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Operator
Ladies and gentlemen, thank you for standing by. Welcome to the TJX Company's fourth quarter fiscal 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. At that time, if you have a question, you will need to press star then 1. As a reminder, this conference call is being recorded on February 27, 2019. I would now like to turn the conference call over to Mr. Ernie Herman, Chief Executive Officer and President of TJX Companies, Inc. Please go ahead, sir.
Ernie Herman
Thanks, Katie. Before we begin, Deb has some opening comments.
Katie
Thank you, Ernie, and 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 limitations, the Form 10-K filed April 4, 2018. Further, these comments and the Q&A that follows are copyrighted today by the TJX Companies, Inc. Any recording, retransmission, reproduction, or other use is 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. We have detailed the impact of foreign exchange on our consolidated results and our international divisions in today's press release and the Investors section of our website, TJX.com. Reconciliation of the non-GAAP measures we discussed today to GAAP measures are posted on our website, TJX.com, in the Investors section. Thank you. And now I'll turn it back over to Ernie.
Ernie Herman
Good morning. Joining me on the call is Scott Goldenberg. Let me begin by saying that we are extremely pleased to report another quarter of outstanding results. Fourth quarter consolidated comp store sales increased a very strong 6%,
Scott Goldenberg
which
Ernie Herman
is well above our plan and over a 4% increase last year. I am most pleased with the consistency of the performance across our major divisions, which all delivered comp sales growth between 4% and 7%. Further, each of our divisions drove their comp sales growth with significant customer traffic increases. This quarter marks the 18th consecutive quarter that customer traffic was up at TJX and Marmax. We also saw strength in both our apparel and home businesses. Fourth quarter adjusted earnings per share were 59 cents, also above our expectations. We also delivered terrific full year results in 2017. Consolidated comp store sales were a 6%, well above our original plan. Each of our four major divisions posted strong comp sales growth driven by customer traffic increases. I am very pleased with the sharp execution of our teams across the company. Clearly, our great values and treasure on shopping experience continues to appeal to consumers around the world. 2018 marks our 23rd consecutive year of comp sales growth, highlighting our long and steady track record. Full year adjusted earnings per share of $2.11 also exceeded our plans. Our excellent results underscore the fundamental strength and consistency of our flexible off price business model. Over more than four decades as a company, we have adapted to many changes in the retail environment and have successfully navigated through both strong and weak economies. Above all, our commitment to value has never wavered. Looking ahead, the first quarter is off to a solid start. For 2019, we have many initiatives planned that we believe will keep driving sales and customer traffic. We are in a great inventory position and have plenty of liquidity to take advantage of the huge amount of quality merchandise we are seeing in the marketplace. We are confident in our full year plans and feel great about the outlook for our business in 2019 and beyond. Before I continue, I'll turn the call over to Scott to recap our fourth quarter and full year numbers.
Scott
Scott? Thanks Ernie and good morning everyone. As Ernie mentioned, fourth quarter consolidated comparable store sales increased a very strong 6% and were significantly above our expectations. Once again, customer traffic was up overall and was the primary driver of our comp sales increases at all divisions. As a reminder, our comp increase excludes the growth from our e-commerce businesses. Fourth quarter diluted earnings per share was 68 cents, excluding an approximate 8 cent benefit from the 2017 Tax Act. Adjusted earnings per share were 59 cents, which exceeded our plans by two pennies. Foreign currency negatively impacted our EPS growth by 2%. Despite the headwind from increased trade costs, merchandise margin was up significantly. Now to recap our fourth quarter performance by division. Marmax comps increased an outstanding 7%, significantly exceeding our plan and over a 3% increase last year. We saw strong performance across all of our geographic regions and across income demographics. Once again, we saw strength in both Marmax's apparel and home businesses. Segment profit margin was down 50 basis points versus last year's adjusted segment profit margin of 13.8%. Expense leverage on the higher comp and merchandise margin improvements were more than offset by incentive compensation accruals, supply chain and other planned expenses. Home goods comps grew a strong 5% on top of last year's 3% increase. We are very pleased with home goods continued comp growth and traffic increases. Although segment profit margin was down 50 basis points, it was much better than we anticipated versus last year's adjusted segment profit margin of 13%. Home goods