TJX COMPANIES INC /DE/ - Quarter Report: 2014 November (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(mark one)

For the quarterly period ended November 1, 2014

OR

For the transition period from                      to                     

Commission file number 1-4908

The TJX Companies, Inc.

(Exact name of registrant as specified in its charter)

(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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    YES  x    NO  ¨

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

The number of shares of registrant’s common stock outstanding as of November 1, 2014: 688,900,341

PART I - FINANCIAL INFORMATION

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

IN THOUSANDS EXCEPT PER SHARE AMOUNTS

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

2

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

IN THOUSANDS EXCEPT PER SHARE AMOUNTS

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

3

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

IN THOUSANDS

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

4

THE TJX COMPANIES, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

IN THOUSANDS, EXCEPT SHARE DATA

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

5

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

IN THOUSANDS

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

6

THE TJX COMPANIES, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

IN THOUSANDS

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

7

THE TJX COMPANIES, INC.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Note A. Summary of Significant Accounting Policies

Basis of Presentation: The consolidated interim financial statements 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 financial statements for the periods reported, all in conformity with accounting principles generally accepted in the United States of America (“GAAP”) consistently applied. The consolidated interim financial statements 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 February 1, 2014 (“fiscal 2014”).

These interim results are not necessarily indicative of results for the full fiscal year, because 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 February 1, 2014 balance sheet data was derived from audited financial statements, but 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 31, 2015 (“fiscal 2015”) and is a 52-week fiscal year. Fiscal 2014 was also a 52-week fiscal year.

Share-Based Compensation: TJX accounts for share-based compensation by estimating the fair value of each award on the date of grant. TJX uses the Black-Scholes option pricing model for stock options awarded and uses the market price on the grant date for performance-based restricted stock awards. Total share-based compensation expense was $25.7 million for the quarter ended November 1, 2014 and $20.9 million for the quarter ended November 2, 2013. Total share-based compensation expense was $67.7 million for the nine months ended November 1, 2014 and $56.6 million for the nine months ended November 2, 2013. These amounts include stock option expense as well as restricted and deferred stock amortization. There were options to purchase 3.0 million shares of common stock exercised during the quarter ended November 1, 2014 and options to purchase 4.7 million shares of common stock exercised during the nine months ended November 1, 2014. There were options outstanding to purchase 32.3 million shares of common stock as of November 1, 2014.

Cash and Cash Equivalents: TJX generally considers highly liquid investments with a maturity of 90 days or less at the date of purchase to be cash equivalents. Investments are classified as either short- or long-term based on their original maturities. Investments with maturities greater than 90 days but less than one year at the date of purchase are included in short-term investments. These investments are classified as trading securities and are stated at fair value. TJX’s investments are primarily high-grade commercial paper, institutional money market funds and time deposits with major banks.

As of November 1, 2014, TJX’s cash and cash equivalents held outside the U.S. were $1,241.2 million, of which $351.2 million was held in countries where TJX has the intention to reinvest any undistributed earnings indefinitely.

Merchandise Inventories: Inventories are stated at the lower of cost or market. TJX uses the retail method for valuing inventories at all of its divisions, except at Sierra Trading Post (“STP”). TJX utilizes a permanent markdown strategy and lowers the cost value of the inventory that is subject to markdown at the time the retail prices are lowered in the stores. TJX accrues for inventory obligations at the time inventory is shipped. As a result, merchandise inventories on TJX’s balance sheet include an accrual for in-transit inventory of $661.1 million at November 1, 2014, $451.6 million at February 1, 2014 and $622.5 million at November 2, 2013. Comparable amounts were reflected in accounts payable at those dates.

New Accounting Standards: In May 2014, a pronouncement was issued that creates common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards. The new guidance supersedes most

8

preexisting revenue recognition guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard will be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and early adoption is not permitted. The standard shall be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. For TJX, the standard will be effective in the first quarter of fiscal 2018. TJX is currently evaluating the impact of the new pronouncement on its consolidated financial statements.

