TJX Companies, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended January 30, 2021 (52 weeks); comparable fiscal year ended February 1, 2020. The filing also reports fourth-quarter results. TJX operates more than 4,500 off-price stores and e-commerce sites across the U.S., Canada, Europe and Australia.
Financial performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net sales | $32.1 billion | $41.7 billion |
| Net income | $90.5 million | $3.27 billion |
| Diluted EPS | $0.07 | $2.67 |
| Pre-tax margin | 0.3% | 10.6% |
| Cost of sales, buying and occupancy as % of sales | 76.3% | 71.5% |
| SG&A as % of sales | 21.8% | 17.9% |
| Net cash from operating activities | $4.56 billion | $4.07 billion |
| Capital expenditures | $568 million | $1.22 billion |
Fourth quarter: Net sales were $10.94 billion, versus $12.21 billion a year earlier; net income was $325.5 million versus $984.8 million, and diluted EPS was $0.27 versus $0.81.
Cash, debt and liquidity: Cash and cash equivalents were $10.47 billion at year-end, compared with $3.22 billion a year earlier. Total long-term debt, including current maturities, was approximately $6.08 billion; $750 million was due in fiscal 2022. TJX had $1.5 billion of available revolving credit capacity and no outstanding revolver borrowings at year-end. Operating lease liabilities were $9.42 billion. Operating cash flow benefited substantially from working-capital movements, including a $2.1 billion increase in accounts payable and lower inventories.
Material changes and drivers
- COVID-19 store closures reduced sales 23% for the year; stores were closed for approximately 24% of potential store days. Lower traffic also weighed on sales, partly offset by higher average baskets.
- Open-only comparable-store sales fell 4% overall. HomeGoods increased 13%, while Marmaxx fell 7%, TJX Canada fell 8% and TJX International fell 2%. Home fashions outperformed apparel.
- Segment profit fell across the business: Marmaxx to $891 million from $3.47 billion; HomeGoods to $510 million from $681 million; and TJX Canada to $124 million from $516 million. TJX International reported a $504 million segment loss, compared with $307 million profit.
- Fixed occupancy costs and lower sales drove higher expense ratios. Markdown activity and freight costs also pressured margins. Average per-store inventory was down 21% on a reported basis at year-end.
- Operating cash flow rose despite sharply lower earnings, largely because of higher accounts payable, lower inventory, and higher accrued expenses and lease liabilities. Management expects cash flow to be negatively affected as extended vendor payment terms unwind and deferred payments are made.
Outlook, management commentary and risks
- Management said the pandemic’s duration and effects remained uncertain. As of March 30, 2021, approximately 580 stores, primarily in Europe, were temporarily closed. Based on then-current restrictions, management expected stores to be closed for approximately 12% of first-quarter FY2022 store days.
- FY2022 capital spending was expected to be $1.2–$1.4 billion, and the company planned approximately 120 net store openings. HomeGoods e-commerce was planned for late FY2022. No full-year revenue or earnings guidance is provided in the supplied filing text.
- Share repurchases were suspended in March 2020. No dividends were declared in the first nine months of FY2021; a $0.26-per-share dividend was declared in the fourth quarter and paid in March 2021.
- COVID-related government programs reduced FY2021 expenses by approximately $0.5 billion. Inventory markdowns and write-offs, including perishable goods, reduced inventory by approximately $0.4 billion. Store and asset impairment charges were $72 million.
- The company issued debt during the year and recorded a $312 million pre-tax loss on early extinguishment of debt, reducing diluted EPS by $0.19. Brexit-related customs and operating costs were expected to weigh on European profitability in the near term.
- Key risks include renewed closures and changes in consumer demand, execution of the off-price buying and inventory model, supply-chain and freight disruption, competition from online retailers, foreign-exchange exposure, labor costs, cybersecurity, and legal, tax and lease obligations. Management stated that existing cash, internally generated funds and credit facilities were adequate for operating needs over the next fiscal year.
Important facts for investors to verify
- How much of the $4.56 billion operating cash flow reflected temporary working-capital benefits, and how quickly those benefits reverse.
- Current store reopening conditions, customer traffic and comparable sales by division, especially in Europe and Canada.
- The pace of margin recovery as markdowns, freight, occupancy and pandemic-related costs change.
- Debt maturities, interest costs, lease obligations and compliance with revolving-credit covenants.
- Progress and capital requirements for planned store growth and HomeGoods e-commerce, alongside any changes to dividends or share repurchases.