FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

x Quarterly Report under Section 13 and 15(d)
Of the Securities Exchange Act of 1934

For Quarter Ended October 30, 2004

The TJX Companies, Inc.

(508) 390-1000
(Registrant’s telephone number, including area code)

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 x. No o.

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Act).

The number of shares of Registrant’s common stock outstanding as of October 30, 2004: 481,872,560

Table of Contents

PART I FINANCIAL INFORMATION

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

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PART I FINANCIAL INFORMATION
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
(UNAUDITED)
AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS

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

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THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(UNAUDITED)
IN THOUSANDS

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

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THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
IN THOUSANDS

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

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NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION

The Thirteen Weeks (third quarter) and Thirty-Nine Weeks (nine months) Ended October 30, 2004
Versus
The Thirteen Weeks (third quarter) and Thirty-Nine Weeks (nine months) Ended October 25, 2003

Results of Operations

Overview: Highlights of our financial performance for third quarter and nine months ended October 30, 2004, include the following:

The following is a summary of the operating results of TJX at the consolidated level. This discussion is followed by an overview of operating results by segment. All references to earnings per share are diluted earnings per share unless otherwise indicated.

Net sales: Consolidated net sales for the quarter ended October 30, 2004 were $3,817.4 million, up 13% from $3,387.5 million in last year’s third quarter. Consolidated net sales for last year’s third quarter ended October 25, 2003 increased 11% over the comparable prior-year period. The 13% increase in net sales for the third quarter ended October 30, 2004 includes 7% from new stores, 4% from same store sales, and 2% from the acquisition of Bob’s Stores. Bob’s Stores was acquired on December 24, 2003, and was therefore not included in our results last year. The increase in consolidated net sales for last year’s third quarter included 9% from new stores and 2% from same store sales. Same store sales for the quarters ended October 30, 2004 and October 25, 2003 benefited by approximately 1 to 1 ½ percentage points from foreign currency exchange rates.

On a year-to-date basis, consolidated net sales for the nine months ended October 30, 2004 were $10,584.4 million, up 15% from $9,222.3 million in last year’s comparable period. This 15% increase in net sales includes 8% from new stores, 5% from same store sales, and 2% from the acquisition of Bob’s Stores. Last year, for the nine months ended October 25, 2003, consolidated net sales increased 9% over the comparable prior year period. This 9% increase in net sales includes 8% from new stores and 1% from same store sales growth. Same store sales for the nine months ended October 30, 2004 and October 25, 2003 benefited by approximately 1 to 1 ½ percentage points from foreign currency exchange rates.

Overall sales for both the three and nine month periods ended October 30, 2004 reflect strong demand for jewelry and accessories, women’s apparel and footwear, partially offset by weaker demand for men’s apparel and home

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fashions categories. Sales in the year-to-date period benefited from improved weather patterns earlier in the year compared to last year when the weather was unusually harsh across much of the United States. Sales also benefited from execution of our inventory disciplines as well as buying closer to need. The 292 stores with expanded jewelry/accessories departments at T.J. Maxx and the 61 stores with expanded footwear departments at Marshalls are significant factors in the same store sales increase for the periods ended October 30, 2004.

We define same store sales to be sales of those 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 classify a store as a new store until it meets the same store criteria. We determine which stores are included in the same store sales calculation at the beginning of a fiscal year and the classification remains constant throughout that year, unless a store is closed. We calculate same store sales results by comparing the current and prior year weekly periods that are most closely aligned. Relocated stores and expanded stores are generally classified in the same way as the original store. We believe that the impact of relocated or expanded stores on the same store percentage is immaterial. Consolidated and divisional same store sales are calculated in U.S. dollars. We also show divisional same store sales in local currency for our foreign divisions, because this removes the effect of changes in currency exchange rates, and we believe it is a more appropriate measure of their operating performance.

