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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 25, 2003
Commission file number 1-4908

The TJX Companies, Inc.

(508) 390-1000

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 is an accelerated filer (as defined by Rule 12b-2 of the Act).

     YES [X] NO [   ]

The number of shares of Registrant’s common stock outstanding as of November 22, 2003: 503,275,923

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PART I FINANCIAL INFORMATION
THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES

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

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

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THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES

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

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THE TJX COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES

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

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NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1.		The results for the first nine 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 consolidated interim financial statements 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. The consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements, including notes thereto, contained in TJX’s Annual Report on Form 10-K for the year ended January 25, 2003.
3.		TJX’s cash payments for interest and income taxes are as follows:

4.		We have a reserve for potential future obligations of discontinued operations that relates primarily to real estate leases for stores for which TJX is an original lessee or guarantor. When such leases were assigned to third parties, TJX generally remained secondarily liable with respect to the lease obligations if the assignee fails to perform, unless there are circumstances that terminate or reduce TJX’s potential liability. Such circumstances include noncompliance with the terms of the guarantee or material changes to the lease terms or leased property. The reserve reflects our estimation of the cost to TJX of claims that have been, or are likely to be, made against TJX based on our potential secondary liability after mitigation of the number and cost of lease obligations as a result of various factors. These factors include assignments to third parties, lease terminations, expirations, subleases, buyouts, modifications and other actions, legal defenses, use by TJX for our own store opening program, and indemnification by BJ’s Wholesale Club, Inc. in the case of the House2Home leases discussed below.
		TJX’s reserve primarily relates to real estate leases of House2Home and Zayre Stores, two discontinued operations that are in liquidation under the Federal Bankruptcy Code. The reserve in prior years also reflected leases of Hit or Miss, another discontinued operation that was liquidated in bankruptcy. Our contingent obligations with respect to Hit or Miss have been substantially resolved. The reserve was established at various times subsequent to TJX’s disposition of these businesses, when the companies then owning them suffered significant financial distress.
		Our contingent obligations with respect to House2Home have also been substantially resolved. House2Home, Inc. (formerly known as Waban, Inc., HomeClub, Inc. and HomeBase, Inc.) was spun off by TJX in 1989, along with BJ’s Wholesale Club. 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. In November 2001, House2Home filed a voluntary petition for relief under Chapter 11 of the Federal Bankruptcy Code and is liquidating its business. As a result of negotiated buyouts, assignments to third parties and lease expirations, the total present

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		value, as of October 25, 2003, of the after-tax cost to TJX of the amounts that have or will come due under remaining House2Home leases during the period from the House2Home bankruptcy filing through the remainder of the term of the leases is less than $5 million, without reflecting any expected mitigating factors other than indemnification by BJ’s Wholesale Club.
		In 1988, TJX completed the sale of its Zayre Stores division to Ames Department Stores, Inc. Following the sale, Ames twice filed voluntary petitions for relief under Chapter 11 of the Federal Bankruptcy Code, most recently in August 2001, and is currently liquidating its business. Based on information received from Ames, we believed that at the time of the more recent bankruptcy filing, there were 60 to 70 leases of former Zayre stores operated by Ames for which we may have contingent obligations. As of October 25, 2003, Ames had rejected 40 store leases for which we may be liable, and some of these landlords have asserted claims against TJX. Through October 25, 2003, as a result of transactions such as buyouts, third-party assignments and leasing for our own use, eleven of these store leases have been resolved. The properties that reverted back to TJX from Ames’ first bankruptcy were largely settled through buyouts and other lease terminations. The ongoing net cost of eight properties from this first bankruptcy is charged to the reserve.
		The reserve for discontinued operations as of October 25, 2003 and October 26, 2002 is summarized below:

		We believe our reserve for discontinued operations is adequate to meet the costs we may incur with respect to House2Home and former Zayre Stores leases and that the future liability to TJX with respect to these leases will not have a material effect on our financial condition, operating results or cash flows. Changes in the underlying assumptions, such as additional expenses for lease settlements or future Zayre Stores lease rejections, could require us to increase this reserve, although we do not expect that any increase would be material to our financial condition, results of operations or cash flows. In addition, we expect to receive a creditor recovery in the House2Home bankruptcy, although the amount has not yet been determined.
		We have contingent obligations on any property leases originally leased or guaranteed by TJX and assigned to third parties without releases by the landlords of our obligations. We believe that most of these obligations will not revert back to TJX and to the extent they do, our obligations can be reduced by mitigating factors. See Notes K and L to our consolidated financial statements in our Form 10-K for the fiscal year ended January 25, 2003.

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5.

