Consumer spending is adversely affected by general economic and other factors, which are beyond our control, and could adversely affect our sales and operating results.

 

 

Interest rates; recession; inflation; deflation; consumer credit availability; consumer debt levels; energy costs; tax rates and policy; unemployment trends; threats or possibilities of war, terrorism or other global or national unrest; actual or threatened epidemics; political or financial instability; and general economic and other factors have significant effects on consumer confidence and spending, which in turn affect sales at TJX and other retailers. These factors are beyond our control and could adversely affect our sales and performance.

 

We are subject to import risks.

 

 

Many of the products sold in our stores are sourced by our vendors and to a limited extent by us in many foreign countries. Imported merchandise is subject to various risks, including potential disruptions in supply, changes in duties, tariffs, quotas and voluntary export restrictions on imported merchandise, strikes and other events affecting delivery; and economic, political or other problems in countries from or through which merchandise is imported. Political or financial instability, trade restrictions, tariffs, currency exchange rates, transport capacity and costs and other factors relating to international trade and imported merchandise are beyond our control and could affect the availability and the price of our inventory.

 

Our expanding international operations expose us to risks inherent in foreign operations.

 

 

We have a significant presence in Canada, the United Kingdom and Ireland, and have plans to expand into Germany in fiscal 2008. 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 understanding the retail climate and trends, local customs and competitive conditions in foreign markets, complying with foreign laws, rules and regulations, and foreign currency fluctuations, which could have an adverse impact on our profitability.

 

Changes in laws and regulations and accounting rules and principles could negatively affect our business operations and financial performance.

 

 

Various aspects of our 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. Regulatory developments and changes in accounting rules and principles could adversely affect our business operations and financial performance.

 

We maintain internal controls over financial reporting, but they cannot provide absolute assurance that there will not be material errors in our financial reporting.

 

 

We maintain 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, our 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.

 

ITEM 1B.  Unresolved Staff Comments

 

 

None

 

 

The following is a summary of our primary distribution centers and administrative office locations as of January 27, 2007. 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 27, 2007:

 

 

ITEM 3.  Legal

 

 

Litigation.   Since mid-January, 2007, a number of putative class actions have been filed against TJX in state and federal courts in Alabama, California, Massachusetts and Puerto Rico, and in provincial Canadian courts in Alberta, British Columbia, Manitoba, Ontario, Quebec and Saskatchewan, putatively on behalf of customers, including all customers in the United States, Puerto Rico and Canada, whose transaction data were allegedly compromised by the Computer Intrusion. An action has also been filed against TJX in federal court in Massachusetts putatively on behalf of all financial institutions who issued credit and debit cards purportedly used at TJX stores during the period of the security breach. The actions assert claims, generally, for negligence and related common-law and/or statutory causes of action stemming from the Computer Intrusion, and seek various forms of relief including damages, related injunctive or equitable remedies, multiple or punitive damages, and attorney’s fees. Various wholly-owned subsidiaries of TJX, as well as Fifth Third Bank and/or Fifth Third Bancorp, are also named as defendants in several of the actions. These cases are all in their initial phases, and no discovery has commenced. On February 15, 2007, the plaintiffs in one of the cases filed a motion with the Judicial Panel on Multidistrict Litigation, MDL Docket No. 1838, to have all of the actions pending in federal court in the United States and Puerto Rico transferred to the District of Massachusetts for pretrial consolidation and coordination, and TJX has supported that motion. TJX intends to defend these actions vigorously. The actions referenced above are as follows:

 

 

On January 19, 2007, a putative class action was filed against TJX in the United States District Court for the District of Alabama, Wood, et ano. v. TJX, Inc., et al. , 07-cv-00147. The plaintiffs purport to represent a class of “all TJX customers who made credit card transactions at TJX’s stores during the period that the security of [d]efendants computer systems were compromised and the privacy or security of whose credit card, check card, or debit card account, transaction or non-public information was compromised.” The complaint asserts claims for negligence per se, negligence, bailment and breach of contract, and also names Fifth Third Bancorp as a defendant. Plaintiffs seek compensatory damages, credit monitoring, injunctive relief, attorney’s fees and costs. On March 6, 2007, the court granted an unopposed motion to stay the action pending disposition of the motion before the Judicial Panel for Multidistrict Litigation to transfer the action and similar federal court actions to the District of Massachusetts for pretrial consolidation and coordination.

