TJX Companies Inc (TJX) — Q1 2015 Earnings Call Transcript

Thank you, Elan. And before we begin, Deb has a few comments.

Good morning. The forward-looking statements we make today about the company’s results and plans are subject to risks and uncertainties that could cause the actual results and the implementation of the company’s plans to vary materially. These risks are discussed in the company’s SEC filings including, without limitation, the Form 10-K filed April 1, 2014. Further, these comments and the Q&A that follows are copyrighted today by The TJX Companies. Any recording, retransmission, reproduction or other use of the same, for profit or otherwise, without prior consent of TJX is prohibited and a violation of United States copyright and other laws. Additionally, while we have approved the publishing of a transcript of this call by a third-party, we take no responsibility for inaccuracies that may appear in that transcript. Please note that the financial results and expectations we discuss today are on a continuing operations basis. Also, we have detailed the impact of foreign exchange on our consolidated results and our international divisions in today’s press release in the Investor Information section of our website, tjx.com. Reconciliations of the non-GAAP measures we discuss today to GAAP measures are included in today’s press release or otherwise posted on our website, tjx.com, in the Investor Information section. Thank you. And now I’ll turn it over to Carol.

Thanks, Deb. And joining me and Deb on the call are Ernie Herrman and Scott Goldenberg. Our first quarter consolidated comp sales increased 1% and earnings per share was $0.64 versus $0.62 last year. Our EPS results were $0.01 below our expectations as the negative impact of foreign currency exchange rates was $0.01 more than our guidance assumed. While sales were not as strong as we would have liked, especially in apparel, we were pleased to see overall business trends improve as the quarter progressed, and we are very well-positioned as we entered the second quarter. While we clearly saw dampened consumer demand for apparel in some of our North American regions during the first quarter, having learned from the fourth quarter I am pleased with the way we managed our inventory. We were extremely strategic in how we flowed inventories to particular regions and categories. Expenses were also tightly controlled. All of this helped mitigate the impact of markdowns overall. Further, I could not be happier with TJX Europe, which delivered another spectacular quarter. This bodes very well for our future growth plans in Europe as we expand our international footprint. We entered the second quarter with lean inventories, and we see a marketplace absolutely loaded with buying opportunities for quality, branded merchandise. We are well-positioned to take advantage of these opportunities. We are maintaining our EPS and comp outlook for the remainder of the year and are confident we will achieve our plans for 2014. Scott will cover guidance later. On today’s call, I will reiterate the magnitude of the top and bottom line growth opportunities we see for our business. We remain convinced that TJX will grow to be a $40 billion company and beyond. But before I continue I will turn the call over to Scott to recap the numbers.

Thanks Carol, and good morning, everyone. Again, our first quarter consolidated comparable store sales increased 1%, and we were pleased to see sales trends pick up as we move through the quarter. Our first quarter comp was driven by an increase in ticket. While customer traffic was slightly down for the quarter, we did see improvement as the quarter progressed. Diluted earnings per share were $0.64 versus $0.62 last year, and $0.01 below the low end of our expected range. The mark-to-market adjustment on our inventory related hedges had a $0.02 negative impact on earnings per share, which was $0.01 more than we contemplated in our guidance. As a reminder, we had a $0.01 negative impact from FX last year. Consolidated pre-tax profit margin was 11.3% for the quarter, down 50 basis points versus last year due to a decline in gross margins. Gross profit margin was 27.9%, down 50 basis points versus the prior year. The decrease was primarily due to lower merchandise margins versus strong improvement last year and expense deleverage on the 1% comp. In addition, the mark-to-market adjustment I just mentioned also had a negative impact. SG&A expense as a percentage of sales was unchanged from last year's ratio as expenses were tightly managed. At the end of the first quarter, consolidated inventories on a per store basis, including the warehouses and excluding in-transit and e-commerce inventories were down 1% in constant currency. This was versus substantial decreases in the last couple of years. We begin the second quarter in a lean inventory position, which enables us to take advantage of the abundant buying opportunities in the marketplace. In terms of share repurchases, during the first quarter, we bought back $360 million of TJX stock retiring 6 million shares. We continue to anticipate buying back $1.6 billion to $1.7 billion of TJX stock this year. In addition, the Board of Directors approved a 21% increase in the per share dividend in April, marking the 18th consecutive year of dividend increases. Now, let me turn the call back to Carol, and I will recap our second quarter and full-year fiscal ’15 guidance at the end of the call.

