TJX COMPANIES INC /DE/ [TJX] Filings

10-Q 1 tjx-20221029.htm 10-Q tjx-20221029

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(mark one)


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

For the quarterly period ended October 29, 2022


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

For the transition period from to

Commission file number 1-4908

The TJX Companies, Inc.

(Exact name of registrant as specified in its charter)


Delaware						04-2207613
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

770 Cochituate Road Framingham, Massachusetts						01701
(Address of principal executive offices)						(Zip Code)

(508) 390-1000

(Registrant’s telephone number, including area code)

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


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

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

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

The TJX Companies, Inc.

TABLE OF CONTENTS


PART I
ITEM 1. Consolidated Financial Statements			3
Consolidated Statements of Income			3
Consolidated Statements of Comprehensive Income			4
Consolidated Balance Sheets			5
Consolidated Statements of Cash Flows			6
Consolidated Statements of Shareholders' Equity			7
Notes To Consolidated Financial Statements			9
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			21
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk			32
ITEM 4. Controls and Procedures			32

PART II
ITEM 1. Legal Proceedings			32
ITEM 1A. Risk Factors			32
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			33
ITEM 6. Exhibits			33

SIGNATURE			34

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

IN THOUSANDS EXCEPT PER SHARE AMOUNTS


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Net sales	$	12,166,286	$	12,531,890	$	35,415,768	$	34,695,614
Cost of sales, including buying and occupancy costs	8,622,556		8,835,532		25,417,319		24,619,297





Selling, general and administrative expenses	2,184,946		2,296,649		6,454,389		6,585,333
Impairment on equity investment	—		—		217,619		—
Loss on early extinguishment of debt	—		—		—		242,248


Interest (income) expense, net	(427)		20,674		29,365		94,023
Income before income taxes	1,359,211		1,379,035		3,297,076		3,154,713
Provision for income taxes	296,405		356,035		837,457		812,102
Net income	$	1,062,806	$	1,023,000	$	2,459,619	$	2,342,611
Basic earnings per share	$	0.92	$	0.85	$	2.10	$	1.95
Weighted average common shares – basic	1,160,763		1,200,661		1,168,608		1,203,718
Diluted earnings per share	$	0.91	$	0.84	$	2.08	$	1.92
Weighted average common shares – diluted	1,172,267		1,215,690		1,179,892		1,219,238

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

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

IN THOUSANDS


	Thirteen Weeks Ended
	October 29, 2022		October 30, 2021
Net income	$	1,062,806	$	1,023,000
Additions to other comprehensive (loss):
Foreign currency translation adjustments, net of related tax benefit of $8,638 in fiscal 2023 and tax provision of $976 in fiscal 2022	(65,858)		(6,688)
Reclassifications from other comprehensive (loss) to net income:

Amortization of prior service cost and deferred gains/losses, net of related tax provisions of $1,602 in fiscal 2023 and $1,156 in fiscal 2022	4,400		3,173

Other comprehensive (loss), net of tax	(61,458)		(3,515)
Total comprehensive income	$	1,001,348	$	1,019,485


	Thirty-Nine Weeks Ended
	October 29, 2022		October 30, 2021
Net income	$	2,459,619	$	2,342,611
Additions to other comprehensive (loss) income:
Foreign currency translation adjustments, net of related tax benefit of $8,803 in fiscal 2023 and tax provision of $2,734 in fiscal 2022	(154,405)		14,685


Reclassifications from other comprehensive (loss) to net income:

Amortization of prior service cost and deferred gains/losses, net of related tax provisions of $4,353 in fiscal 2023 and $3,802 in fiscal 2022	11,956		10,442
Amortization of loss on cash flow hedge, net of related tax provision of $603 in fiscal 2022	—		(263)
Other comprehensive (loss) income, net of tax	(142,449)		24,864
Total comprehensive income	$	2,317,170	$	2,367,475

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

THE TJX COMPANIES, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

IN THOUSANDS, EXCEPT SHARE DATA


	October 29, 2022		January 29, 2022		October 30, 2021
Assets
Current assets:
Cash and cash equivalents	$	3,364,678	$	6,226,765	$	6,791,596