delivered a strong merchandise margin increase despite significant freight costs. This was more than offset by higher expenses related to our distribution centers and other planned expenses. TGX Canada's fourth quarter comps were up a solid 4% over a 7% increase last year. We were pleased with the comp sales growth throughout our Canadian regions. Last year's adjusted segment profit margin excluding foreign currency was down 200 basis points versus last year's adjusted segment profit margin of 12.7%. This was primarily due to a decrease in merchandise margin and store wage increases. At TGX International comps grew a strong 5% in the fourth quarter over a 3% increase last year and was our best comp in the last two years. We are confident that we will continue to gain market share in Europe despite the challenging consumer environment. Once again we saw consistency in our comp sales across all of our UK regions. Further, our Australian sales performance continues to be excellent. Adjusted segment profit margin at TGX International excluding foreign currency was down 50 basis points versus last year's adjusted segment profit margin of 7.3%. TGX International's strong merchandise margin was more than offset by planned expenses, transactional effects and incentive compensation accruals. Now to our full year consolidated fiscal 19 results. Consolidated comp store sales grew an outstanding 6% over a 2% increase last year. Similar to the fourth quarter, overall customer traffic was the primary driver of the comp increases at each of our divisions. While e-commerce remains a very small part of our overall business, sales grew significantly for the full year. Fully diluted earnings per share were $2.43 excluding a 34-cent benefit from the 2017 Tax Act and a 2-cent pension settlement charge. Adjusted earnings per share were $2.11. This was a 9% increase over last year's adjusted 193 and above our plan. Importantly, while merchandise margin was essentially flat in fiscal 19, it would have been up significantly without the increased pressure from freight. I'll finish with our financial strength and shareholder distributions. Our business continues to generate excellent cash flows and strong financial returns. In fiscal 19, pre-cash flow was $3 billion. We continue to take a disciplined approach to capital allocation and our ROIC remains one of the highest we have seen in retail. We remain committed to returning cash to shareholders through our share repurchase and dividend programs while simultaneously reinvesting in the business to support our growth. In fiscal 19, we returned $3.4 billion to shareholders through these programs. Now let me turn the call back to Ernie and I'll recap our first quarter in full year fiscal 20 guns at the end of the call. Thanks
Ernie Herman
Scott. I'm going to start with some 2018 highlights which I will bullet out for you. Beginning with the fourth quarter, we surpassed $11 billion in total sales, a company record. Next, each of our divisions delivered a terrific holiday season with excellent comp sales growth and strong customer traffic increases. Clearly, our great values and ever-changing merchandise mix are resonating with consumers in stores and online. We are very pleased with our marketing initiatives across the company. Finally, our teams transitioned our stores very well post-holiday. Now to our full year highlights. Annual sales with $39 billion. I want to highlight that our annual sales have more than doubled over the last 10 years in a changing retail environment. We saw great customer traffic across the company in every quarter. We are convinced that we captured additional market share in the US, Canada, Europe and Australia. Our research tells us that we saw growth in new customers at each of our divisions, including a significant share of millennial and Gen Z shoppers. We successfully grew our store base, opening a net 236 stores globally, including expanding our newer businesses, Homesense and Sierra in the US and TK Maxx in Australia. Lastly, we continued making important investments in our distribution capabilities and systems to support our growth plans. Now, I'd like to talk about why we believe TJX is so well positioned to continue its successful growth for many years to come. First, we operate four powerful divisions, each with exciting growth potential. All of our major divisions have 25 years or more of operating expertise. That's over two decades of developing thousands of vendor relationships, regional consumer knowledge and internal teams, infrastructures and supply chain. We see this as a tremendous advantage as we pursue our growth strategies around the world. Long term, we see the potential to grow TJX by approximately 1,800 stores to about 6,100 total stores with just our current banners in our current markets. Let me break down the reasons for our confidence by division. At Marmax, sales surpassed $24 billion in 2018. We achieved an outstanding 7% comp increase and significant customer traffic gains, despite an uncertain US economic environment and the continued growth of e-commerce in general. Marmax drove this growth with an average comp store age of 20 years, which is a remarkable indicator of the health of our largest division. We have many