The cash flow impact on operating activities in the prior year’s statement of cash flows, of approximately $80.0 million relating to settlements with tax authorities, has been adjusted from ‘other’ to ‘increase (decrease) in accrued expenses and other liabilities.’

Note B. Reserves related to Former Operations

Reserves Related to Former Operations: TJX has a reserve for its estimate of future obligations related to former business operations that TJX has either closed or sold. The reserve activity is presented below:

The lease-related obligations included in the reserve reflect TJX’s estimation of lease costs, net of estimated assignee/subtenant income, and the cost of probable claims against TJX for liability, as an original lessee and/or guarantor of the leases of A.J. Wright and other former TJX businesses, after mitigation of the number and cost of these lease obligations. During the first nine months of fiscal 2015 TJX decreased this reserve by $10.3 million to reflect a change in the Company’s estimate of the assignee/subtenant income. The actual net cost of these lease-related obligations may differ from TJX’s estimate. TJX estimates that the majority of the former operations reserve will be paid in the next two years. The actual timing of cash outflows will vary depending on how the remaining lease obligations are actually settled.

TJX may also be contingently liable on up to 11 leases of BJ’s Wholesale Club, a former TJX business, and up to 4 leases of Bob’s Stores, also a former TJX business, in addition to leases included in the reserve. The reserve for former operations does not reflect these leases because TJX believes that the likelihood of future liability to TJX is remote.

9

Note C. Accumulated Other Comprehensive Income (Loss)

Amounts included in accumulated other comprehensive income (loss) are recorded net of the related income tax effects. The following table details the changes in accumulated other comprehensive income (loss) for the related periods:

Note D. Capital Stock and Earnings Per Share

TJX repurchased and retired 7.5 million shares of its common stock at a cost of $448.3 million during the quarter ended November 1, 2014, on a “trade date” basis. During the nine months ended November 1, 2014, TJX repurchased and retired 21.5 million shares of its common stock at a cost of $1.2 billion, on a “trade date” basis. TJX reflects stock repurchases in its financial statements on a “settlement date” or cash basis. TJX had cash expenditures under repurchase programs of $1.2 billion for the nine months ended November 1, 2014 and $998.1 million for the nine months ended November 2, 2013.

In September 2014, TJX completed the $1.5 billion stock repurchase program announced in February 2013 under which TJX purchased 25.5 million shares of common stock.

In February 2014, TJX’s Board of Directors announced a stock repurchase program that authorized the repurchase of up to an additional $2.0 billion of TJX common stock from time to time. Under this program, on a “trade date” basis through November 1, 2014, TJX repurchased 4.6 million shares of common stock at a cost of $278.3 million. At November 1, 2014, $1.7 billion remained available for purchase under this program.

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

TJX has five million shares of authorized but unissued preferred stock, $1 par value.

10

Earnings per share: The following schedule presents the calculation of basic and diluted earnings per share (“EPS”) for net income:

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 related fiscal period’s average price of TJX’s common stock. Such options are excluded because they would have an antidilutive effect. There were 8.9 million options excluded for the thirteen weeks and thirty-nine weeks ended November 1, 2014. There were 4.7 million options excluded for the thirteen weeks and thirty-nine weeks ended November 2, 2013.

11

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. When and to the extent deemed appropriate, TJX seeks to minimize risk from changes in interest rates and foreign currency exchange rates and fuel costs through the use of derivative financial instruments. 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 statements of financial position 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 other comprehensive income or are recognized currently in earnings, along with an offsetting adjustment against the basis of the item being hedged. TJX does not hedge its net investments in foreign subsidiaries.

