TJX Companies Inc (TJX) — Q4 2026 Earnings Call Transcript

Thanks, Charlie. Before we begin, Deb has some opening comments.

Thank you, Ernie, and good morning. Today's call is being recorded and includes forward-looking statements about our results and plans. These statements are subject to risks and uncertainties that could cause the actual results to vary materially from these statements, including, among others, the factors identified in our filings with the SEC. Please review our press release for a cautionary statement regarding forward-looking statements as well as the full safe harbor statements included in the Investors section of our website, tjx.com. We have also detailed the impact of foreign exchange on our consolidated results and our international divisions in today's press release and in the Investors section of tjx.com, along with reconciliations to non-GAAP measures we discuss. Thank you. And now I'll turn it back over to Ernie.

Good morning. Joining me and Deb on the call is John. I want to start today by acknowledging our global associates for their excellent work in 2025. I truly appreciate their ongoing commitment to both TJX and our customers every day. Now to an overview of our results beginning with the fourth quarter. I'm extremely pleased with our excellent fourth quarter results. Fourth quarter sales, profitability and earnings per share were all well above our expectations. Overall, comp sales were up a very strong 5% with comp sales strength at each of our divisions. I'm convinced that our exciting assortment of merchandise and great values resonated with shoppers across all of our retail banners this holiday season. Further, our teams did an excellent job transitioning our stores post-holiday to the categories and trends that appeal to consumers and I am confident that our merchandise mix positions us well as we start the year. For the full year, overall net sales surpassed $60 billion, making a major milestone for our company. We are even more excited about the future and the global opportunities we see to keep growing our customer base and to capture additional market share by bringing excitement to shoppers with our values. Full year comp sales increased a very strong 5%. Profitability increased significantly and earnings per share grew double digits, all well above our initial guidance for the year. Importantly, we are confident that we attracted new shoppers to our stores in every country that we operate in. I want to again recognize the excellent execution of our teams and the collective efforts of our associates across the company, which led to this terrific performance in 2025. As we begin 2026, the first quarter is off to a strong start. We have many initiatives planned that we believe will keep driving sales and traffic this year. We remain confident that in-store shopping is not going away and believe our focus on offering customers an exciting treasure hunt shopping experience every day will continue to serve us well. Additionally, we are always looking at ways to further improve our in-store shopping environment and remain committed to investing in store remodels and new prototypes that we believe will enhance the customer shopping experience. In fact, I believe that our organization has done such a great job in this area that it has helped drive the remarkable consistency of comp increases across our store base. The availability of quality branded merchandise in the marketplace continues to be outstanding, and we are in a terrific position to flow a fresh assortment of goods to our stores and online this spring and throughout the year. Longer term, we are convinced that the flexibility of our business and our unwavering commitment to value will continue to be a winning retail formula. I'll speak more about our performance and our confidence in gaining additional market share over the long term in a moment. But first, I'll turn the call over to John to cover our fourth quarter and full year financial results in more detail. John?