initiatives underway to keep driving shoppers to our stores. In 2018, the Home Goods division delivered a 4% comp increase while opening an additional 94 stores. While we are by far the largest off-price home fashion retailer in the US, we still see enormous opportunity to grow both Home Goods and Home Sense in the US. We believe we can bring our eclectic home assortments to many new markets and more consumers. TJX Canada had another terrific year, driving 4% comp sales growth on top of a 5% increase last year. As Canada's only major off-price apparel and home fashions retailer, we are in an excellent position to capture additional market share with our three Canadian banners. We are confident that significant opportunities remain to grow this division throughout Canada. Finally, TJX International delivered very strong performance in 2018. Total sales surpassed $5 billion and comp sales grew 3% despite the challenging retail landscape in Europe. In the UK, we are confident that we continue to capture market share. UK sales trends improved during the year and we believe we widen the comp sales gap between us and other major brick and mortar retailers. TK Maxx in Australia delivered very strong sales and brought our concept to even more shoppers. We see great potential to continue growing this division throughout our current countries. Our e-commerce businesses had another year of double-digit sales growth. In the US, TJMaxx.com added new categories and well over a thousand new brands. Now today, we are very excited to announce that we will be launching e-commerce for Marshalls later this year. Our strategy with our Marshalls.com site will be similar to our successful approach with TJMaxx.com. We plan to offer a differentiated mix online similar to how we differentiate our stores. Our strategy is to maximize multi-channel engagement and drive incremental sales. We are also rebranding Sierra Trading Post to Sierra. Shifting to the UK, we are very pleased with the growth of TKMaxx.com and the metrics we are seeing with our Click and Collect program. Another important factor giving us confidence in our future is our successful track record of navigating through many kinds of economic and retail environments. Our 40 plus years, we have driven steady sales and earnings growth while opening thousands of stores around the world. I'll detail some of the key reasons for our confidence. First and foremost is our commitment to value, core to our concept from the start. More than low prices, we deliver value through a combination of brand, fashion, price, and quality. Importantly, we offer great values on comparable merchandise versus both full price, brick and mortar, and major online retailers. In addition to our great values, we see many advantages to our treasure hunt shopping experience. We are convinced that the ability to touch and feel merchandise will continue to resonate with consumers despite the growth of online retail overall. Our physical store formats also make it easy for consumers to shop a wide variety of items across multiple categories in a very time efficient way. We continue to upgrade the shopping experience by listening to our customers and incorporating their feedback into our store renovations. In 2018, we are again very pleased with our customer satisfaction scores. With our rapidly turning inventories, we always have something new to surprise and excite our customers. Next, we see a huge opportunity to capture market share and our focus on driving customer traffic and comp sales. We view ourselves as leaders in innovation are extremely and are always seeking more ways to attract consumers into our stores and online. In 2019, we will strive to make our shopping experience even more exciting and rewarding. We have several marketing initiatives planned across television and digital platforms to reach consumers wherever they are spending their time.
Marshalls
We
Ernie Herman
see meaningful opportunity to further amplify our loyalty programs to drive even higher member engagement. I also want to emphasize our leadership and flexibility. With our portfolio of change around the world, we reach consumers across a wide demographic and offer them a wide selection of quality branded merchandise. We are disciplined in managing our inventories to allow our buyers the flexibility to take advantage of the best opportunities, hot categories, and trends in the marketplace. With approximately 1,100 associates in our buying organization and over 21,000 vendors in our purchase universe, we have tremendous flexibility in the ways we buy. Lastly on this point, our logistics and systems are designed to support our off-price model and extreme flexibility, which we see as a major advantage. In closing, as we begin a new year, we feel great about our business today and are excited about the future. Over many decades, the strength, consistency, and resiliency of our flexible off-price business model has allowed us to deliver steady growth year after year. We have many important advantages that we believe set us apart from other major retailers. We continue to leverage our global presence. We have great brand awareness in the U.S. and internationally and are offering consumers our excellent values across nine countries.