Thanks, Scott. Before moving to our global growth opportunities, I will share some comments on the first quarter performance by division. In the U.S., Marmaxx comps were flat with last year and segment profit margin decreased 60 basis points. This was primarily due to expense deleverage on the comp, as well as 10 basis points of deleverage from our e-commerce businesses and slightly higher utility costs. We are pleased that Marmaxx held merchandise margins relatively flat on a flat comp. This is a testament to Marmaxx slowing inventory very strategically, feeding regions and categories where trends were stronger and maintaining lean inventories where business was softer. Where weather was a factor, there was as much as a 4 point comp spread within less impacted regions. We also see some execution issues in our junior and dress businesses that we are currently addressing. As always, we evaluate and work to improve what we are not happy with, and we are confident we will fix these issues. Our strongest category was total accessories and the jewelry businesses. Going forward, Marmaxx has some exciting marketing plans in order to drive traffic in the second quarter and the back half. Home Goods delivered a 3% comp increase on top of 7% growth last year, and segment profit margin was up 10 basis points over last year’s significant increase. We are very pleased with HomeGoods ability to continue driving strong performance over strong comparisons. Now for our international division, at TJX Canada, comp sales were down 1% and adjusted segment profit margin decreased 210 basis points. We believe the severe weather across Canada had a significant negative impact on both customer traffic and demand for spring apparel. Further, as we expected, the decline in the Canadian dollar pressured our merchandise margins. We were encouraged to see business trends improved by the end of the quarter. TJX Europe delivered another outstanding quarter, comp sales increased 8% over 4% increase last year, and adjusted segment profit margin was up 180 basis points. We continue to see broad-based strength across the different geographies, economic climate, and consumer environments in which we operate, which is very encouraging for our growth prospects in Europe. We are very excited about our German business, which is delivering terrific performance. As to e-commerce, we were pleased with the performance of our online businesses overall in the first quarter, which was above our plan. At tjmaxx.com, we continue to add more categories and open more vendors. We are investing carefully as we learn more about our online business, including the differentiation from brick-and-mortar stores. Now to the magnitude of our global growth opportunity, first, we see huge potential to gain additional U.S. and international customers. We believe our customer penetration levels in the U.S. remain below those of most department stores and the opportunity to expand our international reach is vast. We continue to target a very wide customer demographic. As we work to drive customer traffic, we plan to be even more aggressive with our marketing. In the second quarter, we have significant increases planned in our overall media impressions in the U.S. and U.K. Our TJX rewards loyalty program is another way we can attract more customers, increase shopping frequency and encourage shopping across our chain. We are expanding our successful credit card loyalty program to include a non-credit card choice. We’ve seen from our test, it’s a great way to invite even more customers to join our loyalty program and have plans to rollout this new option nationwide in the U.S. in the second quarter. We know that customers who shop more than one of our retail brands spend considerably more with us on average and we see the loyalty program as a way to better engage with them. Our customer satisfaction scores across divisions keep going up, yet we still see room for improvement. We are focused on raising the bar as always. We continue to upgrade the shopping experience in our stores; across all of our chains, we plan to remodel approximately 250 stores in 2014. We are also on track with our plans for our new Marshalls prototype. We see ourselves as leaders in innovation. We are constantly testing new ideas and seeking the right product categories, current fashion, and top brands. We are excited about our plan to open two new Sierra Trading Post stores this fall. We really like the outdoor space and see this initiative as a way to offer more categories and brands that are not in our stores today. Now to our vast store growth opportunities, with over 3,200 stores today we see the potential to grow to 5,150 stores long-term that would be about 60% more stores than our existing base, with just our current chain in our current market alone. We have many reasons giving us confidence. At Marmaxx we see the potential to grow our largest most profitable division to 3,000 stores long-term. That represents almost 1,000 more stores than today. The performance of our new stores remains excellent, which underscores our confidence. Further, we are successfully co-locating stores closer to one another while keeping cannibalization levels where we would expect. We believe HomeGoods ultimately has the potential to be a chain of 825 stores, which certainly could be conservative. HomeGoods new store performance is also terrific. There are about 100 markets where we operate T.J. Maxx or Marshalls without HomeGoods, which speaks to the opportunity. At TJX Canada, we see the potential to grow to 450 stores long-term, which includes growing Marshalls to 100 stores in Canada. We believe our 20 plus years of experience and knowledge will continue to serve us well as we further our Canadian expansion. At TJX Europe we see enormous growth potential for TJX. Long-term, we believe we can more than double our current store base to 875 stores surely, with our existing chains in our existing countries. As a reminder in 2014, we plan to accelerate the pace of our store openings in Europe to 40 stores, which is 25% more than last year. This includes more than doubling the number of openings in Germany versus the prior year. To support our growth in Europe we have added more resources to our real estate group, which is helping us to secure some amazing locations. We also see vast opportunity to expand beyond our existing country. We are working on entering our next European country with plans to open our first few stores in Austria in the first half of 2015. Beyond Austria, we believe our off-price concept can work in any country where consumers love great fashion brands and quality at great values. TJX Europe is a major part of our future growth plan and I couldn't be more excited about the opportunities for this business. We are the only brick-and-mortar off-price retailer of significant size in Europe. We have decades of experience and knowledge that cannot easily be replicated. Beyond the success of our brick-and-mortar businesses, we see e-commerce as another long-term growth vehicle for TJX. We view online as another way to attract new customers and drive traffic, both to our websites and stores. Our e-commerce businesses offer consumers the convenience to shop our values 24 hours a day, seven days a week. We remain deliberate in our approach to e-commerce growth. We plan to keep adding more categories and increasing our assortment on T.J. Maxx.com, offering consumers even more online choices at amazing values. In addition, we could not be happier with our acquisition of Sierra Trading Post both from the standpoint of its online businesses as well as brick-and-mortar growth potential in the outdoor value base for the future. In closing, we are in an excellent position as we enter the second quarter and remainder of 2014. We like our lean inventory levels, are in a great position to buy into plentiful opportunities we see in the marketplace. We’re delighted to offer consumers amazing values both in our stores and online. We keep raising the bar on fashion, brands, quality, and price. To drive customer traffic, we have many marketing initiatives underway. We are significantly increasing our marketing impressions in the U.S. and the U.K. in the second quarter. We are also very excited about our planned nationwide expansion of our loyalty program. We keep testing new strategies. Innovation is in our DNA. We are never complacent. To support our growth plans, we continue to invest in our supply chain and distribution network. We expect to begin a gradual rollout of our operating merchandise systems in the next couple of years. We are thrilled with TJX Europe’s performance, which is sensational. I’m so excited about our international growth opportunities including our plans to enter Austria in 2015. I have said this many times before but I will say it again. I truly believe it’s underappreciated how much time, energy, and talent it takes to establish the infrastructure to build an off-price international business. Our EPS and comp outlook for the remainder of the year remains the same as our original guidance. And we are confident that we will achieve our plan and as always we will strive to surpass our goals. This is a company that has grown successfully through strong and weak environments, which gives us great confidence. Over a very long history, we have a consistent track record of sales and profit growth. We're very confident about the future of TJX as we bring our values around the world. And now I’ll turn the call over to Scott to go through guidance and then we’ll open it up for questions.