Accounts receivable, net	570,865		517,623		615,119
Merchandise inventories	8,328,680		5,961,573		6,633,328
Prepaid expenses and other current assets	582,389		438,099		449,377
Federal, state and foreign income taxes recoverable	142,181		114,537		86,690
Total current assets	12,988,793		13,258,597		14,576,110
Net property at cost	5,572,720		5,270,827		5,165,250
Non-current deferred income taxes, net	173,564		184,971		193,583
Operating lease right of use assets	8,985,593		8,853,934		9,143,834
Goodwill	94,501		96,662		98,604
Other assets	613,279		796,467		893,605
Total assets	$	28,428,450	$	28,461,458	$	30,070,986
Liabilities
Current liabilities:
Accounts payable	$	4,993,269	$	4,465,427	$	5,443,007
Accrued expenses and other current liabilities	4,083,434		4,244,997		4,140,660
Current portion of operating lease liabilities	1,574,384		1,576,561		1,606,480
Current portion of long-term debt	499,764		—		—
Federal, state and foreign income taxes payable	82,778		181,155		138,586
Total current liabilities	11,233,629		10,468,140		11,328,733
Other long-term liabilities	906,736		1,015,720		1,013,537
Non-current deferred income taxes, net	74,178		44,175		69,053
Long-term operating lease liabilities	7,691,225		7,575,590		7,861,023
Long-term debt	2,857,999		3,354,841		3,353,866
Commitments and contingencies (See Note K)
Shareholders’ equity
Preferred stock, authorized 5,000,000 shares, par value $1, no shares issued	—		—		—
Common stock, authorized 1,800,000,000 shares, par value $1, issued and outstanding 1,156,263,970; 1,181,188,731 and 1,194,260,626 respectively	1,156,264		1,181,189		1,194,261
Additional paid-in capital	—		—		—
Accumulated other comprehensive loss	(829,599)		(687,150)		(581,207)
Retained earnings	5,338,018		5,508,953		5,831,720
Total shareholders’ equity	5,664,683		6,002,992		6,444,774
Total liabilities and shareholders’ equity	$	28,428,450	$	28,461,458	$	30,070,986

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

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

IN THOUSANDS


	Thirty-Nine Weeks Ended
	October 29, 2022		October 30, 2021
Cash flows from operating activities:
Net income	$	2,459,619	$	2,342,611
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	656,081		647,610
Loss on early extinguishment of debt	—		242,248
Impairment on equity investment	217,619		—
Loss on property disposals and impairment charges	6,664		526

Deferred income tax provision (benefit)	34,655		(44,285)
Share-based compensation	94,564		156,575
Changes in assets and liabilities:
(Increase) in accounts receivable	(68,729)		(155,554)
(Increase) in merchandise inventories	(2,544,990)		(2,287,326)
(Increase) in income taxes recoverable	(27,644)		(50,428)
(Increase) decrease in prepaid expenses and other current assets	(72,128)		20,779
Increase in accounts payable	647,264		611,934
(Decrease) increase in accrued expenses and other liabilities	(237,272)		557,065
(Decrease) increase in income taxes payable	(103,229)		56,426
Increase (decrease) in net operating lease liabilities	2,327		(105,494)
Other, net	(5,549)		(45,754)
Net cash provided by operating activities	1,059,252		1,946,933
Cash flows from investing activities:
Property additions	(1,099,748)		(715,542)


Purchases of investments	(26,183)		(16,979)
Sales and maturities of investments	15,691		16,896

Net cash (used in) investing activities	(1,110,240)		(715,625)
Cash flows from financing activities:
Payments on debt	—		(2,975,518)


Payments for repurchase of common stock	(1,799,802)		(1,093,399)
Cash dividends paid	(997,743)		(941,531)
Proceeds from issuance of common stock	114,501		146,393
Payments of employee tax withholdings for stock awards	(32,451)		(24,478)

Net cash (used in) financing activities	(2,715,495)		(4,888,533)
Effect of exchange rate changes on cash	(95,604)		(20,749)
Net (decrease) in cash and cash equivalents	(2,862,087)		(3,677,974)
Cash and cash equivalents at beginning of year	6,226,765		10,469,570
Cash and cash equivalents at end of period	$	3,364,678	$	6,791,596

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

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

IN THOUSANDS


	Thirteen Weeks Ended
	Common Stock
	Shares	Par Value $1		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance, July 30, 2022	1,161,887	$	1,161,887	$	—	$	(768,141)	$	5,002,903	$	5,396,649
Net income	—	—		—		—		1,062,806		1,062,806

Other comprehensive (loss), net of tax	—	—		—		(61,458)		—		(61,458)
Cash dividends declared on common stock	—	—		—		—		(341,614)		(341,614)
Recognition of share-based compensation	—	—		36,378		—		—		36,378
Issuance of common stock under stock incentive plan, and related tax effect	2,020	2,020		62,502		—		—		64,522
Common stock repurchased and retired	(7,643)	(7,643)		(98,880)		—		(386,077)		(492,600)
Balance, October 29, 2022	1,156,264	$	1,156,264	$	—	$	(829,599)	$	5,338,018	$	5,664,683