Marshalls
We have
Ernie Herman
built and refined our global teams, infrastructure, and supply chain over many, many decades. We see vast opportunities to keep expanding our global store growth and capture market share. Further, we offer consumers the convenience of shopping brick and mortar and online with a differentiated strategy that we believe is right for our business. I also want to underscore the longevity of our organization and management team, which gives me enormous confidence. Our team has the knowledge and experience of managing successfully through both strong and weak environments and capitalizing on the opportunities that each present. We have a world-class training program with our TJX University. It is our people who bring our business to life for our customers every day. I want to recognize them for delivering another great year after many great years for TJX. We are energized for 2019 and our very long runway for growth around the globe. Now I'll turn the call over to Scott to go through our guidance and then we'll open it up for questions.
Scott
Scott? Thanks Ernie. Now to fiscal 20 guidance beginning with the full year. For modeling purposes, we are comparing all fiscal 20 EPS estimates against fiscal 19 EPS results that include the benefit from the 2017 tax act. Again, we are taking this approach to show an apples to apples EPS comparison now that this benefit from the tax act is in both years. We expect fiscal 20 earnings per share to be in the range of 255 to 260. This would represent a 4 to 6 percent increase over the prior year's adjusted to 245, which excluded a two cent negative impact from a pension settlement charge. This EPS guidance assumes consolidated sales in the 41 to 41.2 billion range, a 5 to 6 percent increase over the prior year. We're assuming a 2 to 3 percent comp increase on a consolidated basis. We expect pre-tax profit margin to be in the range of 10.2 to 10.4 percent. This would be down 40 to 60 basis points versus the adjusted 10.8 percent in fiscal 19. We're planning growth profit margin to be in the range of 28.1 to 28.2 percent compared to 28.6 percent last year. We're expecting SG&A as a percentage of sales in the range of 17.8 to 17.9 percent versus 17.8 percent last year. For modeling purposes, we're currently anticipating a tax rate of 26.0 percent, net interest expense of about 4 million, and a weighted average share count of approximately 1.22 billion. Now to our full year guidance by division. At MarMax, we're planning comp growth of 2 to 3 percent on sales of 25.1 to 25.2 billion and segment profit margin in the range of 13.1 percent to 13.3 percent. At HomeGoods, we expect comps to increase 2 to 3 percent on sales of 6.4 to 6.5 billion. We're planning segment profit margin to be in the range of 10.2 percent to 10.4 percent. For TGX Canada, we're planning a comp increase of 2 to 3 percent on sales of approximately 4.1 billion. Adjusted segment profit margin excluding foreign currency is expected to be in the range of 12.8 to 13 percent. At TGX International, we're expecting comp growth of 1 to 2 percent on sales of approximately 5.4 billion. Adjusted segment profit margin excluding foreign currency is expected to be in the range of 4.4 to 4.6 percent. Moving on to Q1 guidance. We expect earnings per share to be in the range of 53 to 54 cents versus last year's 56 cents. We're expecting foreign currency to negatively impact EPS growth by approximately 3 percent. While Q1 EPS growth is planned down, I want to highlight that it implies an adjusted EPS growth of 7 to 10 percent for the last nine months of the year. Moving on, we're modeling first quarter consolidated sales of approximately 9.1 to 9.2 billion. This guidance assumes a 1 percent negative impact due to translational effects. For comp store sales, we're assuming growth of approximately 2 to 3 percent on a consolidated basis and 3 to 4 percent at Marmex. First quarter pre-tax profit margin is planned in the 9.6 to 9.8 percent range versus 11 percent in the prior year. We're anticipating first quarter gross profit margin to be in the range of 27.9 to 28.0 percent versus 28.9 percent last year. We're expecting SG&A as a percent of sales to be in the range of 18.2 to 18.3 percent versus 17.8 percent last year. For modeling purposes, we're currently anticipating a tax rate of 26 percent, 1 million of net interest, and weighted average care count of approximately 1.23 billion. It's important to remember that our guidance for the first quarter and full year assumes that currency exchange rates will remain unchanged from the levels at the beginning of the first quarter. Now to our store growth plans for fiscal 20. We plan to add about 230 net new stores, which would bring our year-end total to more than 4,500 stores. This represents store growth of approximately 5 percent, and similar to this past year, reflects our plans to close only a few stores. Beginning in the U.S., our plans call for us to add about 60 stores at Marmax. Next, we expect to add approximately 65 home goods stores and open up about 15 home cents stores. We also plan to open up an additional 10 Sierra stores. In Canada, we plan to add about 30 new stores. And at TJX International, we plan to open approximately 40 stores in Europe and 10 stores in Australia. I'll wrap up with our cash distributions to shareholders. As we outlined in today's press release, we expect that our board of directors will increase our quarterly dividend by 18 percent on top of the 25 percent increase last year. This would mark our 23rd straight year of dividend increases. In fiscal 20, we also plan to buy back 1.75 to 2.25 billion of TJX stock. Even with our significant shareholder distributions, we still plan to end fiscal 20 with approximately 2.5 billion in cash and short-term investments, which underscores our financial flexibility. Now we are happy to take your questions. To keep the call on schedule or planning, we are going to ask you to please limit your questions to one per person. Thanks, and now we will open it up for questions.