TJX’s comprehensive income for the periods ended October 25, 2003 and October 26, 2002 is presented below:

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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 outstanding stock options when the exercise price of the option is in excess of the related period’s average price of TJX’s common stock. There were no such options excluded for the quarter ended October 25, 2003, 22.9 million options excluded for the nine months ended October 25, 2003, and 11.3 million options excluded for the quarter and nine months ended October 26, 2002. The 16.9 million shares attributable to the zero coupon convertible debt were excluded from the diluted earnings per share calculation in all periods presented because criteria for conversion had not been met.
7.		During the third quarter ended October 25, 2003, TJX repurchased and retired 6.2 million shares of its common stock at a cost of $125.0 million. For the nine months ended October 25, 2003, TJX repurchased and retired 21.2 million shares at a cost of $389.6 million. Since the inception of the current $1 billion stock repurchase program in July 2002, through October 25, 2003, TJX has repurchased and retired 37.3 million shares at a cost of $692.9 million.
8.		In December 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure.” This Statement amends SFAS No. 123, “Accounting for Stock-Based Compensation,” and provides alternative methods of transition for entities that voluntarily convert to the fair value based method of accounting for stock-based employee compensation and requires amended disclosure presentation for the fiscal year ended January 25, 2003 and all subsequent interim periods (See Note 10). The FASB has undertaken a comprehensive rulemaking in this area. Until the FASB adopts new rules, we are continuing to account for stock-based compensation in accordance with Accounting Principles Board (“APB”) Opinion No. 25.
		In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This Statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts. This Statement is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The adoption of this standard did not have a material effect on the Company’s financial position or results of operations.
		In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity in its balance sheet. This Statement is effective for financial instruments entered into or

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		modified after May 31, 2003, or the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities. The adoption of this standard did not have a material effect on the Company’s financial position or results of operations.
9.		TJX evaluates the performance of its segments based on “segment profit or loss” which TJX defines 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 financial information on TJX’s business segments (In thousands):

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* Includes the results of HomeSense stores.

10.		TJX has adopted the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” and continues to apply the provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” in accounting for compensation expense under its stock option plans. We grant options at fair market value on the date of the grant; accordingly, no compensation expense is recognized for the stock options issued during fiscal 2004 or 2003. Compensation expense determined in accordance with SFAS No. 123, net of related income tax effect, would have amounted to $14.5 million and $11.2 million for the thirteen weeks ended October 25, 2003 and October 26, 2002, respectively, and $40.9 million and $29.4 million for the thirty-nine weeks ended October 25, 2003 and October 26, 2002, respectively.
		Presented below are the unaudited pro forma net income and related earnings per share showing the effect that stock compensation expense, determined in accordance with SFAS No. 123, would have on reported results (dollars in thousands except per share amounts):

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11.		At October 25, 2003, TJX had interest rate swap agreements outstanding with a notional amount of $100 million. The agreements entitle the Company to receive biannual payments of interest at a fixed rate of 7.45% and pay a floating rate of interest indexed to the six-month LIBOR rate with no exchange of the underlying notional amounts.
		The interest rate swap agreements converted a portion of the Company’s long-term debt from a fixed rate obligation to a floating rate obligation. The Company has designated the interest rate swaps as a fair value hedge of the related long-term debt. The fair value of the swap agreements outstanding at October 25, 2003 was a liability of $3.2 million. The valuation of the derivative instruments results in an offsetting fair value adjustment to the debt hedged; accordingly, long-term debt has been reduced by $3.9 million, which excludes the recorded reduction to accrued interest expense of $700,000.
12.		On October 22, 2003, TJX announced that it signed an agreement to purchase substantially all of the assets of Bob’s Stores, Inc. and its subsidiaries (“Bob’s Stores”), pursuant to Sections 363 and 365 under the U.S. Bankruptcy code. Bob’s Stores is a value-oriented retail chain in the Northeast U.S., offering branded apparel and footwear. Under the agreement, TJX would purchase the assets of Bob’s Stores for $100 million, less various adjustments, and assume certain liabilities including store leases and operating contracts to be designated by TJX. TJX expects to assume most, but not all, of Bob’s Stores’ leases. The purchase price will be reduced for various adjustments, including reductions in inventory from September 27, 2003 to the closing and the customer obligations, employee vacation obligations and post-bankruptcy petition trade payables assumed by TJX. The transaction is subject to a number of conditions, including bankruptcy court approval.
13.		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

	The Thirteen Weeks (Third Quarter) and Thirty-Nine Weeks (Nine Months) Ended October 25, 2003 Versus the Thirteen Weeks and Thirty-Nine Weeks Ended October 26, 2002

Results of Operations

Net sales: Net sales for the third quarter ended October 25, 2003 were $3,387.5 million, up 11% from $3,045.0 million in last year’s third quarter. Consolidated same store sales increased 3% for the third quarter ended October 25, 2003 as compared to a 2% increase in same store sales for last year’s third quarter. For the thirteen weeks ended October 25, 2003, 76% of the increase in net sales was due to new stores, with the balance due to increased same store sales. For the thirteen weeks ended October 25, 2002, the increase in sales attributable to new stores amounted to 82% of the total increase, with the balance attributable to same store sales growth. Same store sales in the third quarter ended October 25, 2003 were favorably impacted by strong growth in our younger businesses and changes in foreign currency exchange rates. More seasonable fall weather patterns this year as compared to last year also aided third quarter sales.

