DAVID T. CHING*
  
JOHN F. O’BRIEN*
David T. Ching, Director
 
John F. O’Brien, Director
 
 
 
MICHAEL F. HINES*
  
WILLOW B. SHIRE*
Michael F. Hines, Director
 
Willow B. Shire, Director
 


 
  
*BY
/s/ SCOTT GOLDENBERG
Dated:
April 3, 2019
 
Scott Goldenberg,
as attorney-in-fact

44




The TJX Companies, Inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
For Fiscal Years Ended February 2, 2019, February 3, 2018 and January 28, 2017.
 


F-1



Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of The TJX Companies, Inc.:

Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of The TJX Companies, Inc. and its subsidiaries (the “Company”) as of February 2, 2019 and February 3, 2018, and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended February 2, 2019, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended February 2, 2019 appearing under Item 15 (a) (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of February 2, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of February 2, 2019 and February 3, 2018, and the results of its operations and its cash flows for each of the three years in the period ended February 2, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 2, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

F-2



Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/PricewaterhouseCoopers LLP
Boston, Massachusetts
April 3, 2019

We have served as the Company’s auditor since 1962.

F-3



The TJX Companies, Inc.
CONSOLIDATED STATEMENTS OF INCOME
 
 
Fiscal Year Ended
Amounts in thousands except per share amounts
February 2
2019
February 3
2018
January 28
2017
 
 
(53 weeks)
 
Net sales
$
38,972,934

$
35,864,664

$
33,183,744

Cost of sales, including buying and occupancy costs
27,831,177

25,502,167

23,565,754

Selling, general and administrative expenses
6,923,564

6,375,071

5,768,467

Impairment of goodwill and other long-lived assets, related to Sierra

99,250


Loss on early extinguishment of debt


51,773

Pension settlement charge
36,122


31,173

Interest expense, net
8,860

31,588

43,534

Income before provision for income taxes
4,173,211

3,856,588

3,723,043

Provision for income taxes
1,113,413

1,248,640

1,424,809

Net income
$
3,059,798

$
2,607,948

$
2,298,234

Basic earnings per share:
 
 
 
Net income
$
2.47

$
2.05

$
1.75

Weighted average common shares – basic
1,241,153

1,273,654

1,311,294

Diluted earnings per share:
 
 
 
Net income
$
2.43

$
2.02

$
1.73

Weighted average common shares – diluted
1,259,252

1,292,209

1,328,864

















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

F-4



The TJX Companies, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 
Fiscal Year Ended
In thousands
February 2
2019
February 3
2018
January 28
2017
 
 
(53 weeks)
 
Net income
$
3,059,798

$
2,607,948

$
2,298,234

Additions to other comprehensive income:
 
 
 
Foreign currency translation adjustments, net of related tax benefit of $8,233 in fiscal 2019, and provisions of $36,929 and $25,656 in fiscal 2018 and fiscal 2017, respectively
(192,664
)
211,752

(52,611
)
Gain on net investment hedges, net of related tax provision of $7,113 in fiscal 2019
19,538



Recognition of net gains/losses on benefit obligations, net of related tax benefit of $19,813 in fiscal 2019, provision of $8,989 in fiscal 2018 and benefit of $7,394 in fiscal 2017
(54,420
)
24,691

(11,239
)
Reclassifications from other comprehensive income to net income:
 
 
 
Pension settlement charge, net of related tax provision of $9,641 in fiscal 2019 and $12,369 in fiscal 2017
26,481


18,804

Amortization of loss on cash flow hedge, net of related tax provisions of $304, $438 and $450 in fiscal 2019, 2018 and 2017, respectively
847

696

684

Amortization of prior service cost and deferred gains/losses, net of related tax provisions of $4,280, $9,592, and $11,584 in fiscal 2019, 2018 and 2017, respectively
11,756

15,228

17,608

Other comprehensive (loss) income, net of tax
(188,462
)
252,367

(26,754
)
Total comprehensive income
$
2,871,336

$
2,860,315

$
2,271,480
















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

F-5



The TJX Companies, Inc.
CONSOLIDATED BALANCE SHEETS
 
Fiscal Year Ended
Amounts in thousands except share amounts
February 2,
2019
February 3,
2018
ASSETS
 
 
Current assets:
 
 
Cash and cash equivalents
$
3,030,229

$
2,758,477

Short-term investments

506,165

Accounts receivable, net
346,298

327,166

Merchandise inventories
4,579,033

4,187,243

Prepaid expenses and other current assets
513,662

706,676

Total current assets
8,469,222

8,485,727

Net property at cost
5,255,208

5,006,053

Non-current deferred income taxes, net
6,467

6,558

Goodwill
97,552

100,069

Other assets
497,580

459,608

TOTAL ASSETS
$
14,326,029

$
14,058,015

LIABILITIES
 
 
Current liabilities:
 
 
Accounts payable
$