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Financial Instruments | 9 Months Ended
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Oct. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial Instruments | Financial InstrumentsAs a result of its operating and financing activities, TJX is exposed to market risks from changes in interest and foreign currency exchange rates and fuel costs. These market risks may adversely affect TJX’s operating results and financial position. TJX seeks to minimize risk from changes in interest and foreign currency exchange rates and fuel costs through the use of derivative financial instruments when and to the extent deemed appropriate. TJX does not use derivative financial instruments for trading or other speculative purposes and does not use any leveraged derivative financial instruments. TJX recognizes all derivative instruments as either assets or liabilities in the Consolidated Balance Sheets 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 (loss) income or are recognized currently in earnings, along with an offsetting adjustment against the basis of the item being hedged. Diesel Fuel Contracts TJX hedges portions of its estimated notional diesel requirements based on the diesel fuel expected to be consumed by independent freight carriers transporting TJX’s inventory. Independent freight carriers transporting TJX’s inventory charge TJX a mileage surcharge based on the price of diesel fuel. The hedge agreements are designed to mitigate the volatility of diesel fuel pricing (and the resulting per mile surcharges payable by TJX) by setting a fixed price per gallon for the period being hedged. During fiscal 2020, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for fiscal 2021, and during the first nine months of fiscal 2021, TJX entered into agreements to hedge a portion of its estimated notional diesel requirements for the first nine months of fiscal 2022. The hedge agreements outstanding at October 31, 2020 relate to approximately 40% of TJX’s estimated notional diesel requirements for the remainder of fiscal 2021 and approximately 41% of TJX’s estimated notional diesel requirements for the first nine months of fiscal 2022. These diesel fuel hedge agreements will settle throughout the remainder of fiscal 2021 and throughout the first ten months of fiscal 2022. TJX elected not to apply hedge accounting to these contracts. Foreign Currency Contracts TJX enters into forward foreign currency exchange contracts to obtain economic hedges on portions of merchandise purchases made and anticipated to be made by the Company’s operations in currencies other than their respective functional currencies. As a result of the COVID-19 pandemic, there was a significant change in the Company's anticipated merchandise purchases and we early settled derivative contracts designed to hedge merchandise purchases that would no longer take place. The settlement of these contracts resulted in a net gain of $24.8 million in the first quarter of fiscal 2021. The contracts outstanding at October 31, 2020 cover the merchandise purchases the Company is committed to over the next several months. Additionally, TJX’s operations in Europe are subject to foreign currency exposure as a result of their buying function being centralized in the U.K. All merchandise is purchased centrally in the U.K. and then shipped and billed to the retail entities in other countries. This intercompany billing to TJX’s European businesses’ Euro denominated operations creates exposure to the central buying entity for changes in the exchange rate between the Euro and British Pound. The inflow of Euros to the central buying entity provides a natural hedge for merchandise purchased from third-party vendors that is denominated in Euros. TJX calculates any excess Euro exposure each month and