TJX Companies - 10-K annual report

FORM 10-K

/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

NONE

       Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held on June 6, 2006 (Part III).

PART I

ITEM 1.      BUSINESS

       We are the leading off-price retailer of apparel and home fashions in the United States and worldwide. Our seven off-price chains are synergistic in their philosophies and operating platforms. We sell off-price family apparel and home fashions through our T.J. Maxx, Marshalls and A.J. Wright chains in the United States, our Winners chain in Canada, and our T.K. Maxx chain in the United Kingdom and Ireland. We sell off-price home fashions through our HomeGoods chain in the United States and our Canadian HomeSense chain, operated by Winners. The target customer for all of our off-price chains, except A.J. Wright, is the middle to upper-middle income shopper, with the same profile as a department or specialty store customer. A.J. Wright targets the moderate income customer. Bob’s Stores, acquired in December 2003, is a value-oriented, branded apparel chain based in the Northeast United States that offers casual, family apparel. Bob’s Stores’ target customer demographic spans the moderate to upper-middle income bracket.

       Our off-price mission is to deliver an exciting, fresh and rapidly changing assortment of brand-name merchandise at excellent values to our customers. We define value as the combination of quality, brand, fashion and price. With over 400 buyers and over 10,000 vendors worldwide and over 2,300 stores, we believe we are well positioned to continue accomplishing this goal. Our key strengths include:

       As an off-price retailer, we offer quality, name brand and designer family apparel and home fashions every day at substantial savings from comparable department and specialty store regular prices. We can offer these everyday savings as a result of our opportunistic buying strategies, disciplined inventory management, including rapid inventory turns, and low expense structure.

       In our off-price concepts, we purchase the majority of our inventory opportunistically. Different from traditional retailers that order goods far in advance of the time they appear on the selling floor, TJX buyers are in the marketplace virtually every week. By maintaining a liquid inventory position, our buyers can buy close to need, enabling them to buy into current market trends and take advantage of the opportunities in the marketplace. Due to the unpredictable nature of consumer demand in the marketplace and the mismatch of supply and demand, we are regularly able to buy the vast majority of our inventory directly from manufacturers, with some merchandise coming from retailers and others. Virtually all of our buys for our off-price concepts are made at discounts from initial wholesale prices. We generally purchase merchandise to sell in the current selling season, with a limited quantity of packaway merchandise that we buy specifically to warehouse and sell in a future selling season. We are willing to purchase less than a full assortment of styles and sizes. We pay promptly and do not ask for typical retail concessions in our off-price chains such as advertising, promotional and markdown allowances or delivery concessions such as drop shipments to stores or delayed deliveries. Our financial strength, strong reputation and ability to sell large quantities of merchandise through a geographically diverse network of stores provide us excellent access to leading branded merchandise. Our opportunistic buying permits us to consistently offer our customers a rapidly changing merchandise assortment at everyday values that are below department and specialty store regular prices.

       We are extremely disciplined in our inventory management, and we rapidly turn the inventory in our off-price chains. We rely heavily on sophisticated, internally developed inventory systems and controls that permit a virtually continuous flow of merchandise into our stores and an expansive distribution infrastructure that supports ourclose-to-need buying by delivering goods to our stores quickly and efficiently. For example, highly automated storage and distribution systems track, allocate and deliver an average of 11,000 items per week to each T.J. Maxx and Marshalls

store. In addition, specialized computer inventory planning, purchasing and monitoring systems, coupled with warehouse storage, processing, handling and shipping systems, permit a continuous evaluation and rapid replenishment of store inventory. Pricing, markdown decisions and store inventory replenishment requirements are determined centrally, using satellite-transmitted information provided bypoint-of-sale computer terminals and are designed to move inventory through our stores in a timely and disciplined manner. These inventory management and distribution systems allow us to achieve rapid in-store inventory turnover on a vast array of product and sell substantially all merchandise within targeted selling periods.

       We operate with a low cost structure relative to many other retailers. While we seek to provide a pleasant, easy shopping environment with emphasis on customer convenience, we do not spend large amounts on store fixtures. Our selling floor space is flexible and largely free of permanent fixtures, so we can easily expand and contract departments in response to customer demand and available merchandise. Also, our large retail presence, strong financial position and expertise in the real estate market allow us to obtain very favorable lease terms. In our off-price concepts, our advertising budget as a percentage of sales is low compared to traditional department and specialty stores, with our advertising focused mainly on awareness of shopping at our stores, and some promoting of particular merchandise. Our high sales-per-square-foot productivity and rapid inventory turnover also provide expense efficiencies.

       With all of our off-price chains operating with the same off-price strategies and systems, we are able to capitalize upon expertise and best practices across our chains, develop associates by transferring them from one chain to another, and grow our various businesses more efficiently and effectively.

       During the fiscal year ended January 28, 2006, we derived 80.2% of our sales from the United States (29.2% from the Northeast, 14.2% from the Midwest, 23.1% from the South, 0.7% from the Central Plains, and 13.0% from the West), 9.1% from Canada, 9.5% from Europe (specifically, in the United Kingdom and Ireland) and 1.2% from Puerto Rico. By merchandise category, we derived approximately 65% of our sales from apparel (including footwear), 24% from home fashions and 11% from jewelry and accessories.

       We consider each of our operating divisions to be a segment. The T.J. Maxx and Marshalls store chains are managed as one division, referred to as Marmaxx, and are reported as a single segment. The Winners and HomeSense chains, which operate exclusively in Canada, are also managed as one division and are reported as a single segment. Each of our other store chains, T.K. Maxx, HomeGoods, A.J. Wright and Bob’s Stores are reported as separate segments. More detailed information about our segments can be found in Note N to the consolidated financial statements.

       Unless otherwise indicated, all store information is as of January 28, 2006 and references to store square footage are to gross square feet. Fiscal 2004 means the fiscal year ended January 31, 2004, fiscal 2005 means the fiscal year ended January 29, 2005, fiscal 2006 means the fiscal year ended January 28, 2006, and fiscal 2007 means the fiscal year ending January 27, 2007. Our business is subject to seasonal influences, which causes us generally to realize higher levels of sales and income in the second half of the year. This is common in the apparel retail business. In fiscal 2006, we closed our T.J. Maxx and HomeGoodse-commerce website.

       T.J. Maxx is the largest off-price retail chain in the United States, with 799 stores in 48 states. Marshalls is the second-largest off-price retailer in the United States, with 701 stores in 42 states, as well as 14 stores in Puerto Rico. We maintain the separate identities of the T.J. Maxx and Marshalls stores through product assortment and merchandising, marketing and store appearance. This encourages our customers to shop at both chains.

       T.J. Maxx and Marshalls primarily target female shoppers who have families with middle to upper-middle incomes and who generally fit the profile of a department or specialty store customer. These chains operate with a common buying and merchandising organization and have consolidated administrative functions, including finance and human resources. The combined organization, known internally as The Marmaxx Group, offers us increased leverage to purchase merchandise at favorable prices and allows us to operate with a lower cost structure. These advantages are key to our ability to sell quality, brand name merchandise at substantial discounts from department and specialty store regular prices.

       T.J. Maxx and Marshalls sell quality, brand name merchandise at prices generally 20%-60% below department and specialty store regular prices. Both chains offer family apparel, accessories, giftware, and home fashions. Within these broad categories, T.J. Maxx offers a shoe assortment for women and fine jewelry, while Marshalls offers a full-line footwear department and a larger men’s department. In fiscal 2006, T.J. Maxx continued to roll out expanded jewelry and accessories departments and Marshalls continued to add expanded footwear departments. We believe these expanded offerings further differentiate the shopping experience at T.J. Maxx and Marshalls, driving traffic to both chains and we expect to continue rolling out these expanded departments.

       T.J. Maxx and Marshalls stores are generally located in suburban community shopping centers. T.J. Maxx stores average approximately 30,000 square feet. Marshalls stores average approximately 32,000 square feet. We currently expect to add a net of 50 stores in fiscal 2007. Ultimately, we believe that T.J. Maxx and Marshalls together can operate approximately 1,800 stores in the United States and Puerto Rico.

       HomeGoods is our off-price retail chain that sells exclusively home fashions with a broad array of giftware, accent furniture, lamps, rugs, accessories and seasonal merchandise for the home. Many of the HomeGoods stores are stand-alone stores; however, we also combine HomeGoods stores with a T.J. Maxx or Marshalls store in a superstore format. We count the superstores as both a T.J. Maxx or Marshalls store and a HomeGoods store. In fiscal 2006, we continued to open a superstore format, in which a HomeGoods store is located beside a T.J. Maxx or Marshalls store, with interior passageways providing access between the stores. This configuration is dual-branded with both the T.J. Maxx or Marshalls logo and the HomeGoods logo.

       Stand-alone HomeGoods stores average approximately 27,000 square feet. In superstores, which average approximately 50,000 square feet, we dedicate an average of 22,000 square feet to HomeGoods. The 251 stores open at year-end include 140 stand-alone stores and 111 superstores. In fiscal 2007, we plan to net 10 additional stores, including 4 superstores. We believe that the U.S. market could potentially support approximately 650 HomeGoods stores in the long term.