Thanks, Ernie. I also want to add my gratitude to all of our global associates for their hard work and commitment to TJX this year. Now I'll share some additional details on the fourth quarter. As I recap our fourth quarter results, I'm going to speak to everything on an adjusted basis, which excludes the net impact from a litigation settlement related to the credit card interchange fees and the related expenses associated with that settlement. Reconciliations detailing the net impact of these settlement-related items on our results can be found in today's press release and on the Investors section of our website. Net sales grew to $17.7 billion, a 9% increase above last year. As Ernie mentioned, our fourth quarter consolidated comp sales increased 5%, which was well above our plan and on top of a 5% increase last year. I want to note that our quarterly comp was trending higher prior to the winter storms that swept across North America at the end of the quarter. Importantly, we saw sales pick up again after the storms passed. Our fourth quarter comp was driven by a combination of a higher average basket and an increase in customer transactions. Further, we saw strong comp sales increases in both our apparel and home categories as we have all year long. Adjusted pretax profit margin of 12.2% was up 60 basis points over last year's 11.6% and well above our plan. Adjusted gross margin was 31.1%, up 60 basis points over last year's 30.5%. This increase was primarily driven by a higher merchandise margin and expense leverage on sales, partially offset by unfavorable inventory hedges. Adjusted SG&A was 19.1%, favorable 10 basis points versus last year's 19.2%. Net interest income negatively impacted pretax profit margin by 10 basis points versus last year. All of this led to adjusted diluted earnings per share of $1.43, up 16% over last year's $1.23 and well above our plan. Fourth quarter adjusted pretax profit margin and adjusted diluted earnings per share were both well above plan. This was primarily due to lower shrink and expense leverage on above-plan sales, partially offset by higher incentive compensation accruals. As for our divisional performance in the fourth quarter, each of our divisions saw comp sales growth of 4% or better and had strong adjusted segment profit margins. Now to our fiscal '26 results. Once again, for our full year financial results, I'm going to speak to everything on an adjusted basis, which excludes the net impact from a litigation settlement related to credit card interchange fees and the related expenses associated with that settlement. Net sales grew to $60.4 billion, a 7% increase over last year. Consolidated comp sales were up 5% and driven by both a higher average basket and an increase in customer transactions. Adjusted pretax profit margin was 11.7%, up 20 basis points over last year's 11.5%. Full year adjusted gross margin was 31%, up 40 basis points over last year's 30.6%. This increase includes a 20 basis point benefit from shrink favorability. We once again saw shrink favorability across all of our segments. I want to take a moment to acknowledge the outstanding efforts of our associates who worked hard all year long to drive this improvement. I'm also pleased to share that shrink is essentially back to our pre-COVID level. We believe this speaks to our culture of working to quickly address issues that come up and our commitment and laser focus on fixing them. Full year adjusted SG&A was 19.5%, 10 basis points unfavorable to last year's 19.4%. Net interest income negatively impacted full year pretax profit margin by 10 basis points versus last year. All of this led to full year adjusted diluted earnings per share of $4.73, up 11% over last year's $4.26. Ernie will talk about our full year divisional highlights in a moment. Moving to inventory. Balance sheet inventory was up 14% and inventory on a per store basis was up 10%. We feel great about our inventory levels and the excellent availability we are seeing in the marketplace. I'll finish with our liquidity and shareholder distributions. For the full year, we generated $6.9 billion of operating cash flow and ended the year with $6.2 billion in cash. In fiscal '26, we returned $4.3 billion to shareholders through our buyback and dividend programs. Now I'll turn it back to Ernie.