	Thirteen Weeks Ended
	Common Stock
	Shares	Par Value $1		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance, July 31, 2021	1,202,981	$	1,202,981	$	117,603	$	(577,692)	$	5,663,492	$	6,406,384
Net income	—	—		—		—		1,023,000		1,023,000

Other comprehensive (loss), net of tax	—	—		—		(3,515)		—		(3,515)
Cash dividends declared on common stock	—	—		—		—		(311,129)		(311,129)
Recognition of share-based compensation	—	—		42,454		—		—		42,454
Issuance of common stock under stock incentive plan, and related tax effect	2,970	2,970		80,910		—		—		83,880
Common stock repurchased and retired	(11,690)	(11,690)		(240,967)		—		(543,643)		(796,300)
Balance, October 30, 2021	1,194,261	$	1,194,261	$	—	$	(581,207)	$	5,831,720	$	6,444,774

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

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

IN THOUSANDS


	Thirty-Nine Weeks Ended
	Common Stock
	Shares	Par Value $1		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance, January 29, 2022	1,181,189	$	1,181,189	$	—	$	(687,150)	$	5,508,953	$	6,002,992
Net income	—	—		—		—		2,459,619		2,459,619

Other comprehensive (loss), net of tax	—	—		—		(142,449)		—		(142,449)
Cash dividends declared on common stock	—	—		—		—		(1,031,816)		(1,031,816)
Recognition of share-based compensation	—	—		94,564		—		—		94,564
Issuance of common stock under stock incentive plan, net of shares used to pay tax withholdings	4,187	4,187		77,987		—		(599)		81,575
Common stock repurchased and retired	(29,112)	(29,112)		(172,551)		—		(1,598,139)		(1,799,802)
Balance, October 29, 2022	1,156,264	$	1,156,264	$	—	$	(829,599)	$	5,338,018	$	5,664,683


	Thirty-Nine Weeks Ended
	Common Stock
	Shares	Par Value $1		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance, January 30, 2021	1,204,698	$	1,204,698	$	260,515	$	(606,071)	$	4,973,542	$	5,832,684
Net income	—	—		—		—		2,342,611		2,342,611

Other comprehensive income, net of tax	—	—		—		24,864		—		24,864
Cash dividends declared on common stock	—	—		—		—		(940,443)		(940,443)
Recognition of share-based compensation	—	—		156,575		—		—		156,575
Issuance of common stock under stock incentive plan, net of shares used to pay tax withholdings	5,764	5,764		116,465		—		(347)		121,882
Common stock repurchased and retired	(16,201)	(16,201)		(533,555)		—		(543,643)		(1,093,399)
Balance, October 30, 2021	1,194,261	$	1,194,261	$	—	$	(581,207)	$	5,831,720	$	6,444,774

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

THE TJX COMPANIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Basis of Presentation

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

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

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

Fiscal Year

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

Use of Estimates

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

Equity Investment

In fiscal 2020, the Company acquired a minority ownership stake in privately held Familia, an off-price retailer of apparel and home fashions domiciled in Luxembourg that operates stores throughout Russia. During the quarter ended April 30, 2022, the Company announced that it had committed to divesting its minority investment and as a result, the Company performed an impairment analysis of this investment. Based on this analysis the Company concluded that there was an other-than-temporary impairment of this investment and recorded an impairment charge of $218 million representing the entirety of the Company’s investment. The Company completed the divestiture of this investment during the quarter ended October 29, 2022, resulting in a $54 million tax benefit. See Note F—Fair Value Measurements for additional information.

Deferred Gift Card Revenue

The following table presents deferred gift card revenue activity:


In thousands	October 29, 2022		October 30, 2021
Balance, beginning of year	$	685,202	$	576,187
Deferred revenue	1,258,784		1,169,729
Effect of exchange rates changes on deferred revenue	(9,466)		1,799
Revenue recognized	(1,317,335)		(1,201,704)
Balance, end of period	$	617,185	$	546,011

TJX recognized $412 million in gift card revenue for the three months ended October 29, 2022 and $400 million in gift card revenue for the three months ended October 30, 2021. Gift cards are combined in one homogeneous pool and are not separately identifiable. As such, the revenue recognized consists of gift cards that were part of the deferred revenue balance at the beginning of the period as well as gift cards that were issued during the period.