Net sales for the nine months ended October 25, 2003 were $9,222.3 million, a 9% increase over the prior year. Consolidated same store sales increased 1% for the nine-month period ended October 25, 2003 as compared to an increase of 4% for the nine-month period ended October 26, 2002. For the thirty-nine weeks ended October 25, 2003, 89% of the increase in sales was attributable to new stores, with the balance due to same store sales growth. For the thirty-nine weeks ended October 26, 2002, the increase in sales attributable to new stores amounted to 73% of the total increase, with the balance due to same store sales growth. Sales for the nine months ended October 25, 2003 were negatively impacted by unseasonable weather in much of the United States and Canada throughout most of the 2003 first quarter, May and early June. Sales for the nine-months ended October 26, 2002, were aided by favorable spring weather in most regions of the United States and Canada.

We define same store sales as 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 determine which stores are included in the same store 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 classified in the same way as the original store. 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:

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Cost of sales, including buying and occupancy costs: Cost of sales, including buying and occupancy costs, as a percentage of net sales, decreased for the quarter ended October 25, 2003 from the prior year’s third quarter, and increased for the nine-month period ended October 25, 2003. The decrease in this ratio for the quarter reflects a significant improvement in the merchandise margin at Marmaxx which led to a .7% reduction in its cost of sales ratio. Merchandise margins also improved at each of our younger divisions, HomeGoods, T.K. Maxx and A.J. Wright. The increase in this ratio for the nine months ended October 25, 2003 resulted from, higher distribution costs as a result of the opening of our new T.J. Maxx distribution facility in Pittston, Pennsylvania, and modest sales growth. Including the effect of the modest sales growth, store occupancy and depreciation costs as a percentage of net sales increased by .4% for the nine months ended October 25, 2003 over the same period last year and distribution costs for the first nine months as a percentage of net sales increased by .2% over last year.

Selling, general and administrative expenses: Selling, general and administrative expenses, as a percentage of net sales, decreased for the quarter ended October 25, 2003 from the prior year’s third quarter and increased for the nine-month period over the first nine months last year. Included in last year’s selling, general and administrative expenses for both the quarter and nine months ended October 26, 2002, was a pre-tax charge of $16 million for the estimated cost of settling claims relating to four California lawsuits. The absence of this charge this year is the primary reason selling, general and administrative expenses decreased for the quarter ended October 25, 2003. The quarter ended October 25, 2003 also included approximately $9 million in net charges related to foreign currency exchange losses as compared to a net charge of approximately $2 million last year. The increase in this expense ratio for the nine-month period ended October 25, 2003 is primarily due to the impact of modest sales growth. Also contributing to the increase in this expense ratio for the nine-month period were increases in retirement costs, medical benefits, insurance and foreign currency exchange losses. For the nine month period ended October 25, 2003, a net charge of approximately $10 million related to foreign currency exchange losses was included in selling, general and administrative expenses compared to a net charge of approximately $3 million last year. The majority of these losses relate to derivative contracts that provide an economic hedge on certain inventory purchases which will reverse in future periods when allocated to the appropriate division to offset similar gains recognized on the sale of the hedged inventory. For the periods ended October 25, 2003, these foreign currency exchange losses also included a $2.8 million charge related to the foreign currency exchange impact on the deferred tax liability associated with Winners’ unrepatriated earnings.

Interest expense, net: Interest expense, net includes interest income of $1.1 million in the third quarter of the current fiscal year versus $1.7 million of interest income last year. The thirty-nine weeks ended October 25, 2003 includes interest income of $4.3 million versus $7.8 million of interest income last year. The reduction in interest income is due to lower cash balances and lower interest rates during each of the periods ended October 25, 2003. Gross interest expense for the periods ended October 25, 2003 was comparable to that of the respective prior year periods.

Income taxes: Our effective income tax rate was 39.1% and 38.9% for the three and nine months ended October 25, 2003, respectively, and 38.4% and 38.3% for the three and nine months ended October 26, 2002, respectively. The increase in the income tax rate reflects the impact of a pre-tax foreign currency exchange loss on the deferred tax liability associated with Winners unrepatriated earnings. In addition, for the nine months ended October 25, 2003, the effective income tax rate reflects increases in state income taxes.

Net income: Net income for the third quarter of fiscal 2004 was $182.8 million, or $.36 per diluted share, versus $147.4 million, or $.28 per diluted share last year. Net income for the first nine months of

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fiscal 2004 was $419.6 million, or $.81 per diluted share, versus $424.1 million or $.78 per diluted share last year.

Segment information: 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):