 

 

On January 19, 2007, a putative class action was filed against TJX in the Supreme Court of British Columbia, Canada, Ryley v. TJX Companies, Inc. , et al. , Court File No. 07-0278. The plaintiff purports to represent a putative class of “all individuals resident in British Columbia, or throughout Canada and elsewhere, who have communicated confidential debit and credit information to the [d]efendants in 2003, or between May 1, 2006 and December 31, 2006.” The complaint also names “Winners Apparel Inc.” and “HomeSense Inc.” as defendants, and asserts claims for negligence, breach of confidence and violation of privacy. The plaintiff seeks general and pecuniary damages, punitive damages, interest, attorney’s fees and costs.

 

 

On January 19, 2007, a putative class action was filed against TJX in the Quebec Superior Court, Canada, Howick v. TJX Companies, Inc., et al. , Court File No. 06-000382-073. The plaintiff purports to represent a putative class of “[a]ll physical persons in Quebec and Canada and all legal persons in Quebec and Canada who, during the twelve (12) month period preceding this Motion for Authorization to Institute a Class Action, had not more than fifty (50) employees under their direction or control, who have communicated personal or confidential information to the [r]espondents and have suffered damage as a result of the loss or theft of this personal or confidential information.” The complaint also names “Winners Merchants International LP” and “HomeSense Inc.” as defendants. The plaintiff seeks general and special damages, punitive damages, attorney’s fees, interest and costs.

 

 

On January 20, 2007, a putative class action was filed against TJX in The Court of Queen’s Bench, Alberta, Canada, Churchman, et ano. v. The TJX Companies, Inc., et al. , Court File No. 0701-00964. The plaintiffs purport to represent a putative class of “individuals who communicated to the [d]efendants confidential information being their debit card numbers and credit card numbers, expiry dates, and all of the information accessible to someone in possession of those debit cards or credit cards.” The complaint also names “Winners Apparel Inc.,” “Winners Merchants International LP” and “HomeSense Inc.” as defendants and asserts claims for negligence, breach of confidence and violation of privacy. Plaintiffs seek general and special damages, punitive damages, attorney’s fees, interest and costs.

 

 

On January 22, 2007, a putative class action was filed against TJX in The Court of Queen’s Bench, Saskatchewan, Canada, Copithorn v. TJX Companies, Inc., et al. , Court File No. 100. The plaintiff purports to represent a putative class of

“all individuals resident in Saskatchewan or throughout Canada and elsewhere, who have communicated confidential debit and credit information to the Defendants in 2003 or between May 1, 2006 and December 31, 2006.” The complaint also names “Winners Apparel Inc.” and “HomeSense Inc.” as defendants and asserts claims for negligence, breach of confidence and violation of privacy. The plaintiff seeks general and pecuniary damages, punitive damages, interest, attorney’s fees and costs.

 

 

On January 26, 2007, a putative class action was filed against TJX in the Superior Court of Los Angeles County, California, Lemley v. TJX, Inc., et al. , BC365384. The action was subsequently removed to the United States District Court for the District of California (docket no. 07-cv-01017), where plaintiff filed an amended complaint. On March 15, 2007, the Court issued an order remanding the action back to the Superior Court, and TJX is seeking further review of that order. The plaintiff in the action purports to represent a class of “all TJX customers who made credit card transactions at TJX’s stores during the period that the security of [d]efendants’ computer systems were compromised and the privacy or security of whose credit card, check card, or debit card account, transaction or non-public information was compromised.” The complaint, as amended, asserts claims for negligence per se, negligence, bailment, breach of contract, and violation of California Civil Code § 17200, California Civil Code § 1798.80-84, and California Civil Code § 1798.53. The action also includes Bob’s Stores Corp. and Fifth Third Bancorp as defendants. The plaintiff seeks compensatory, statutory and punitive damages, credit monitoring, injunctive and equitable relief including disgorgement of profits and appointment of a receiver, attorney’s fees, costs and interest.

