UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(mark one)

þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                     to                    

The TJX Companies, Inc.

(Exact name of registrant as specified in its charter)

DELAWARE (State or other jurisdiction of incorporation or organization)		04-2207613 (I.R.S. Employer Identification No.)
770 Cochituate Road Framingham, Massachusetts (Address of principal executive offices)		01701 (Zip Code)

(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 þ NO o

     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 þ NO o

     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:

Large Accelerated Filer þ		Accelerated Filer o		Non-Accelerated Filer o		Smaller Reporting Company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ.

The number of shares of registrant’s common stock outstanding as of July 31, 2010: 400,661,233

 

 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

THE TJX COMPANIES, INC.
STATEMENTS OF INCOME
(UNAUDITED)
AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS

		Thirteen Weeks Ended
		July 31,				August 1,
		2010				2009
Net sales		$	5,068,080			$	4,747,528
Cost of sales, including buying and occupancy costs			3,719,210				3,534,302
Selling, general and administrative expenses			853,801				790,876
Provision (credit) for Computer Intrusion related costs			(11,550	)			—
Interest expense, net			10,272				9,249
Income before provision for income taxes			496,347				413,101
Provision for income taxes			191,363				151,540
Net income		$	304,984			$	261,561
Basic earnings per share:
Net income		$	0.76			$	0.62
Weighted average common shares — basic			403,708				423,891
Diluted earnings per share:
Net income		$	0.74			$	0.61
Weighted average common shares — diluted			409,742				430,453
Cash dividends declared per share		$	0.15			$	0.12

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

THE TJX COMPANIES, INC.
STATEMENTS OF INCOME
(UNAUDITED)
AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS

		Twenty-Six Weeks Ended
		July 31,				August 1,
		2010				2009
Net sales		$	10,084,620			$	9,101,752
Cost of sales, including buying and occupancy costs			7,367,884				6,807,648
Selling, general and administrative expenses			1,675,164				1,525,933
Provision (credit) for Computer Intrusion related costs			(11,550	)			—
Interest expense, net			20,474				15,850
Income before provision for income taxes			1,032,648				752,321
Provision for income taxes			396,230				281,546
Net income		$	636,418			$	470,775
Basic earnings per share:
Net income		$	1.57			$	1.13
Weighted average common shares — basic			405,880				418,212
Diluted earnings per share:
Net income		$	1.54			$	1.09
Weighted average common shares — diluted			412,394				431,091
Cash dividends declared per share		$	0.30			$	0.24

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

THE TJX COMPANIES, INC.
BALANCE SHEETS
IN THOUSANDS, EXCEPT SHARE DATA

		July 31,				January 30,				August 1,
		2010				2010				2009
		(unaudited)								(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	1,380,169			$	1,614,607			$	1,426,895
Short-term investments			139,229				130,636				134,627
Accounts receivable, net			171,203				148,126				145,387
Merchandise inventories			2,884,602				2,532,318				3,100,175
Prepaid expenses and other current assets			277,766				255,707				295,766
Current deferred income taxes, net			95,950				122,462				108,852
Total current assets			4,948,919				4,803,856				5,211,702
Property at cost:
Land and buildings			286,056				281,527				277,463
Leasehold costs and improvements			2,017,064				1,930,977				1,865,203
Furniture, fixtures and equipment			3,229,120				3,087,419				2,958,867
Total property at cost			5,532,240				5,299,923				5,101,533
Less accumulated depreciation and amortization			3,193,958				3,026,041				2,872,297
Net property at cost			2,338,282				2,273,882				2,229,236
Property under capital lease, net of accumulated amortization of $20,474; $19,357 and $18,240, respectively			12,098				13,215				14,332
Other assets			207,535				193,230				200,951
Goodwill and tradename, net of amortization			179,875				179,794				179,779
TOTAL ASSETS		$	7,686,709			$	7,463,977			$	7,836,000
LIABILITIES
Current liabilities:
Current installments of long-term debt		$	—			$	—			$	418,943
Obligation under capital lease due within one year			2,529				2,355				2,263
Accounts payable			1,847,547				1,507,892				1,740,443
Accrued expenses and other liabilities			1,117,127				1,248,002				1,067,862
Federal, foreign and state income taxes payable			7,417				136,737				—
Total current liabilities			2,974,620				2,894,986				3,229,511
Other long-term liabilities			719,325				697,099				753,254
Non-current deferred income taxes, net			230,204				192,447				229,991
Obligation under capital lease, less portion due within one year			14,516				15,844				17,045
Long-term debt, exclusive of current installments			774,362				774,325				774,287
Commitments and contingencies			—				—				—
SHAREHOLDERS’ EQUITY
Common stock, authorized 1,200,000,000 shares, par value $1, issued and outstanding 400,661,233; 409,386,126 and 423,853,927, respectively			400,661				409,386				423,854
Additional paid-in capital			—				—				215,568
Accumulated other comprehensive (loss)			(132,733	)			(134,124	)			(115,791	)
Retained earnings			2,705,754				2,614,014				2,308,281
Total shareholders’ equity			2,973,682				2,889,276				2,831,912
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	7,686,709			$	7,463,977			$	7,836,000

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

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

		Twenty-Six Weeks Ended
		July 31,				August 1,
		2010				2009
Cash flows from operating activities:
Net income		$	636,418			$	470,775
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			227,231				209,420
Loss on property disposals			4,989				867
Deferred income tax provision			55,047				108,326
Amortization of share-based compensation expense			28,029				25,859
Excess tax benefits from share-based compensation expense			(17,964	)			(6,213	)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable			(23,072	)			1,573
(Increase) in merchandise inventories			(345,911	)			(408,952	)
(Increase) in prepaid expenses and other current assets			(29,730	)			(23,275	)
Increase in accounts payable			335,463				422,565
(Decrease) in accrued expenses and other liabilities			(211,350	)			(91,869	)
Other			6,819				(4,342	)
Net cash provided by operating activities			665,969				704,734
Cash flows from investing activities:
Property additions			(326,856	)			(163,637	)
Purchase of short-term investments			(72,398	)			(167,184	)
Sales and maturities of short-term investments			67,914				42,756
Proceeds from repayments on note receivable			458				(5,438	)
Net cash (used in) investing activities			(330,882	)			(293,503	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			—				774,263
Principal payments on current portion of long-term debt			—				(2,283	)
Cash payments for debt issuance expenses			(2,960	)			(7,202	)
Payments on capital lease obligation			(1,154	)			(1,065	)
Cash payments for repurchase of common stock			(574,651	)			(236,713	)
Proceeds from issuance of common stock			100,467				68,790
Excess tax benefits from share-based compensation expense			17,964				6,213
Cash dividends paid			(110,125	)			(96,601	)
Net cash (used in) provided by financing activities			(570,459	)			505,402
Effect of exchange rate changes on cash and cash equivalents			934				56,735
Net (decrease) increase in cash and cash equivalents			(234,438	)			973,368
Cash and cash equivalents at beginning of year			1,614,607				453,527
Cash and cash equivalents at end of period		$	1,380,169			$	1,426,895

