01—Abstract
Summary
Summary of the 10-K filed March 27, 2020. Cited figures are marked; the original filing is the authoritative source.
TJX Companies' fiscal 2020 (year ended February 1, 2020) was a strong year on the surface, with net sales rising 7% to $41.7 billiona, comparable store sales up 4%, and diluted EPS of $2.67, up from $2.43.
Net income reached $3.27 billionb, and the company operated 4,529 stores at year-end. Pre-tax margin held nearly flat at 10.6%, with merchandise and supply chain cost pressures offsetting expense leverage. Segment results were mixed: Marmaxx held its 13.5% margin, HomeGoods and TJX Canada compressed, and TJX International's margin was flat at 5.4% despite 8% comp growth.
Investors should note that the filing was written under the shadow of COVID-19, which forced the closure of all stores as of March 19, 2020. The pandemic dominates the forward-looking picture. TJX suspended its share repurchase program, drew down $1.0 billionc on its revolving credit facilities, withdrew fiscal 2021 guidance, will not declare a dividend for Q1 fiscal 2021, and is reducing capital expenditures.
Management said it cannot reasonably estimate the duration or severity of the disruption, and the auditor included an emphasis-of-matter paragraph on the uncertainty. Structurally, the balance sheet changed sharply because of the adoption of ASC 842 lease accounting: total assets rose to $24.1 billiond from $14.3 billion, and long-term obligations rose to $10.1 billion, mostly from operating lease liabilities of roughly $9.2 billion. Shareholders' equity increased modestly to $5.9 billion.
Cash generation remained solid, with operating cash flow of $4.1 billion and capital expenditures of $1.2 billion, leaving meaningful free cash flow before shareholder returns. In fiscal 2020 TJX repurchased 27.1 million shares for $1.5 billion and paid $1.1 billion in dividends.
It also made a $225 million minority investment in Russian off-price retailer Familia. Cash stood at $3.2 billion at year-end, which provided a liquidity cushion going into the pandemic, although the $1.0 billion revolver draw was a clear sign that management was preparing for a significant earnings and cash flow disruption in fiscal 2021.
02—Key points
Key Highlights
- Net sales rose 7% to $41.7 billion in fiscal 2020, with comparable store sales up 4%, driven primarily by customer traffic across all four segments.
- Diluted EPS increased 10% to $2.67 from $2.43, aided by share repurchases that reduced the diluted share count by about 3%. Pre-tax margin was 10.6%, down 0.1 percentage point.
- Marmaxx (T.J. Maxx and Marshalls) generated $25.7 billion in net sales and $3.47 billion in segment profit at a 13.5% margin, and is the largest contributor to earnings.
- Segment margins were mixed: HomeGoods fell to 10.7% from 11.6%, TJX Canada fell to 12.8% from 14.3%, and TJX International held at 5.4% despite 8% comp growth.
- COVID-19 led TJX to close all stores effective March 19, 2020, suspend buybacks, withdraw fiscal 2021 guidance, skip the Q1 fiscal 2021 dividend, and draw $1.0 billion on its revolving credit facilities.
- Adoption of ASC 842 lease accounting added about $9 billion of right-of-use assets and lease liabilities, lifting total assets to $24.1 billion and long-term obligations to $10.1 billion, though this is largely a presentation change rather than a change in economics.
- Operating cash flow of $4.1 billion covered $1.2 billion of capital expenditures, $1.1 billion of dividends and $1.6 billion of repurchases, with $3.2 billion of year-end cash on hand.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed March 27, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $41.72B$38.97B | +7.0% |
| Cost of Revenue | $29.85B$27.83B | +7.2% |
| Gross Profit | $11.87B$11.14B | +6.5% |
| SG&A Expenses | $7.45B$6.92B | +7.7% |
| Interest Expense | $61.40M$69.10M | −11.1% |
| Net Income | $3.27B$3.06B | +6.9% |
| EPS (Basic) | $2.71$2.47 | +9.7% |
| EPS (Diluted) | $2.67$2.43 | +9.9% |
| Shares Outstanding (Basic) | 1.21B1.24B | −2.7% |
| Shares Outstanding (Diluted) | 1.23B1.26B | −2.6% |
05—Questions
Frequently Asked Questions
How did TJX perform financially in fiscal 2020 before the COVID-19 disruption?
TJX posted solid results. Net sales grew 7% to $41.7 billion, comparable sales rose 4%, net income was $3.27 billion, and diluted EPS was $2.67, up 10% year over year. Results were driven by higher customer traffic, although margin pressure from supply chain costs, wage increases and tariffs limited profit expansion.
How severely is COVID-19 expected to affect TJX's fiscal 2021?
The filing does not quantify the impact. TJX closed all stores on March 19, 2020, withdrew its fiscal 2021 guidance, and said it could not reasonably estimate the duration or severity of the disruption. Management is cutting capital spending, has suspended buybacks, and has drawn $1.0 billion on its credit lines. Investors should expect significant near-term revenue and earnings pressure, with the exact magnitude dependent on how long closures last and how quickly stores reopen.
Is TJX's dividend at risk?
TJX does not intend to declare a dividend for the first quarter of fiscal 2021 and is evaluating its dividend program in the near term. It states it remains committed to paying dividends over the long term once the environment normalizes. Fiscal 2020 dividends totaled $0.92 per share, or $1.1 billion in cash, and the company had $3.2 billion of cash at year-end to support its obligations.
Why did total assets and liabilities jump so much in fiscal 2020?
The jump reflects the adoption of the new lease accounting standard (ASC 842) on February 3, 2019. TJX recorded operating lease right-of-use assets of about $9.06 billion and lease liabilities totaling about $9.2 billion, which lifted total assets to $24.1 billion from $14.3 billion. The change is largely presentational because store leases were already economic obligations. However, it does raise reported leverage metrics, so investors should look at lease-adjusted debt and EBITDAR when comparing periods.
06—Continue