Microsoft Excel LibreOffice Calc

TJX Cos. Inc. (TJX)

Economic Value Added (EVA)

High level of difficulty

EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit

TJX Cos. Inc., economic profit calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015 Feb 1, 2014
Net operating profit after taxes (NOPAT)1 3,155,360  2,635,209  2,446,942  2,503,986  2,500,016  2,386,960 
Cost of capital2 8.19% 7.97% 8.01% 8.28% 8.24% 8.29%
Invested capital3 16,960,214  16,160,847  14,935,402  13,469,411  13,017,789  11,971,690 
 
Economic profit4 1,766,054  1,347,910  1,250,387  1,389,253  1,427,778  1,394,229 

Based on: 10-K (filing date: 2019-04-03), 10-K (filing date: 2018-04-04), 10-K (filing date: 2017-03-28), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-04-01).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

<>4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,155,360 – 8.19% × 16,960,214 = 1,766,054

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. TJX Cos. Inc.’s economic profit increased from 2017 to 2018 and from 2018 to 2019.

Net Operating Profit after Taxes (NOPAT)

TJX Cos. Inc., NOPAT calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015 Feb 1, 2014
Net income 3,059,798  2,607,948  2,298,234  2,277,658  2,215,128  2,137,396 
Deferred income tax expense (benefit)1 (87,835) (137,125) (5,841) 30,783  102,070  52,647 
Increase (decrease) in equity equivalents2 (87,835) (137,125) (5,841) 30,783  102,070  52,647 
Interest expense, excluding capitalized interest 64,839  64,295  61,671  60,269  55,380  46,091 
Interest expense, operating lease liability3 223,288  216,355  194,234  254,438  241,471  271,867 
Adjusted interest expense, excluding capitalized interest 288,127  280,650  255,905  314,707  296,851  317,958 
Tax benefit of interest expense, excluding capitalized interest4 (60,507) (94,579) (89,567) (110,147) (103,898) (111,285)
Adjusted interest expense, excluding capitalized interest, after taxes5 227,621  186,071  166,338  204,559  192,953  206,673 
Interest income (55,979) (32,707) (18,137) (13,869) (15,593) (15,010)
Investment income, before taxes (55,979) (32,707) (18,137) (13,869) (15,593) (15,010)
Tax expense (benefit) of investment income6 11,756  11,022  6,348  4,854  5,458  5,254 
Investment income, after taxes7 (44,223) (21,685) (11,789) (9,015) (10,135) (9,757)
Net operating profit after taxes (NOPAT) 3,155,360  2,635,209  2,446,942  2,503,986  2,500,016  2,386,960 

Based on: 10-K (filing date: 2019-04-03), 10-K (filing date: 2018-04-04), 10-K (filing date: 2017-03-28), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-04-01).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in equity equivalents to net income.

3 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 8,895,947 × 2.51% = 223,288

4 2019 Calculation
Tax benefit of interest expense, excluding capitalized interest = Adjusted interest expense, excluding capitalized interest × Statutory income tax rate
= 288,127 × 21.00% = 60,507

5 Addition of after taxes interest expense to net income.

6 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 55,979 × 21.00% = 11,756

7 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. TJX Cos. Inc.’s NOPAT increased from 2017 to 2018 and from 2018 to 2019.

Cash Operating Taxes

TJX Cos. Inc., cash operating taxes calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015 Feb 1, 2014
Provision for income taxes 1,113,413  1,248,640  1,424,809  1,380,642  1,334,756  1,182,093 
Less: Deferred income tax expense (benefit) (87,835) (137,125) (5,841) 30,783  102,070  52,647 
Add: Tax savings from interest expense, excluding capitalized interest 60,507  94,579  89,567  110,147  103,898  111,285 
Less: Tax imposed on investment income 11,756  11,022  6,348  4,854  5,458  5,254 
Cash operating taxes 1,249,999  1,469,322  1,513,869  1,455,152  1,331,126  1,235,478 

Based on: 10-K (filing date: 2019-04-03), 10-K (filing date: 2018-04-04), 10-K (filing date: 2017-03-28), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-04-01).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. TJX Cos. Inc.’s cash operating taxes declined from 2017 to 2018 and from 2018 to 2019.

Invested Capital

TJX Cos. Inc., invested capital calculation (financing approach)

US$ in thousands

Microsoft Excel LibreOffice Calc
Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015 Feb 1, 2014
Long-term debt 2,233,616  2,230,607  2,227,599  1,624,054  1,623,864  1,274,216 
Operating lease liability1 8,895,947  8,619,738  7,738,413  6,951,852  6,597,580  6,249,827 
Total reported debt & leases 11,129,563  10,850,345  9,966,012  8,575,906  8,221,444  7,524,043 
Shareholders’ equity 5,048,606  5,148,309  4,510,599  4,307,075  4,264,230  4,229,893 
Net deferred tax (assets) liabilities2 151,724  226,499  307,807  271,271  260,353  312,924 
Equity equivalents3 151,724  226,499  307,807  271,271  260,353  312,924 
Accumulated other comprehensive (income) loss, net of tax4 630,321  441,859  694,226  667,472  554,385  199,532 
Adjusted shareholders’ equity 5,830,651  5,816,667  5,512,632  5,245,818  5,078,968  4,742,349 
Short-term investments5 —  (506,165) (543,242) (352,313) (282,623) (294,702)
Invested capital 16,960,214  16,160,847  14,935,402  13,469,411  13,017,789  11,971,690 

Based on: 10-K (filing date: 2019-04-03), 10-K (filing date: 2018-04-04), 10-K (filing date: 2017-03-28), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-04-01).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of equity equivalents to shareholders’ equity.