enters into forward contracts of approximately 30 days' duration to mitigate this exposure. TJX also enters into derivative contracts, generally designated as fair value hedges, to hedge intercompany debt and intercompany interest payable. The changes in fair value of these contracts are recorded in selling, general and administrative expenses and are offset by marking the underlying item to fair value in the same period. Upon settlement, the realized gains and losses on these contracts are offset by the realized gains and losses of the underlying item in selling, general and administrative expenses. The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at October 31, 2020:
In thousands | Pay | Receive | Blended Contract Rate | Balance Sheet Location | Current Asset U.S.$ | Current (Liability) U.S.$ | Net Fair Value in U.S.$ at October 31, 2020
Fair value hedges: |  |  |  |  |  |  |
Intercompany balances, primarily debt and related interest: |  |  |
| zł | 65,000 |  | £ | 12,780 |  | 0.1966 |  | Prepaid Exp / (Accrued Exp) | $ | 195 |  | $ | (68) |  | $ | 127 |
| € | 60,000 |  | £ | 53,412 |  | 0.8902 |  | (Accrued Exp) | — |  | (904) |  | (904) |
| A$ | 80,000 |  | U.S.$ | 58,016 |  | 0.7252 |  | Prepaid Exp | 1,749 |  | — |  | 1,749 |
| U.S.$ | 72,475 |  | £ | 55,000 |  | 0.7589 |  | (Accrued Exp) | — |  | (1,280) |  | (1,280) |
| £ | 200,000 |  | U.S.$ | 249,499 |  | 1.2475 |  | (Accrued Exp) | — |  | (9,810) |  | (9,810) |
Economic hedges for which hedge accounting was not elected: |  |  |
| Diesel fuel contracts | Fixed on 2.9M – 3.5M gal per month |  | Float on 2.9M – 3.5M gal per month | N/A | (Accrued Exp) | — |  | (15,078) |  | (15,078) |
Merchandise purchase commitments: |  |  |  |  |
| C$ | 637,508 |  | U.S.$ | 481,000 |  | 0.7545 |  | Prepaid Exp / (Accrued Exp) | 3,328 |  | (1,152) |  | 2,176 |
| £ | 415,653 |  | U.S.$ | 533,150 |  | 1.2827 |  | Prepaid Exp / (Accrued Exp) | 1,050 |  | (6,768) |  | (5,718) |
| A$ | 45,584 |  | U.S.$ | 32,650 |  | 0.7163 |  | Prepaid Exp | 600 |  | — |  | 600 |
| zł | 264,400 |  | £ | 53,293 |  | 0.2016 |  | Prepaid Exp | 2,189 |  | — |  | 2,189 |
| U.S.$ | 53,605 |  | € | 45,600 |  | 0.8507 |  | (Accrued Exp) | — |  | (394) |  | (394) |
Total fair value of derivative financial instruments |  | $ | 9,111 |  | $ | (35,454) |  | $ | (26,343) |
The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at February 1, 2020:
In thousands | Pay | Receive | Blended Contract Rate | Balance Sheet Location | Current Asset U.S.$ | Current (Liability) U.S.$ | Net Fair Value in U.S.$ at February 1, 2020
Fair value hedges: |  |  |  |  |  |  |
Intercompany balances, primarily debt and related interest: |  |  |
| zł | 45,000 |  | £ | 8,930 |  | 0.1984 |  | Prepaid Exp | $ | 270 |  | $ | — |  | $ | 270 |
| A$ | 50,000 |  | U.S.$ | 33,911 |  | 0.6782 |  | Prepaid Exp | 275 |  | — |  | 275 |
| U.S.$ | 72,475 |  | £ | 55,000 |  | 0.7589 |  | Prepaid Exp | 743 |  | — |  | 743 |
Economic hedges for which hedge accounting was not elected: |  |  |
| Diesel fuel contracts | Fixed on 2.9M – 3.5M gal per month |  | Float on 2.9M– 3.5M gal per month | N/A | (Accrued Exp) | — |  | (9,927) |  | (9,927) |
Intercompany billings in TJX International, primarily merchandise related: |  |
| € | 58,700 |  | £ | 49,848 |  | 0.8492 |  | Prepaid Exp | 655 |  | — |  | 655 |
Merchandise purchase commitments: |  |  |  |
| C$ | 609,340 |  | U.S.$ | 463,200 |  | 0.7602 |  | Prepaid Exp / (Accrued Exp) | 2,877 |  | (207) |  | 2,670 |
| C$ | 37,051 |  | € | 25,200 |  | 0.6801 |  | Prepaid Exp / (Accrued Exp) | 61 |  | (44) |  | 17 |
| £ | 265,653 |  | U.S.$ | 341,880 |  | 1.2869 |  | Prepaid Exp / (Accrued Exp) | 11 |  | (9,792) |  | (9,781) |
| zł | 362,700 |  | £ | 72,217 |  | 0.1991 |  | Prepaid Exp | 1,903 |  | — |  | 1,903 |
| A$ | 29,400 |  | U.S.$ | 20,151 |  | 0.6854 |  | Prepaid Exp | 435 |  | — |  | 435 |