Thanks Carol. Now to fiscal ‘15 guidance, beginning with the full year. We now expect fiscal ‘15 earnings per share to be in the range of $3.05 to $3.17 over $2.94 in fiscal ‘14. We are lowering the high end of the range by $0.02 to reflect our first quarter results while maintaining our outlook for the remainder of the year. As a reminder, fiscal ‘14 included a tax benefit of $0.11. Excluding this benefit, our full year expected EPS would be 8% to 12% over the prior year's adjusted $2.83. We continue to expect consolidated comp store sales growth of 1% to 2%. For the year, we continue to expect pretax profit margins to be 12.0% to 12.3%. This would be down 10 to up 20 basis points versus 12.1% in fiscal ‘14. This now reflects expected gross margins of 28.3% to 28.6%, which would be down 20 basis points to up 10 basis points versus fiscal ‘14. We now anticipate SG&A as a percent of sales to be approximately 16.2%, a 10 basis point improvement versus last year. Foreign currency exchange rates, assuming current levels are now expected to have a $0.02 negative impact on full-year EPS versus a $0.01 positive impact last year. Now to Q2 guidance. We expect earnings per share to be in the range of $0.70 to $0.74. This would be a 6% to 12% increase over the last year's $0.66 per share and on top of many years of double-digit EPS growth in the second quarter. We’re assuming second quarter consolidated sales in the $6.8 billion to $6.9 billion range. This is based on expected comp sales growth in the 2% to 3% range on both the consolidated basis and at the Marmaxx Group. Second quarter pretax profit margins are planned to be in the 11.7% to 12.1% range, down 30 to up 10 basis points versus the prior year. We're anticipating second quarter gross profit margin to be in the range of 28.5% to 28.8%, down 30 to flat versus the prior year. We're expecting SG&A as a percent of sales to be 16.6% versus 16.7% last year. Foreign currency rates, assuming current levels are expected to have a neutral impact on EPS this year, which is the same as last year. For modeling purposes, we're anticipating a tax rate of 37.7% and net interest expense of about $9 million. We anticipate a weighted average share count of approximately 708 million. Again, our guidance for the second quarter and full year assumes that currency exchange rates will remain unchanged from current levels. Now we are happy to take your questions. To keep the call on schedule, we're going to continue to ask you to please limit your questions to one per person. We appreciate your cooperation with this. Thanks. And we will now open it up for questions.