Leases

Supplemental cash flow information related to leases is as follows:


	Thirty-Nine Weeks Ended
In thousands	October 29, 2022		October 30, 2021
Operating cash flows paid for operating leases	$	1,453,151	$	1,571,815
Lease liabilities arising from obtaining right of use assets	$	1,696,883	$	1,427,486

Future Adoption of New Accounting Standards

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

Note B. Property at Cost

The following table presents the components of property at cost:


In thousands	October 29, 2022		January 29, 2022		October 30, 2021
Land and buildings	$	1,983,902	$	1,911,569	$	1,813,270
Leasehold costs and improvements	3,743,919		3,652,280		3,655,735
Furniture, fixtures and equipment	7,189,806		6,871,777		6,761,778
Total property at cost	$	12,917,627	$	12,435,626	$	12,230,783
Less: accumulated depreciation and amortization	7,344,907		7,164,799		7,065,533
Net property at cost	$	5,572,720	$	5,270,827	$	5,165,250

Depreciation expense was $217 million for the three months ended October 29, 2022 and $215 million for the three months ended October 30, 2021. Depreciation expense was $651 million for the nine months ended October 29, 2022 and $640 million for the nine months ended October 30, 2021.

Non-cash investing activities in the cash flows consist of accrued capital additions of $190 million and $148 million as of the periods ended October 29, 2022 and October 30, 2021, respectively.

Note C. Accumulated Other Comprehensive (Loss) Income

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


In thousands	Foreign Currency Translation		Deferred Benefit Costs		Cash Flow Hedge on Debt		Accumulated Other Comprehensive (Loss) Income
Balance, January 30, 2021	$	(441,532)	$	(164,802)	$	263	$	(606,071)
Additions to other comprehensive loss:
Foreign currency translation adjustments (net of taxes of $207)	(46,715)		—		—		(46,715)

Recognition of net gains/losses on benefit obligations (net of taxes of $17,659)	—		(48,504)		—		(48,504)

Reclassifications from other comprehensive loss to net income:
Amortization of loss on cash flow hedge (net of taxes of $603)	—		—		(263)		(263)
Amortization of prior service cost and deferred gains/losses (net of taxes of $4,588)	—		14,403		—		14,403
Balance, January 29, 2022	$	(488,247)	$	(198,903)	$	—	$	(687,150)
Additions to other comprehensive loss:
Foreign currency translation adjustments (net of taxes of $8,803)	(154,405)		—		—		(154,405)
Reclassifications from other comprehensive loss to net income:


Amortization of prior service cost and deferred gains/losses (net of taxes of $4,353)	—		11,956		—		11,956
Balance, October 29, 2022	$	(642,652)	$	(186,947)	$	—	$	(829,599)

Note D. Capital Stock and Earnings Per Share

Capital Stock

TJX repurchased and retired 7.7 million shares of its common stock at a cost of approximately $0.5 billion during the quarter ended October 29, 2022, on a “trade date” basis. During the nine months ended October 29, 2022, TJX repurchased and retired 29.1 million shares of its common stock at a cost of approximately $1.8 billion, on a “trade date” basis. TJX reflects stock repurchases in its consolidated financial statements on a “settlement date” or cash basis. TJX had cash expenditures under repurchase programs of $1.8 billion for the nine months ended October 29, 2022 and $1.1 billion for the nine months ended October 30, 2021. These expenditures were funded by cash generated from current and prior period operations.

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

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

Earnings Per Share

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


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
Amounts in thousands, except per share amounts	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Basic earnings per share:
Net income	$	1,062,806	$	1,023,000	$	2,459,619	$	2,342,611
Weighted average common shares outstanding for basic earnings per share calculation	1,160,763		1,200,661		1,168,608		1,203,718
Basic earnings per share	$	0.92	$	0.85	$	2.10	$	1.95
Diluted earnings per share:
Net income	$	1,062,806	$	1,023,000	$	2,459,619	$	2,342,611

Weighted average common shares outstanding for basic earnings per share calculation	1,160,763		1,200,661		1,168,608		1,203,718
Assumed exercise / vesting of stock options and awards	11,504		15,029		11,284		15,520
Weighted average common shares outstanding for diluted earnings per share calculation	1,172,267		1,215,690		1,179,892		1,219,238
Diluted earnings per share	$	0.91	$	0.84	$	2.08	$	1.92
Cash dividends declared per share	$	0.295	$	0.26	$	0.885	$	0.78

The weighted average common shares for the diluted earnings per share calculation excludes the impact of outstanding stock options if the assumed proceeds per share of the option is in excess of the average price of TJX’s common stock for the related fiscal period. Such options are excluded because they would have an antidilutive effect. There were 11.2 million such options excluded for the thirteen weeks and thirty-nine weeks ended October 29, 2022. There were 5.3 million such options excluded for the thirteen weeks and thirty-nine weeks ended October 30, 2021.