Thanks, John. I'll cover some full year divisional highlights. I'm extremely pleased with the strong and consistent sales performance across each of our divisions. All of our businesses delivered comp sales growth of 4% or better this year. Importantly, each division drove increases in customer transactions and attracted new shoppers throughout the year. I truly believe our value proposition appeals to a wide customer demographic across our retail banners, which differentiates us from so many other major retailers. I am convinced that each of our divisions is set up extremely well to continue capturing market share around the world for many years to come. At Marmaxx, overall sales for the full year grew to $36.6 billion. Marmaxx's comp sales grew a strong 4% with increases in both their apparel and home categories. Further, comp sales were up across each of Marmaxx's regions and consistent across all customer income demographics. At Sierra, we were very pleased with their performance as they delivered healthy sales growth while accelerating their store openings across the United States. Additionally, our U.S. online businesses continue to add new categories and brands to deliver even more freshness and excitement for our e-commerce shoppers. As to Marmaxx's outstanding profitability, adjusted full year segment profit margin increased to an outstanding 14.4%. Going forward, we are very excited about the opportunities we see to open more stores, attract more shoppers and increase sales at our largest division. At HomeGoods, annual sales surpassed $10 billion, a great milestone for this division. Comp sales increased a very strong 5% with broad strength across all regions of the country. During the year, we opened 27 stores for this division, bringing our eclectic mix of home fashions to even more consumers across the United States. As to profitability, HomeGoods' full year adjusted segment profit margin increased to an outstanding 12%. Long term, we see plenty of opportunities for HomeGoods and HomeSense to capture an even bigger share of the United States home market. At TJX Canada, full year sales increased to $5.6 billion and comp sales increased an outstanding 7%. It was great to see consistent and strong performance at all 3 of our Canadian retail banners, which each delivered similar comp increases. Adjusted segment profit margin on a constant currency basis increased a strong 13.8%. Through our winners, Marshalls and HomeSense banners, we are one of the top destinations for apparel and home fashions in Canada. We continue to see a long runway for growth and are excited to further grow our footprint across this country. At TJX International, full year sales grew to $8 billion and comp sales increased a strong 4% with strength in both Europe and Australia. In Europe, we are the largest brick-and-mortar off-price retailer and believe our size and scale allow us to offer consumers an unmatched mix of merchandise at great value. Further, we are on track to open our first stores in Spain this spring and are excited to deliver our values to more shoppers in Europe. In Australia, sales were once again outstanding, and we continue to open stores across the country. As to profitability, I am extremely pleased with the TJX International division's improvement in 2025. Adjusted segment profit margin on a constant currency basis increased significantly to 7.3%. Going forward, we are confident that we can continue capturing more shoppers in each country that we operate in. We continue to be very pleased with our joint venture in Mexico and minority investment in the Middle East. In Mexico, we've made excellent progress on the merchandising side of the business and continue to see opportunities to further optimize the store assortment. In the Middle East, Brands for Less stores continue to perform well, and they have plans to continue opening stores across that region. We're excited to be participating in the growth of off-price in these regions of the world. Moving on, I'd like to highlight some of the key reasons why we are confident that we can continue to grow our company and gain market share around the world for well into the future. First is our relentless focus on delivering value for our customers every day. Availability of merchandise continues to be exceptional as our team of more than 1,400 buyers source from a universe of approximately 21,000 vendors every year, including thousands of new ones. We have developed very strong relationships with our vendors and believe they look to us to clear their excess inventory and to grow their business and introduce their brands to new customers. This gives us great confidence that we will have plenty of access to goods going forward and that we are in an excellent position to continue bringing shoppers joy and terrific value every time they visit. Second, we believe our strategy of operating stores across a wide customer demographic will continue to serve us well. With outstanding access to good, better and best merchandise, we can curate our stores with an assortment that appeals to various income and age demographics. This allows us to reach a broad range of shoppers, which we believe differentiates us from many other major brick-and-mortar retailers. Further, we continue to see an outsized number of new younger customers visiting our retail banners at each of our divisions. All of this gives us confidence that we can continue to open stores in new markets in each of our geographies. This leads me to my next point, which is the significant opportunity we see to grow our global store base. We see the long-term potential to grow to 7,000 stores with our existing retail banners in our current countries and Spain. We have an excellent track record of opening stores in the right locations in the right markets and are convinced that we will continue to do so. With the long-term opportunity to open 1,700-plus additional stores globally, we see a very strong path ahead for continued global growth. Fourth, we believe we are a retail leader in flexibility. Our business is centered around being flexible, including our buying, our store formats and our supply chain and systems. This allows us to quickly pivot to take advantage of hot categories and trends in the marketplace and get the right goods to the right stores at the right time, which we believe drives shopper excitement when they visit. Going forward, we are confident that our flexibility will allow us to successfully navigate ever-changing macro environments and economic landscapes, just as it has throughout our 50-year history. Lastly, I am convinced that the strength of our talent and our focus on culture have been major contributors to our success and will continue to drive the business for many years to come. I truly believe that the tenure, depth of expertise and off-price knowledge of our teams are unmatched. Further, we continue to invest in teaching and training our associates to develop the next generation of TJX leaders. I am confident that our global talent base and consistency of our culture will be tremendous advantages as we continue our growth around the world. In closing, we feel great about our terrific performance in 2025. We are confident in our plans for 2026, and as always, we will strive to beat them. Our value perception remains very strong. I'm convinced that our focus on value and delivering an exciting treasure hunt shopping experience will continue to bring joy to shoppers around the world. I am so excited about the growth opportunities we see in both the near and long term, and I'm confident we can achieve them. The entire TJX team is laser-focused on executing our business model to grow our top and bottom lines and to continue our global growth and capture additional market share. Now I'll turn the call back to John to cover our full year and first quarter guidance, and then we'll open it up for questions.