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

THE TJX COMPANIES, INC.
STATEMENT OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
IN THOUSANDS

														Accumulated
		Common Stock								Additional				Other
						Par Value				Paid-In				Comprehensive				Retained
		Shares				$1				Capital				Income (Loss)				Earnings				Total
Balance, January 30, 2010			409,386			$	409,386			$	—			$	(134,124	)		$	2,614,014			$	2,889,276
Comprehensive income:
Net income			—				—				—				—				636,418				636,418
Foreign currency translation adjustments			—				—				—				(1,684	)			—				(1,684	)
Recognition of prior service cost and deferred gains			—				—				—				3,075				—				3,075
Total comprehensive income																							637,809
Cash dividends declared on common stock			—				—				—				—				(121,345	)			(121,345	)
Amortization of share-based compensation expense			—				—				28,029				—				—				28,029
Issuance of common stock under stock incentive plan and related tax effect			4,577				4,577				109,987				—				—				114,564
Common stock repurchased			(13,302	)			(13,302	)			(138,016	)			—				(423,333)				(574,651	)
Balance, July 31, 2010			400,661			$	400,661			$	—			$	(132,733	)		$	2,705,754			$	2,973,682

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

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, 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 The TJX Companies, Inc. (together with its subsidiaries, “TJX”) for a fair presentation of its financial statements for the periods reported, all in conformity with accounting principles generally accepted in the United States of America (“U.S. 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 January 30, 2010 (“fiscal 2010”).

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.

Share-Based Compensation — Total share-based compensation expense was $14.7 million for the quarter ended July 31, 2010 and $13.5 million for the quarter ended August 1, 2009. Total share-based compensation expense was $28.0 million for the six months ended July 31, 2010 and $25.9 million for the six months ended August 1, 2009. These amounts include stock option expense as well as restricted and deferred stock amortization. There were options to purchase 551,000 shares of common stock exercised during the second quarter ended July 31, 2010 and options to purchase 4.4 million shares of common stock exercised during the six months ended July 31, 2010. There were options to purchase 23.4 million shares of common stock outstanding as of July 31, 2010.

Cash and Cash Equivalents — TJX generally considers highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents. Investments with maturities greater than three months but less than a year at the date of purchase are included in short-term investments. TJX’s investments are primarily high-grade commercial paper, government and corporate bonds, institutional money market funds and time deposits with major banks.

Merchandise Inventories — TJX accrues for inventory purchase obligations at the time of shipment by the vendor. As a result, merchandise inventories on TJX’s balance sheet include an accrual for in-transit inventory of $465.1 million at July 31, 2010, $396.8 million at January 30, 2010 and $423.7 million at August 1, 2009. A liability for a comparable amount is included in accounts payable for the respective periods.

New Accounting Standards — There were no new accounting standards issued during the second quarter ended July 31, 2010 that are expected to have a material impact on TJX’s financial condition, results of operations or cash flows.

Note B. Commitments and Contingencies

Provision (credit) for Computer Intrusion related costs — TJX has a reserve for its estimate of the total probable losses arising from an unauthorized intrusion or intrusions (the intrusion or intrusions, collectively, the “Computer Intrusion”) into portions of its computer system, which was discovered late in fiscal 2007 and in which TJX believes customer data were stolen. TJX reduced the Provision for Computer Intrusion related costs by $11.6 million during the second quarter ended July 31, 2010 primarily as a result of insurance proceeds and adjustments to our remaining reserve. The reserve balance was $19.6 million at July 31, 2010. As an estimate, the reserve is subject to uncertainty, actual costs may vary from the current estimate and such variations may be material. TJX may, in the future, decrease or increase the amount of the reserve to adjust for matters such as developments in litigation, claims and related expenses, insurance proceeds and changes in the estimate.

Reserve for Discontinued Operations — TJX has a reserve for future obligations of discontinued operations that relates primarily to real estate leases associated with former TJX businesses. The reserve balance was $32.2 million at July 31, 2010.

TJX may also be contingently liable on up to 14 leases of BJ’s Wholesale Club, a former TJX business, and up to seven leases of Bob’s Stores, also a former TJX business, in addition to those included in the reserve. The reserve for discontinued operations does not reflect these leases because TJX does not believe that the likelihood of future liability to TJX is probable.

Note C. Other Comprehensive Income

TJX’s comprehensive income information, net of related tax effects, is presented below:

		Thirteen Weeks Ended
		July 31,				August 1,
In thousands		2010				2009
Net income		$	304,984			$	261,561
Other comprehensive income (loss):
Foreign currency translation adjustments			3,029				71,823
Recognition of unfunded post retirement obligations			—				—
Recognition of prior service cost and deferred gains			1,536				1,220
Total comprehensive income		$	309,549			$	334,604

		Twenty-Six Weeks Ended
		July 31,				August 1,
In thousands		2010				2009
Net income		$	636,418			$	470,775
Other comprehensive income (loss):
Foreign currency translation adjustments			(1,684	)			100,300
Recognition of unfunded post retirement obligations			—				(1,212	)
Recognition of prior service cost and deferred gains			3,075				2,902
Total comprehensive income		$	637,809			$	572,765

Note D. Capital Stock and Earnings Per Share

Capital Stock — During the quarter ended July 31, 2010, TJX repurchased and retired 8.2 million shares of its common stock at a cost of $355.5 million. For the six months ended July 31, 2010, TJX repurchased 13.7 million shares of its common stock at a cost of $589.6 million. TJX reflects stock repurchases in its financial statements on a “settlement” basis. TJX’s expenditures for its repurchase programs were $574.7 million for the six months ended July 31, 2010 and $236.7 million for the six months ended August 1, 2009. These expenditures were funded primarily by cash generated from operations together, in 2009, with the proceeds of a debt issuance. As of July 31, 2010, on a “trade date” basis, TJX had repurchased 19.2 million shares of common stock at a cost of $794.6 million under a $1 billion stock repurchase program authorized in September 2009. All shares repurchased under TJX’s stock repurchase programs have been retired.