Diesel Fuel Contracts: TJX hedges portions of its estimated notional diesel 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 for diesel fuel price increases as incurred by the carrier. 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 2014 and the first nine months of fiscal 2015, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2015 and for the fiscal year ending January 30, 2016 (“fiscal 2016”). The hedge agreements outstanding at November 1, 2014 relate to approximately 50% of TJX’s estimated notional diesel requirements for the remainder of fiscal 2015 and approximately 37% of TJX’s estimated notional diesel requirements for the first nine months of fiscal 2016. These diesel fuel hedge agreements will settle throughout the remainder of fiscal 2015 and the first nine months of fiscal 2016. TJX elected not to apply hedge accounting rules 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 TJX Europe (United Kingdom, Ireland, Germany and Poland), TJX Canada (Canada), Marmaxx (U.S.) and HomeGoods (U.S.) in currencies other than their respective functional currencies. These contracts typically have a term of twelve months or less. The contracts outstanding at November 1, 2014 cover a portion of such actual and anticipated merchandise purchases throughout the remainder of fiscal 2015 and a portion of fiscal 2016. TJX elected not to apply hedge accounting rules to these contracts.

TJX also enters into derivative contracts, generally designated as fair value hedges, to hedge intercompany debt and intercompany interest payable. 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.

12

The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at November 1, 2014:

13

The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at November 2, 2013:

14

Presented below is the impact of derivative financial instruments on the statements of income for the periods shown:

15

Note F. Disclosures about Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date or “exit price.” The inputs used to measure fair value are generally classified into the following hierarchy:

The following table sets forth TJX’s financial assets and liabilities that are accounted for at fair value on a recurring basis:

The fair value of TJX’s general corporate debt, including current installments, was estimated by obtaining market quotes given the trading levels of other bonds of the same general issuer type and market perceived credit quality. These inputs are considered to be Level 2. The fair value of long-term debt as of November 1, 2014 was $1.69 billion compared to a carrying value of $1.62 billion. The fair value of long-term debt as of February 1, 2014 was $1.34 billion compared to a carrying value of $1.27 billion. The fair value of long-term debt as of November 2, 2013 was $1.35 billion compared to a carrying value of $1.27 billion. These estimates do not necessarily reflect provisions or restrictions in the various debt agreements that might affect TJX’s ability to settle these obligations.

TJX’s cash equivalents are stated at cost, which approximates fair value, due to the short maturities of these instruments.

Investments designed to meet obligations under the Executive Savings Plan are invested in securities traded in active markets and are recorded at unadjusted quoted prices.

Short-term investments, foreign currency exchange contracts and diesel fuel contracts are valued using broker quotations which include observable market information. TJX’s investments are primarily high-grade commercial paper, institutional money market funds and time deposits with major banks. TJX does not make adjustments to quotes or prices obtained from brokers or pricing services but does assess the credit risk of counterparties and will adjust final valuations when appropriate. Where independent pricing services provide fair values, TJX obtains an understanding of the methods used in pricing. As such, these instruments are classified within Level 2.

16

Note G. Segment Information

TJX operates four main business segments. The Marmaxx segment (T.J. Maxx, Marshalls and tjmaxx.com) and the HomeGoods segment both operate in the United States, the TJX Canada segment operates Winners, HomeSense and Marshalls in Canada, and the TJX Europe segment operates T.K. Maxx, HomeSense and tkmaxx.com in Europe. TJX also operates STP, an off-price Internet retailer in the U.S. that operates a small number of stores. The results of STP are included in the Marmaxx segment.

All of TJX’s stores, with the exception of HomeGoods and HomeSense, sell family apparel and home fashions. HomeGoods and HomeSense offer home fashions.

TJX evaluates the performance of its segments based on “segment profit or loss,” which it defines as pre-tax income or loss before general corporate expense, loss on early extinguishment of debt and interest expense, net. “Segment profit or loss,” as defined by TJX, 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 alternatives to net income or cash flows from operating activities as an indicator of TJX’s performance or as a measure of liquidity.

Presented below is financial information with respect to TJX’s business segments:

17

Note H. Pension Plans and Other Retirement Benefits

Presented below is financial information related to TJX’s funded defined benefit pension plan (qualified pension plan or funded plan) and its unfunded supplemental retirement plan (unfunded plan) for the periods shown.