Thanks again, Ernie. I'll start with our full year fiscal '27 guidance. We are planning overall comp sales growth of 2% to 3%. For the full year, we expect consolidated sales to be in the range of $62.7 million to $63.3 million, up 4% to 5%. We're planning full year pretax profit margin to be in the range of 11.7% to 11.8%, flat to up 10 basis points versus last year's adjusted 11.7%. Moving to full year gross margin. We expect it to be in the range of 31.1% to 31.2%. This will be up 10 to 20 basis points versus last year's adjusted 31% due to an expected increase in merchandise margin. We are expecting full year SG&A to be 19.5%, flat versus last year's adjusted 19.5%. We're expecting incremental store wage and payroll costs to be offset by lower incentive compensation accruals this year. We're planning net interest income of $76 million, which we expect to delever fiscal '27 pretax profit margin by 10 basis points. Our full year guidance assumes a tax rate of 25.0% and a weighted average share count of approximately 1.12 billion shares. As a result of these assumptions, we're expecting full year diluted earnings per share to be in the range of $4.93 to $5.02, up 4% to 6% versus last year's adjusted $4.73. Lastly, I want to mention that we are evaluating the potential impact of last Friday's ruling on tariffs and monitoring the changing tariff environment. That said, our full year guidance assumes that we will be able to offset the tariff pressure on our business this year. Moving to the first quarter. We're planning overall comp sales to increase 2% to 3%, consolidated sales to be in the range of $13.8 billion to $13.9 billion, up 5% to 6%. Pretax profit margin to be in the range of 10.3% to 10.4%, flat to up 10 basis points versus last year's 10.3%. Gross margin to be in the range of 29.9% to 30%, up 40 to 50 basis points versus last year's 29.5%. This would be due to an expected favorable inventory hedge comparison to last year and an expected increase in merchandise margin. SG&A to be 19.8%, 40 basis points unfavorable versus last year's 19.4%. This would be primarily due to incremental store wage and payroll costs. We're also planning net interest income of $22 million, which we expect to have a neutral impact on our year-over-year first quarter pretax profit margin. Our first quarter guidance also assumes a tax rate of 23.1% and a weighted average share count of approximately 1.12 billion shares. Based on these assumptions, we expect first quarter diluted earnings per share to be in the range of $0.97 to $0.99, up 5% to 8% versus last year's diluted earnings per share of $0.92. Moving to our fiscal '27 capital plans. We expect capital expenditures to be in the range of $2.2 billion to $2.3 billion. This includes opening new stores, remodels and relocations as well as investments in our distribution network and infrastructure to support our growth. For new stores, we plan to add 146 net new stores, which would bring our year-end total to well over 5,300 stores. This would represent a store growth of about 3%. In the U.S., our plans call for us to add 45 net new stores at Marmaxx, 35 new stores at HomeGoods, which includes 11 HomeSense stores and 24 new Sierra stores. In Canada, we plan to add 13 new stores. At TJX International, we plan to add 19 net new stores in Europe, which includes our first 5 stores in Spain and 10 new stores in Australia. Lastly, we're planning about 540 remodels and plan to relocate approximately 40 stores in fiscal '27. As to our fiscal '27 cash distribution plans, we remain committed to returning cash to shareholders. As we outlined in today's press release, we expect that our Board of Directors will increase our quarterly dividend by 13% to $0.48 per share. Additionally, in fiscal '27, we currently expect to buy back $2.5 billion to $2.75 billion of TJX stock. In closing, I want to reiterate that we are excited about the growth opportunities we see in the long term. We are in an excellent position to continue to invest in the growth of TJX while simultaneously returning significant cash to our shareholders. Thank you, and now we're happy to take your questions.