Note E. Financial Instruments

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

Diesel Fuel Contracts

TJX hedges portions of its estimated notional diesel fuel requirements based on the diesel fuel expected to be consumed by independent freight carriers transporting TJX’s inventory. Independent freight carriers transporting TJX’s inventory charge TJX a mileage surcharge based on the price of diesel fuel. The hedge agreements are designed to mitigate the volatility of diesel fuel pricing, and the resulting per mile surcharges payable by TJX, by setting a fixed price per gallon for the period being hedged. During fiscal 2022, TJX entered into agreements to hedge a portion of its estimated notional diesel fuel requirements for fiscal 2023, and during the first nine months of fiscal 2023, TJX entered into agreements to hedge a portion of its estimated notional diesel fuel requirements for the first nine months of fiscal 2024. The hedge agreements outstanding at October 29, 2022 relate to approximately 50% of TJX’s estimated notional diesel fuel requirements for the remainder of fiscal 2023 and the first nine months of fiscal 2024. These diesel fuel hedge agreements will settle throughout fiscal 2023 and throughout the first ten months of fiscal 2024. TJX elected not to apply hedge accounting to these contracts.

Foreign Currency Contracts

TJX enters into forward foreign currency exchange contracts to obtain economic hedges on portions of merchandise purchases made and anticipated to be made by the Company’s operations in currencies other than their respective functional currencies. The contracts outstanding at October 29, 2022 cover merchandise purchases the Company is committed to over the next several months. Additionally, TJX’s operations in Europe are subject to foreign currency exposure as a result of their buying function being centralized in the U.K. Merchandise is purchased centrally in the U.K. and then shipped and billed to the retail entities in other countries. This intercompany billing to TJX’s European businesses’ Euro denominated operations creates exposure to the central buying entity for changes in the exchange rate between the Euro and British Pound. A portion of the inflows of Euros to the central buying entity provides a natural hedge for merchandise purchased from third-party vendors that is denominated in Euros. TJX calculates any excess Euro exposure each month and enters into forward contracts of approximately 30 days' duration to mitigate this exposure.

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

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


In thousands		Pay	Receive		Blended Contract Rate	Balance Sheet Location	Current Asset U.S.$		Current (Liability) U.S.$		Net Fair Value in U.S.$ at October 29, 2022
Fair value hedges:
Intercompany balances, primarily debt related:

	€	60,000	£	51,156	0.8526	(Accrued Exp)	$	—	$	(794)	$	(794)
	A$	170,000	U.S.$	119,579	0.7034	Prepaid Exp	10,612		—		10,612
	U.S.$	74,646	£	55,000	0.7368	(Accrued Exp)	—		(11,295)		(11,295)
	£	200,000	U.S.$	246,811	1.2341	Prepaid Exp / (Accrued Exp)	20,765		(4,074)		16,691
	€	200,000	U.S.$	217,236	1.0862	Prepaid Exp / (Accrued Exp)	17,655		(547)		17,108

Economic hedges for which hedge accounting was not elected:
	Diesel fuel contracts	Fixed on 3.1M – 3.9M gal per month		Float on 3.1M – 3.9M gal per month	N/A	Prepaid Exp	18,365		—		18,365
Intercompany billings in TJX International, primarily merchandise related:
	€	222,000	£	194,677	0.8769	Prepaid Exp	4,170		—		4,170
Merchandise purchase commitments:
	C$	710,029	U.S.$	542,000	0.7633	Prepaid Exp / (Accrued Exp)	22,308		(459)		21,849
	C$	16,101	€	12,000	0.7453	Prepaid Exp / (Accrued Exp)	151		(39)		112
	£	388,909	U.S.$	474,500	1.2201	Prepaid Exp / (Accrued Exp)	29,735		(2,977)		26,758
	A$	79,273	U.S.$	54,250	0.6843	Prepaid Exp	3,600		—		3,600
	zł	614,000	£	108,039	0.1760	(Accrued Exp)	—		(2,806)		(2,806)

	U.S.$	87,699	€	84,500	0.9635	Prepaid Exp / (Accrued Exp)	263		(3,953)		(3,690)
Total fair value of derivative financial instruments							$	127,624	$	(26,944)	$	100,680

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


In thousands		Pay	Receive		Blended Contract Rate	Balance Sheet Location	Current Asset U.S.$		Current (Liability) U.S.$		Net Fair Value in U.S.$ at January 29, 2022
Fair value hedges:
Intercompany balances, primarily debt related:
	zł	25,000	£	4,541	0.1816	Prepaid Exp	$	72	$	—	$	72
	€	60,000	£	50,568	0.8428	Prepaid Exp	111