In February 2010, TJX’s Board of Directors approved another stock repurchase program that authorizes the repurchase of up to an additional $1 billion of TJX common stock from time to time.

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

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

		Thirteen Weeks Ended
		July 31,				August 1,
In thousands, except per share data		2010				2009
Basic earnings per share
Net income		$	304,984			$	261,561
Weighted average common shares outstanding for basic EPS			403,708				423,891
Basic earnings per share – continuing operations		$	0.76			$	0.62
Diluted earnings per share
Net income		$	304,984			$	261,561
Add back: Interest expense on zero coupon convertible subordinated notes, net of income taxes			—				1
Net income used for diluted EPS calculation		$	304,984			$	261,562
Shares for basic and diluted earnings per share calculations:
Weighted average common shares outstanding for basic EPS			403,708				423,891
Assumed conversion/exercise/vesting of:
Stock options and awards			6,034				6,026
Zero coupon convertible subordinated notes			—				536
Weighted average common shares outstanding for diluted EPS			409,742				430,453
Diluted earnings per share		$	0.74			$	0.61

		Twenty-Six Weeks Ended
		July 31,				August 1,
In thousands, except per share data		2010				2009
Basic earnings per share
Net income		$	636,418			$	470,775
Weighted average common shares outstanding for basic EPS			405,880				418,212
Basic earnings per share – continuing operations		$	1.57			$	1.13
Diluted earnings per share
Net income		$	636,418			$	470,775
Add back: Interest expense on zero coupon convertible subordinated notes, net of income taxes			—				1,073
Net income used for diluted EPS calculation		$	636,418			$	471,848
Shares for basic and diluted earnings per share calculations:
Weighted average common shares outstanding for basic EPS			405,880				418,212
Assumed conversion/exercise/vesting of:
Stock options and awards			6,514				5,077
Zero coupon convertible subordinated notes			—				7,802
Weighted average common shares outstanding for diluted EPS			412,394				431,091
Diluted earnings per share		$	1.54			$	1.09

In April 2009, TJX called for the redemption of its zero coupon convertible subordinated notes. There were 462,057 notes with a carrying value of $365.1 million that were converted into 15.1 million shares of TJX common stock at a conversion rate of 32.667 shares per note, most during the second quarter of fiscal 2010. TJX paid $2.3 million to redeem the remaining 2,886 notes outstanding that were not converted.

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. No such options were excluded for the thirteen weeks or for the twenty-six weeks ended July 31, 2010. There were 4.9 million options excluded for the thirteen weeks ended August 1, 2009 and 9.8 million options excluded for the twenty-six weeks ended August 1, 2009.

Note E. Financial Instruments

TJX enters into financial instruments to manage its cost of borrowing and to manage its exposure to changes in fuel costs and foreign currency exchange rates. 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.

Interest Rate Contracts — During fiscal 2004, TJX entered into interest rate swaps with respect to $100 million of the $200 million ten-year notes outstanding at that time. Under those interest rate swaps, which settled in December 2009, TJX paid a specific variable interest rate indexed to the six-month LIBOR rate and received a fixed rate applicable to the underlying debt, effectively converting the interest on a portion of the notes from fixed to a floating rate of interest. The interest income/expense on those swaps was accrued as earned and recorded as an adjustment to the interest expense accrued on the fixed-rate debt. The interest rate swaps were designated as fair value hedges on the underlying debt.

Diesel Fuel Contracts — During the fourth quarter of fiscal 2010 and second quarter of fiscal 2011, TJX entered into agreements to hedge a portion of its notional diesel requirements for fiscal 2011 based on the diesel fuel consumed by independent freight carriers transporting the Company’s inventory. These economic hedges at July 31, 2010 relate to 50% of its notional diesel requirements in the third and fourth quarters of fiscal 2011. These diesel fuel hedge agreements will settle during the last two quarters of fiscal 2011 and expire in February 2011. During fiscal 2009, TJX entered into agreements to hedge approximately 30% of its notional diesel fuel requirements for fiscal 2010, which settled throughout the year and terminated in February 2010. Independent freight carriers transporting the Company’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 year. 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 in currencies other than the functional currency of TJX Europe (operating in the United Kingdom, Ireland, Germany and Poland), TJX Canada (Canada) and Marmaxx (U.S.). These contracts are typically twelve months or less in duration. The contracts outstanding at July 31, 2010 covered certain inventory purchases for the two remaining quarters of fiscal 2011. 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. There were no such contracts outstanding as of July 31, 2010.

Following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at July 31, 2010:

																										Net Fair
																										Value in
										Blended								Current				Current				US$ at
										Contract				Balance Sheet				Asset				(Liability)				July 31,
In thousands		Pay				Receive				Rate				Location				US$				US$				2010
Hedge accounting not elected:
Diesel contracts		Fixed on 260K — 1.3M gal per month				Float on 260K — 1.3M gal per month					N/A			Prepaid Exp				$	164			$	—			$	164
Merchandise purchase commitments
		C$	225,158			US$	220,416				0.9789			Prepaid Exp/ (Accrued Exp)					2,765				(822	)			1,943
		C$	3,228			€	2,400				0.7435			Prepaid Exp/(Accrued Exp)					41				(44	)			(3	)
		£	67,332			US$	102,872				1.5278			(Accrued Exp)					—				(2,742	)			(2,742	)
		£	56,492			€	64,539				1.1424			Prepaid Exp/(Accrued Exp)					48				(4,514	)			(4,466	)
		€	24,456			£	20,326				0.8311			Prepaid Exp/(Accrued Exp)					—				(30	)			(30	)
		€	3,782			US$	4,935				1.3049			(Accrued Exp)					1				(2	)			(1	)
		US$	1,006			€	783				1.2848			Prepaid Exp/(Accrued Exp)					43				(28	)			15
Total fair value of all financial instruments																		$	3,062			$	(8,182	)		$	(5,120	)

Following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at August 1, 2009:

																								Net Fair
																								Value in
										Blended						Current				Current				US$ at
										Contract				Balance Sheet		Asset				(Liability)				August
In thousands		Pay				Receive				Rate				Location		US$				US$				1, 2009
Fair value hedges:
Interest rate swap fixed to floating on notional of $50,000
		LIBOR + 4.17%					7.45	%			N/A			Prepaid Exp		$	524			$	—			$	524
Interest rate swap fixed to floating on notional of $50,000
		LIBOR + 3.42%					7.45	%			N/A			Prepaid Expense			712				—				712
Intercompany balance hedges primarily short-term debt and related interest
		C$	68,410			US$	63,224				0.9242			(Accrued Exp)							(317	)			(317	)
Hedge accounting not elected:
Diesel contracts		Fixed on 750K gal per month				Float on 750K gal per month					N/A			(Accrued Exp)			—				(1,217	)			(1,217	)
Merchandise purchase commitments
		C$	227,502			US$	196,125				0.8621			(Accrued Exp)			—				(15,132	)			(15,132	)
		C$	2,283			€	1,450				0.6351			(Accrued Exp)			—				(53	)			(53	)
		£	24,316			US$	39,100				1.6080			(Accrued Exp)			—				(1,539	)			(1,539	)
		£	27,485			€	32,000				1.1643			Prepaid Expense/(Accrued Exp)			11				(355	)			(344	)
		US$	334			€	242				1.3805			Prepaid Exp			11				—				11
Total fair value of all financial instruments																$	1,258			$	(18,613	)		$	(17,355	)

The impact of derivative financial instruments on the statements of income during the second quarter of fiscal 2011 and fiscal 2010 are as follows:

		Location of Gain (Loss)
		Recognized in Income by		Amount of Gain (Loss) Recognized
		Derivative		in Income by Derivative
In thousands				July 31, 2010				August 1, 2009
Fair value hedges:
Interest rate swap fixed to floating on notional of $50,000		Interest expense, net		$	—			$	200
Interest rate swap fixed to floating on notional of $50,000		Interest expense, net			—				245
Intercompany balances, primarily short-term debt and related interest		Selling, general & administrative expenses			—				(4,923	)
Hedge accounting not elected:
Diesel contracts		Cost of sales, including buying and occupancy costs			(776	)			3,034
Merchandise purchase commitments		Cost of sales, including buying and occupancy costs			(3,070	)			(5,583	)
Gain (loss) recognized in income				$	(3,846	)		$	(7,027	)

The impact of derivative financial instruments on the statements of income during the first six months of fiscal 2011 and fiscal 2010 are as follows:

		Location of Gain (Loss)
		Recognized in Income by		Amount of Gain (Loss) Recognized
		Derivative		in Income by Derivative
In thousands				July 31, 2010				August 1, 2009
Fair value hedges:
Interest rate swap fixed to floating on notional of $50,000		Interest expense, net		$	—			$	541
Interest rate swap fixed to floating on notional of $50,000		Interest expense, net			—				730
Intercompany balances, primarily short-term debt and related interest		Selling, general & administrative expenses			—				(7,023	)
Hedge accounting not elected:
Diesel contracts		Cost of sales, including buying and occupancy costs			606				3,714
Merchandise purchase commitments		Cost of sales, including buying and occupancy costs			(9,896	)			(21,175	)
Gain (loss) recognized in income				$	(9,290	)		$	(23,213	)

The counterparties to the forward exchange contracts and swap agreements are major international financial institutions and the contracts contain rights of offset which are designed to minimize TJX’s exposure to credit loss in the event of nonperformance by one of the counterparties. TJX is not required by counterparties to maintain, and TJX does not require that counterparties maintain, collateral for these contracts. TJX monitors its position and the

credit ratings of the counterparties on an ongoing basis and does not anticipate losses resulting from potential nonperformance of these institutions.

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 (exit price). U.S. GAAP classifies the inputs used to measure fair value into the following hierarchy:

		Level 1:		Unadjusted quoted prices in active markets for identical assets or liabilities.
		Level 2:		Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
		Level 3:		Unobservable inputs for the asset or liability.

TJX endeavors to utilize the best available information in measuring fair value and classifies financial assets and liabilities in their entirety based on the lowest level of input that is significant to the fair value measurement. TJX has determined that its financial assets and liabilities are classified within level 1 or level 2 in the fair value hierarchy. The following table sets forth TJX’s financial assets and liabilities that are accounted for at fair value on a recurring basis:

		July 31,				January 30,				August 1,
In thousands		2010				2010				2009
Level 1
Assets:
Executive savings plan		$	62,569			$	55,404			$	50,031
Level 2
Assets:
Short-term investments		$	139,229			$	130,636			$	134,627
Foreign currency exchange contracts			2,898				5,642				22
Diesel fuel contracts			164				—				—
Interest rate swaps			—				—				1,236
Liabilities:
Foreign currency exchange contracts		$	8,182			$	1,029			$	17,396
Diesel fuel contracts			—				442				1,217

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. The fair value of the zero coupon convertible subordinated notes was estimated by obtaining market quotes. The fair value of long-term debt at July 31, 2010 was $911.4 million versus a carrying value of $774.4 million. The fair value of the current installments of long-term debt at August 1, 2009 was $422.7 million versus a carrying value of $418.9 million. The fair value of long-term debt as of August 1, 2009 was $805.8 million versus a carrying value of $774.3 million. 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.

As a result of its international operating and financing activities, TJX is exposed to market risks from changes in interest and foreign currency exchange rates, which may adversely affect its operating results and financial position. When deemed appropriate, TJX seeks to minimize risk from interest and foreign currency exchange rate fluctuations through the use of derivative financial instruments. Derivative financial instruments are not used for trading or other speculative purposes. TJX does not use leveraged derivative financial instruments. The forward foreign currency exchange contracts and interest rate swaps are valued using broker quotations which include observable market information. 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 derivative instruments are classified within level 2.

Note G. Segment Information

TJX operates five business segments, three in the United States and one each in Canada and Europe. Each of TJX’s segments has its own administrative, buying and merchandising organization and distribution network. Of the U.S. based store chains, T.J. Maxx and Marshalls, referred to as Marmaxx, are managed together and reported as a single segment and A.J. Wright and HomeGoods each is reported as a separate segment. Outside the U.S., store chains in Canada (Winners and HomeSense) are under common management and reported as the TJX Canada segment, and store chains in Europe (T.K. Maxx and HomeSense) are also under common management and reported as the TJX Europe segment.