       Winners is the leading off-price retailer in Canada, offering off-price brand name women’s apparel and shoes, lingerie, accessories, home fashions, giftware, fine jewelry, menswear and children’s clothing. Winners operates HomeSense, our Canadian off-price home-fashions chain, launched in fiscal 2002. Like our HomeGoods chain, HomeSense offers a wide and rapidly changing assortment of off-price home fashions including giftware, accent furniture, lamps, rugs, accessories and seasonal merchandise. We operate HomeSense in a stand-alone format, as well as a superstore format where a HomeSense store and a Winners store are combined or operate side-by-side.

       We currently operate a total of 174 Winners stores, which average approximately 30,000 square feet and 58 HomeSense stores, which average approximately 24,000 square feet. We expect to add a net of 11 Winners stores and 10 HomeSense stores in fiscal 2007, in both the stand-alone and superstore format. Ultimately, we believe the Canadian market can support approximately 200 Winners stores and approximately 80 HomeSense stores.

       T.K. Maxx, operating in the United Kingdom and Ireland, is the only major off-price retailer in any European country. T.K. Maxx utilizes the same off-price strategies employed by T.J. Maxx, Marshalls and Winners, and offers the same type of merchandise. At the end of fiscal 2006, we operated 197 T.K. Maxx stores which averaged approximately 30,000 square feet. We expect to add a total of 15 stores in the United Kingdom and Ireland in fiscal 2007 and believe that the U.K. and Ireland can support approximately 300 stores in the long term.

       A.J. Wright, launched in fiscal 1999, brings our off-price concept to a different demographic customer, the moderate income shopper. A.J. Wright stores offer brand-name family apparel, accessories, footwear, domestics, giftware,

including toys and games, and special, opportunistic purchases. A.J. Wright stores average approximately 26,000 square feet. We operated 152 A.J. Wright stores in the United States at fiscal year end. In fiscal 2007, we expect to net 8 A.J.Wright stores, primarily in existing markets to lever advertising and distribution costs. In the long term, we believe that the U.S. could potentially support approximately 1,000 A.J. Wright stores.

       Bob’s Stores, acquired in late 2003, offers casual, family apparel and footwear, including workwear, activewear, and licensed team apparel. Bob’s Stores’ customer demographics span the moderate to upper-middle income bracket. Bob’s Stores average approximately 46,000 square feet and, at the end of fiscal 2006, there were 35 Bob’s stores in operation. We expect to open one Bob’s Store in fiscal 2007.

       We operated stores in the following locations as of January 28, 2006:

       Winners operated 174 stores in Canada (including the Winners portion of a superstore): 22 in Alberta, 22 in British Columbia, 5 in Manitoba, 3 in New Brunswick, 2 in Newfoundland, 5 in Nova Scotia, 80 in Ontario, 1 on Prince Edward Island, 31 in Quebec and 3 in Saskatchewan.

       HomeSense operated 58 stores in Canada (including the HomeSense portion of a superstore): 7 in Alberta, 9 in British Columbia, 2 in Manitoba, 2 in New Brunswick, 2 in Nova Scotia, 29 in Ontario and 7 in Quebec.

       T.K. Maxx operated 190 stores in the United Kingdom and 7 stores in the Republic of Ireland.

       At January 28, 2006, we had approximately 119,000 employees, many of whom work less than 40 hours per week. In addition, we hire temporary employees during the peakback-to-school and holiday seasons.

       The retail apparel and home fashion business is highly competitive. We compete on the basis of fashion, quality, price, merchandise selection and freshness, brand name recognition and, to a lesser degree, store location. We compete with local, regional, national and international department, specialty, off-price, discount and outlet stores as well as other retailers that sell in stores, through catalogues and media and over the internet. We purchase most of our inventory opportunistically and compete for that merchandise with other national and regional off-price apparel and outlet stores. We also compete with other retailers for store locations.

       Our stores operate primarily on a cash-and-carry basis. Each chain accepts credit sales through programs offered by banks and others. While we do not operate our own customer credit card program or maintain customer credit receivables, a TJX Visa card is offered through a major bank for our domestic divisions. The rewards program associated with this card is partially funded by TJX.

       We operate a centralized buying organization that services both the T.J. Maxx and Marshalls chains, while each of our other chains has its own centralized buying organization. All of our chains are serviced through their own distribution networks which includes the use of third party providers at our HomeGoods division.

       Our principal trademarks and service marks, which are T.J. Maxx, Marshalls, HomeGoods, Winners, HomeSense, T.K. Maxx, A.J. Wright and Bob’s Stores, are registered in relevant countries. Our rights in these trademarks and service marks endure for as long as they are used.

       Copies of our annual reports on Form 10-K, proxy statements, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to those filings, are available free of charge on our website, www.tjx.com under “SEC Filings,” as soon as reasonably practicable after they are filed electronically. They are also available free of charge from TJX Investor Relations, 770 Cochituate Road, Framingham, Massachusetts, 01701.

       Also available on the “Corporate Governance” section of the TJX corporate website set forth above and in print free of charge upon request sent to TJX Investor Relations at the above address are our Code of Conduct, our Code of Ethics for TJX Executives, including any waiver from or amendment to the Code of Ethics given or made from time to time, our Code of Business Conduct and Ethics for Directors, information about our Vendor Compliance Program, our Corporate Governance Principles and Charters for our Board Committees.

ITEM 1A.      RISK FACTORS

       The statements in this Section describe the major risks to our business and should be considered carefully. In addition, these statements constitute our cautionary statements under the Private Securities Litigation Reform Act of 1995.

       Our disclosure and analysis in this 2005 Form 10-K and in our 2005 Annual Report to Shareholders contain some forward-looking statements, including some of the statements made under Item 1, “Business,” Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 8, “Financial Statements and Supplementary Data,” and in our 2005 Annual Report to Stockholders under “Letter to Shareholders” and “Financial Graphs.” From time to time, we also provide forward-looking statements in other materials we release to the public as well as oral forward-looking statements. Such statements give our current expectations or forecasts of future events; they do not relate strictly to historical or current facts. We have generally identified such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will,” “target,” “forecast” and similar expressions in connection with any discussion of future operating or financial performance. All statements that address activities, events or developments that we intend, expect or believe may occur in the future are forward-looking statements. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales, expenses, interest rates, foreign exchange rates, the outcome of contingencies, such as legal proceedings, and financial results.

       We cannot guarantee that any forward-looking statement will be realized. Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected. You should bear this in mind as you consider forward-looking statements.

       We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Form 10-Qand 8-K reports to the SEC. The risks that follow, individually or in the aggregate, are those that we think could cause our actual results to differ materially from those stated or implied in forward-looking statements. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties.

       TJX has rapidly expanded the number of chains and stores it operates and its selling square footage. Our revenue growth is dependent upon our ability to continue to expand successfully through new store openings as well as our ability to increase same store sales. Successful store growth requires selection of store locations in appropriate geographies, availability of attractive stores or store sites in such locations and negotiation of acceptable terms. Competition for desirable sites and increases in real estate, construction and development costs could limit our growth opportunities. Even if we succeed in opening new stores, these new stores may not achieve the same sales or profit levels as our existing stores. Further, expansion places demands upon us to manage rapid growth, and we may not do so successfully.

       TJX has expanded its original off-price model into different product lines, chains, geographic areas and countries. TJX’s growth is dependent upon our ability to successfully execute our off-price retail apparel and home fashions concepts in new markets and geographic regions. If the Company is unable to successfully execute its concepts in these new markets and regions, or if consumers there are not receptive to the concepts, TJX’s financial performance could be adversely affected.

       TJX purchases the majority of our inventory opportunistically with our buyers purchasing close to need. To drive traffic to the stores and to increase same store sales, the treasure hunt nature of the off-price buying experience requires continued replenishment of fresh high quality, attractively priced merchandise. While opportunistic buying enables our buyers to buy at the right time and price, in the quantities we need and into market trends, it places considerable discretion in our buyers, subjecting us to risks on the timing, quantity and nature of inventory flowing to the stores. We rely on our expansive distribution infrastructure to support delivering goods to our stores on time. We must effectively and timely distribute inventory to stores, maintain an appropriate mix and level of inventory and effectively manage

pricing and markdowns. Failure to acquire and manage our inventory well and to operate our distribution infrastructure effectively, can adversely affect our performance and our relationship with our customers.

       We use marketing and promotional programs to attract customers to our stores and to encourage purchases by our customers. We use various media for our promotional efforts, including print, television, database marketing and direct marketing. If we fail to choose the appropriate medium for our efforts, or fail to implement and execute new marketing opportunities, our competitors may be able to attract some of our customers and cause them to decrease purchases in our stores and increase purchases elsewhere, which might negatively impact our revenues. Changes in the amount and degree of promotional intensity or merchandising strategy by our competitors could cause TJX to have difficulties in retaining existing customers and attracting new customers.

       Customers’ willingness to shop and their demand for the merchandise in our stores is affected by adverse and unseasonable weather. Frequent or unusually heavy snow, ice or rain storms, severe cold or heat or extended periods of unseasonable temperatures in our markets could adversely affect our sales and increase markdowns.

       The retail business is highly competitive. TJX competes for customers, associates, locations, merchandise, services and other important aspects of its business with many other local, regional, national and international retailers. TJX also faces competition from alternative retail distribution channels such as catalogues and internet sites. Changes in the merchandising, pricing and promotional activities of those competitors and in the retail industry generally, may adversely affect our performance.