The following table sets forth operating results expressed as a percentage of net sales:

Cost of sales, including buying and occupancy costs: Cost of sales, including buying and occupancy costs, as a percentage of net sales, increased by .2% for the quarter ended October 30, 2004 and was unchanged on a year-to-date basis, as compared to the same periods last year. The increase in this ratio for the quarter reflects a .6% increase in our combined buying and occupancy costs as a percentage of net sales. This increase was partially offset by improvement in merchandise margin of .4%. Year-to-date, improved merchandise margins reduced our consolidated cost of sales ratio by approximately .4%, but were offset by higher buying and occupancy costs as a percent of sales. The increase in buying and occupancy costs as a percentage of net sales in both periods is largely due to the increased share that divisions other than Marmaxx have as a percentage to our consolidated results, and the investments we have made in these divisions. Marmaxx’s cost ratio for buying and occupancy costs is generally less than that of the other divisions, and is essentially flat to last year for the year-to-date period.

Selling, general and administrative expenses: Selling, general and administrative expenses, as a percentage of net sales, increased .1% over the third quarter last year. The increase in this ratio for the third quarter, as compared to last year, reflects an increase of .2% due to the inclusion of Bob’s Stores in this year’s consolidated results. Bob’s Stores operates with a higher advertising cost ratio than our typical off-price divisions. The levering of expenses due to our strong third quarter sales performance as well as disciplined expense management during the period helped to partially offset the increase in this expense ratio attributable to Bob’s Stores. Selling, general and administrative expenses as a percentage of net sales, for the year-to-date period, decreased by .1% from last year’s comparable period. This improvement in the ratio reflects the levering effect of our strong year-to-date sales performance as well as disciplined expense management.

Interest expense, net: Interest expense, net of interest income, for both periods ended October 30, 2004 is comparable to the prior year periods. Both periods reflect reduced interest costs due to the favorable impact of interest rate swap agreements which we entered into in the latter part of last year’s second quarter.

Income taxes: Our effective income tax rate was 38.6% and 38.7% for the three and nine months ended October 30, 2004, as compared to 39.1% and 38.9% for the three and nine months ended October 25, 2003, respectively. Last

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year’s higher rates include the impact of a foreign currency exchange loss on the deferred tax liability associated with Winners unrepatriated earnings.

The American Jobs Creation Act of 2004 (AJCA) enacted on October 22, 2004 will allow companies to repatriate up to $500 million of undistributed foreign earnings in fiscal 2006 at an effective rate of 5.25%. The Company is evaluating the impact of the act on TJX and whether it will utilize this benefit.

Net income: Net income for this year’s third quarter was $200.9 million, or $.41 per diluted share, versus $182.8 million, or $.36 per diluted share, in last year’s third quarter. Net income for the nine months ended October 30, 2004 was $487.2 million, or $.98 per diluted share, compared to $419.6 million, or $.81 per diluted share last year. The increase in earnings per share, on a percentage basis, increased more than the related earnings as a result of the impact of our share repurchase program.

Segment information: The following is a discussion of the operating results of our business segments. We consider each of our operating divisions to be a segment. We evaluate the performance of our segments based on “segment profit or loss” which we define as pre-tax income before general corporate expense and interest. “Segment profit or loss” as defined by TJX may not be comparable to similarly titled measures used by other entities. In addition, this measure 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 (U.S. dollars in millions):

Marmaxx had a 2% same store sales increase for the third quarter ended October 30, 2004, and a 3% increase in same store sales for the nine months ended October 30, 2004, over the comparable periods last year. Same store sales growth in the third quarter was driven by the continuation of strong sales in our jewelry, accessories and footwear categories. Sales of women’s sportswear were also strong in the third quarter. Sales for men’s apparel and home fashions continued to be soft in the third quarter. Same store sales also benefited significantly from the T.J. Maxx stores in which we have expanded the space allocated to jewelry and accessories and the Marshalls stores where we have expanded the footwear category. Segment profit for the third quarter grew 7% to $284.3 million. Segment profit margin for the quarter ended October 30, 2004 was .2% above last year’s third quarter. Marmaxx continued to execute its inventory management strategies leading to a .7% increase in third quarter merchandise margins, primarily due to improved initial markon. This improvement was partially offset by an increase in store payroll and benefit costs of .4% of sales, primarily due to additional costs relating to the expansion of the jewelry/accessories and footwear departments. This increase in the store payroll and benefits cost ratio, as well as an increase in occupancy costs of .1% as a percentage of sales, also reflects the negative impact on the ratio of expenses to sales of a 2% increase in same store sales for the third quarter.