Hi. Congratulations on your global success. I have a question about your gross margin guidance moving forward. What do you expect for merchandise margin, and how should we perceive the trend of merchandise margin over the past quarter? Additionally, what strategies do you have in place for this line item in the future? Thank you.

Well, for Marmaxx in Q2, our merchandise margins are planned flat to slightly up. Scott, do you want to go over the aggregate?

Just to be clear, do you want more breakout on the first-quarter gross profit margin?

Yes. I’m curious about month-to-month, and if that’s trended in any way, like that kind of corresponds to how we should think about them going forward? And then if the junior business is kind of related to this in terms of the opportunity you see there as well?

So Oliver, regarding merchandise, looking back at Q1 for Marmaxx, the merchandise margins remained mostly unchanged, which speaks to their inventory management. For Q2, we anticipate these margins to stay flat or increase slightly, so we feel confident about that. Concerning juniors, we have missed some trends, but the team is addressing this. There are a few execution challenges, and I believe we can resolve them soon. Did I address your question?

Yeah. That’s clear. Thank you. Thank you. That’s encouraging.

Good morning. Thanks for taking the question. I guess, one quick follow-up to that. Could you just provide a little bit more color on the puts and takes to the merch margin in the first quarter as it relates to kind of initial markups versus markdowns?

On the decrease in gross profit margin, it was influenced by a combination of factors related to merchandise margin and some deleverage effects. We experienced a 10 basis point impact from mark-to-market adjustments, alongside additional pressure from buying and occupancy deleverage. The remainder stemmed from a shortfall in merchandise margin, which was particularly affected by currency devaluation in Canada that reduced markup. Furthermore, we encountered some extra mark-ons in both Canada and Marmaxx due to sales performance falling short of our plans at the lower end. Nevertheless, it's worth noting that, as mentioned, Marmaxx remained relatively flat overall.

Yes. Most of it was driven by markdowns.

Markdowns.

Yes. Our markup is pretty healthy.

Great. That’s helpful. One other follow-up if I may. Just as you are talking about entering Austria in the first half of ‘15, can you provide a little bit more detail on the investments required to make that happen as it relates to talent, distribution, and maybe how quickly you think you can ramp there versus other markets? Thanks.

Pretty leveraged. Ernie, do you want to comment?

Yes, Steve, I was in Europe last week and we discussed how our entry there is quite seamless. We can utilize most of our central buying and planning resources. It's mainly about hiring talent for the field as we open our first few stores, so we don't need much additional talent beyond what we already have.

We think the mix is very similar to Germany, unlike going from the U.K. to Germany.