       TJX’s performance is dependent on recruiting, developing, training and retaining quality sales, distribution center and other associates in large numbers as well as experienced buying and management personnel. Many of our associates are in entry level or part-time positions with historically high rates of turnover. TJX’s ability to meet our labor needs while controlling costs is subject to external factors such as unemployment levels, prevailing wage rates, minimum wage legislation and changing demographics. In the event of increasing wage rates, if we do not increase our wages competitively, our customer service could suffer because of a declining quality of our workforce, or our earnings would decrease if we increase our wage rates. In addition, certain associates in our distribution centers are members of unions and therefore subject us to the risk of labor actions. Further, our off-price model limits the market for experienced buying and management personnel and requires us to do significant internal training and development. Changes that adversely impact TJX’s ability to attract and retain quality associates and management personnel could adversely affect our performance.

       We have used mergers and acquisitions to grow our business in the past. For example, in 2003, we completed the acquisition of Bob’s Stores. Integrating new stores and concepts can be a difficult task. We may consider attractive opportunities to acquire new businesses or to divest any of our current business segment. Acquisition or divestiture activities may divert attention of our executive management team away from the existing businesses. We may do a less than optimal job of due diligence or evaluation of target companies. Failure to execute on mergers or divestitures in a satisfactory manner could have an adverse effect on our future business prospects or our financial performance in the future.

       The efficient operation of our business is dependent on our information systems, including our ability to operate them effectively and successfully to implement new technologies, systems, controls and adequate disaster recovery systems. In addition, we must protect the confidentiality of our and our customers’ data. The failure of TJX’s information systems to perform as designed or our failure to implement and operate them effectively could disrupt our business or subject us to liability and thereby harm our profitability.

       TJX’s business is dependent upon its operations generating strong cash flows to support our capital expansion requirements, our general operating activities and our stock repurchase programs and to fund debt repayment and the availability of financing sources. Our inability to continue to generate sufficient cash flows to support these activities or the lack of availability of financing in adequate amounts and on appropriate terms could adversely affect our financial performance or our earnings per share growth.

       Interest rates; recession; inflation; deflation; consumer credit availability; consumer debt levels; energy costs; tax rates and policy; unemployment trends; the threat or possibility of war, terrorism or other global or national unrest; political or financial instability; and other general economic factors have significant effects on consumer confidence and spending, which in turn affect retail sales at TJX. General economic factors in the United States and in other countries where we operate are beyond our control and could adversely affect our sales and performance.

       Many of the products sold in our stores are sourced by our vendors and to a limited extent by us in many foreign countries. Political or financial instability, trade restrictions, tariffs, currency exchange rates, transport capacity and costs and other factors relating to international trade are beyond our control and could affect the availability and the price of our inventory.

       We have a significant presence in Canada, the United Kingdom and Ireland. We may also seek to expand into other international markets in the future. Our foreign operations encounter risks similar to those faced by our U.S. operations, as well as risks inherent in foreign operations, such as local customs and competitive conditions and foreign currency fluctuations, which could have an adverse impact on our worldwide profitability.

       Various aspects of TJX’s operations are subject to federal, state or local laws, rules and regulations, any of which may change from time to time. Generally accepted accounting principles may change from time to time, as well. Additionally, TJX is frequently involved in various litigation matters that arise in the ordinary course of business. Litigation, regulatory developments and changes in accounting rules and principles could adversely affect TJX’s business operations and financial performance.

       TJX maintains a system of internal controls over financial reporting, but there are limitations inherent in internal control systems. If we are unable to maintain adequate and effective internal control over financial reporting, TJX’s financial performance could be adversely affected. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be appropriate relative to their costs.

       None

       We lease virtually all of our store locations, generally for 10 years with an option to extend the lease for one or more5-year periods. We have the right to terminate some of these leases before the expiration date under specified circumstances and for specified payments.

       The following is a summary of our primary distribution centers and administration office locations as of January 28, 2006. Square footage information for the distribution centers represents total “ground cover” of the facility. Square footage information for office space represents total space occupied:

       The table below indicates the approximate average store size as well as the gross square footage of stores and distribution centers, by division, as of January 28, 2006:

       None.

       There was no matter submitted to a vote of TJX’s security holders during the fourth quarter of fiscal 2006.

       All officers hold office until the next annual meeting of the Board in June 2006 and until their successors are elected, or appointed, and qualified.

PART II

       TJX’s common stock is listed on the New York Stock Exchange (Symbol: TJX). The quarterly high and low trading stock prices for fiscal 2006 and fiscal 2005 are as follows:

       The approximate number of common shareholders at January 28, 2006 was 88,000.

       TJX declared four quarterly dividends of $.06 per share for fiscal 2006 and $.045 per share for fiscal 2005.

       The number of shares of common stock repurchased by TJX during the fourth quarter of fiscal 2006 and the average price paid per share is as follows:

       In January 2006 we completed our $1 billion share repurchase program announced in May 2004, and on October 11, 2005 we announced a new repurchase program to repurchase up to $1 billion of TJX common stock from time to time. As of January 28, 2006 we had repurchased 268,298 shares at a cost of $6.6 million under the new $1 billion share repurchase program.

Selected Financial Data (Continuing Operations)

       The following discussion contains forward-looking information and should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this report. Our actual results could differ materially from the results contemplated by these forward-looking statements due to various factors, including those discussed in Item 1A of this report under the section entitled “Risk Factors.”

       The discussion that follows relates to our fiscal years ended January 28, 2006 (fiscal 2006), January 29, 2005 (fiscal 2005) and January 31, 2004 (fiscal 2004).

       In the fourth quarter of fiscal 2006 TJX elected to early adopt the provisions of Statement of Financial Accounting Standards No. 123(R) (SFAS No. 123(R)), “Share-Based Payment.” This standard requires that the fair value of all stock based awards be reflected in the financial statements based on the fair value of the award. TJX has elected the modified retrospective transition method and accordingly, all prior periods have been adjusted to reflect the impact of this standard in those periods, based on the pro forma amounts as disclosed in the notes to our financial statements.

RESULTS OF OPERATIONS

       The following is a summary of the operating results of TJX at the consolidated level. This discussion is followed by an overview of operating results by segment. All references to earnings per share are diluted earnings per share unless otherwise indicated. All prior periods have been adjusted to reflect the adoption of SFAS No. 123(R). See Note A to our consolidated financial statements.

      Net sales: Net sales for fiscal 2006 totaled $16.1 billion, an 8% increase over net sales of $14.9 billion in fiscal 2005. Net sales for fiscal 2005 increased 12% over sales of $13.3 billion for fiscal 2004. Our reporting period for fiscal 2004 included 53 weeks compared to 52 weeks in both fiscal 2006 and fiscal 2005, which added incremental sales of approximately $200 million in fiscal 2004.

       The 8% increase in net sales for fiscal 2006 includes a 6% increase attributable to new stores and a 2% increase in same store sales. The 12% increase in net sales for fiscal 2005 over fiscal 2004 reflects approximately 6% from new stores, 5% from same store sales growth and 2% from the acquisition of Bob’s Stores, partially offset by approximately a 1% reduction to the growth rate due to fiscal 2005 having one less week than fiscal 2004. Bob’s Stores was acquired on December 24, 2003 and our sales results for fiscal 2004 include Bob’s Stores from the date of acquisition as compared to a full year for fiscal 2005 and fiscal 2006.

       New stores are a major source of sales growth. Our consolidated store count increased by 7.1% in fiscal 2006 and 7.8% in fiscal 2005 over the respective prior year period. Our selling square footage increased by 7.7% in fiscal 2006 and 8.2% in fiscal 2005. We expect to add 105 stores (net of store closings) in the fiscal year ending January 27, 2007 (fiscal 2007), a 4% projected increase in our consolidated store base, and we expect to increase our selling square footage base by 5%.

       Same store sales for fiscal 2006 were driven by strong demand for jewelry, accessories, and footwear, which continued to generate significant increases on top of very strong results last year, as well as improved demand for men’s apparel. The positive impact of growth in these categories was partially offset by same store sales declines in home fashions and women’s sportswear. Marmaxx continued its program of expanding certain departments in its stores and ended the year with 594 T.J. Maxx stores with expanded jewelry/ accessories departments and 146 Marshalls stores with expanded footwear departments. These stores had same store sales growth which exceeded Marmaxx’s chain average. In the United States, where TJX generates approximately 80% of its sales, same store sales were strong in warm weather regions, particularly Florida, the Southwest and California, while flat to slightly negative in the Midwest and Northeast. Same store sales growth was positively impacted by foreign currency exchange rates, which contributed approximately¹/2 a percentage point of growth.

       Net sales for fiscal 2005 reflected strong demand for jewelry and accessories, women’s apparel and footwear, partially offset by weaker demand for men’s apparel and home fashions. The 5% growth in consolidated same store sales for fiscal 2005 over the prior year was driven by a 4% same store sales increase at Marmaxx, our largest division. Marmaxx ended the year with 303 T.J. Maxx stores with expanded jewelry/ accessories departments and 67 Marshalls stores with expanded footwear departments which were significant factors in Marmaxx achieving a 4% same store sales increase in fiscal 2005. Same store sales growth in fiscal 2005 benefited by approximately 1¹/2 percentage points from foreign currency exchange rates.