Ernie, can you update us on pricing actions that you've taken? How is the customer reacting to some of the higher ticket prices? And is that reaction any different for different demographics?

Great question, Lorraine. First of all, we assess the competitive retail landscape to determine our pricing strategies. When it comes to existing items, if their prices fluctuate, we may take pricing actions to maintain our value gap. It's important to note that this is selective and applies to certain categories or items. Additionally, when our average ticket prices increase, it can also be attributed to a change in our product mix. For instance, in Marmaxx, during the fourth quarter, we offered more premium goods at higher prices, which reflects a shift in our mix rather than a direct price change. Overall, our business has shown consistent performance, with strong value retention. We regularly conduct surveys to gauge customer perception of our value, which has actually improved over the last six months. Our model allows us to adapt to market movements without strictly dictating retail changes. When market prices shift, we aim to preserve our value proposition and adjust accordingly. I hope that answers your question.

Congrats on another nice quarter.

Thanks, Matt.

So Ernie, what's your ability to further accelerate your offense globally if we're thinking about this year, maybe to take advantage of disruption in the marketplace, whether that's from tariff volatility and what it's doing to sourcing and supply chains or even the consolidation that's happening at luxury retail? And then I've got to ask my near-term question, which is, could you just elaborate on the strong start to the first quarter? Have you seen any moderation relative to the fourth quarter at any of your segments?

That's very good, Matt. Let me begin by addressing your first question directly. I was planning to discuss several initiatives we have in place since the consumer is eager to explore new shopping options due to disappointments with in-store experiences or merchandise at other retailers. Our teams have leveraged this situation effectively. I want to highlight some of our proactive strategies, as this aligns perfectly with the topics I wanted to cover. First and foremost, we aim to boost our top line, and we believe customers are willing to try new offerings. Our marketing efforts, which we've touched on in past meetings, are more aggressive than ever, using marketing as a proactive tool like never before. Recently, we launched a new campaign for HomeGoods and are preparing to introduce a new campaign for T.J. Maxx and Sierra in the near future. We've engaged with platforms like the Olympics to enhance our promotional activities. On all fronts, we apply marketing mix modeling to assess how our marketing efforts drive top-line growth. This sophisticated approach has been a focus for our teams in recent years, and they're ramping it up even further in fiscal '27 to evaluate our spending and creative strategies to capture additional market share. Secondly, we are pursuing brands with more aggression than ever. We hold significant importance for the branded vendor community, which is evident from the recent store closures you mentioned. Our teams are conducting more regular meetings with key brand representatives across various management levels, driven largely by the vendors' desire to collaborate with us. This includes a range of product quality categories. Furthermore, John mentioned our focus on remodels and store environment improvements, also under the umbrella of a proactive strategy. We want to attract customers through exciting marketing, and once they're in the store, we aim to provide an exceptional value mix. We're successfully engaging with the branded merchandise market, and our product availability is remarkable. We're actually needing to temper our buyers in every division due to high availability, which is telling us something important. Regarding the shopping experience, we are actively testing new store prototypes and refreshing our existing locations, which is essential for maintaining consistent comparable sales across all our regions and stores globally. With over 5,000 stores, it's crucial to continue investing in this area to avoid any decline in sales. Additionally, another aspect of our proactive approach is related to store payroll. I credit our field management and store directors at TJX for their belief in staffing our stores adequately to enhance our operations, ensuring goods are readily accessible and organized, allowing for a pleasant shopping experience that encourages quick customer checkout. This proactive strategy starkly contrasts with the approaches of some other retailers currently. So that encapsulates our offensive strategy. John, would you like to add anything?

Yes. Regarding your second question about the strong start, much of what Ernie mentioned focuses on execution. Customers are looking for value, and they are very pleased when they visit our store locations. We are witnessing a continuation of strong performance.