| U.S.$ | 49,849 |  | € | 44,635 |  | 0.8954 |  | Prepaid Exp / (Accrued Exp) | 10 |  | (235) |  | (225) |
Total fair value of derivative financial instruments |  | $ | 7,240 |  | $ | (20,205) |  | $ | (12,965) |
The following is a summary of TJX’s derivative financial instruments, related fair value and balance sheet classification at November 2, 2019:
In thousands | Pay | Receive | Blended Contract Rate | Balance Sheet Location | Current Asset U.S.$ | Current (Liability) U.S.$ | Net Fair Value in U.S.$ at November 2, 2019
Fair value hedges: |  |  |  |  |  |  |
Intercompany balances, primarily debt and related interest: |  |
| zł | 64,000 |  | £ | 13,144 |  | 0.2054 |  | Prepaid Exp | $ | 246 |  | $ | — |  | $ | 246 |
| € | 46,450 |  | £ | 41,712 |  | 0.8980 |  | Prepaid Exp | 1,919 |  | — |  | 1,919 |
| A$ | 50,000 |  | U.S.$ | 34,370 |  | 0.6874 |  | (Accrued Exp) | — |  | (303) |  | (303) |
| U.S.$ | 72,020 |  | £ | 55,000 |  | 0.7637 |  | (Accrued Exp) | — |  | (757) |  | (757) |
Economic hedges for which hedge accounting was not elected: |  |  |
| Diesel fuel contracts | Fixed on 2.7M – 3.3M gal per month |  | Float on 2.7M – 3.3M gal per month | N/A | (Accrued Exp) | — |  | (3,878) |  | (3,878) |
Intercompany billings in TJX International, primarily merchandise related: |  |
| € | 86,800 |  | £ | 76,837 |  | 0.8852 |  | Prepaid Exp | 2,411 |  | — |  | 2,411 |
Merchandise purchase commitments: |  |  |
| C$ | 642,859 |  | U.S.$ | 487,300 |  | 0.7580 |  | Prepaid Exp / (Accrued Exp) | 808 |  | (2,960) |  | (2,152) |
| C$ | 31,863 |  | € | 21,600 |  | 0.6779 |  | Prepaid Exp / (Accrued Exp) | 36 |  | (111) |  | (75) |
| £ | 308,166 |  | U.S.$ | 386,700 |  | 1.2548 |  | Prepaid Exp / (Accrued Exp) | 373 |  | (14,122) |  | (13,749) |
| A$ | 42,054 |  | U.S.$ | 28,767 |  | 0.6840 |  | Prepaid Exp / (Accrued Exp) | 46 |  | (414) |  | (368) |
| zł | 369,290 |  | £ | 76,343 |  | 0.2067 |  | Prepaid Exp / (Accrued Exp) | 2,192 |  | (148) |  | 2,044 |
| U.S.$ | 2,254 |  | £ | 1,761 |  | 0.7813 |  | Prepaid Exp | 23 |  | — |  | 23 |
| U.S.$ | 69,558 |  | € | 61,875 |  | 0.8895 |  | Prepaid Exp / (Accrued Exp) | 304 |  | (614) |  | (310) |
Total fair value of derivative financial instruments |  | $ | 8,358 |  | $ | (23,307) |  | $ | (14,949) |
Presented below is the impact of derivative financial instruments on the Consolidated Statements of Income (Loss) for the periods shown:
|  | Amount of (Loss) Gain Recognized in Income / (Loss) by Derivative
| Location of (Loss) Gain Recognized in Income / (Loss) by Derivative | Thirteen Weeks Ended | Thirty-Nine Weeks Ended
In thousands | October 31, 2020 | November 2, 2019 | October 31, 2020 | November 2, 2019
Fair value hedges: |  |  |  |  |
Intercompany balances, primarily debt and related interest | Selling, general and administrative expenses | $ | (2,086) |  | $ | 7,238 |  | $ | (45,319) |  | $ | 526 |
Economic hedges for which hedge accounting was not elected: |  |  |
Intercompany receivable | Selling, general and administrative expenses | — |  | — |  | — |  | 3,257 |
Diesel fuel contracts | Cost of sales, including buying and occupancy costs | (7,059) |  | 529 |  | (19,790) |  | (2,103) |
Intercompany billings in TJX International, primarily merchandise related | Cost of sales, including buying and occupancy costs | (310) |  | 5,144 |  | (4,201) |  | 944 |
International lease liabilities | Cost of sales, including buying and occupancy costs | — |  | 301 |  | — |  | (1,113) |
Merchandise purchase commitments | Cost of sales, including buying and occupancy costs | 7,302 |  | (18,622) |  | 41,629 |  | 8,536 |
(Loss) gain recognized in income / (loss) | $ | (2,153) |  | $ | (5,410) |  | $ | (27,681) |  | $ | 10,047 |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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