       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 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 on a comparable 52 week basis. Relocated stores and stores that are increased in size are generally classified in the same way as the original store and we

believe the impact of these 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 our consolidated operating results as a percentage of net sales:

      Cost of sales, including buying and occupancy costs: Cost of sales, including buying and occupancy costs, as a percentage of net sales was 76.6% in fiscal 2006, 76.4% in fiscal 2005 and 75.8% in fiscal 2004. This ratio for fiscal 2006, as compared to fiscal 2005, reflects an improvement in our consolidated merchandise margin of .5%. The improvement in merchandise margin was largely due to lower markdowns at our smaller divisions, partially offset by an increase in fuel related freight costs. In addition, the comparison to the fiscal 2005 expense ratio was favorably impacted by a $30.7 million non-cash charge ($19.3 million after-tax) in fiscal 2005 to conform our lease accounting practices to generally accepted accounting principles. See Note A to the consolidated financial statements under the caption “Lease Accounting”. This charge was included in cost of sales in fiscal 2005 and increased last year’s expense ratio by .2%. These improvements in the fiscal 2006 expense ratio were more than offset by increases in operating costs as a percentage of net sales, primarily occupancy costs, which reflect the de-levering impact of a 2% same store sales growth as well as higher cost of sales ratios at divisions other than Marmaxx, which represent a greater proportion of the consolidated results in fiscal 2006 compared to fiscal 2005.

       Cost of sales, including buying and occupancy costs, as a percentage of net sales for fiscal 2005 as compared with fiscal 2004 reflects consolidated merchandise margins that were essentially flat to the prior year. Throughout fiscal 2005, the Marmaxx division effectively executed its merchandising and inventory management strategies, maintaining a liquid inventory position and buying close to need, all of which led to improved merchandise margin at this division. However, this improved merchandise margin at Marmaxx in fiscal 2005 was offset by reduced merchandise margin at our other divisions, most of which experienced higher markdowns. The increase in this ratio in fiscal 2005 includes a .2% increase due to the lease accounting charge. This ratio in fiscal 2005, as compared to fiscal 2004, also reflects an increase of approximately .2% due to the absence of the 53rd week in fiscal 2005 as the sales volume from the extra week helped lever certain fixed costs in fiscal 2004. The balance of the increase in the ratio in fiscal 2005 is primarily due to higher cost of sales ratios at divisions other than Marmaxx, which represent a greater proportion of the consolidated results in fiscal 2005 as compared to fiscal 2004.

      Selling, general and administrative expenses: Selling, general and administrative expenses as a percentage of net sales were 16.9% in fiscal 2006, 16.8% in fiscal 2005 and 16.6% in fiscal 2004. The increase in fiscal 2006 over the prior year is due to an increase in store payroll costs as a percentage of net sales, reflecting the de-levering impact of the low single digit same store sales increase. The increase in this ratio was also negatively impacted by the net impact of third quarter events including the cost of the executive resignation agreements, e-commerce exit and hurricane related costs, offset in part by the VISA/Mastercard antitrust litigation settlement. The increase in this ratio in fiscal 2005 was primarily due to a .1% increase in advertising costs as a percentage of sales as a result of the inclusion of Bob’s Stores for a full fiscal year in our consolidated results. Bob’s Stores operates with a higher advertising cost ratio than our off-price divisions. In addition, the fiscal 2005 expense ratio compared to fiscal 2004 reflects an increase in stock based compensation. TJX has taken various actions to reduce selling, general and administrative expenses in fiscal 2007 designed to improve profit margins. TJX also revised its approach to long-term compensation in fiscal 2006 by substantially decreasing the number

of stock options issued and increasing the long-term cash incentive award opportunities, which is designed to help control the long-term portion of compensation costs going forward.

      Interest expense, net: Interest expense, net of interest income, was $29.6 million in fiscal 2006, $25.8 million in fiscal 2005, and $27.3 million in fiscal 2004. Interest income was $9.4 million in fiscal 2006, $7.7 million in fiscal 2005 and $6.5 million in fiscal 2004. The increase in net interest expense in fiscal 2006 is due to higher short-term borrowings and interest rates. The higher borrowing levels were primarily driven by the timing of inventory purchases, capital expenditures and repurchase of the Company’s common stock. The additional interest expense from short-term borrowings was partially offset by reduced interest costs due to the repayment of $100 million of 7% unsecured notes in June 2005, as well as an increase in interest income due to higher interest rates. The reduction in net interest expense in fiscal 2005 as compared to fiscal 2004 is primarily due to an increase in interest income in fiscal 2005.

      Income taxes: Our effective annual income tax rate was 31.6% in fiscal 2006, 38.3% in fiscal 2005 and 38.2% in fiscal 2004. The tax provision for fiscal 2006 includes a fourth quarter benefit of $47 million due to the repatriation of earnings from our Canadian subsidiary. In addition, during the fourth quarter of fiscal 2006, we corrected our accounting for the tax impact of foreign currency gains on certain intercompany loans. We had previously established a deferred tax liability on these gains which are not taxable. The impact of correcting for the tax treatment of these gains results in a tax benefit of $22 million, or $.04 per share in fiscal 2006. The cumulative impact of this adjustment through the end of the third quarter of fiscal 2006 was $18.2 million, all of which was recorded in the fourth quarter of fiscal 2006. Of the $18.2 million, $10.1 million related to fiscal 2005. These two items collectively reduced the fiscal 2006 effective income tax rate by 6.8%. See Note H to the consolidated financial statements. The increase in the effective income tax rate in fiscal 2005 as compared to fiscal 2004 was primarily due to increases in state income tax rates.

      Net income: Net income was $690.4 million in fiscal 2006, $609.7 million in fiscal 2005 and $609.4 million in fiscal 2004. Net income per share was $1.41 in fiscal 2006, $1.21 in fiscal 2005 and $1.16 in fiscal 2004.

       Net income for fiscal 2006 was favorably impacted by a tax benefit of $47 million, or $.10 per share, due to the repatriation of foreign earnings as well as a tax benefit of $22 million, or $.04 per share, relating to the correction of a previously established deferred tax liability. Net income for fiscal 2006 was adversely impacted by approximately $12 million, or $.02 per share, due to the third quarter events. These third quarter events included the after-tax cost of executive resignation agreements, primarily with respect to our former CEO ($5 million),e-commerce exit costs and third quarter operating losses ($6 million), and uninsured losses due to hurricanes in the third quarter, including the estimated impact of lost sales ($6 million), all of which were partially offset by a gain from a VISA/MasterCard antitrust litigation settlement ($5 million). Operating losses of the e-commerce operation in the first six months of fiscal 2006 were largely offset by fiscal 2005 start up costs and a fourth quarter operating loss in fiscal 2005.

       Net income for fiscal 2005 was reduced by $19.3 million, or $.04 per share, as a result of the after-tax effect of the $30.7 million cumulative pre-tax, non-cash charge associated with our lease accounting practices. In fiscal 2004, we estimate that the 53rd week added approximately $24 million to net income and $.05 to our earnings per share. Lastly, favorable changes in currency exchange rates during fiscal 2005 and fiscal 2004 added approximately $.02 to our earnings per share in each year.

       The change in earnings per share from year to year was favorably impacted by our share repurchase program. During fiscal 2006 we repurchased 25.9 million shares of our stock at a cost of $600 million and in fiscal 2005 we repurchased 25.1 million shares at a cost of $588 million. We plan to continue our share repurchase program in fiscal 2007 with planned purchases of approximately $650 million.

       Trends improved in the fourth quarter, with significant increases in net income and earnings per share compared to the prior year. Reported net income was $288.7 million, up 75% over the prior year, and earnings per share was $.60, up 82% over the prior year. Results for both of these years include certain items that affect the comparability of reported results. The chart below shows the effect of these items on fourth quarter net income and earnings per share:

       Excluding these one-time items, fourth quarter net income was $220 million, up 19% and earnings per share was $.46, up 24%. Results were driven by same store sales growth of 3% as well as by decreases in cost of sales, including buying and occupancy costs and selling, general and administrative expenses as a percent of net sales. The reduction in the cost of sales ratio was due to improved merchandise margins, with reduced levels of markdowns at our Winners, HomeGoods and A.J. Wright divisions being the major factors. The reduction in the selling, general and administrative expense ratio was due to a decrease in store payroll and other store costs as a percentage of net sales.

      Segment information: The following is a discussion of the operating results of our business segments. We consider each of our operating divisions to be a 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 and interest expense, net. “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. More detailed information about our segments, including a reconciliation of “segment profit or loss” to “income before provision for income taxes” can be found in Note N to the consolidated financial statements.

       Segment profit or loss for fiscal 2005 includes each segment’s share of the cumulative pre-tax charge relating to lease accounting. See Note A to the consolidated financial statements under the caption “Lease Accounting.” Also, segment profit for the current year and all prior periods include the effect of the adoption of SFAS No. 123(R).

       Segment profit for fiscal 2006 was positively impacted by the strong fourth quarter, in which every division increased its segment profit, or decreased its segment loss, compared to the fourth quarter of the prior year.