TJX evaluates the performance of its segments based on “segment profit or loss,” which it defines as pre-tax income before general corporate expense, provision (credit) for Computer Intrusion related costs 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:

		Thirteen Weeks Ended
		July 31,				August 1,
In thousands		2010				2009
Net sales:
U.S. segments:
Marmaxx		$	3,309,549			$	3,145,504
HomeGoods			455,685				412,837
A.J. Wright			193,219				181,927
International segments:
TJX Canada			581,447				495,671
TJX Europe			528,180				511,589
		$	5,068,080			$	4,747,528
Segment profit:
U.S. segments:
Marmaxx		$	416,255			$	358,351
HomeGoods			35,176				24,532
A.J. Wright			2,012				1,371
International segments:
TJX Canada			81,722				47,971
TJX Europe			2,122				24,720
			537,287				456,945
General corporate expenses			42,218				34,595
Provision (credit) for Computer Intrusion related costs			(11,550	)			—
Interest expense, net			10,272				9,249
Income before provision for income taxes		$	496,347			$	413,101

     Financial information on TJX’s business segments (continued):

		Twenty-Six Weeks Ended
		July 31,				August 1,
In thousands		2010				2009
Net sales:
U.S. segments:
Marmaxx		$	6,587,413			$	6,083,813
HomeGoods			912,744				804,732
A.J. Wright			404,598				361,321
International segments:
TJX Canada			1,136,445				919,763
TJX Europe			1,043,420				932,123
		$	10,084,620			$	9,101,752
Segment profit:
U.S. segments:
Marmaxx		$	884,735			$	689,021
HomeGoods			75,769				40,105
A.J. Wright			11,798				5,784
International segments:
TJX Canada			136,081				67,698
TJX Europe			7,964				34,013
			1,116,347				836,621
General corporate expenses			74,775				68,450
Provision (credit) for Computer Intrusion related costs			(11,550	)			—
Interest expense, net			20,474				15,850
Income before provision for income taxes		$	1,032,648			$	752,321

Note H. Pension Plans and Other Retirement Obligations

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

		Pension								Pension
		(Funded Plan)								(Unfunded Plan)
		Thirteen Weeks Ended								Thirteen Weeks Ended
		July 31,				August 1,				July 31,				August 1,
In thousands		2010				2009				2010				2009
Service cost		$	7,750			$	8,507			$	206			$	309
Interest cost			9,019				7,734				728				720
Expected return on plan assets			(9,991	)			(7,511	)			—				—
Amortization of prior service cost			—				4				20				31
Recognized actuarial losses			2,722				3,730				694				396
Settlement cost			—				—				—				840
Total expense		$	9,500			$	12,464			$	1,648			$	2,296

		Pension								Pension
		(Funded Plan)								(Unfunded Plan)
		Twenty-Six Weeks Ended								Twenty-Six Weeks Ended
		July 31,				August 1,				July 31,				August 1,
In thousands		2010				2009				2010				2009
Service cost		$	15,499			$	16,132			$	411			$	547
Interest cost			18,038				15,783				1,457				1,460
Expected return on plan assets			(19,981	)			(14,011	)			—				—
Amortization of prior service cost			—				7				41				62
Recognized actuarial losses			5,444				6,803				1,388				570
Settlement cost			—				—				—				1,158
Total expense		$	19,000			$	24,714			$	3,297			$	3,797

In fiscal 2009 the Pension Protection Act (PPA) became effective in the U.S., and TJX’s policy is to fund, at a minimum, the amount required to maintain a funded status of 75% to 80% of the pension liability as defined by the PPA. As a result of funding in fiscal 2010, TJX does not anticipate any required funding in fiscal 2011 for the defined benefit retirement plan. TJX anticipates $3.8 million in cash expenditures to pay benefits under the unfunded plan in fiscal 2011.

Note I. Long-Term Debt and Credit Lines

On April 7, 2009, TJX issued $375 million aggregate principal amount of 6.95% ten-year notes and used the proceeds from the 6.95% notes offering to repurchase additional common stock under its stock repurchase program in fiscal 2010. Also in April 2009, prior to the issuance of the 6.95% notes, TJX entered into a rate-lock agreement to hedge the underlying treasury rate of those notes. The cost of this agreement is being amortized to interest expense over the term of the 6.95% notes and results in an effective fixed rate of 7.00% on those notes.

On July 23, 2009, TJX issued $400 million aggregate principal amount of 4.20% six-year notes. TJX used a portion of the proceeds from the sale of the notes to refinance its C$235 million term credit facility on August 10, 2009, prior to its scheduled maturity, and used the remainder, together with funds from operations, to repay its $200 million 7.45% notes due December 15, 2009, at maturity. Also in July 2009, prior to the issuance of the 4.20% notes, TJX entered into a rate-lock agreement to hedge the underlying treasury rate on $250 million of those notes.

The cost of this agreement is being amortized to interest expense over the term of the 4.20% notes and results in an effective fixed rate of 4.19% on the notes.

In February 2001, TJX issued $517.5 million zero coupon convertible subordinated notes due in February 2021 and raised gross proceeds of $347.6 million. The issue price of the notes represented a yield to maturity of 2% per year. During fiscal 2010, TJX called for the redemption of these notes at the original issue price plus accrued original issue discount, and 462,057 notes with a carrying value of $365.1 million were converted into 15.1 million shares of TJX common stock at a rate of 32.667 shares per note. TJX paid $2.3 million to redeem the remaining 2,886 notes outstanding that were not converted. Prior to fiscal 2010, a total of 52,557 notes were either converted into common shares of TJX or put back to TJX.

In May 2010, TJX entered into a $500 million three-year revolving credit facility with similar terms and provisions as the $500 million facility it replaced, updated for market pricing. As of July 31, 2010, TJX also had a $500 million revolving credit facility maturing May 2011. The three-year agreement requires the payment of 17.5 basis points annually on the committed amounts. The agreement maturing in May 2011 requires the payment of six basis points annually on the committed amount. Both of these agreements have no compensating balance requirements, have various covenants including a requirement of a specified ratio of debt to earnings, and serve as back up to TJX’s commercial paper program. There were no outstanding amounts under these credit facilities as of July 31, 2010 or August 1, 2009.

As of July 31, 2010 and August 1, 2009, 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 July 31, 2010 and August 1, 2009, there were no amounts outstanding on the Canadian credit line for operating expenses. As of July 31, 2010, TJX Europe had a credit line of £20 million. There were no outstanding borrowings on this U.K. credit line as of July 31, 2010 or August 1, 2009.