Yes. And Matt, in addition to what John mentioned, another aspect we evaluate is the marketing team's great support in providing John and me insights on income and age demographics, right, John?

Yes. I mean certainly, in Q4... Very balanced.

Very balanced. We analyzed both above and below $100,000 income levels in the U.S., and the performance was consistent for both groups. Geographically, the fourth quarter showed strong consistency across all our divisions. Another highlight is that we skew younger than the average customer due to some of the new customer acquisitions over the last couple of years. When looking at the age groups 18 to 34, 35 to 54, and 55 plus, we tend to attract a younger demographic compared to the general population, which I believe is positive for our future.

Best of luck. Congrats again.

Thanks, Matt.

SG&A leverage came in a little bit lighter than I think what you guided to despite higher sales. So just curious if you could talk about the flow-through and maybe what the offsets, what drove less leverage than you might have expected, if there was something to the TJX Foundation or incentive comp, marketing? And then just second, if you could talk a little bit more about traffic versus ticket or transactions versus ticket by segment and how you're thinking about those metrics as the drivers of that 2% to 3% comp assumption for '26?

Yes, regarding your first question, the Q4 SG&A in relation to our guidance is primarily due to the incentive accrual. In terms of traffic and ticket sales, both showed an increase during the quarter. Overall, transactions rose across most divisions, except for HomeGoods, which remained flat. Before the storm hit the U.S. in late January, HomeGoods was experiencing an upward trend in transactions. The main factor affecting performance was the average basket size, which was driven by increases in average retail. This trend has been consistent over the last few quarters. We are pleased to note that customer transactions and traffic into our stores have continued to grow. Factors such as advertising and customer demographics are positively influencing our product mix, which has resulted in satisfied customers.

Yes, Paul, in relation to John's point about HomeGoods, it was only in Q4. For the year, HomeGoods did experience a slight increase in transactions. One of the reasons for this, as you mentioned, is the confidence that the combination of basket size and ticket will help us achieve a 2% to 3% increase. Our approach differs from traditional retailers; we focus on a good, better, best strategy. Yesterday, I met with a senior leader at Marshalls to discuss this balance. I believe our teams excel at ensuring this balance, presenting the right looks without sacrificing fashion, and balancing basic with contemporary styles in our home department. We don't artificially push an average retail situation; instead, we focus on value by maintaining a mix of good, better, and best options. This strategy reinforces our belief that we can meet and possibly exceed our future plans.

Got it. And Ernie, if you were to exceed that 2% to 3%, do you think it's more likely to come from more transactions or ticket? Is there one that you would favor and expect to be a...

It's hard for us to predict that going forward. It's based on the customers.

Yes. Right now, I can say that it's a mix of various factors. Over the past year, we saw a combination of ticket sales, basket sizes, and transactions. I believe this approach allows us to avoid focusing on just one component and instead consider a combination of them.

As long as we're driving the top line, to us, it really doesn't matter whether it's coming from the basket or the transactions as long as they're both healthy.

Right.

Got it. Good luck.

Thank you, Paul.

How favorable was the stronger AUR and margin delivery in the quarter? And then looking forward, can you speak to the drivers of merchandise margin improvement that you're forecasting for the year and the most important areas of opportunity that you see there within the business?

All right. John, do you want to take the first.

As far as a stronger AUR, we don't parse that out. I mean we basically said when we talked about sales that for the quarter, it was more the basket than the transactions that drove the comp. And within that, it was the average retail that drove that. So we can't really parse out any more of that. And then as far as merchandise margin.

Yes. So Brooke, are you asking how we are achieving the improvement in merchandise margin?

I'm asking what the forward merchandise margin improvement is based on where you see the biggest opportunity?