 

 

On January 26, 2007, a putative class action was filed against TJX in the Superior Court of Justice, Ontario, Canada, Wong, et ano. v. The TJX Companies, Inc., et al. , Court File No. CV-07-0272-00. The plaintiffs purport to represent a putative class of “[a]ll persons (including their estates, executors, or personal representatives), corporations, and other entities, who have communicated personal, debit card, or credit card information to the [d]efendants in 2003, or between May 1, 2006 and December 31, 2006; which information was later stolen or released to unauthorized third parties.” The complaint also names “Winners Apparel Inc.,” “Winners Merchants International LP” and “HomeSense Inc.” as defendants and asserts claims for negligence, breach of confidence and violation of privacy. Plaintiffs seek compensatory damages, punitive damages, interest, attorney’s fees and costs.

 

 

On January 29, 2007, a putative class action was filed against TJX in the United States District Court for the District of Massachusetts, Mace v. TJX Companies, Inc. , 07-cv-10162. The plaintiff purports to represent a class of “all persons or entities in the United States who have had personal or financial data stolen from TJX’s computer network, and who were damaged thereby.” The complaint asserts a claim for negligence and seeks compensatory damages, credit monitoring, injunctive relief, attorney’s fees, costs and interest.

 

 

On January 31, 2007, a putative class action was filed against TJX in the United States District Court for the District of Puerto Rico, Miranda, et al. v. TJX, Inc., et ano. , 07-cv-01075. The plaintiffs purport to represent a class of “all TJX customers who made credit card transactions at TJX’s stores during the period that the security of [d]efendants computer systems were compromised and the privacy or security of whose credit card, check card, or debit card account, transaction or non-public information was compromised.” The complaint asserts claims for negligence per se, negligence, bailment and breach of contract, and also names Fifth Third Bancorp as a defendant. Plaintiffs seek compensatory damages, credit monitoring, injunctive relief, attorney’s fees and costs.

 

 

On January 31, 2007, a putative class action was filed against TJX in the United States District Court for the District of Massachusetts, AmeriFirst Bank v. TJX Companies, Inc., et al. , 07-cv-10169. The plaintiff purports to represent a class of “all financial institutions that issued credit cards and/or debit cards to its customers that were used at any of TJX’s outlets and/or stores during the period of the security breach.” The complaint asserts claims for negligence, breach of contract and negligence per se, and also names Fifth Third Bancorp and Fifth Third Bank as defendants. The plaintiff seeks compensatory damages including for recovery of the cost of issuance of replacement cards and liability for unauthorized transactions, as well as injunctive relief, attorney’s fees and costs.

 

 

On January 31, 2007, a putative class action was filed against TJX in The Court of Queen’s Bench, Manitoba, Canada, Churchman, et ano. v. The TJX Companies, Inc., et al. , Court File No. 07-01-50449. The plaintiffs purport to represent a putative class of “[a]ll persons (including their estates, executors, or personal representatives), corporations, and other entities, who have communicated personal, debit card, or credit card information to the [d]efendants in 2003, or between May 1, 2006 and December 31, 2006; which information was later stolen or released to unauthorized third parties.” The complaint also names “Winners Apparel Inc.,” “Winners Merchants International LP” and “HomeSense Inc.” as defendants and asserts claims for negligence, breach of confidence and violation of privacy. Plaintiffs seek general and special damages, punitive damages, attorney’s fees, interest and costs.