Note J. Income Taxes

TJX had unrecognized tax benefits of $127.4 million as of July 31, 2010 and $129.7 million as of August 1, 2009. The effective income tax rate was 38.6% for the fiscal 2011 second quarter and 36.7% for last year’s second quarter. The effective income tax rate was 38.4% for the six months ended July 31, 2010 and 37.4% for the comparable period last year. The increase in the income tax rate for both the second quarter and year-to-date periods of fiscal 2011 was largely driven by a fiscal 2010 favorable tax treatment of foreign currency gains on certain intercompany loans between TJX and TJX Canada that was absent in fiscal 2011.

TJX is subject to U.S. federal income tax as well as income tax in multiple state, local and foreign jurisdictions. In nearly all jurisdictions, the tax years through fiscal 2001 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 accrued amounts for interest and penalties were $54.8 million as of July 31, 2010 and $53.0 million as of August 1, 2009.

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 $3.0 million to $74.0 million.

Note K. Supplemental Cash Flows Information

TJX’s non-cash investing and financing activities are as follows:

		Twenty-Six Weeks Ended
		July 31,				August 1,
In thousands		2010				2009
Conversion of zero coupon convertible notes		$	—			$	365,088

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Thirteen Weeks (second quarter) and Twenty-Six Weeks (six months) Ended July 31, 2010
Compared to
The Thirteen Weeks (second quarter) and Twenty-Six Weeks (six months) Ended August 1, 2009

Business Overview

We are the leading off-price apparel and home fashions retailer in the United States and worldwide. Our nearly 2,800 stores offer a rapidly changing assortment of quality, brand-name and designer merchandise at prices generally 20% to 60% below department and specialty store regular prices every day.

We operate eight off-price retail chains in the U.S., Canada and Europe and are known for our treasure hunt shopping experience and excellent values on brand-name merchandise. We turn our inventories rapidly relative to traditional retailers to create a sense of urgency and excitement for our customers, to encourage frequent customer visits and to drive merchandise margins. Our flexible “no walls” business model allows us to expand and contract merchandise categories quickly in response to consumers’ changing tastes. The values we offer appeal to a broad range of customers across demographic groups and income levels. The operating platforms and strategies of all of our retail concepts are synergistic. As a result, we capitalize on our off-price expertise and systems throughout our business, leveraging best practices, initiatives and new ideas and developing talent across our concepts. We also leverage the substantial buying power of our businesses and the geographic scope and depth of our merchant organization to develop our global relationships with vendors.

Results of Operations

Highlights of our financial performance for the second quarter and six months ended July 31, 2010 include the following:

	•		Same store sales increased 3% for the second quarter and increased 6% for the six-month period ending July 31, 2010 over last year’s comparable periods. Our same store sales increases were on top of a 4% increase in the fiscal 2010 second quarter and 3% increase in the six months ended August 1, 2009. Same store sales growth was driven once again by increases in customer traffic over significant increases last year, as we continued to attract new customers and retain existing customers across a broad span of income levels.
	•		Net sales increased 7% to $5.1 billion for the second quarter and 11% to $10.1 billion for the six-month period over last year’s comparable periods. Stores in operation and total selling square footage were both up 4% as of July 31, 2010 when compared to the same period last year. The movement in foreign currency exchange rates had a 1 percentage point favorable impact on net sales in the six months ended July 31, 2010. Foreign currency exchange rates had no significant impact on net sales in the second quarter of fiscal 2011.
	•		Our fiscal 2011 second quarter pre-tax margin (the ratio of pre-tax income to net sales) was 9.8% compared to 8.7% for the same period last year. For the six months ended July 31, 2010, our pre-tax margin was 10.2% compared to 8.3% for the same period last year. The improvement in both the second quarter and six-month periods of fiscal 2011 was primarily driven by the growth in merchandise margins, which were achieved as a result of managing the business with substantially lower levels of inventory (resulting in faster inventory turns), along with expense leverage from the strong same store sales growth, as well as our continued cost reduction programs. The periods ended July 31, 2010 include a pre-tax benefit of $11.6 million due to a reduction in the Provision for Computer Intrusion related costs which increased pre-tax margin by 0.2 percentage points for the quarter and 0.1 percentage points for the six-month period.
	•		Our cost of sales ratios improved in both the second quarter and six-month periods of fiscal 2011, primarily due to improved merchandise margins and the leverage of buying and occupancy costs on strong same store sales. Selling, general and administrative expense as a percentage of net sales increased 0.1 percentage points for the second quarter of fiscal 2011 compared to the same period last year. The costs of opening a greater number of new stores this year, the impact of our younger European businesses on cost ratios and increased investment in our field organization more than offset the impact of our cost reduction program. The selling,

			general and administrative expense as a percentage of net sales decreased 0.2 percentage points for the six months ended July 31, 2010 compared to the same period last year due to leverage on the 6% increase in same store sales and our cost reduction programs, partially offset by increased administrative and new store costs.
	•		Net income for the second quarter of fiscal 2011 was $305.0 million, or $0.74 per diluted share, compared to $261.6 million, or $0.61 per diluted share, in last year’s second quarter. Net income for the six months ended July 31, 2010 was $636.4 million, or $1.54 per diluted share, compared to $470.8 million, or $1.09 per diluted share in the same period last year. The credit to the Provision for Computer Intrusion related costs increased earnings per share by $0.01 per share in both the current year’s second quarter and six-month period.
	•		During the second quarter of fiscal 2011, we repurchased 8.2 million shares of our common stock at a cost of $355.5 million. For the first six months of fiscal 2011, we repurchased 13.7 million shares of our common stock at a cost of $589.6 million. Diluted earnings per share reflect the benefit of the stock repurchase program.
	•		Consolidated per store inventories, including inventory on hand at our distribution centers, were down 13% at the end of the second quarter of fiscal 2011 from the prior year as compared to a decrease of 4% at the end of the second quarter of fiscal 2010 from the prior year’s second quarter end. We planned to operate with lower inventories to position us to take advantage of opportunities in the marketplace and to increase inventory turns.

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 second quarter ended July 31, 2010 totaled $5.1 billion, a 7% increase over net sales of $4.7 billion in the fiscal 2010 second quarter. The increase reflected a 4% increase from new stores and a 3% increase in same store sales. Foreign currency exchange rates had an immaterial impact on fiscal 2011 second quarter sales. This compares to sales growth of 4% in last year’s second quarter, which consisted of a 4% increase from new stores and a 4% increase in same store sales, partially offset by a 4% decline from the negative impact of foreign currency exchange rates.