So, even talent would come from Germany versus pulling people in?

Yes.

Okay.

We didn’t need extra people, no.

Thanks so much. Best of luck.

Thank you.

Thanks. I think it’s a pretty good result considering everything happening out there. I would like to explore a bit more about the power and flexibility of the model that has served the company well, particularly its ability to react and respond. Can you discuss either the big picture or provide examples of what has been happening over the last couple of quarters? What have you learned, where can you be more flexible, and in what areas has it been more challenging? Especially with the extremely cold weather, could you share if there were places where you could have been better positioned to adapt to that cold weather in terms of the business's flexibility? Thanks.

We learn something from every quarter, and the fourth quarter provided valuable insights, which is why Marmaxx merchandise margins performed well. Looking ahead, I would consider allocating more resources to the warmer zones while scaling back slightly in the northern regions and adjusting some categories. They made significant changes, but I still see potential for improvement. It was a strong quarter overall, but we are focused on the future. I prefer not to dwell on the weather too much because we are optimistic about the upcoming year and have confidence in our model for it.

Thanks, Carol.

Hi, good morning. Just I guess a little bit of follow-up in thinking about the fourth quarter and then into the first quarter. Maybe just if you could kind of help us better understand the company’s strategy during let’s say a period when sales are a little bit light, I think a lot of us are so used to the company being very nimble, you are able to react late in the season. What in terms of just the way you run the business let’s say results in a situation where you find that you are taking some greater markdowns. Given how lean you run the business and how kind of late you make buying decisions relative to full price? Thanks very much.

So obviously, our home business was spectacular as you saw in home goods in Europe. That was pretty consistent in terms of whether the business was great. I will reiterate, every quarter, we evaluate and we have certain businesses that are extremely strong and we are feeding into them. Our inventory position is spectacular right now. We are more open to buy than we had a year ago. We are actually turning faster in Marmaxx than we did a year ago, and as we go through the quarter and as we transition for each quarter, especially the first and fourth quarter, we are going to take into consideration all of the patterns that we have seen and do some tweaking with that, and that’s usually how we get better each quarter.

So is it fair to say that to some degree because you want to have the sales floor very fresh, that if you find that for whatever reason the product isn't quite selling the way you expected for weather or other reasons, that you just choose to basically move it out right then as opposed to holding it in the store?

What we do is, I mean, we look at every single category and we would see certain categories harder in the north that are less weather, we call this weather proofing. And then we would see the southern zones of the warmer climate is a little bit heavier and that’s a tweaking we do.

And Daniel, if I may add, we have maintained lean inventories, as Carol mentioned earlier, even in categories affected by the weather. This approach has helped us avoid significant liabilities in our inventories, which is one reason our margins have remained strong. Even in categories impacted by weather, we kept inventory levels low, minimizing our liabilities while maintaining flexibility. When discussing the fourth and first quarters, this is essentially our regular practice. We typically follow trends and do not hold onto large liabilities in any category.

We could have increased inventories in Marmaxx and achieved higher sales, but that would have likely resulted in more markdowns, which requires careful balancing. Specifically, there are areas where we could add more inventory to boost sales without needing to support them, and those are adjustments we would consider making.

Which we do ongoing all the time right every quarter…

All right. Well, thanks, guys. I appreciate that.

Hi, good morning. This is (indiscernible) filling in for Brian. Thanks for taking our question. We wanted to ask about Europe. Comps have been clearing very strong now for 10 quarters in a row. So we’re wondering who you think you're gaining share from in Europe and how your marketing initiatives compare to the ones in U.S.? And now from a real estate perspective, you clearly have pretty ambitious store opening plans, actually both in the U.S. and Europe. But I guess it’s easier for us to see here where you may be getting these larger boxes that further downsizing at some department stores and maybe even consolidation among office suppliers retailers. So, wanted to see if real estate dynamics are similar in Europe as well and maybe if there are any retailers that you want to or look to co-locate with in Europe. Thanks.