 

On February 2, 2007, a putative class action was filed against TJX in the United States District Court for the District of Massachusetts, Buckley, et al. v. TJX Companies, Inc. , 07-cv-10209. The plaintiffs purport to represent a class of “all individuals in the United States whose personal or financial data was stolen, or cannot definitively be determined not to have been stolen, from TJX as a result of the conduct described herein.” The complaint asserts claims for negligence, breach of contract and bailment, and TJX has received a related demand letter purporting to assert a further claim on behalf of individuals in the United States and Canada under Massachusetts General Laws, c. 93A. Plaintiffs seek compensatory damages, creation of a fund for future damages, credit monitoring, injunctive relief, attorney’s fees and costs.

 

 

On February 5, 2007, a putative class action was filed against TJX in the United States District Court for the District of Massachusetts, Gaydos v. TJX Companies, Inc., et ano. , 07-cv-10217. The plaintiff purports to represent a class of “all persons or entities in the United States who have had personal or financial data stolen from TJX’s computer network, and who were damaged thereby.” The complaint asserts a claim for negligence, and also names Fifth Third Bancorp as a defendant. The plaintiff seeks compensatory damages, credit monitoring, injunctive relief, attorney’s fees, costs and interest.

 

 

On February 5, 2007, a putative class action was filed against TJX in the Superior Court of Middlesex County, Massachusetts, McMorris v. The TJX Companies, Inc., et ano. , 07-0460. The plaintiff purports to represent a class of “[r]esidents of Massachusetts who made purchases and paid by credit or debit card or check or who made a return at one or more Marshalls, T.J. Maxx, HomeGoods, or A.J. Wright stores in the United States in 2003 or from May to December 2006.” The complaint asserts claims for negligence and violation of Massachusetts General Laws c. 214, § 1B, and TJX has received a related demand letter asserting a further claim under Massachusetts General Laws, c. 93A. The plaintiff seeks compensatory damages, credit monitoring, injunctive relief, attorney’s fees, costs and interest.

 

 

On February 15, 2007, a putative class action was filed against TJX in the United States District Court for the District of Massachusetts, Cohen, et al. v. TJX Companies, Inc., et ano. , 07-cv-10280. The plaintiffs purport to represent a class of “all persons or entities in the United States who have had personal or financial data stolen from TJX’s computer network, and who were damaged thereby.” The complaint asserts a claim for negligence, and also names Fifth Third Bancorp as a defendant. Plaintiffs seek compensatory damages, credit monitoring, injunctive relief, attorney’s fees, costs and interest.

 

 

On March 8, 2007, two putative class actions were filed against TJX in the Superior Court of Los Angeles County, California, Salinas, et ano. v. The TJX Companies, Inc., et al. , BC367531, and Pickering v. The TJX Companies, Inc., et al. , BC367530. The plaintiffs in each case purport to represent a class of ‘[a]ll California residents whose debit cards, check cards, credit cards (including American Express, Discover, MasterCard or Visa accounts), transaction or other personal or non-public information, including information at any TJX retail store such as T.J. Maxx and Marshalls, was maintained, provided to others and/or subject to unauthorized release by Defendants from January 2003 through the date of [j]udgment.” The complaints in each case assert claims for negligence and for violation of California Civil Code § 1781.81, California Civil Code § 1798.82, and California Civil Code § 17200, and also name T.J. Maxx of CA, LLC and Fifth Third Bancorp as defendants. The plaintiffs in each case seek compensatory damages, injunctive and equitable relief including implementation of security measures, notification to customers and credit monitoring, and attorney’s fees, costs and interest.

 

 

On March 16, 2007, a putative class action was filed against TJX in the United States District Court for the Southern District of California, Tennent v. The TJX Companies, Inc., et ano. , 07-cv-00484. The plaintiff purports to represent a class of “all TJX customers who entered into credit card transactions at TJX’s stores and whose personal and/or financial information was stored in [d]efendant’s databases during the period that the security of said databases was compromised.” The complaint asserts claims for negligence per se, negligence, and bailment, and also names Fifth Third Bancorp as a defendant. The plaintiff seeks compensatory damages, credit monitoring, injunctive relief, attorneys fees and costs.