Consolidated net sales for the six months ended July 31, 2010 totaled $10.1 billion, an 11% increase over net sales of $9.1 billion in last year’s comparable period. The increase reflected a 6% increase in same store sales, a 4% increase from new stores and a 1% increase from the impact of foreign currency exchange rates. This compares to sales growth of 3% in last year’s six-month period, which consisted of a 4% increase from new stores, a 3% increase in same store sales and a 1% increase due to the shift in the fiscal calendar, partially offset by a 5% decline from the negative impact of foreign currency exchange rates.

New stores are a major source of sales growth. Both our consolidated store count and selling square footage increased by 4% as of July 31, 2010 as compared to August 1, 2009.

The same store sales increases for both the second quarter and six months ended July 31, 2010 were driven by significant increases in customer traffic at virtually all of our businesses. Juniors, jewelry and home fashions performed particularly well in the second quarter and six-month periods of fiscal 2011. For the second quarter of fiscal 2011, geographically, same store sales increases in Canada were above the consolidated average while European same store sales declined. In the U.S., same store sales increases were strong throughout the country with New England and the Midwest above the consolidated average, while the Southwest, Southeast and Florida were below the average.

For the six-month period of fiscal 2011, geographically, same store sales increases in Canada were in line with the consolidated average and same store sales in Europe declined. In the U.S., same store sales increases were strong across all regions, with Florida’s positive same store sales slightly below the consolidated average.

In the second half of fiscal 2011 we face more challenging comparisons as we recorded a double digit same stores sales increase in last year’s second half. As a result, we have planned a larger than normal portion of our advertising budget for the last six months of fiscal 2011.

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 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 divisions are calculated on a constant currency basis, meaning we translate the current year’s same store sales of our foreign divisions 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 divisional operating performance.

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

		Percentage of Net Sales								Percentage of Net Sales
		Thirteen Weeks Ended								Twenty-Six Weeks Ended
		July 31,				August 1,				July 31,				August 1,
		2010				2009				2010				2009
Net sales			100.0	%			100.0	%			100.0	%			100.0	%
Cost of sales, including buying and occupancy costs			73.4				74.4				73.1				74.8
Selling, general and administrative expenses			16.8				16.7				16.6				16.8
Provision (credit) for Computer Intrusion related expenses			(0.2	)			—				(0.1	)			—
Interest expense, net			0.2				0.2				0.2				0.2
Income before provision for income taxes*			9.8	%			8.7	%			10.2	%			8.3	%

Impact of foreign currency exchange rates: Our operating results can be 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 affects our reported results are as follows:

Translation of foreign operating results into U.S. dollars: In our financial statements, we translate the operations of our segments in Canada and Europe from local currencies into U.S. dollars using currency rates in effect at different points in time. Significant changes in foreign exchange rates between comparable prior periods can result in meaningful variations in consolidated net sales, net income and earnings per share growth as well as the net sales and operating results of our Canadian and European segments. Currency translation generally does not affect operating margins, as sales and expenses of the foreign operations are translated at essentially the same rates in a given period.

Inventory hedges: We routinely enter into inventory-related hedging instruments to mitigate the impact of foreign currency exchange rates on merchandise margins when our divisions, principally Europe and Canada, purchase goods in currencies other than their local currencies. As we have not elected “hedge accounting” as defined by U.S. GAAP, we record a mark-to-market gain or loss on the hedging instruments in our results of operations at the end of each reporting period. In subsequent periods, the income statement impact of these adjustments is effectively offset when the inventory being hedged is sold. While these effects occur every reporting period, they are of much greater magnitude when there are sudden and significant changes in currency exchange rates during a short period of time. The mark-to-market adjustment on these hedges does not affect net sales, but it does affect cost of sales, operating margins and reported earnings.

Cost of sales, including buying and occupancy costs: Cost of sales, including buying and occupancy costs, as a percentage of net sales, decreased 1.0 percentage points for the second quarter ended July 31, 2010 as compared to the same period last year. Cost of sales, including buying and occupancy costs, as a percentage of net sales, decreased 1.7 percentage points for the first six months of fiscal 2011. The improvement in both periods of fiscal 2011 was due to improved consolidated merchandise margin, which increased 0.8 percentage points for the second quarter and increased 1.3 percentage points for the six-month period. Merchandise margin improvement was driven by our strategy of

operating with leaner inventories and buying closer to need, which resulted in an increase in markon and a reduction in markdowns compared to the second quarter and six-month periods of fiscal 2010.

Selling, general and administrative expenses: Selling, general and administrative expenses, as a percentage of net sales, increased 0.1 percentage points to 16.8% for the quarter ended July 31, 2010 and decreased 0.2 percentage points to 16.6% for the six-month period ended July 31, 2010, as compared to the same periods last year. The increase in expenses in the second quarter of fiscal 2011 was driven by a year-over-year increase in the number of new stores opened during the second quarter of fiscal 2011, the impact of our new European businesses on consolidated cost ratios and increased investment in our field organization more than offset the impact of our cost reduction program. The improvement in the six months ended July 31, 2010 compared to the same period last year was due to levering of expenses on the 6% same store sales increase and our cost reduction programs, partially offset by increased administrative and new store costs.

Interest expense, net: Interest expense, net amounted to expense of $10.3 million for the second quarter of fiscal 2011 compared to expense of $9.2 million for the same period last year and was expense of $20.5 million for the six-month period ended July 31, 2010 compared to expense of $15.9 million for the same period last year. The components of interest expense, net are summarized below:

		Thirteen Weeks Ended								Twenty-Six Weeks Ended
		July 31,				August 1,				July 31,				August 1,
Dollars in millions		2010				2009				2010				2009
Interest expense		$	12,169			$	11,823			$	24,138			$	20,981
Capitalized interest			—				(194	)			—				(438	)
Interest (income)			(1,897	)			(2,380	)			(3,664	)			(4,693	)
Interest expense, net		$	10,272			$	9,249			$	20,474			$	15,850

Gross interest expense for fiscal 2011 increased over last year for both the second quarter and six-month periods as a result of the incremental interest cost of the $375 million 6.95% notes issued in April 2009 over the interest cost of the zero coupon convertible debentures which were redeemed as a result of this debt issuance. This increase was partially offset by the lower interest cost of the $400 million 4.20% notes issued in July 2009, as compared to the interest cost of the long-term debt retired in fiscal 2010.