Look, first of all, we believe in Europe. We are taking a bit of share from everyone. I mean, we see everyone as our competition. Off-price is very new to Europe not to U.K. because we’ve been there for a long time. But in Germany, it is very new and people are very, very excited about it. In terms of the real estate, Ernie and the team had put on quite a few additional people that are seeking sites which is why we are able to increase our count in Germany and obviously go into Austria and we will see how that goes. But it’s a matter of manning it and continuing to build and leverage the infrastructure that we have that took us 20 years to build.

Thank you.

Hi, thanks. I just wanted to ask you if there’s anything we should think about in terms of market share. JCPenney did better this quarter in a quarter where your comps didn't do as well. I mean, it sounds to me as if it's a lot of weather. But just wondering if you think some of the JCPenney doing a little bit better has any impact. And I guess really after you answer that, just explain to us how you understand that. What specifically you look at to get an indication as to how a situation like that might be impacting you guys? Thanks.

Michael, we do a pretty deep analytical study on stores that are next to our stores, stores that are within a mile away, three miles away, five miles away. And quite frankly, we didn’t see the impact when Penney’s comps were substantially down and we’re really not seeing an impact going the other way, but we do a deep dive and we analyze it.

Okay. That’s helpful. One more quick question. It seems like you mentioned that your outlook for the rest of the year remains unchanged, but you are now anticipating 2% to 3% comparable sales in the second quarter. Was that your original plan, or does it reflect a loss of weather-related business in the first quarter with expectations of recovery in the second quarter?

There is a little bit of pent-up demand. Ernie and I feel, there are a couple of areas that we can execute a little bit better, and our marketing impressions are up 35% in Marmaxx and we're really excited about some of the things that we are doing in our loyalty program in Marmaxx.

And you would view our long plans for those impressions to be up, or that was a shift when you saw the business meter?

No, that was just our plan.

Okay. Thank you.

That's also part of our analyzing Q1 into Q2, the weather patterns, all of that. That's where we wanted to put our dollars.

Great. Good morning. Just looking at 1Q, I know this is probably difficult to parse out, but you mentioned a 4% comp differential in weather impacted regions versus none. I'm just wondering if in total you can describe how much weather was an impact overall to our 1Q shortfall at Marmaxx versus the impact of dresses and juniors underperforming? And how do you feel about the inventory specifically in the dresses and juniors category and how long maybe it could take to right size that inventory? Thank you.

Well, as I said before, probably, we would certainly be at the high end of our range on looking at the numbers. We can’t come up with an exact specific number but it's pretty clear to us, when we look at the different regions and areas that it was probably about four points in Marmaxx. It was actually more than that in HomeGoods, so it did hit us. In terms of both categories, dresses and juniors are improving. I think we are going to see a substantial improvement in the second quarter and we are working on it. I can't give you specific numbers and I don’t usually do that. But we're working on it. And usually as a company, we fix things pretty quickly.

Great. Thank you so much.

I would also jump in at the weather analysis that Carol was talking about. If you ever did, I guess dollar it out to figure out the impact that would be far greater than junior dress business execution impact. Yeah, I think you had asked that in your question.

Thanks guys. Can you give any update you can give us on stores opened in the last one or two years, new store productivity kind of by chain, how does that look?

Actually the productivity of our new stores is sensational, to say the least. It just continues to be incredibly strong. We are getting better and better at our sites there. Brand new stores and their performance is incredible, both Marmaxx and HomeGoods actually every chain. We are very happy with new store performance.

That’s great. Thanks.

Good morning, Carol. I would like to delve into your loyalty program a little bit. Can you talk about the number of members you have currently, the average spend and how you intend to, kind of get the word out that you don’t have to be a credit card holder to join the program?

So you are asking me for some things I’m not going to give you. But what I will tell you is we tested the loyalty program in several markets last year and we saw a substantial increase in the number of visits. And we are rolling that out across the country starting really today through June. So we're pretty excited about it, and there are a lot of special some things like stores opening early for that customer, giving them e-mail information on things that are coming into the store. We have several little trigger points that we have been testing over the last year. So this is very, very exciting to us. So, we will see what happens when it rolls out.

Can you talk at all about the average spend of the loyalty customer versus non-loyalty?

Our loyal customers spend significantly more, and more importantly, the number of visits has increased substantially.

Got it. Okay. Great. Thank you.