For the nine months ended October 30, 2004 segment profit grew 17% to $758.8 million over the comparable prior year period and segment profit margin grew from 9.3% to 10.1%. The increase in segment profit margin on a year-to-date basis reflects improved merchandise margins and expense leverage for the nine-month period. Merchandise margin improved .6%, primarily due to improved initial markon as a result of effective execution of our merchandising and inventory management strategies. The balance of the growth in the segment profit margin reflects expense leverage as a result of disciplined cost management.

Last year’s segment profit for the nine months ended October 25, 2003 was adversely affected by higher second quarter markdowns as well as increased distribution costs associated with the opening of a new T.J. Maxx distribution center in Pittston, PA.

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As of October 30, 2004, average per store inventories, including inventory on hand at our distribution centers, were up 1% compared to the end of the third quarter last year. This inventory position gives us the ability to take advantage of buying opportunities in the marketplace as we enter the holiday selling season.

Same store sales (in local currency) for Winners and HomeSense increased by 4% during this year’s third quarter, and 7% for the nine months ended October 30, 2004. Net sales grew 23% for the third quarter and 25% for the nine month period. Winners’ segment profit for the quarter was negatively impacted by approximately $1.5 million due to currency exchange rates. Winners’ segment profit margin for the third quarter was reduced by 1% due to the negative currency impact and by a .8% reduction in merchandise margin, primarily due to increased markdowns. For the nine month period, segment profit increased 28% over last year. The growth in segment profit was primarily due to strong same store sales increases and improved merchandise margins, which increased .6% as a percentage of sales, primarily due to improved initial markon, reflecting solid execution of our merchandising strategies. The growth in segment profit margin for the year-to-date period reflects these improved merchandise margins, offset in part by an increase of .3% in distribution costs. Currency exchange rates did not have a significant impact on the year-to-date growth in segment profit.

T.K. Maxx’s same store sales (in local currency) increased 4% for this year’s third quarter and 3% for the nine month period over the same periods in the prior year. Segment profit for this year’s third quarter increased 70% over the prior year’s third quarter and increased 55% for the nine month period ended October 30, 2004, over the same period last year. Currency exchange rates contributed approximately one-quarter of the year-over-year growth in segment profit for the third quarter and contributed approximately one-third of the year-over-year growth for the nine-month period. The increase in segment profit margins for both periods ended October 30, 2004 is due to improved expense ratios (as a percent of sales) across numerous areas of the business. The third quarter also reflects the benefit a 4% same store sales increase had on expense ratios and both periods reflect the strong performance from new stores and disciplined expense management.

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HomeGoods total sales increased 13% and same store sales decreased 1% for the quarter ended October 30, 2004 over last year’s third quarter. On a year-to-date basis, total sales increased 18% and same store sales increased 1% over the comparable period last year. Sales for both the quarter and year-to-date periods were negatively impacted by an unfavorable merchandise mix, leading to higher markdowns. Segment profit declined for each of the periods ended October 30, 2004, primarily due to lower merchandise margins, which decreased by 1.5% in the quarter and 1.6% in the year-to-date period. The lower merchandise margins were primarily driven by the higher markdowns. Segment profit and margins were also impacted by an increase in occupancy costs and distribution center costs as a percentage of net sales due to the negative impact on expense ratios of low same store sales, partially offset by improvements in administrative expenses and preopening costs as a percentage of sales.

A.J. Wright’s same store sales for the quarter ended October 30, 2004 increased 3% on top of a very strong 14% increase in the prior year. Sales were impacted by a weak trend early in the quarter. However, as we moved through the quarter the trend improved, with same store sales down 3% in August but increasing 5% and 7% in September and October, respectively, as the division repositioned its merchandise mix to offer better values to its customer base. On a year-to-date basis, same store sales increased 5%. We believe the A.J. Wright customer is more sensitive to economic factors such as higher gas prices and tax rebates, and that this has had an impact on sales. Segment profit margins for each of the periods ended October 30, 2004, reflect lower merchandise margins, principally due to higher markdown activity, as well as higher occupancy and distribution costs. Distribution costs were impacted by expense increases relating to A.J. Wright’s new distribution facility in Indiana. Segment profit (loss) for the nine months ended October 25, 2003, included a $1.7 million gain from a store closing.

Bob’s Stores

This was the third full quarter for Bob’s Stores as a TJX division. Bob’s Stores now operates 33 stores and recorded third quarter net sales of $80.9 million and a segment loss of $2.4 million. For the nine months ended October 30, 2004, Bob’s had net sales of $206.0 million and a segment loss of $9.4 million.

