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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

/X/ Quarterly Report under Section 13 and 15(d)
Of the Securities Exchange Act of 1934
Or
/  / Transition Report Pursuant to Section 13 and 15(d)
Of the Securities Exchange Act of 1934

For Quarter Ended July 27, 2002
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 o

The number of shares of Registrant’s common stock outstanding as of August 24, 2002: 528,211,936

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

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)
DOLLARS 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 FINANCIAL STATEMENTS

1.		The results for the first six months 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.
2.		The preceding data are unaudited and in the opinion of management reflect all normal recurring adjustments, the use of retail statistics, and accruals and deferrals among periods required to match costs properly with the related revenue or activity, considered necessary by TJX for a fair presentation of its financial statements for the periods reported, all in accordance with generally accepted accounting principles and practices consistently applied.
3.		On April 10, 2002, the Board of Directors approved a two-for-one stock split in the form of a 100% stock dividend. The split shares were distributed on May 8, 2002 to shareholders of record on April 25, 2002 and resulted in the issuance of 269.4 million shares of common stock. The stock split was recorded in the second quarter of fiscal 2003, the period it was distributed; however all historical per share amounts and basic and diluted share amounts utilized in the calculation of earnings per share have been restated to reflect the two-for-one stock split.
4.		TJX’s cash payments for interest and income taxes are as follows:

5.		TJX has a reserve for future obligations relating primarily to real estate leases of House2Home, Inc. and Zayre Stores, both of which were previously owned by TJX, for which TJX or a subsidiary is a lessee or guarantor. Both of these operations have filed for relief under Chapter 11 of the Federal Bankruptcy Code and are in liquidation. The reserves were established at various times subsequent to the disposition when the operation suffered significant financial distress. These reserves reflect the estimated cost to TJX of these potential lease obligations. The reserves reflect the fact that the number and cost of the lease obligations for which TJX may have liability will be reduced by various mitigating factors including assignments to third parties, lease terminations, expirations, subletting, buyouts, modifications and other actions, legal defenses, use by TJX for its own store opening program, and indemnification by BJ’s Wholesale Club, Inc. in the case of House2Home leases.
		House2Home (formerly known as Waban, Inc., HomeClub, Inc. and HomeBase, Inc.) was spun-off by TJX in 1989, along with BJ’s Wholesale Club. In 1997, House2Home spun-off BJ’s Wholesale Club, Inc., and BJ’s Wholesale Club agreed to indemnify TJX for all liabilities relating to the House2Home leases with respect to the period through January 31, 2003, and 50% of such liabilities thereafter. On November 7, 2001, House2Home, Inc. filed for a voluntary petition for relief under Chapter 11 of the Federal Bankruptcy Code and is liquidating its business. At the time of House2Home’s announcement TJX believed there were up to 41 leases for which it could be liable. As of July 27, 2002, this number had been reduced to up to 31 leases as a result of assignments to third parties, negotiated buyouts and lease expirations. As of July 27, 2002, the total present value of the after-tax cost of the remaining 31 leases for which TJX may have liability, was approximately $50 million without reflecting any mitigating factors other than indemnification by BJ’s Wholesale Club.

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		TJX completed the sale of its former Zayre Stores division to Ames Department Stores, Inc. in 1988. In a 1992 bankruptcy reorganization of Ames, many former Zayre leases were disposed of by Ames or TJX through assignments and buyouts. There were also a small number of leases assumed by TJX, which have been mitigated through subletting, the net cost of which is charged to the reserve. On August 20, 2001, Ames again filed a voluntary petition for relief under Chapter 11 of the Federal Bankruptcy Code and on August 14, 2002, announced its intention to liquidate its business. As of July 27, 2002, Ames had rejected five leases for which TJX may be liable, of which TJX settled one by a negotiated buyout. At the time of the 2001 Ames bankruptcy announcement, TJX believed that there were up to approximately 60 to 90 leases of former Zayre stores for which TJX may have contingent obligations. Based on information received from Ames, TJX believes there remain up to approximately 60 to 70 leases for which TJX may have contingent obligations. TJX believes that most of the leases for which it may have contingent obligations have favorable terms and that any future liability to TJX with respect to these leases will be minimal.
		TJX is also contingently liable on up to 25 leases of BJ’s Wholesale Club, Inc. for which BJ’s Wholesale Club, Inc. is primarily liable. TJX believes that the likelihood of any future liability to TJX with respect to these leases is remote due to the current financial condition of BJ’s Wholesale Club.
		The reserve for discontinued operations as of July 27, 2002 and July 28, 2001 is summarized below:

TJX believes that its reserve for discontinued operations is adequate to meet the costs it may incur with respect to the House2Home and Ames leases and that the future liability to TJX with respect to these leases will not have a material adverse effect on its financial condition, operating results or cash flows.

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6.

TJX’s comprehensive income for the periods ended July 27, 2002 and July 28, 2001 is presented below:

7.