Hey, everyone. Congratulations on a great job despite the tough weather in the first quarter. Can you provide a quick update on Home and HomeGoods? How did they perform compared to the Marmaxx Group? Also, I've noticed some smaller departments within Marmaxx tend to do well when apparel sales are down, like beauty, fitness, or footwear. Could you share insights on those areas aside from accessories, which I believe you mentioned?

So, Marni, I don’t usually do a deep dive into our categories for competitive reasons. But HomeGoods and Marmaxx was pretty strong, big furniture. We had some issues with some of our big-ticket items. But generally, home across the board was certainly stronger than apparel. I will tell you that women's apparel has increased dramatically coming into May. So we are pretty pleased with that, but across-the-board, the categories were pretty similar in most divisions.

Fantastic. Thank you, guys. Best of luck for the second quarter.

Thanks.

Hi. Good morning. I have a question about the recent increase in marketing impressions in the U.S. and the U.K. Could you provide an example from the last few quarters where these investments led to significant outperformance and your level of confidence in seeing a change in traffic trends related to these investments?

I mean, it’s hard to measure very specifically, but I think it's usually a combination of how you market and the number of impressions. So we have a group of things going on, which you will see from TV, social media, Facebook which we have millions and millions of people and it's really a combination. So we are pretty excited about our plans. But I think a big piece of it is going to the loyalty piece of it also. But you can’t measure specific question equal this.

Okay. Okay. And then just on the store expansion plans, are you seeing increased competition for real estate that's impacting your plans at all?

Well, there is always competition for real estate but we are not having any issues in selling the number of stores we need at the appropriate ROI. And we think that there will probably be some opportunities going forward. There are some specific changes that are certainly not in business and are planning on closing quite a few stores. I think that is going to be an opportunity for us.

No difference than in the past.

Yeah.

And just to mention, we are really in a good place in terms of where we are positioned on new store opening targets going forward, so we are feeling very good about where we look going forward.

We are filling to our open to buy hopefully. And Ernie has a complete open-to-buy in Europe, if it’s beyond the 40 stores.

Good morning. Carol, you mentioned stepping up your marketing this quarter, when was that decision made and what drove that decision? Is it an expectation that people want more apparel now that the weather is more normal or am I reading too much into it?

No. We’ve outlined our strategy at the end of the year. We learned from the fourth quarter and analyze each quarter's potential. We aim to reduce perceived negative impacts while capitalizing on perceived positives, and we believe this is a strong strategy.

Great. Thank you.

Hi. A question about inventory, you've been reducing some of the levels per store. Are we at the point where you've gotten halfway down to where your target is, or if there is more to go? And then within juniors, Carol, do you expect the merchandise to be at your level of expectations by back-to-school?

I would hope so. I’m answering that question either way. As for our inventory levels, we are certainly not halfway there, but we will continue to deliver to the stores more frequently and with greater freshness, which will help us maintain leaner inventories. We still have some room for improvement, and we also see opportunities to cater to the individual needs of each store based on their specific sales drivers. This is the purpose of our investment in systems for the future. Additionally, we are implementing foundational changes that will help us expand internationally more effectively than we do now. We are laying the groundwork and investing for the future, which we hope will allow us to move a bit faster.

Okay. Yeah. When I said halfway, I mean, is it fair to say that the majority of your per-store inventory reductions are in the past and there's a little bit less more to go?

There’s less more to go, but I think there could be some sales opportunity.

Thanks. Good morning, everyone. I'm curious if you could provide more details about tjmaxx.com, specifically how it's progressing since its launch in the fall and if there have been any surprising outcomes, whether good or bad. I'm also interested to know if you remain as optimistic about this opportunity as you were in the fall, and what plans you have for potentially launching marshalls.com or expanding into other concepts. Thank you.

I think, what we’re learning is we’re increasing our SKUs, we’re increasing our categories. We’re very pleased with the business, certainly since the launch. We have in our plans to continue the investment and we're very pleased with it. We want to again make sure that we’re differentiating because we want to build the thing the right way and we keep learning. And I think once we cycle a year, we’ll have a lot more information on newness in customer, what’s bringing us back into brick-and-mortar. We are seeing most of returns coming back to the stores which is terrific. But we’ll have a lot more analytics to it. But our goal right now is just to build tjmaxx.com as big as we can get it.