One of the biggest opportunities we see in the market is our ability to adapt in a highly saturated merchandise environment, which enables us to choose the best buys. With 1,400 buyers across various locations, our team members can cover a wide range of categories. Our merchants are trained not to commit to having anything in stock, allowing them to focus on securing the most appealing offers for customers while maintaining healthy merchandise margins. This approach distinguishes us from many other retailers, particularly due to the experience of our merchants and the training they receive. Additionally, our buyers often receive priority on excess inventories because the market prefers to work with them, given their straightforward, courteous nature and their reputation for timely payments. As we enter the year, we are in a strong liquidity position, which I’m very pleased about. We're off to a solid sales start, and our liquidity across all banners is well-maintained, which is a positive sign. Furthermore, amidst any confusion surrounding tariffs or market changes, our buyers have consistently demonstrated their ability to navigate these challenges effectively. This allows us to improve our merchandise margin even during uncertain times, a trend that we anticipate may recur. Thanks for your question; it’s very relevant, and it highlights how we drive both revenue and margin by offering an exciting value mix to our customers.

I have a couple of follow-ups on margin as well. The first one is on HomeGoods. HomeGoods versus Marmaxx, the margin gap has widened in recent years. And I know you've talked about the drivers being freight and fixed costs. Do you see an opportunity for HomeGoods to catch up to Marmaxx level margins, especially if we see continued relief on freight and potentially some lower tariffs on Asian source markets? And then a quick follow-up on your comments just now on gross margin drivers. Can you talk about what you're assuming for the non-IMU-related drivers like shrink, operating leverage as well as freight in the next year for your gross margin assumptions?

I want to start with HomeGoods. We are very pleased with the improvements we’ve seen there. HomeGoods achieved a leverage of 150 basis points in the fourth quarter and 110 basis points for the entire year. We're really happy with their performance, which has been driven by sales leverage and improvements in merchandise margins. This is due to better buying practices, favorable freight conditions, and reduced shrinkage. Additionally, there have been significant operational efficiencies. We will not speculate on whether they will reach Marmaxx level margins, especially since Marmaxx continues to improve. However, they are doing an excellent job at increasing their pretax profit over the last couple of years.

Aneesha, John and I discussed this recently with the HomeGoods team, and I believe John would agree. They are highly motivated to get as close to Marmaxx as possible, even though we haven't set a specific target. It's interesting you brought that up because over the past couple of years, the incremental bottom line operating margin in that business is likely one of the highest within the brick-and-mortar home sector, and they take pride in that. However, I think there's still potential for improvement. As John mentioned, we won't commit to defining how high they can go. What I do know is that they are not simply aiming to meet plans, as you can see.

I really liked the Olympic content. I'd like to understand how you approached the overall macro environment and adapted your strategy this year compared to the last few years, especially regarding consumer responses to your business during times of stimulus. Are there any specific tactics you've focused on to capture market share or any drivers of spending you considered, such as tax benefits on tips and their potential impact over time? Additionally, when we met in December, you mentioned a desire to be more aggressive with marketing. While I know you're not looking to reduce that effort, could you elaborate on how you see that fitting into your leverage profile this year and whether there's a chance to decrease leverage to pursue higher revenue?

Yes, Michael, that’s a significant strategic question. When I previously discussed playing offense, I think it directly relates to what you're asking. This year, and starting last year, we began expanding into markets like Mexico with BFL. We are optimistic because we have a solid team in place, and I want to leverage our experience more than ever. Our trained associates are ready to step up, enabling us to take advantage of opportunities. As John and his team review our financial plans for the future, we see ample opportunity for TJX to continue growing. As I mentioned earlier, in addition to our current banners and countries, including Spain, we have plenty of room for expansion, particularly in Mexico as we grow that business further. We also see potential in our investment with BFL. The core business has more potential than we previously realized. Considering recent store closures and the softer sales, along with a competitive landscape that might be overlapping with customer bases, we believe this context allows us to capture more market share. This ties back to Matt's point about playing offense. You can expect us to be more aggressive—consistent with our culture—when it comes to driving growth, taking market share, and opening new stores where we identify potential for success. Every division is actively figuring out ways to drive growth. I believe the outlook has adjusted slightly over the past couple of years. John, do you want to add anything?