       Marmaxx posted a 2% same store sales increase in fiscal 2006, compared to a 4% increase in same store sales for fiscal 2005. Same store sales growth in fiscal 2006 was driven by strong sales in the jewelry, accessories and footwear categories, while same store sales for home fashions and women’s sportswear were below the chain average. Same store sales in fiscal 2005 also reflected strong sales in the jewelry, accessories and footwear categories as well as women’s sportswear. Same store sales in both years benefited from the continuation of the Marmaxx program whereby certain

departments in the T.J. Maxx and Marshalls stores were expanded. Marmaxx ended fiscal 2006 with 594 T.J. Maxx stores with expanded jewelry and accessories departments and 146 Marshalls stores with expanded footwear departments as compared to 303 T.J. Maxx stores with expanded jewelry and accessories departments and 67 Marshalls stores with expanded footwear departments at the end of fiscal 2005. These initiatives were significant factors in Marmaxx’s overall same store sales results, particularly in fiscal 2005 when sales in the stores with the expanded departments were above the chain average. Geographically in fiscal 2006, Florida, the Southwest and the West Coast all performed above the chain average, while the Northeast and the Midwest performed below the chain average.

       Segment profit as a percentage of net sales (“segment margin”) decreased to 9.0% in fiscal 2006 from 9.4% in fiscal 2005. The decline in the fiscal 2006 segment margin was largely driven by the de-levering impact of a 2% same store sales increase, which impacted operating expense ratios, primarily occupancy costs (which increased .3% as a percentage of sales) and distribution center costs (which increased .1% as a percentage of sales). In addition, the certain third quarter events described earlier (e-commerce and hurricane related losses offset in part by the gain from the VISA/ MasterCard settlement) reduced segment margin in fiscal 2006 by .1%. The comparison to the fiscal 2005 margin is favorably impacted by the inclusion in last year’s segment profit of a $16.8 million charge for the cumulative impact of the lease accounting adjustment, which reduced fiscal 2005 segment profit margin by .2%. Merchandise margin for fiscal 2006 was essentially flat compared to fiscal 2005 despite fuel related increases in freight costs. As of January 28, 2006, average inventories per store were down 10% compared to the prior year primarily due to reduced inventory levels on hand at the distribution centers.

       Segment margin increased in fiscal 2005 compared to fiscal 2004 despite the impact of the lease accounting charge described above. In fiscal 2005, Marmaxx executed its merchandising and inventory strategies effectively, which led to strong markon and improved merchandise margins which increased .4%. Marmaxx also effectively managed expenses in fiscal 2005. These improvements in segment profit margin were partially offset by an increase in occupancy costs of .3% as a percentage of sales, .2% of which represents the impact of the lease accounting charge. Segment profit and segment profit margin for fiscal 2005 as compared to fiscal 2004 are also impacted by the benefit of the 53rd week in the fiscal 2004 reporting period. The 53rd week in fiscal 2004 had an estimated favorable impact of .2% on the segment profit margin for that year, as the sales volume from this extra week helped to lever certain fixed costs.

       We added a net of 46 new stores (T.J. Maxx or Marshalls) in fiscal 2006 and increased total selling square footage of the division by 4%. We expect to open 50 new stores (net of closings) in fiscal 2007, increasing the Marmaxx store base by 3% and increasing its selling square footage by 4%. We plan to add approximately 99 expanded jewelry and accessories departments in existing and new T.J. Maxx stores and to add approximately 130 expanded footwear departments in existing and new Marshalls stores.

WINNERS AND HOMESENSE:

       Net sales for Winners and HomeSense, our Canadian businesses, for fiscal 2006 increased by 13% over fiscal 2005, with approximately half of this growth due to currency exchange rates. Same store sales (in local currency) decreased by 3% in fiscal 2006 and increased by 4% in fiscal 2005. Same store sales for fiscal 2006 were adversely impacted by a decline

in the average unit selling price. Same store sales were also impacted by lower clearance sales volume, primarily in the second half of the year, as Winners’ per-store inventories were significantly below the prior year due to improved inventory management. At the end of fiscal 2006, average per-store inventories were down 6% compared to the prior year. Same store sales were also negatively impacted by declines in the women’s sportswear and home fashion categories.

       Segment profit margin improved by .5% compared to fiscal 2005. This improvement was primarily due to a 2.9% increase in merchandise margins which were driven by improved inventory management resulting in reduced clearance sales and lower markdowns. The increase in merchandise margin was partially offset by the de-levering impact of the 3% decline in same store sales. Expense ratios increased across most categories, with a 1.4% increase in occupancy and distribution costs being the most significant. Incremental costs associated with three store closings in fiscal 2006 also impacted segment profit. The comparison of segment profit and segment margin for fiscal 2006 to fiscal 2005 is also favorably impacted by the inclusion in the fiscal 2005 segment profit of a $3.5 million charge for this division’s share of the cumulative impact of the lease accounting adjustment.

       The growth in Winners segment profit in fiscal 2005 over fiscal 2004 was due to favorable currency exchange rates. The segment profit margin for fiscal 2005 of 7.8% was 1.4% below fiscal 2004, primarily due to lower merchandise margins, which decreased .9% from the prior year, primarily driven by markdowns. Sales in the second half of fiscal 2005 slowed considerably from the first half, due to unseasonable weather and a promotional retail environment. This, combined with Winners’ aggressive buying based on the strength of its first-half sales, resulted in excess inventories, requiring the division to take aggressive markdowns to clear merchandise in the second half of the year, negatively impacting segment profit margin. The lease accounting charge reduced segment profit margin by .2% in fiscal 2005.

       The change in segment profit margin for both fiscal 2006 and fiscal 2005 was negatively impacted by the growth of the Company’s HomeSense business, which is at an earlier stage of development than the core Winners business and therefore operates with higher expense ratios.

       We added a net of 6 Winners stores and 18 HomeSense stores in fiscal 2006, and expanded selling square footage in Canada by 12%. We expect to add a net of 11 Winners and 10 HomeSense stores in fiscal 2007, increasing our total Canadian store base by 9%, and increasing selling square footage by 8%. The store counts include the Winners portion and HomeSense portion of this division’s superstores which either combine a Winners store with a HomeSense store or operates them side-by-side. As of January 28, 2006, we operated 22 of these superstores and expect to have a total of 29 superstores at the end of fiscal 2007.

T.K. MAXX:

       Net sales in fiscal 2006 for T.K. Maxx, operating in the United Kingdom and Ireland, increased by 16% over fiscal 2005. T.K. Maxx had a same store sales increase of 1% (in local currency) in fiscal 2006 on top of a 3% increase in fiscal 2005. T.K. Maxx’s same store sales in fiscal 2006 were negatively impacted by a weak retail environment in the United Kingdom, as well as unseasonably warm weather early in the year. Women’s sportswear and footwear categories were below the chain average, while sales of home fashions were strong.

       Segment profit margin declined .3% to 4.6% of sales. T.K. Maxx had an improved merchandise margin in fiscal 2006, primarily due to lower markdowns. In addition, the comparison of segment profit and segment margin for fiscal 2006 to fiscal 2005 is favorably impacted by the inclusion in the fiscal 2005 segment profit of this division’s share of the

cumulative impact of the lease accounting adjustment of $6.5 million. These improvements however, were more than offset by an increase in occupancy expense due to higher cost for rent, utilities and property taxes as well as the de-levering impact of a 1% same store sales increase. Distribution and administrative costs as a percentage of net sales were essentially flat compared to fiscal 2005, despite the low same store sales increase.

       T.K. Maxx’s operating results for fiscal 2005 were adversely affected by unseasonable weather patterns in the first half of the year and a highly promotional retail environment in the latter half of the year. In light of the retail environment under which T.K. Maxx operated in fiscal 2005, this division was effective in managing inventories and expenses to minimize the impact on segment profit margins. Segment profit and segment margin for fiscal 2005 include a $6.5 million charge for T.K. Maxx’s share of the cumulative impact of the lease accounting adjustment. The significant growth in T.K. Maxx’s segment profit in fiscal 2005 is attributable to the increase in sales as well as the favorable benefit of foreign currency exchange rates. The segment profit margin in fiscal 2005 decreased .5% to 4.9%, primarily due to an increase in occupancy costs of .7% as a percentage of sales, of which .5% was attributable to the cumulative lease accounting charge.

       We added 27 new T.K. Maxx stores in fiscal 2006 and increased the division’s selling square footage by 21%. We plan to open an additional 15 T.K. Maxx stores in fiscal 2007, and expand selling square footage by 10%.

HOMEGOODS:

       HomeGoods’ same store sales grew 1% in both fiscal 2006 and fiscal 2005. Customer transactions and unit sales increased at HomeGoods during fiscal 2006 compared to fiscal 2005, but these increases were partially offset by a decline in the average ticket resulting from planned changes to the merchandise mix. Segment profit increased to $28.4 million from $18.1 million and segment profit margin increased to 2.4% of sales from 1.8% of sales in the prior year. The increase in segment profit margin resulted primarily from an increase in merchandise margin (lower markdowns partially offset by the impact of higher freight costs), as well as the impact on prior year results of the cumulative lease accounting charge of $2.2 million. HomeGoods fourth quarter same store sales and operating results were particularly strong. The strength of HomeGoods fourth quarter more than offset unfavorable factors to segment profit and margin for fiscal 2006, including the de-levering impact of the 1% same store sales increase,e-commerce operating loss of $3.7 million and approximately $2 million of costs related to the planned closing of a distribution center.