And then just a question on, what was said earlier on the weather impact at Marmaxx. Did you say it was about 4 points of same-store sales?

Versus the group of stores that we felt were impacted by weather.

Hi. This is Jerry Gray on for John. I just have a question about the assumptions that are built into your SG&A guidance. It seems like you have some increased marketing dollars and then some investments in the real estate team and accelerating store growth in Europe. And I was just wondering if you could give us some more details on what's driving the leverage in your assumptions? Thank you.

Sure. So all the above is built into the plans and all those were built into the original plans. So just to reiterate what Carol said today, our plans for the back half of the year in the second quarter were what we gave or reflected in our February guidance. But in terms of the SG&A, again no major changes. There is some leverage due to anniversarying some spend in our technology investments, some of that is due to our datacenter move which is almost complete, so that some of the benefit in the rest of the year. And also, we had expenses last year in the back half of the year related to some of our home office moves, again which were anniversarying and are built into some of the favorability that are implied in our guidance for the rest of the year.

Yes. Thank you. Good morning. In terms of what you’re seeing in the channel, in terms of merchandise availability, can you talk a little bit about the pricing you’re seeing of goods, or any material change there one way or the other?

Yes, David. The market also as Carol mentioned earlier is really loaded and across most categories and across most sectors whether it’s more moderate goods or the better brands. And with that, there is often time, especially given the weather situation, many vendors and manufacturers experienced ramifications of that weather. So we’re seeing some pricing than we’ve seen in the past. Our objective is to always maintain strong relationships with our vendors. So amidst all the better pricing we want to have the consistent approach that is a partnership with our vendor community, but the pricing has definitely gotten sharper over the last I would say 60 days.

I would also tell you David that I think we’re even opening more some additional very unique vendors. So it’s pretty exciting out there.

Generally, during a period like this where there may be some improvement in pricing, is your intention to retain that increase or do you think you will need to use it to adopt a more aggressive pricing strategy for the customer?

I think it’s up to each buyer and what they do is really balance their mix, so we may buy something that has zero margin and then we think it's appropriate. We put them out. There might be a mix that has high margin. But as I said we’re generally planning our margins slightly up in our big box and we feel we will achieve that with outrageous values.

Yes. Good morning. In the past, you've discussed that differentiating between the brands is key to placing stores close together. Can you discuss how you're going about doing this and how you would like to define the brands within the increased marketing messaging?

Yeah. Bridget, we don’t talk about how we differentiate. In fact, specifically the brands have separate marketing agencies, teams. The way we brand is very different and we differentiate in many, many ways and we look at that every day. The buyer that buys for T.J. Maxx and Marshalls is the same buyer, so they have the ability to differentiate. And they know exactly how to ship to a store to make it look different. So that’s been since day one.

We physically approach the layout of our HomeGoods stores differently compared to our Marmaxx stores, particularly in home areas. Marshalls and T.J. Maxx are designed to look distinct in size, alongside other aspects Carol mentioned. Across the board, whether it’s marketing, physical layout, or the merchandise selection, we have strategies in place to ensure differentiation.

However, the one thing they do, do is leverage together. It’s great because they can see and say, I want to put this here, I want to put this there. So they really all know what's going on with each other and are able to leverage it.

Could you clarify if traffic returned to positive by the end of the quarter? You mentioned it improved. More generally, regarding the competitive environment, it’s difficult to determine how much weather played a role. It has already been noted that Penny is recovering, but some department stores performed better. Additionally, Nordstrom Rack had a strong comparable sales growth, although their locations differ geographically. Could you discuss the competitive environment in more detail? So, two questions: traffic and weather?

Yeah. I mean, we’ll start with the competitive environment. We have that all the time. As weather hit a lot of people, most people got aggressive. I think they'll continue to, I think there is a promotional environment. But I think our business model in itself is absolutely terrific and provide very well in all environment. And we will take full advantage of it. Not going to specifically talk about traffic each month, but I mean, we’ll improve and it did improve. And we were slightly down with our ticket up for the quarter.

I want to thank everyone. And we look forward to reporting on our second quarter. Thank you and thanks Élan.