In 2002, we, at The TJX Companies, once again proved our ability to grow substantially in a very difficult environment. The year 2002 was marked by a sluggish economy and geopolitical issues that dampened consumer confidence, in addition to a highly promotional retail environment. We are particularly pleased that, despite these challenges, our top line met our original expectations, growing 12% to $12 billion. Comparable store sales increased 3%, also in line with our goals. Diluted earnings per share were $1.08 for the year, which was within the range we established at the beginning of the year and represents an 11% increase over last year. Given the challenges of the business environment, we would certainly term our performance “solid.” We are very pleased to have once again achieved a 42% after-tax return on average shareholders’ equity for the year, while maintaining our strong financial position.

Excellent New Stores: We are very pleased with the performance of our new stores throughout the Company. On a consolidated basis, we added 178 stores, growing our store base by 11% and ending the year with 1,843 stores. Combined, T.J. Maxx and Marshalls added 73 stores to end 2002 with 713 T.J. Maxx and 629 Marshalls stores. HomeGoods and A.J. Wright each grew dramatically. HomeGoods’ store base grew by 27% to end the year with 142 stores and A.J. Wright grew by 67% to end 2002 with 75 stores. Winners, in Canada, opened 15 stores and ended the year with 146 stores and our new Canadian chain, HomeSense, more than doubled in size to end 2002 with 15 stores. T.K. Maxx, in the United Kingdom and Ireland, increased its chain by 22% and ended the year with 123 stores. The excellent performance of our new stores and their strong returns on investment give us great confidence in our ability to continue to successfully grow our Company while continuing to achieve strong returns on shareholders’ equity.

Flexibility at Largest Division: The Marmaxx Group, comprised of T.J. Maxx and Marshalls, posted $9.5 billion in sales, representing a 7% increase, while comparable store sales increased 2%. Segment profit was $888 million in 2002 versus $894 million in the prior year. Marmaxx’s decline in segment profit resulted from steep cost increases in insurance and employee benefits and an after-tax charge of $.02 per share for the tentative settlement of California lawsuits. In addition, we experienced higher-than-expected payroll costs at the store level, due to lower attrition. Although we had higher expectations for Marmaxx in 2002, this very large division performed admirably in an extremely difficult retail climate. Inventories were very well managed, which was key to our flexibility and enabled us to react quickly to trends in the marketplace and the competitive environment, and maintain strong merchandise margins. Also, Marmaxx continued to achieve high returns on investment and generated significant amounts of excess cash. Further, we have nearly completed enhancing Marmaxx’s distribution center network and have increased capacity, which will afford Marmaxx even greater flexibility in managing inventories, and will continue to benefit us in executing our off-price mission in the future.

HomeGoods Hits Homerun: Performance at HomeGoods far exceeded our objectives and we are delighted with the manner in which this business is operating. Sales increased at HomeGoods by 39% to $705 million, segment profit increased nearly nine-fold and profit margin was 4.6% in 2002. Comparable store sales at HomeGoods increased 6%. These above-plan results were achieved while HomeGoods grew its store base substantially. This division did a great job at merchandising, managing inventories, store operations and distribution. HomeGoods has truly taken hold with our customers and we are excited about this division and its future prospects.

Powerful International Businesses: Winners had an excellent year, outperforming its sales and profit objectives. Our sales in Canada increased by 20% to $793 million and segment profit increased by 44% to $85 million, with a profit margin of 10.8%. Comparable store sales at Winners increased 5%. One of Winners’ many achievements in 2002 was the opening of its College Park, Toronto, store, setting the record for performance of a new store opening in Winners’ 13-year history as a TJX division. Winners also did an excellent job of inventory management. Further, this division successfully opened eight HomeSense stores, which continue to generate great customer response.

T.K. Maxx, in the U.K. and Ireland, also performed very well in 2002, posting above-plan sales and segment profit. Sales grew to $720 million, increasing 38% and comparable store sales increased by 5%. Segment profit increased by 232% to $43 million and profit margin at T.K. Maxx was 6.0%. Inventory management was a focus for T.K. Maxx in 2002, and this division was successful in achieving dramatic improvement in this area. We continue to believe that T.K. Maxx holds great growth potential for our Company.

Progress at A.J. Wright: A.J. Wright, our youngest business in the United States, increased its store base by 67% in 2002 and saw strong performance in its new stores. New markets into which A.J. Wright expanded were Chicago and upstate New York. Also, we expanded our presence in metropolitan New York significantly. Sales increased by 76% and comparable store sales increased by 11%. While bottom-line performance at this division did not meet our objectives, we continue to believe that A.J. Wright is an excellent concept with great growth potential, serving the moderate-income customer throughout the U.S.

Excess Cash and Financial Strength: In 2002, our strong return on investment continued to result in our generating significant excess cash. As our increased distribution capacity enabled us to buy goods closer to the time they were needed on the selling floor, we generated even more excess cash from operations than we had anticipated.

We remain committed to share repurchase as an excellent means to utilize excess cash, while increasing shareholder value. In 2002, we repurchased $498 million in TJX stock, retiring 26 million shares. During 2002, we completed our $1 billion share repurchase program initiated in 2000 and announced a new $1 billion buyback program. We plan to continue to aggressively repurchase our shares in 2003 and beyond.

Our Board of Directors: Our Board of Directors is comprised of 11 individuals who bring high integrity, along with diverse backgrounds and a vast array of talent and experience, to the ethical oversight and governance of TJX. Over 70% of our directors are independent and key committees of the Board, which meet regularly, are comprised solely of independent directors. Further, at TJX, the position of Chairman is separated from that of Chief Executive Officer. Our independent directors have, for some time, had a Lead Director and we have several Audit Committee Financial Experts in place. Corporate Governance Principles and Committee Charters are now posted to our corporate website.

Reasons for our Confidence: With all the uncertainty in today’s world, there are many reasons why we continue to be confident in our future success. First and foremost is our fine organization of 94,000 dedicated associates who make up the TJX family. Also, 2002 presented many macro challenges and we once again proved our ability to grow. Further, our younger divisions are doing very well, holding great promise for our growth for many years to come. Last, but certainly not least, we have great financial strength behind us. We are grateful for the continued support of our customers, vendors and shareholders.

Respectfully,

Bernard Cammarata
Chairman of the Board


Edmond J. English
President and Chief Executive Officer