4 Removal of accumulated other comprehensive income.

5 Subtraction of short-term investments.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. TJX Cos. Inc.’s invested capital increased from 2017 to 2018 and from 2018 to 2019.

Cost of Capital

TJX Cos. Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 64,579,671  64,579,671  ÷ 75,645,617  = 0.85 0.85 × 9.26% = 7.90%
Long-term debt3 2,170,000  2,170,000  ÷ 75,645,617  = 0.03 0.03 × 2.51% × (1 – 21.00%) = 0.06%
Operating lease liability4 8,895,947  8,895,947  ÷ 75,645,617  = 0.12 0.12 × 2.51% × (1 – 21.00%) = 0.23%
Total capital: 75,645,617  Total weights: 1.00 Cost of total capital: 8.19%

Based on: 10-K (filing date: 2019-04-03).

1 US$ in thousands

2 Equity. See details »

3 Long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 52,661,538  52,661,538  ÷ 63,441,276  = 0.83 0.83 × 9.26% = 7.68%
Long-term debt3 2,160,000  2,160,000  ÷ 63,441,276  = 0.03 0.03 × 2.51% × (1 – 33.70%) = 0.06%
Operating lease liability4 8,619,738  8,619,738  ÷ 63,441,276  = 0.14 0.14 × 2.51% × (1 – 33.70%) = 0.23%
Total capital: 63,441,276  Total weights: 1.00 Cost of total capital: 7.97%

Based on: 10-K (filing date: 2018-04-04).

1 US$ in thousands

2 Equity. See details »

3 Long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 50,820,835  50,820,835  ÷ 60,729,248  = 0.84 0.84 × 9.26% = 7.75%
Long-term debt3 2,170,000  2,170,000  ÷ 60,729,248  = 0.04 0.04 × 2.51% × (1 – 35.00%) = 0.06%
Operating lease liability4 7,738,413  7,738,413  ÷ 60,729,248  = 0.13 0.13 × 2.51% × (1 – 35.00%) = 0.21%
Total capital: 60,729,248  Total weights: 1.00 Cost of total capital: 8.01%

Based on: 10-K (filing date: 2017-03-28).

1 US$ in thousands

2 Equity. See details »

3 Long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 52,092,920  52,092,920  ÷ 60,744,773  = 0.86 0.86 × 9.26% = 7.94%
Long-term debt3 1,700,000  1,700,000  ÷ 60,744,773  = 0.03 0.03 × 3.66% × (1 – 35.00%) = 0.07%
Operating lease liability4 6,951,852  6,951,852  ÷ 60,744,773  = 0.11 0.11 × 3.66% × (1 – 35.00%) = 0.27%
Total capital: 60,744,773  Total weights: 1.00 Cost of total capital: 8.28%

Based on: 10-K (filing date: 2016-03-29).

1 US$ in thousands

2 Equity. See details »

3 Long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 47,884,158  47,884,158  ÷ 56,211,739  = 0.85 0.85 × 9.26% = 7.88%
Long-term debt3 1,730,000  1,730,000  ÷ 56,211,739  = 0.03 0.03 × 3.66% × (1 – 35.00%) = 0.07%
Operating lease liability4 6,597,580  6,597,580  ÷ 56,211,739  = 0.12 0.12 × 3.66% × (1 – 35.00%) = 0.28%
Total capital: 56,211,739  Total weights: 1.00 Cost of total capital: 8.24%

Based on: 10-K (filing date: 2015-03-31).

1 US$ in thousands

2 Equity. See details »

3 Long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 43,065,416  43,065,416  ÷ 50,655,244  = 0.85 0.85 × 9.26% = 7.87%
Long-term debt3 1,340,000  1,340,000  ÷ 50,655,244  = 0.03 0.03 × 4.35% × (1 – 35.00%) = 0.07%
Operating lease liability4 6,249,827  6,249,827  ÷ 50,655,244  = 0.12 0.12 × 4.35% × (1 – 35.00%) = 0.35%
Total capital: 50,655,244  Total weights: 1.00 Cost of total capital: 8.29%

Based on: 10-K (filing date: 2014-04-01).

1 US$ in thousands

2 Equity. See details »

3 Long-term debt. See details »

4 Operating lease liability. See details »

Economic Spread Ratio

TJX Cos. Inc., economic spread ratio calculation

Microsoft Excel LibreOffice Calc
Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015 Feb 1, 2014
Selected Financial Data (US$ in thousands)
Economic profit1 1,766,054  1,347,910  1,250,387  1,389,253  1,427,778  1,394,229 
Invested capital2 16,960,214  16,160,847  14,935,402  13,469,411  13,017,789  11,971,690 
Performance Ratio
Economic spread ratio3 10.41% 8.34% 8.37% 10.31% 10.97% 11.65%

Based on: 10-K (filing date: 2019-04-03), 10-K (filing date: 2018-04-04), 10-K (filing date: 2017-03-28), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-04-01).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,766,054 ÷ 16,960,214 = 10.41%

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. TJX Cos. Inc.’s economic spread ratio deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Economic Profit Margin

TJX Cos. Inc., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015 Feb 1, 2014
Selected Financial Data (US$ in thousands)
Economic profit1 1,766,054  1,347,910  1,250,387  1,389,253  1,427,778  1,394,229 
Net sales 38,972,934  35,864,664  33,183,744  30,944,938  29,078,407  27,422,696 
Performance Ratio
Economic profit margin2 4.53% 3.76% 3.77% 4.49% 4.91% 5.08%

Based on: 10-K (filing date: 2019-04-03), 10-K (filing date: 2018-04-04), 10-K (filing date: 2017-03-28), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-04-01).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 1,766,054 ÷ 38,972,934 = 4.53%

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. TJX Cos. Inc.’s economic profit margin deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.