If customers have more money from tax benefits this spring, we are certainly going to advertise. The advertising will be very aggressive in reaching customers. Ernie mentioned earlier the product mix, which offers options that appeal to a wide range of customers. We plan to put our best foot forward and hopefully increase our market share.

What's been interesting, Michael, is that our brands are more appealing for gift giving than ever before. I believe they are cooler, whether it's HomeGoods, Maxx, Marshalls, or T.K. Maxx in Europe, and winners and Marshalls in Canada. We are seeing an increase in gift-giving purchases for various holidays. This aligns with the ongoing improvement of our brand images. The same goes for Sierra. I believe we are capturing gift-giving business throughout the year now, rather than just during the fourth quarter as we used to.

I appreciate it. Congrats again.

Thank you.

Thanks, Matt.

Really nice job. Ernie, I appreciate your comments on your own ability to work through tariffs. I was curious if you have any thoughts yet on impacts that the uncertainty might have on the vendors and channel inventory going forward? And then, John, I appreciate the shrink commentary. How do you think about that going forward? Sorry if I missed it. Is it just generally neutral at this point? Or is there anything else to keep in mind?

In terms of the vendors, it's still early to make any definitive statements. We're uncertain about their actions regarding the past, but looking ahead, it will be interesting to see if prices decrease on certain items or if tariffs are adjusted on specific categories. This will influence the retail dynamics. Fortunately, our model allows us to observe retail developments around us and respond accordingly. My assumption is that if a vendor struggles in a category, possibly due to tariffs, they might reconsider their pricing and make adjustments where feasible. The reason for my caution is the uncertainty of the long-term outcomes. We have some insights, similar to everyone else observing the situation, but that's the best assessment we can provide at this stage.

Yes. Regarding your question about shrink, we have seen 20 basis point improvements over the last two years, bringing us back to pre-COVID levels. Our teams have done an outstanding job creating a safe shopping environment for customers and associates, which encourages shopping without hassle. We've implemented methods that have led to increased sales in several areas. Over the past year, we made improvements to our shrink performance that will be sustained this year. Our teams are currently reviewing last year's strategies to identify further opportunities. We remain committed to improving shrink, and while we expect continued progress, it may not be as pronounced as before since we are now close to our pre-COVID status.

Maybe, Ernie, I just want to talk about HomeGoods a little bit. Can you just really dive into that the 6% comp. Are you seeing opportunities in new categories? You're talking about so much opportunity buying. I think people always assume you need apparel. But are there other things, whether it's bed, kitchen, bathroom, home, like area rugs, lamps, anything that's adding to the store that's new that's driving that comp that you see more potential just because of everything that the company is doing?

Yes, that's a great question. I can’t provide specific details about categories as that could give competitors an advantage. However, I can say that our business is very diverse, which contributes to its overall health. If you visit our stores, you'll observe how the HomeGoods team has successfully targeted categories where other stores have either closed or reduced their focus. This creates a demand for specific products that HomeGoods is now uniquely positioned to meet. There are several categories where customers really have to come to us for their needs. Regarding basic items such as bedding, sheets, towels, and blankets, we face less competition and offer unbeatable value that others cannot match. In utilitarian products like picture frames, candles, and stationery, we provide a comprehensive selection with both style and functionality at exceptional prices. Importantly, over 30% of TJX's home business is now attributed to HomeGoods, which achieved a significant milestone of $10 billion last year. John and I often discuss how Home and TJX give us a competitive edge since our homebuyers collaborate to create a stylish and eclectic mix that attracts impulse purchases. Our stores have become well-known on social media for being the go-to place for impulse home shopping, which is why many customers find it difficult to leave without spending more than $100. While I'm unable to share precise details about specific categories, I can confirm that there’s a broad assortment available, and I credit our talented merchants at HomeGoods and throughout the company for this success. Okay. That was our last question. Thank you all for joining us today. We look forward to updating you again on our first quarter earnings call in May. Take care, everybody.