       Segment profit in fiscal 2005 declined to $18.1 million from $45.4 million in the prior year. The business was adversely affected by weaker retail demand for home fashion product as well as an unfavorable merchandise mix, which led to a 1% same store sales increase. The business also took additional markdowns, which led to a reduction in its merchandise margin. The decline in segment profit margin from 5.2% in fiscal 2004 to 1.8% in fiscal 2005 is primarily due to this reduction in merchandise margin. Segment profit in fiscal 2005 also included a charge for $2.2 million for HomeGoods’ share of the cumulative impact of the lease accounting adjustment. Segment profit margin was also impacted by increases in occupancy costs and distribution center costs as a percentage of net sales. These expense ratio increases reflect the de-levering impact on expense ratios of a 1% same store sales increase.

       We opened a net of 35 HomeGoods stores in fiscal 2006, a 16% increase, and increased selling square footage of the division by 17%. In fiscal 2007, we plan to add a net of 10 HomeGoods stores (15 new less 5 closings) and increase selling square footage by 5%, reflecting our plan to slow the pace of store openings for this division.

A.J. WRIGHT:

       A.J. Wright’s same store sales increased 3% for fiscal 2006 compared to a 4% increase in same store sales for fiscal 2005. A.J. Wright’s segment loss for fiscal 2006 was narrowed to $2.2 million from $19.6 million in fiscal 2005. This improvement was driven by improved merchandise margin, primarily the result of lower markdowns in fiscal 2006. The comparison to fiscal 2005 is also impacted by the inclusion of a $1.7 million charge in fiscal 2005 for its share of the lease accounting adjustment. In fiscal 2006, effective expense control also led to a reduction in expenses as a percentage of sales across most expense categories, primarily in advertising and store payroll and benefits. We reduced the number of our new store openings for A.J. Wright in fiscal 2006 as we believe that the pace of store openings in fiscal 2005 may have been too aggressive for this young division, placing a strain on operations.

       A.J. Wright’s segment loss grew to $19.6 million in fiscal 2005 from $2.1 million in fiscal 2004. We believe that the A.J. Wright customer is more sensitive to economic factors, such as higher energy costs, and that such factors along with a weaker demand in urban fashion trends impacted sales in fiscal 2005. These sales trends caused us to take higher markdowns to clear inventories and to reposition our merchandise mix. Segment profit margin for fiscal 2005 reflected a reduction in merchandise margins of 1.2%, primarily due to this higher markdown activity. In addition, the lower-than- planned sales volume for fiscal 2005 negatively impacted expense ratios for occupancy costs, distribution center costs and store payroll. Distribution center costs were also impacted by expense increases relating to A.J. Wright’s new distribution facility in Indiana. Segment loss for fiscal 2005 also included a $1.7 million charge for A.J. Wright’s share of the cumulative impact of the lease accounting adjustment.

       We added 22 new A.J. Wright stores in fiscal 2006, increasing selling square footage by 17%. In fiscal 2007, we plan to add a net of 8 new stores (10 new stores less 2 closings) and increase selling square footage by 5%, reflecting our plan to slow the pace of new store openings.

BOB’S STORES:

       Fiscal 2005 was the first full fiscal year for Bob’s Stores as a TJX division. Bob’s Stores operated 35 stores as of the end of fiscal 2006. Net sales for fiscal 2006 were less than the prior year, primarily due to a reduction in the number of promotional advertising circulars. Although merchandise margin improved in fiscal 2006 (due to lower promotional markdowns), the sales decline and incremental operating costs resulted in an increased segment loss for fiscal 2006 as compared to fiscal 2005. Segment loss in fiscal 2006 also includes severance costs of $0.8 million in connection with a reduction in the work force at Bob’s Stores. For fiscal 2007, we plan to open 1 Bob’s store. We are in the process of implementing new strategies for Bob’s with the goal of reducing its segment loss in fiscal 2007.

GENERAL CORPORATE EXPENSE:

       General corporate expense for segment reporting purposes are those costs not specifically related to the operations of our business segments. This item includes the costs of the corporate office, including the compensation and benefits (including stock based compensation) for senior corporate management; payroll and operating costs of the corporate departments of accounting and budgeting, internal audit, treasury, investor relations, tax, risk management, legal, human resources and systems; and the occupancy and office maintenance costs associated with the corporate staff. In addition, general corporate expense includes the cost of benefits for existing retirees and non-operating costs and other gains and losses not attributable to individual divisions. General corporate expense is included in selling, general and administrative expenses in the consolidated statements of income.

       The increase in general corporate expense in fiscal 2006 over fiscal 2005 is primarily due to the costs associated with executive resignation agreements ($9 million) and of exiting the e-commercebusiness of ($6 million). Both of these items occurred in our third quarter period ended October 29, 2005. In addition, general corporate expense includes a charge ($4 million) in connection with an idle leased facility.

       The increase in general corporate expense in fiscal 2005 over the prior year reflects the change in net foreign exchange gains and losses, the majority of which relates to derivative contracts that hedge foreign currency exposures on intercompany activity. In addition, general corporate expense for fiscal 2005 reflects an increase in general corporate overhead, incremental audit fees and costs related to thestart-up of oure-commerce businesses. This increase was offset in part by a $6.3 million reduction in contributions to The TJX Foundation in fiscal 2005, compared to fiscal 2004.

LIQUIDITY AND CAPITAL RESOURCES

       Net cash provided by operating activities was $1,158.0 million in fiscal 2006, $1,076.8 million in fiscal 2005, and $767.9 million in fiscal 2004. The cash generated from operating activities in each of these fiscal years was largely due to operating earnings. Net income adjusted for non-cash items was essentially the same in each year. The difference in net cash provided from operating activities from year to year was largely driven by the change in inventory, net of accounts payable, from prior year-end levels. In fiscal 2006 this change in net inventory position resulted in a source of cash of $26.2 million compared to a use of cash of $85.3 million in fiscal 2005 and $191.8 million in fiscal 2004. This trend is largely explained by our average per store inventory levels at each year-end period. Average per store inventories at January 28, 2006, including inventory on hand at our distribution centers, decreased 11% compared to the prior year and at January 29, 2005 they increased 1% compared to the prior year. This compares to inventories per store at January 31, 2004 that were up 11% compared to the prior year. Effective with the third quarter ended October 30, 2004, we began to accrue for inventory obligations at the time inventory is shipped rather than when received and accepted by TJX. This accrual increased inventory by $341 million as of January 28, 2006 and by $237 million as of January 29, 2005 along with a comparable increase to our accounts payable, and thus had no impact on cash flows from operations.

       The cash flows from operating activities for both fiscal 2006 and fiscal 2005 were also impacted by increases in accrued expenses and other liabilities in each year. Accrued expenses and other liabilities increased in each year in part due to higher liabilities for rent, gift cards and payroll and benefits. In addition, fiscal 2005 was impacted by an increase in deferred landlord allowances. Cash flows from operating activities were reduced by contributions to our qualified pension fund of $40 million in fiscal 2006, $25.0 million in fiscal 2005 and $17.5 million in fiscal 2004. All of the contributions to the pension fund in fiscal 2006, 2005 and 2004 were made on a voluntary basis.

      Discontinued operations reserve: We have a reserve for potential future obligations of discontinued operations that relates primarily to real estate leases of former TJX businesses. The reserve reflects TJX’s estimation of its cost for claims, updated quarterly, that have been, or are likely to be, made against TJX for liability as an original lessee or guarantor of

the leases of these businesses, after mitigation of the number and cost of lease obligations. At January 28, 2006, substantially all leases of discontinued operations that were rejected in bankruptcy and for which the landlords asserted liability against TJX had been resolved. Although TJX’s actual costs with respect to any of these leases may exceed amounts estimated in our reserve, and TJX may incur costs for leases from these discontinued operations that were not terminated or had not expired, TJX does not expect to incur any material costs related to discontinued operations in excess of the reserve. The reserve balance amounted to $15.0 million as of January 28, 2006, $12.4 million as of January 29, 2005 and $17.5 million as of January 31, 2004. During fiscal 2006, TJX received creditor recoveries of $8.5 million, offset by equivalent additions to the reserve to reflect adjustments to the reserve during the year. Any additional creditor recoveries are expected to be immaterial.

       We may also be contingently liable on up to 18 leases of BJ’s Wholesale Club, another former TJX business, for which BJ’s Wholesale Club is primarily liable. Our reserve for discontinued operations does not reflect these leases, because we believe that the likelihood of any future liability to TJX with respect to these leases is remote due to the current financial condition of BJ’s Wholesale Club.

      Off-balance sheet liabilities: We have contingent obligations on leases, for which we were a lessee or guarantor, which were assigned to third parties without TJX being released by the landlords. Over many years, we have assigned numerous leases that we originally leased or guaranteed to a significant number of third parties. With the exception of leases of our discontinued operations discussed above, we have rarely had a claim with respect to assigned leases, and accordingly, we do not expect that such leases will have a material adverse effect on our financial condition, results of operations or cash flows. We do not generally have sufficient information about these leases to estimate our potential contingent obligations under them.

       We also have contingent obligations in connection with some assigned or sublet properties that we are able to estimate. We estimate the undiscounted obligations, not reflected in our reserves, of leases of closed stores of continuing operations, BJ’s Wholesale Club leases discussed above, and properties of our discontinued operations that we have sublet, if the subtenants did not fulfill their obligations, is approximately $100 million as of January 28, 2006. We believe that most or all of these contingent obligations will not revert to TJX and, to the extent they do, will be resolved for substantially less due to mitigating factors.