 

 

On March 23, 2007, a putative class action was filed in the United States District Court for the District of Massachusetts, Rivas, et ano. v. TJX Companies, Inc. , 07-cv-10565. The plaintiffs purport to represent a class of “all individuals in the United States whose personal or financial data was stolen, or cannot definitively be determined not to have been stolen, from TJX as a result of the conduct” alleged in the complaint. The complaint asserts claims for negligence, breach of contract, bailment and for violation of Massachusetts General Laws c. 93A, § 2. The plaintiffs seek

compensatory damages, treble damages with respect to the statutory violation claim, injunctive relief, a fund to compensate future damages, attorney’s fees, interest and costs.

 

 

In addition, the Arkansas Carpenters Pension Fund (the “Pension Fund”), the purported beneficial holder of 4,500 shares of TJX common stock, has commenced an action in the Delaware Chancery Court under Section 220 of the Delaware General Corporation Law demanding to inspect certain of TJX’s books and records relating to the Computer Intrusion and TJX’s response to the Computer Intrusion. As relief, the Pension Fund seeks the right to inspect records dating back to 2003, as well as its attorneys’ fees and costs.

 

 

Government Investigations.   A number of government agencies are conducting investigations as to whether TJX as a result of the Computer Intrusion may have violated laws regarding consumer protection and related matters. TJX has been advised that the Attorney General of the Commonwealth of Massachusetts is leading an investigation into the Computer Intrusion on behalf of a multi-state group of state Attorneys General (the “Multi-State Group”), which as initially comprised had approximately 30 participating states. In March 2007, the Company received a civil investigative demand (“CID”) from the Massachusetts Attorney General’s office seeking documents concerning the Computer Intrusion as part of that office’s review of allegations that the Company may have violated state law regarding consumer protection and related matters. The Company also received nearly identical demands in March 2007 from eight other state Attorneys General that are participating in the Multi-State Group. These demands include a CID from the Attorney General of the State of Arkansas, a CID from the Attorney General of the State of Illinois, a subpoena from the Attorney General of the State of New Jersey, a subpoena from the State of Ohio, a CID from the State of Oregon Department of Justice, a subpoena from the Attorney General of the Commonwealth of Pennsylvania, a Request for Consumer Protection Information (“Request”) from the Attorney General of the State of Tennessee (which had issued an earlier Request in January 2007), and a subpoena from the Attorney General of the State of Vermont. TJX has been advised that the Attorneys General of two other states participating in the Multi-State Group may also issue their own demands, which if issued are expected to be substantively identical to the other demands TJX has received.

 

 

In addition to these demands, the Company also has received a number of other inquiries, requests and demands from state Attorneys General for information relating to the Computer Intrusion (most shortly after TJX announced the Computer Intrusion publicly and before the Multi-State Group commenced its investigation), including a request by the Attorney General of the State of Connecticut that the Company voluntarily provide written answers to various questions relating to the Computer Intrusion, a CID from the Secretary of the State of Rhode Island and verbal requests for information from various other state Attorneys General.

 

 

TJX also has been advised that the Federal Trade Commission (“FTC”) is investigating the Computer Intrusion to determine whether the Company may have violated federal law regarding consumer protection and related matters.

 

 

TJX also has been advised that the Office of the Privacy Commissioner of Canada and the Office of the Information and Privacy Commissioner of Alberta have initiated formal investigations of TJX as a result of the Computer Intrusion and that the Office of the Information and Privacy Commissioner of British Columbia has initiated an investigation relating to the collection of personal information in connection with merchandise returns at TJX’s stores. The Office of the Privacy Commissioner of Quebec also has inquired about the Computer Intrusion, but has not advised the Company of any formal investigation.

 

 

TJX has been cooperating in each of these investigations.

 

 

 

All officers hold office until the next annual meeting of the Board in June 2007 and until their successors are elected, or appointed, and qualified.