18

TJX’s policy with respect to the funded plan is to fund, at a minimum, the amount required to maintain a funded status of 80% of the applicable pension liability (the funding target pursuant to the Internal Revenue Code section 430) or such other amount sufficient to avoid restrictions with respect to the funding of TJX’s nonqualified plans under the Internal Revenue Code. TJX does not anticipate any required funding in fiscal 2015 for the funded plan. TJX made a voluntary contribution of $25.0 million to the funded plan in September 2014. TJX anticipates making payments of $3.4 million to provide current benefits coming due under the unfunded plan in fiscal 2015.

The amounts included in amortization of prior service cost and recognized actuarial losses in the table above have been reclassified in their entirety from other comprehensive income to the statements of income, net of related tax effects, for both periods presented.

TJX also has an unfunded postretirement medical plan which was closed to new benefits in fiscal 2006. The liability as of November 1, 2014 is estimated at $1.2 million, all of which is included in non-current liabilities on the balance sheet.

The amendment to the plan benefits in fiscal 2006 resulted in a negative plan amendment which is being amortized to income over the estimated average remaining life of the eligible plan participants. Amortization from other comprehensive income to net income was $864,000 for the quarter ended November 1, 2014 and $863,000 for the quarter ended November 2, 2013. Amortization from other comprehensive income to net income was $2.6 million for both the thirty nine weeks ended November 1, 2014 and the thirty nine weeks ended November 2, 2013.

19

Note I. Long-Term Debt and Credit Lines

The table below presents long-term debt, exclusive of current installments, as of November 1, 2014, February 1, 2014 and November 2, 2013. All amounts are net of unamortized debt discounts.

At November 1, 2014, TJX had outstanding $750 million aggregate principal amount of 2.75% seven-year notes, due June 2021. TJX entered into rate-lock agreements to hedge the underlying treasury rate of all of the 2.75% notes prior to their issuance. The agreements were accounted for as cash flow hedges and the pre-tax realized loss of $7.9 million was recorded as a component of other comprehensive income and is being amortized to interest expense over the term of the notes, resulting in an effective fixed interest rate of 2.91%. On July 8, 2014 TJX used a portion of the proceeds of the 2.75% seven-year notes to redeem the 4.2% notes and recorded pre-tax loss on the early extinguishment of debt of $16.8 million, which includes $16.4 million of redemption premium and $0.4 million to write off unamortized debt expenses and discount.

At November 1, 2014, TJX also had outstanding $500 million aggregate principal amount of 2.50% ten-year notes due May 2023 and $375 million aggregate principal amount of 6.95% ten-year notes due April 2019. TJX entered into rate-lock agreements to hedge the underlying treasury rate of $250 million of the 2.50% notes and all of the 6.95% notes. The costs of these agreements are being amortized to interest expense over the term of the respective notes, resulting in an effective fixed interest rate of 2.57% for the 2.50% notes and 7.00% for the 6.95% notes.

At November 1, 2014, TJX had two $500 million revolving credit facilities, one which matures in June 2017 and one which matures in May 2016. As of November 1, 2014, February 1, 2014 and November 2, 2013 and during the quarters and year then ended, there were no amounts outstanding under these facilities. At November 1, 2014, the agreements require quarterly payments on the unused committed amounts of 8.0 basis points for the agreement maturing in 2017 and 12.5 basis points for the agreement maturing in 2016. These rates are based on the credit ratings of TJX’s long-term debt and would vary with specified changes in the credit ratings. These agreements have no compensating balance requirements and have various covenants. Each of these facilities requires TJX to maintain a ratio of funded debt and four-times consolidated rentals to consolidated earnings before interest, taxes, consolidated rentals, depreciation and amortization (“EBITDAR”) of not more that 2.75 to 1.00 on a rolling four-quarter basis. TJX was in compliance with all covenants related to its credit facilities at the end of all periods presented.