       We are a party to various agreements under which we may be obligated to indemnify the other party with respect to breach of warranty or losses related to such matters as title to assets sold, specified environmental matters or certain income taxes. These obligations are typically limited in time and amount. There are no amounts reflected in our balance sheets with respect to these contingent obligations.

Our cash flows for investing activities include capital expenditures for the last two years as set forth in the table below:

       We expect that capital expenditures will approximate $395 million for fiscal 2007. This includes $115 million for new stores, $226 million for store renovations, expansions and improvements and $54 million for our office and distribution centers. The planned decrease in capital expenditures is attributable to fewer new store openings, primarily at HomeGoods, A.J. Wright and T.K. Maxx, as well as lower capital spending across most other areas of our business.

       Cash flows from financing activities resulted in net cash outflows of $503.7 million in fiscal 2006, $584.6 million in fiscal 2005, and $544.3 million in fiscal 2004. The majority of this outflow relates to our share repurchase program.

       We spent $603.7 million in fiscal 2006, $594.6 million in fiscal 2005, and $520.7 million in fiscal 2004 under our stock repurchase programs. We repurchased 25.9 million shares in fiscal 2006, 25.1 million shares in fiscal 2005, and 26.8 million shares in fiscal 2004. All shares repurchased were retired. During fiscal 2006, we completed a $1 billion stock repurchase program and announced our intention to repurchase an additional $1 billion of common stock. Under the new $1 billion stock repurchase program, we repurchased 0.3 million shares at a total cost of $6.6 million through January 28, 2006.

       In January 2006, Winners entered into a C$235 million (US$204.4) non-revolving term credit facility, due in January 2009 and guaranteed by TJX. Interest is payable at rates equal to, or less than the Canadian prime rate. Winners entered into an interest rate swap agreement which effectively establishes a fixed rate of approximately 4.5% on this debt. The proceeds were used to fund the repatriation of Winners earnings to TJX as well as other general corporate purposes of this division. Financing activities also included scheduled principal payments on long-term debt of $100 million in fiscal 2006, $5 million in fiscal 2005, and $15 million in fiscal 2004.

       We declared quarterly dividends on our common stock which totaled $.24 per share in fiscal 2006, $.18 per share in fiscal 2005, and $.14 per share in fiscal 2004. Cash payments for dividends on our common stock totaled $105.3 million in fiscal 2006, $83.4 million in fiscal 2005, and $68.9 million in fiscal 2004. Financing activities also include proceeds of $102.4 million in fiscal 2006, $96.9 million in fiscal 2005, and $59.2 million in fiscal 2004 from the exercise of employee stock options.

       We traditionally have funded our seasonal merchandise requirements through cash generated from operations, short-term bank borrowings and the issuance of short-term commercial paper. In May 2005, we entered into a $500 million four-year revolving credit facility and a $500 million five-year revolving credit facility. These arrangements replaced our $370 million five-year revolving credit facility entered into in March 2002 and our $330 million364-day revolving credit facility, which had been extended through July 15, 2005. The new agreements have no compensating balance requirements and have various covenants including a requirement of a specified ratio of debt to earnings. These agreements serve as back up to our commercial paper program. As of January 28, 2006 there were no outstanding amounts under our credit facilities. The maximum amount of our U.S. short-term borrowings outstanding was $567 million during fiscal 2006, $5 million during fiscal 2005 and $27 million during fiscal 2004. The weighted average interest rate on our U.S. short-term borrowings was 3.69% in fiscal 2006, 2.04% in fiscal 2005 and 1.09% in fiscal 2004.

       As of January 28, 2006, Winners had credit lines totaling C$20 million, C$10 million to meet certain operating needs and C$10 million letter of credit facility. There were credit lines totaling C$20 million at both January 29, 2005 and January 31, 2004, respectively. The maximum amount outstanding under our Canadian credit lines was C$4.6 million in fiscal 2006, C$6.8 million in fiscal 2005, and C$5.6 million in fiscal 2004. As of January 28, 2006, T.K. Maxx had a £2 million credit line to meet certain operating needs. The maximum amount outstanding in fiscal 2006 was £1.7 million on this line. There were no outstanding borrowings on either of these credit lines as of January 28, 2006.

       We believe that our current credit facilities are more than adequate to meet our operating needs. See Note C to the consolidated financial statements for further information regarding our long-term debt and available financing sources.

      Contractual obligations: As of January 28, 2006, we had payment obligations (including current installments) under long-term debt arrangements, leases for property and equipment and purchase obligations that will require cash outflows as follows (in thousands):

The long-term debt obligations above includes estimated interest costs and assumes that all holders of the zero coupon convertible subordinated notes exercise their put option in fiscal 2008. The note holders also have a put option available to them in fiscal 2014. If none of the put options are exercised and the notes are not redeemed or converted, the notes will mature in fiscal 2022. The effect of the interest rate swap agreements was estimated based on their values as of January 28, 2006.

       The lease commitments in the above table are for minimum rent and do not include costs for insurance, real estate taxes and common area maintenance costs that we are obligated to pay. These costs were approximately one-third of the total minimum rent for the fiscal year ended January 28, 2006.

       Our purchase obligations consist of purchase orders for merchandise; purchase orders for capital expenditures, supplies and other operating needs; commitments under contracts for maintenance needs and other services; and commitments under executive employment agreements. We excluded long-term agreements for services and operating needs that can be cancelled without penalty.

       We also have long-term liabilities which includes $138.7 million for employee compensation and benefits, most of which will come due beyond five years, derivative contracts of approximately $100 million, the majority of which comes due in fiscal 2010 and $133.2 million for accrued rent, the cash flow requirements of which are included in the lease commitments in the above table.

CRITICAL ACCOUNTING POLICIES

       TJX must evaluate and select applicable accounting policies. We consider our most critical accounting policies, involving management estimates and judgments, to be those relating to inventory valuation, retirement obligations, casualty insurance, and accounting for taxes. We believe that we have selected the most appropriate assumptions in each of the following areas and that the results we would have obtained, had alternative assumptions been selected, would not be materially different from the results we have reported.

      Inventory valuation: We use the retail method for valuing inventory on a first-infirst-out basis. Under the retail method, the cost value of inventory and gross margins are determined by calculating acost-to-retail ratio and applying it to the retail value of inventory. This method is widely used in the retail industry and involves management estimates with regard to such things as markdowns and inventory shrinkage. A significant factor involves the recording and timing of permanent markdowns. Under the retail method, permanent markdowns are reflected in the inventory valuation when the price of an item is changed. We believe the retail method results in a more conservative inventory valuation than other accounting methods. In addition, as a normal business practice, we have a very specific policy as to when markdowns are to be taken, greatly reducing the need for management estimates. Inventory shortage involves estimating a shrinkage rate for interim periods, but is based on a full physical inventory at fiscal year end. Thus, the difference between actual and estimated amounts may cause fluctuations in quarterly results, but is not a factor in full year results. Overall, we believe that the retail method, coupled with our disciplined permanent markdown policy and a full physical inventory taken at each fiscal year end, results in an inventory valuation that is fairly stated. Lastly, many retailers have arrangements with vendors that provide for rebates and allowances under certain conditions, which ultimately affect the

value of the inventory. Our off-price businesses have historically not entered into such arrangements with our vendors. Bob’s Stores, the value-oriented retailer we acquired in December 2003, does have vendor relationships that provide for recovery of advertising dollars if certain conditions are met. These arrangements do have some impact on Bob’s inventory valuation but such amounts are immaterial to our consolidated results.

      Retirement obligations: Retirement costs are accrued over the service life of an employee and represent in the aggregate obligations that will ultimately be settled far in the future and are therefore subject to estimates. We are required to make assumptions regarding variables, such as the discount rate for valuing pension obligations and the long-term rate of return assumed to be earned on pension assets, both of which impact the net periodic pension cost for the period. The discount rate, which we determine annually based on market interest rates, has dropped over the past several years and our actual returns on pension assets for fiscal 2006 and for several years prior to fiscal 2004 were considerably less than our expected returns. These two factors can have a considerable impact on the annual cost of retirement benefits and in recent years have had an unfavorable effect on the funded status of our qualified pension plan. We have made contributions of $82.5 million, which exceeded the minimum required, over the last three years to largely restore the funded status of our plan.

      Casualty insurance: TJX’s casualty insurance program requires TJX to estimate the total claims it will incur as a component of its annual insurance cost. The estimated claims are developed, with the assistance of an actuary, based on historical experience and other factors. These estimates involve significant estimates and assumptions and actual results could differ from these estimates. If TJX’s estimate for the claims component of its casualty insurance expense for fiscal 2006 were to change by 10%, the fiscal 2006 pre-tax cost would increase or decrease by approximately $5.5 million. A large portion of these claims are funded with a non-refundable payment during the policy year, offsetting our estimated claims accrual. The company has a net accrual of $34.7 million for the unfunded portion of its casualty insurance program as of January 28, 2006.

      Accounting for taxes: Like many large corporations, we are regularly under audit by the United States federal, state, local or foreign tax authorities in the areas of income taxes and the remittance of sales and use taxes. In evaluating the potential exposure associated with the various tax filing positions, we accrue charges for possible exposures. Based on the annual evaluations of tax positions, we believe we have appropriately filed our tax returns and accrued for possible exposures. To the extent we were to prevail in matters for which accruals have been established or be required to pay amounts in excess of reserves, our effective tax rate in a given financial period might be materially impacted. The Internal Revenue Service has examined the fiscal years ended January 2000 through January 2003 and several proposed adjustments are under appeal. We also have various state and foreign tax examinations in process.

