Company: TJX
Filing Date: 2025-05-30
Form Type: 10-Q
Source: 0000109198-25-000043
Chunk: 87

Company: TJX COMPANIES INC /DE/
Filing Date: 2025-05-30
Form: 10-Q
Item: Part I, Item 2
Chunk 87
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 a given period.

Mark-to-Market Inventory Derivatives

We routinely enter into inventory-related hedging instruments to mitigate the impact on earnings of changes in foreign currency exchange rates on merchandise purchases denominated in currencies other than the local currencies of our divisions, principally TJX Canada and TJX International. As we have not elected hedge accounting for these instruments, as defined by U.S. generally accepted accounting principles (“GAAP”), we record a mark-to-market gain or loss on the derivative instruments in our results of operations at the end of each reporting period. In subsequent periods, the income statement impact of the mark-to-market adjustment is effectively offset when the inventory being hedged is paid for. 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 derivatives does not affect net sales, but it does affect the cost of sales, operating margins and earnings we report.

Transactional Foreign Exchange

When discussing the impact on our results of the effect of foreign currency exchange rates on certain transactions, we refer to it as “transactional foreign exchange”. This primarily includes the impact that foreign currency exchange rates may have on the year-over-year comparison of merchandise margin as well as “foreign currency gains and losses” on transactions that are denominated in a currency other than the operating division's local currency. These two items can impact segment margin comparison of our foreign divisions and we have highlighted them when they are meaningful to understanding operating trends.

Cost of Sales, Including Buying and Occupancy Costs

Cost of sales, including buying and occupancy costs, as a percentage of net sales was 70.5% for the first quarter of fiscal 2026, an increase of 0.5 percentage points compared to 70.0% for the first quarter of fiscal 2025. 

The increase in the cost of sales ratio, including buying and occupancy costs, for the first quarter of fiscal 2026 was attributable to the unfavorable year-over-year impact related to the mark-to-market adjustments on inventory hedges.

Selling, General and Administrative Expenses

SG&A expenses, as a percentage of net sales, was 19.4% for the first quarter of fiscal 2026, an increase of 0.2 percentage points compared to 19.2% for the first quarter of fiscal 2025. 

The increase in the SG&A ratio for the first quarter of fiscal 2026 was due to the year-over-year impact from an