As of November 1, 2014, February 1, 2014 and November 2, 2013, TJX’s foreign subsidiaries had uncommitted credit facilities. TJX Canada had two credit lines, a C$10 million facility for operating expenses and a C$10 million letter of credit facility. As of November 1, 2014, February 1, 2014 and November 2, 2013, and during the quarters

20

and year then ended there were no amounts outstanding on the Canadian credit line for operating expenses. As of November 1, 2014, February 1, 2014 and November 2, 2013, TJX Europe had a credit line of £20 million. As of November 1, 2014, February 1, 2014, and November 2, 2013, and during the quarters and year then ended there were no amounts outstanding on the European credit line.

Note J. Income Taxes

The effective income tax rate was 38.0% for the fiscal 2015 third quarter and 29.2% for last year’s third quarter. The effective income tax rate for the nine months ended November 1, 2014 was 37.8% as compared to 34.8% for last year’s comparable period. The increase in the effective income tax rate for both periods was primarily due to the impact of last year’s third quarter tax benefits of approximately $80 million, primarily due to a reduction in our reserve for uncertain tax positions as a result of settlements with state taxing authorities and the reversal of a valuation allowance against a foreign net operating loss carryfoward. These benefits reduced last year’s third quarter effective tax rate by 8.9 percentage points and the effective income tax rate for the nine-month period ended November 2, 2013 by 3.3 percentage points. In addition, the effective income tax rate for the third quarter of fiscal 2015 increased due to the expiration of legislation allowing for the U.S. Work Opportunity Tax Credit on December 31, 2013, offset by a difference in the jurisdictional mix of income.

TJX had net unrecognized tax benefits of $29.3 million as of November 1, 2014, $26.2 million as of February 1, 2014 and $23.6 million as of November 2, 2013.

TJX is subject to U.S. federal income tax as well as income tax in multiple states, local and foreign jurisdictions. In nearly all jurisdictions, the tax years through fiscal 2006 are no longer subject to examination.

TJX’s accounting policy classifies interest and penalties related to income tax matters as part of income tax expense. The total accrued amount on the balance sheets for interest and penalties was $9.3 million as of November 1, 2014; $8.1 million as of February 1, 2014 and $6.2 million as of November 2, 2013.

Based on the outcome of tax examinations or judicial or administrative proceedings, or as a result of the expiration of statute of limitations in specific jurisdictions, it is reasonably possible that unrecognized tax benefits for certain tax positions taken on previously filed tax returns may change materially from those presented in the financial statements. During the next 12 months, it is reasonably possible that tax examinations of prior years’ tax returns or judicial or administrative proceedings that reflect such positions taken by TJX may be finalized. As a result, the total net amount of unrecognized tax benefits may decrease, which would reduce the provision for taxes on earnings, by a range of $0 million to $11.7 million.

21

The Thirteen Weeks (third quarter) and Thirty-Nine Weeks (nine months) Ended November 1, 2014

Compared to

The Thirteen Weeks (third quarter) and Thirty-Nine Weeks (nine months) Ended November 2, 2013

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 department and specialty store regular prices on comparable merchandise, every day. We operate over 3,300 stores through our four main segments: in the U.S., Marmaxx (which operates T.J. Maxx, Marshalls and tjmaxx.com) and HomeGoods; TJX Canada (which operates Winners, HomeSense and Marshalls in Canada); and TJX Europe (which operates T.K. Maxx, HomeSense and tkmaxx.com in Europe). We also operate Sierra Trading Post (STP), an off-price Internet retailer, which operates a small number of stores in the U.S. and sierratradingpost.com in the U.S. The results of STP have been included with the Marmaxx segment.

Results of Operations

Details of our financial performance for the third quarter and nine months ended November 1, 2014 include the following:

22

The following is a discussion of our consolidated operating results, followed by a discussion of our segment operating results.