RECENT ACCOUNTING PRONOUNCEMENTS

       In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment” (SFAS No. 123R) which requires that the cost of all employee stock options, as well as other equity-based compensation arrangements, be reflected in the financial statements based on the estimated fair value of the awards on the grant date (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award or the requisite service period (usually the vesting period). TJX adopted this standard in the fourth quarter of fiscal 2006 and elected the modified retrospective transition method. Accordingly all prior periods have been adjusted to reflect the impact of SFAS No. 123R in amounts equal to the pro forma results presented in the notes to consolidated financial statements.

       In November 2004, the FASB issued SFAS No. 151, “Inventory Costs,” which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) by requiring these items to be recognized as current-period charges. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005, with earlier application permitted. We do not believe the adoption of this Statement will have any material impact on our financial statements.

       In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets,” an amendment of APB Opinion No. 29. This Statement addresses the measurement of exchanges of nonmonetary assets. It eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of

APB 29 and replaces it with an exception for exchanges that do not have commercial substance. We adopted SFAS No. 153 in the second quarter of fiscal 2006 which did not have a material impact on our financial statements.

       In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” a replacement of APB Opinion No. 20, and FASB Statement No. 3. SFAS No. 154 changes the requirements for accounting and reporting a change in accounting principle. The Statement requires retrospective application of a voluntary change in accounting principle to prior period financial statements rather than recording the cumulative effect of the change in net earnings in the current period. SFAS No. 154 also strictly defines the term “restatement” to mean the correction of an error by revising previously issued financial statements. SFAS No. 154 is effective for fiscal years beginning after December 15, 2005 (fiscal 2007 for TJX). We do not expect the adoption of SFAS No. 154 to have a material effect on our results of operations, financial condition or cash flows.

       In June 2005, the EITF reached a consensus on Issue No. 05-06, “Determining the Amortization Period for Leasehold Improvements” (“EITF 05-06”).EITF 05-06provides guidance for determining the amortization period used for leasehold improvements acquired in a business combination or purchased after the inception of a lease, collectively referred to as subsequently acquired leasehold improvements. EITF 05-06provides that the amortization period used for the subsequently acquired leasehold improvements to be the lesser of (a) the subsequently acquired leasehold improvements’ useful lives, or (b) a period that reflects renewals that are reasonably assured upon the acquisition or the purchase. EITF 05-06 is effective on a prospective basis for subsequently acquired leasehold improvements purchased or acquired in periods beginning after the date of the FASB’s ratification, which was on June 29, 2005. The adoption of EITF 05-06 did not have a material impact on our results of operations or financial condition.

       Financial Accounting Standards Board Interpretation No. 47 (FIN 47), “Accounting for Conditional Asset Retirement Obligations (an interpretation of FASB Statement No. 143)” was issued in March 2005. This Interpretation provides clarification with respect to the timing of liability recognition for legal obligations associated with the retirement of tangible long-lived assets when the timing and/or method of settlement of the obligation is conditional on a future event. This Interpretation requires that the fair value of a liability for a conditional asset retirement obligation be recognized in the period in which it occurred if a reasonable estimate of fair value can be made. We have determined that conditional legal obligations exist for certain of our leased facilities, primarily our distribution centers. The asset retirement obligation and the annual cost reflected in these financials is immaterial.

MARKET RISK

       We are exposed to foreign currency exchange rate risk on our investment in our Canadian (Winners and HomeSense) and European (T.K. Maxx) operations. As more fully described in Notes A and D to the consolidated financial statements, we hedge a significant portion of our net investment in foreign operations; intercompany transactions with these operations; and certain merchandise purchase commitments incurred by these operations; with derivative financial instruments. We utilize currency forward and swap contracts, designed to offset the gains or losses in the underlying exposures. The contracts are executed with banks we believe are creditworthy and are denominated in currencies of major industrial countries. We do not enter into derivatives for speculative trading purposes.

       We are also subject to interest rate risk under the terms of our revolving credit line, which has variable rate of interest. The impact on our future interest expense as a result of future changes in interest rates will depend largely on the gross amount of our borrowings.

       In addition, the assets of our qualified pension plan, a large portion of which is invested in equity securities, are subject to the risks and uncertainties of the public stock market. We allocate the pension assets in a manner that attempts to minimize and control our exposure to these market uncertainties.

       We are exposed to foreign currency exchange rate risk on our investment in our Canadian (Winners and HomeSense) and European (T.K. Maxx) operations. As more fully described in Notes A and D to the consolidated financial statements, we hedge a significant portion of our net investment in foreign operations; intercompany transactions with these operations; and certain merchandise purchase commitments incurred by these operations; with derivative financial instruments. We enter into derivative contracts only when there is an underlying economic exposure. We utilize currency forward and swap contracts, designed to offset the gains or losses in the underlying exposures; most of these gains and losses are recorded directly in shareholders’ equity. The contracts are executed with banks we believe are creditworthy and are denominated in currencies of major industrial countries. We have performed a sensitivity analysis assuming a hypothetical 10% adverse movement in foreign currency exchange rates applied to the hedging contracts and the underlying exposures described above. As of January 28, 2006, the analysis indicated that such an adverse movement would not have a material effect on our consolidated financial position, results of operations or cash flows.

       Our cash equivalents and short-term investments and certain lines of credit bear variable interest rates. Changes in interest rates affect interest earned and paid by the Company. We occasionally enter into financial instruments to manage our cost of borrowing; however, we believe that the use of primarily fixed rate debt minimizes our exposure to market conditions.

       We have performed a sensitivity analysis assuming a hypothetical 10% adverse movement in interest rates applied to the maximum variable rate debt outstanding during the previous year. As of January 28, 2006, the analysis indicated that such an adverse movement would not have a material effect on our consolidated financial position, results of operations or cash flows.

       The information required by this item may be found on pages F-1 through F-35 of this Annual Report on Form 10-K.

       Not applicable.

       The Company carried out an evaluation as of the end of the period covered by this report, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15e and15d-15e of the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in ensuring that all information required to be filed in this annual report was recorded, processed, summarized and reported within the time period required by the rules and regulations of the Securities and Exchange Commission, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

       There have been no changes in internal controls over financial reporting, that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

       The management of TJX is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f)promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

       Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

       Under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting as of January 28, 2006 based on the framework inInternal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on that evaluation, management concluded that its internal control over financial reporting was effective as of January 28, 2006.

       PricewaterhouseCoopers LLP, an independent registered public accounting firm, who audited and reported on the consolidated financial statements of The TJX Companies, Inc., has audited management’s assessment of our internal control over financial reporting as of January 28, 2006, as stated in their report which is included herein.

       Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of January 28, 2006 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

       None.

PART III

       TJX will file with the Securities and Exchange Commission a definitive proxy statement no later than 120 days after the close of its fiscal year ended January 28, 2006. The information required by this Item and not given in Item 4A, under the caption “Executive Officers of the Registrant,” will appear under the headings “Election of Directors,” “Corporate Governance,” “Audit Committee Report” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our Proxy Statement, which sections are incorporated in this item by reference.

       The information required by this Item will appear under the heading “Executive Compensation” in our Proxy Statement, which section is incorporated in this item by reference.

       The information required by this Item will appear under the heading “Beneficial Ownership” in our Proxy Statement, which section is incorporated in this item by reference.

       The following table provides certain information as of January 28, 2006 with respect to our equity compensation plans:

Equity Compensation Plan Information

       For additional information concerning our equity compensation plans, see Note F to our consolidated financial statements, on page F-18.

       The information required by this Item will appear under the heading “Retirement Plans” in our Proxy Statement, which section is incorporated in this item by reference.

       The information required by this Item will appear under the heading “Audit Committee Report” in our Proxy Statement, which section is incorporated in this item by reference.

PART IV

       For a list of the consolidated financial information included herein, see Index to the Consolidated Financial Statements on page F-1.

Schedule II - Valuation and Qualifying Accounts

       Listed below are all exhibits filed as part of this report. Some exhibits are filed by the Registrant with the Securities and Exchange Commission pursuant to Rule 12b-32 under the Securities Exchange Act of 1934, as amended.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: March 29, 2006

       Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

Dated: March 29, 2006

To The Board of Directors and Shareholders of The TJX Companies, Inc:

We have completed integrated audits of The TJX Companies, Inc.’s 2006 and 2005 consolidated financial statements and of its internal control over financial reporting as of January 28, 2006, and an audit of its 2004 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of The TJX Companies, Inc. and its subsidiaries (the “Company”) at January 28, 2006 and January 29, 2005, and the results of their operations and their cash flows for each of the three years in the period ended January 28, 2006 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note F to the consolidated financial statements, the Company has adjusted its financial statements to reflect the adoption of Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment (Revised 2004)” for all periods presented.

Also, in our opinion, management’s assessment, included in “Management’s Annual Report on Internal Control Over Financial Reporting” appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of January 28, 2006 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 28, 2006, based on criteria established in Internal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP

Boston, Massachusetts

March 27, 2006

Consolidated Statements of Income

Prior periods have been adjusted to reflect the effect of adopting SFAS 123(R). See Note A to consolidated financial statements.

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

Consolidated Balance Sheets