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General corporate expense

General corporate expense for segment reporting purposes are those costs not specifically related to the operations of our business segments, and is included in selling, general and administrative expenses. General corporate expense decreased 13% to $22.5 million for the third quarter ended October 30, 2004 and increased 6% to $64.1 million for the year-to-date period. The decrease in general corporate expense for the third quarter ended October 30, 2004, reflects the impact of reduced foreign exchange losses as compared to the comparable period last year. General corporate expense includes approximately $2 million in foreign exchange losses for the quarter ended October 30, 2004, and approximately $9 million in losses for the quarter ended October 25, 2003. On a year to date basis lower foreign exchange losses in the period ended October 30, 2004, as compared to the prior year reduced general corporate expense by approximately $6 million. This reduction however is offset by increased audit fees, restricted stock expense and start up costs of the e-commerce businesses. The additional foreign exchange losses in the prior year periods include unrealized losses relating to the fair value of derivative contracts designed as an economic hedge of certain inventory purchases of our foreign divisions. The actual gains or losses on these contracts were allocated to the appropriate division when the contracts were settled. Effective with the period ended January 31, 2004, we began including the unrealized value of these contracts within the individual segments.

Financial Condition

Operating activities for the nine months ended October 30, 2004 provided cash of $694.6 million while operating activities for the nine months ended October 25, 2003 provided cash of $329.1 million. Of this $365.5 million increase in cash flows from operating activities, $101.6 million was due to an increase in net income and depreciation expense. In addition, the net change in inventory and accounts payable from year-end levels had a favorable impact on cash from operations of $112.8 million for the nine months ended October 30, 2004 as compared to the prior year. Effective with the third quarter ended October 30, 2004, we have begun to accrue for inventory obligations at the time inventory is shipped rather than when received and accepted by TJX. See Note 14 to the consolidated interim financial statements. This accrual as of October 30, 2004 increased both inventory and accounts payable by $202 million and thus had no impact on cash flow from operations. Average per-store inventories, including inventory on hand at our distribution centers, as of October 30, 2004 increased by 25% from January 2004 year-end levels which compares to an inventory per store level as of October 25, 2003 that increased 32% from January 2003 year-end levels. This additional increase in last year’s inventory levels resulted in a greater use of cash in that period. The net increase in accrued expenses and other current liabilities for the nine months ended October 30, 2004 reflects the impact of classifying as a current liability $95 million of checks outstanding in excess of the book balance in certain cash accounts. These are zero-balance cash accounts maintained with certain financial institutions which we fund as checks clear, and for which no other right of offset exists.

Investing activities relate primarily to property additions for new stores, store improvements and renovations and expansion of our distribution network.

Financing activities for the period ended October 30, 2004, include cash expenditures of $490.9 million for the repurchase of common stock as compared to $390.0 million last year. During May 2004, we completed our $1 billion stock repurchase program and announced our intention to repurchase up to an additional $1 billion of common stock. Since the inception of the new $1 billion stock repurchase program, through October 30, 2004, we had repurchased 13.3 million shares at a total cost of $299.2 million. During the quarter ended October 30, 2004, we repurchased and retired 7.9 million shares at a cost $172.0 million.

In March 2002, we entered into a $370 million five-year revolving credit facility and in March 2004 we renewed our $330 million, 364-day revolving credit facility with substantially all of the terms and conditions of the original facility unchanged. Combined availability under our revolving credit facilities at October 30, 2004 and October 25, 2003 was $700 million, and we were undrawn on both facilities. We believe our internally generated funds and our revolving credit facilities are more than adequate to meet our operating needs.

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Forward Looking Information

Various statements made in this report are forward-looking and involve a number of risks and uncertainties. All statements that address activities, events or developments that we intend, expect or believe may occur in the future are forward-looking statements. The following are some of the factors that could cause actual results to differ materially from the forward-looking statements:

We do not undertake to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied in such statements will not be realized.

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PART I (Continued)

Item 3 Quantitative and Qualitative Disclosure about Market Risk

Item 4 Controls and Procedures

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PART II. Other Information

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

Item 6(a) Exhibits

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Item 6(b) Reports on Form 8-K

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SIGNATURE

Pursuant to the requirements 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.

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