Income taxes: The effective income tax rate was 38.6% for the fiscal 2011 second quarter, compared to 36.7% for last year’s second quarter. The effective income tax rate for the six months ended July 31, 2010 was 38.4% as compared to 37.4% for last year’s comparable period. The increase in the income tax rate for both the second quarter and six-month periods of fiscal 2011 was largely driven by a fiscal 2010 favorable tax treatment of foreign currency gains on certain intercompany loans between TJX and TJX Canada that was absent in fiscal 2011.

Net income and net income per share: Net income for the second quarter ended July 31, 2010 was $305.0 million, or $0.74 per diluted share, versus $261.6 million, or $0.61 per diluted share, in last year’s second quarter. Net income for the six months ended July 31, 2010 was $636.4 million, or $1.54 per diluted share, compared to $470.8 million, or $1.09 per diluted share, in the same period last year. Diluted earnings per share for both the fiscal 2011 second quarter and six-month period benefited by $0.01 from the $7.1 million after-tax effect of the credit to our Provision for Computer Intrusion related costs. Changes in foreign currency rates also affected the comparability of our results. The effect of foreign currency exchange rates on the fiscal 2011 second quarter earnings per share was immaterial compared with a $0.01 per share negative impact on the fiscal 2010 second quarter earnings per share. For the six-month period ended July 31, 2010, changes in foreign currency rates benefited earnings per share by $0.01, compared with a $0.03 per share negative impact for the same period in fiscal 2010.

In addition, our weighted average diluted shares outstanding, which benefit from our stock repurchase programs, affect the comparability of earnings per share. Our stock repurchase programs benefit our earnings per share. We repurchased 8.2 million shares of our stock at a cost of $355.5 million in the second quarter of fiscal 2011 and we repurchased 13.7 million shares at a cost of $589.6 million in the first six months of fiscal 2011. During the second quarter of fiscal 2010, we repurchased 6.4 million shares at a cost of $193.8 million, and for the first six months of fiscal 2010, we repurchased 8.0 million shares at a cost of $236.7 million.

Segment information: The following is a discussion of the operating results of our business segments. In the United States, our T.J. Maxx and Marshalls stores are aggregated as the Marmaxx segment, and HomeGoods and A.J. Wright is each reported as a separate segment. TJX’s stores operated in Canada (Winners and HomeSense) are reported as the TJX Canada segment, and TJX’s stores operated in Europe (T.K. Maxx and HomeSense) are reported as the TJX Europe 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, Provision (credit) for Computer Intrusion related costs and interest. “Segment profit or loss,” as we define the term, 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. Segments:
Marmaxx

		Thirteen Weeks Ended								Twenty-Six Weeks Ended
		July 31,				August 1,				July 31,				August 1,
Dollars in millions		2010				2009				2010				2009
| | | |
Net sales		$	3,309.5			$	3,145.5			$	6,587.4			$	6,083.8
Segment profit		$	416.3			$	358.4			$	884.7			$	689.0
Segment profit as a percentage of net sales			12.6	%			11.4	%			13.4	%			11.3	%
Percent increase in same store sales			3	%			4	%			7	%			3	%
Stores in operation at end of period
T.J. Maxx											903				882
Marshalls											820				811
Total Marmaxx											1,723				1,693
Selling square footage at end of period (in thousands)
T.J. Maxx											21,191				20,714
Marshalls											20,655				20,455
Total Marmaxx											41,846				41,169

Net sales for Marmaxx increased 5% for the second quarter of fiscal 2011 and increased 8% for the six-month period of fiscal 2011 as compared to the same periods last year. Same store sales for Marmaxx increased 3% in the second quarter and 7% for the first six months of fiscal 2011. We executed the fundamentals of our off-price business model well during the second quarter and first six months of fiscal 2011 by maintaining a lean inventory position, buying close to need and offering customers excellent values, which led to improved merchandise margins.

Sales at Marmaxx for both the second quarter and six-month periods ended July 31, 2010 were driven by significant increases in customer traffic. Categories that posted particularly strong same store sales increases included juniors, jewelry and home fashions. Geographically, same store sales increases in the New England and Midwest regions were above the chain average, while same store sales increases in the Southeast, Pacific and Florida were below the chain average. We continued our renovation program for existing Marmaxx stores, and expect to have approximately 700 stores in our new prototype during the fall of fiscal 2011.

Segment profit for the second quarter ended July 31, 2010 was $416.3 million, a 16% increase compared to the second quarter of fiscal 2010. Segment profit as a percentage of net sales (“segment profit margin” or “segment margin”) for the second quarter of fiscal 2011 increased to 12.6% from 11.4% for the same period last year. Segment profit for the six months ended July 31, 2010 increased to $884.7 million up 28% compared to the same period last year. Segment profit margin was 13.4% for the six-month period in fiscal 2011 versus 11.3% last year. The increase in segment margin for both periods was driven by strong merchandise margins, which were up 0.8 percentage points for the second quarter and 1.3 percentage points for the six months ended July 31, 2010. Segment margin also improved due to expense levering on strong same store sales, primarily occupancy and store operating costs, as well as our cost reduction efforts. The improvement in segment margin for this year’s second quarter was partially offset by the cost impact of a year-over-year increase in the number of new stores opened during the quarter.

As of July 31, 2010, Marmaxx’s per store inventories, including inventory on hand at its distribution centers, were down 14% as compared to those inventory levels at the same time last year. Per store inventories at August 1, 2009 were flat compared to those of the prior year period. As of July 31, 2010, inventory commitments (inventory on hand and merchandise on order) were down on a per store basis compared to the end of the second quarter ended August 1, 2009.

HomeGoods

		Thirteen Weeks Ended								Twenty-Six Weeks Ended
		July 31,				August 1,				July 31,				August 1,
Dollars in millions		2010				2009				2010				2009
Net sales		$	455.7			$	412.8			$	912.7			$	804.7
Segment profit		$	35.2			$	24.5			$	75.8			$	40.1
Segment profit as a percentage of net sales			7.7	%			5.9	%			8.3	%			5.0	%
Percent increase in same store sales			8	%			9	%			11	%			4	%
Stores in operation at end of period											328				323
Selling square footage at end of period (in thousands)											6,451				6,340