Net sales: Consolidated net sales for the third quarter ended November 1, 2014 totaled $7.4 billion, a 6% increase over consolidated net sales of $7.0 billion in the fiscal 2014 third quarter. The increase reflected a 4% increase in new store sales and a 2% increase in same store sales. This increase compares to sales growth of 9% in last year’s third quarter, which reflected a 5% increase in same store sales and a 4% increase in new store sales (including 1% attributable to the inclusion of STP). Foreign currency exchange had a neutral impact on the fiscal 2015 and fiscal 2014 sales growth.

Consolidated net sales for the nine months ended November 1, 2014 totaled $20.8 billion, a 6% increase over $19.6 billion in last year’s comparable period. The increase reflected a 4% increase in new store sales and a 2% increase in same store sales. Foreign currency exchange had a neutral impact on the fiscal 2015 sales growth. This compares to sales growth of 8% in the nine-month period of fiscal 2014, which reflected a 5% increase from new store sales (including 1% attributable to the inclusion of STP) and a 3% increase in same store sales.

As of November 1, 2014, our consolidated store count increased 5% and selling square footage increased 4% as compared to the end of the third quarter last year.

The same store sales increase for the third quarter was driven by an increase in units sold and a slight increase in traffic. Same store sales growth for nine-month period ended November 1, 2014 was driven by an increase in the average ticket and to a lesser extent an increase in units sold. Customer traffic was down slightly for the nine-month period, compared to last year. In the U.S., the Southeast and Southwest regions posted the strongest same stores sales for the third quarter and nine-month period. We believe same store sales were negatively impacted by unseasonable weather late in the third quarter of fiscal 2015 in parts of the U.S. and parts of the third quarter throughout much of Europe. In Europe, same store sales were down for the third quarter but well above the consolidated average for the nine-month period. In Canada, same store sales were slightly above the consolidated average for the third quarter and were at the consolidated average for the nine-month period.

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. Tjmaxx.com and tkmaxx.com are treated as stores of the related divisions that they support. Revenue from our Sierra Trading Post business is not included in same store sales. We classify a store as a new store until it meets the same store sales 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 stores that have increased 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 same store percentage is immaterial. Same store sales of our foreign segments are calculated on a constant currency basis, meaning we translate the current year’s same store 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. We define customer traffic to be the number of transactions in stores included in the same store sales calculation and define average ticket to be the average retail price of the units sold. We define average transaction to be the average dollar value of transactions included in the same store sales calculation.

23

The following table sets forth certain information about our consolidated operating results from continued operations as a percentage of net sales:

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 in relation to other currencies. Two ways in which foreign currency exchange rates affect our reported results are as follows:

Cost of sales, including buying and occupancy costs: Cost of sales, including buying and occupancy costs, as a percentage of net sales improved by 0.1 percentage points to 70.6% for the third quarter of fiscal 2015 as compared to the same period last year and increased by 0.2 percentage points to 71.3% for the nine months ended November 1, 2014 as compared to the same period last year. The improvement in this ratio for the third quarter of fiscal 2015 reflects the positive impact of 0.2 percentage points from the mark-to-market adjustment on inventory-related hedges, partially offset by a slight decrease in merchandise margin. The increase in this ratio for the first nine months of fiscal 2015 was

24

due to a lower consolidated merchandise margin and some expense de-leverage on buying and occupancy costs. The decrease in the merchandise margin in both the quarter and year-to-date periods was primarily due to TJX Canada where the change in foreign currency rates caused an increase in cost of merchandise purchased in U.S. dollars.

Selling, general and administrative expenses: Selling, general and administrative expenses, as a percentage of net sales, were 16.2% in the third quarter of fiscal 2015, a 0.4 percentage point improvement over last year’s ratio and improved by 0.3 percentage points to 16.3% for the nine months ended November 1, 2014 as compared to the same period last year. The improvement in this expense ratio for both periods was due to certain costs incurred last year as well as expense favorability this year. Last year’s third quarter included costs in connection with the move to our new home office facility. In addition, both the quarter and nine-month periods included costs in connection with the migration to our new technology center incurred last year as well as contributions to the TJX Foundation. Collectively the absence of these costs in fiscal 2015 benefitted this expense ratio by 0.3 percentage points in the third quarter and by 0.2 percentage points in the nine-month period. The year-over-year comparison of this expense ratio also reflects some expense favorability, primarily advertising and pension costs in the third quarter of this year and insurance costs and pension cost for the nine-month period of this year.