The computation of basic and diluted earnings per share is as follows:

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		The weighted average common shares for the diluted earnings per share calculation excludes the incremental effect related to certain outstanding stock options, if the exercise price of such options is in excess of the related quarter’s average price of TJX’s common stock. There were no such options excluded as of July 27, 2002 and July 28, 2001. The 16.9 million shares (on a post-split basis) attributable to the zero coupon convertible debt were excluded from the diluted earnings per share calculation because criteria for conversion had not been met during the quarter.
8.		During the second quarter ended July 27, 2002, TJX completed its $1 billion stock repurchase program and announced that its Board of Directors had approved a new multi-year program for the repurchase of an additional $1 billion of TJX common stock. During the second quarter ended July 27, 2002, TJX repurchased 9.5 million shares of its common stock for a cost of $180.3 million. For the six months ended July 27, 2002, TJX repurchased 14.7 million shares (adjusted for the two-for-one stock split) at a cost of $282.3 million. Since the inception of the second $1 billion stock repurchase program through July 27, 2002, TJX repurchased 4.9 million shares at a cost of $88.1 million.
9.		In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets.” This statement addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. TJX implemented SFAS No. 142 during our fiscal year beginning January 27, 2002. As a result of the new standard, TJX no longer amortizes goodwill or the Marshalls tradename which has an indefinite life.
		The book values, as of July 27, 2002, amounted to $71.4 million for goodwill and $107.7 million for the Marshalls tradename. Goodwill of $70 million relates to the Marmaxx segment with the balance relating to Winners. Historically the goodwill asset amounts and the related amortization were not included in the segment results of these divisions but effective January 27, 2002, the assets are now included in the related segments. The value of the Marshalls tradename and the related amortization has always been included in the Marmaxx segment. No impairments have been recorded on these assets to date.
		The first six months of last year included goodwill amortization of $1.3 million and Marmaxx operating income for the six months ended July 28, 2001, was reduced by $1.6 million for tradename amortization. Thus the impact of applying SFAS No. 142 in the six months ended July 27, 2002, increased pre-tax income by $2.9 million, net income by $2.3 million and increased earnings per share less than a penny per share. On an annual basis the new standard is expected to increase net income by approximately $5 million, or $.01 per share.
		In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This statement addresses financial accounting and reporting for costs associated with exit or disposal activities including store closing activities. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002, with early adoption encouraged. The Company is evaluating the effect of the adoption of SFAS No. 146 and does not expect the adoption of SFAS No. 146 to have a material impact on its financial position or results of operations.

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10.

TJX evaluates the performance of its segments based on “operating income” which is defined as pre-tax income before general corporate expense, goodwill amortization and interest. Presented below is financial information on TJX’s business segments (Dollars in thousands):

         *   Includes the operating results of HomeSense stores which commenced operations in April 2001.

11.

Certain amounts in the financial statements of the prior period have been reclassified for comparative purposes.

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

Twenty-Six Weeks Ended
July 27, 2002
Versus Twenty-Six Weeks Ended July 28, 2001

Historical earnings per share amounts have been restated to reflect a two-for-one stock split, distributed on May 8, 2002. All reference to earnings per share amounts are diluted earnings per share unless otherwise indicated.

Net sales for the second quarter of fiscal 2003 were $2,765.1 million, up 11% from $2,487.6 million in last year’s second quarter. Net sales for the first half of fiscal 2003 were $5,430.8 million, a 14% increase over the prior year. Consolidated same store sales increased 2% for the second quarter ended July 27, 2002 and increased 4% for the six-month period. Consolidated same store sales increased 2% for the second quarter ended July 2001, and increased 1% for the six-month period ended July 2001. For the thirteen weeks ended July 2002, approximately 80% of the increase in net sales was due to new stores, with the balance due to increased comparable store sales. For the twenty-six weeks ended July 2002, the increase in sales attributable to new stores amounted to approximately 70%, with the balance due to same store sales growth.

Net income for the second quarter of fiscal 2003 was $129.6 million, or $.24 per share, versus $111.9 million, or $.20 per share last year. For the twenty-six week period, net income was $276.7 million, or $.51 per share, versus $235.6 million, or $.42 per share.

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

Cost of sales including buying and occupancy costs, as a percentage of net sales, decreased for both periods ended July 2002, due to increases in merchandise margin from the prior year of 1.6% for the second quarter and .6% for the six month period. This margin improvement is primarily due to reduced markdowns reflecting our lower inventory levels and more liquid inventory position during the periods ended July 2002, as compared to the prior periods. This margin improvement was partially offset by an increase in occupancy costs as a percent of net sales of .4% in the second quarter and .2% for the six month period, reflecting new store occupancy costs and the less than planned growth in second quarter sales. On a year to date basis the lower than planned sales growth in the second quarter offset the favorable impact in the first quarter of that period’s strong sales performance.

Selling, general and administrative expenses, as a percentage of net sales, increased from the prior year in both periods. Contributing to the second quarter increase were higher store payroll costs as well as the effect of less than planned growth in sales.

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Impacting the ratio in both periods was an increase in retirement and medical costs as compared to the same periods last year.

Interest expense, net includes interest income of $3.1 million in the second quarter of the current fiscal year versus $4.3 million of interest income in the second quarter last year. The twenty-six weeks ended this year includes interest income of $6.1 million versus $9.7 million of interest income last year. The reduction in interest income is due to lower interest rates. The decrease in gross interest expense, over the comparable periods last year, is due to the amortization of the debt expenses relating to the zero coupon convertible notes, included in the last year’s reporting periods.

Our effective income tax rate was 38.5% and 38.3% for the three and six months ended July 27, 2002, respectively, versus 38.1% for the comparable periods last year. The increase in the effective income tax rate as compared to last year is due to the impact of foreign operations.

We evaluate the performance of our segments based on “operating income” which is defined as pre-tax income before general corporate expense, goodwill amortization and interest. The following is a summary of key operating statistics of our business segments (US dollars in millions):

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