Loss on early extinguishment of debt: On July 8, 2014, we redeemed our $400 million aggregate principal amount of 4.20% notes and recorded a pre-tax loss on the early extinguishment of debt of $16.8 million.

Interest expense, net: The components of interest expense, net are summarized below:

The increase in net interest expense for the third quarter and first nine months of fiscal 2015 reflected the interest cost from the date of issuance (June 5, 2014) on the $750 million of 2.75% seven-year notes, partially offset by interest savings due to the redemption for the $400 million 4.20% notes. In addition, year-to-date net interest expense reflected nine months of interest expense on the $500 million 2.5% ten-year notes in fiscal 2015, compared to fiscal 2014, which only reflects six months of interest expense. For the nine-month period, the reduction in capitalized interest on ongoing capital projects was largely offset by an increase in interest income driven by higher cash balances.

Income taxes: The effective income tax rate was 38.0% for the fiscal 2015 third quarter and 29.2% for last year’s third quarter. The effective income tax rate for the nine months ended November 1, 2014 was 37.8% as compared to 34.8% for last year’s comparable period. The increase in the effective income tax rates for both periods of fiscal 2015 was primarily due to the impact of tax benefits recognized in the fiscal 2014 third quarter. Last year’s third quarter tax provision included tax benefits of approximately $80 million, which were primarily due to a reduction in our reserve for uncertain tax positions as a result of settlements with state taxing authorities and the reversal of a valuation allowance against a foreign net operating loss carryfoward. These benefits reduced the fiscal 2014 third quarter effective tax rate by 8.9 percentage points and the fiscal 2014 nine-month period effective income tax rate by 3.3 percentage points. In addition, the effective income tax rate for the third quarter of fiscal 2015 increased due to the expiration of legislation allowing for the U.S. Work Opportunity Tax Credit which expired on December 31, 2013, offset by a difference in the jurisdictional mix of income.

Net income and net income per share: Net income for the third quarter of fiscal 2015 was $595.0 million, or $0.85 per diluted share, versus $622.7 million, or $0.86 per diluted share, in last year’s third quarter. Foreign currency had a neutral impact on earnings per share in the third quarter of fiscal 2015 and fiscal 2014. Net income for the nine months ended November 1, 2014 was $1,566.9 million, or $2.22 per diluted share, versus $1,555.1

25

million, or $2.14 per diluted share, in the same period last year. Foreign currency had a $0.01 negative impact for the nine-month period in fiscal 2015 compared to a neutral impact for the nine-month period of fiscal 2014. The after tax cost for the loss on early extinguishment of debt reduced earnings per share for the first nine months of fiscal 2015 by $0.01 per share. The tax benefits referred to above added $0.11 per share to net income for both the third quarter and nine-month periods in fiscal 2014.

Our weighted average diluted shares outstanding affect the comparability of earnings per share. Our stock repurchases benefit our earnings per share. During the third quarter of fiscal 2015, we repurchased 7.5 million shares of our common stock at a cost of $448 million. For the first nine months of fiscal 2015, we repurchased 21.5 million shares of our common stock at a cost of $1.2 billion.

Segment information: We operate four main business segments. Marmaxx (T.J. Maxx, Marshalls and tjmaxx.com) and HomeGoods both operate in the United States. Our TJX Canada segment operates Winners, HomeSense and Marshalls in Canada, and our TJX Europe segment operates T.K. Maxx, HomeSense and tkmaxx.com in Europe. We also operate STP, an off-price Internet retailer with a small number of stores in the U.S. The results of STP have been included with 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 and interest expense. “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:

U.S. Segments:

Marmaxx