Operator
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star then one. You may hear a tone indicating you've been placed in queue. Please unmute your phone and record your name when prompted. Your name is required in order to ask your question. You may remove yourself from queue at any time by pressing star two. Once again, if you have a question, please press star then one at this time. Our first question comes from Alexandra Walvis from Goldman Sachs. You may ask your question.
spk01
Good morning. Thanks so much for taking the question. I guess I'll start with the guidance and particularly on the gross margin. So it looks like you're guiding to around 90 basis points negative for the first quarter and then for the full year that moderates around 40 or 50 basis points. Can you talk us through what's contained within that guidance in particular? How much of it is freight and how should we think about when that freight headwind starts to phase out for the business? Thank you.
Scott
Good morning, Scott. So in talking about our Q1 guidance, just to be clear, the guidance is down about at the high end about 100 basis points in the first quarter, which implies, as we said in the prepared remarks, that we're up 7 to 10 percent on EPS growth in the back nine. And also that means our EPS, our basis points is down 20 on the rest of the year, which correlates to that 7 to 10 percent. In terms of the gross profit, the down 90 is 70 XFX in the first quarter and down 30 basis points for the rest of the year, for the last nine approximately, which gets you to the 40 basis points down that were down on gross profit. So the gross profit is being impacted less next year for freight, but it's still a significant impact to our gross margin. So we would be up on our merchandise margin if not for the freight impact next year. So it is moderating. It's moderating for two primary reasons. We had some large rate increases this year. Our best estimates at this point is that we'll still have large increases for the first couple quarters. And then we expect based on what we see or what our intelligence say is going to moderate a bit in the back half of the year. And we have freight mitigation strategies, which we believe are going to start impacting and benefiting us next year. And again, more likely in the back half of the year than the first half. So we feel good about that. Our supply chain pressure is slightly less next year than it is this year. Again, more first half oriented and much bigger in the first quarter than the rest of the year. And again, it's more due to home goods and Marmax. Home goods as we're still annualizing the opening of a DC who opened in New Jersey this year and Marmax where we have a San Antonio DC this year that will be opening up. In terms of the rest of it, so it's really supply chain pressure and merchandise margin in the first quarter driven by what will be more of an outsized or over weighted to that versus the rest of the year. Also one other thing I would call out, we'll have to see how it plays out, is that particularly in our European business we have an impact baked in for the year but more for the first quarter for the impact of Brexit, which impacts us in the first quarter and we'll have to see how that develops. Some of those are fixed costs to make sure that we are prepared for doing business in Europe and some of that is variable cost depending on what happens. The second piece to that is we have more and another piece is that we have more mark on pressure in Canada and Europe in the first quarter than what we'll be seeing for the rest of the year.
Operator
Thank you. Our next question comes from Matthew Boss from JP Morgan. You may ask your question.
Marshalls
Thanks and congrats on a great quarter. Thank you. So maybe larger picture, can you just speak to your confidence and maybe some of the drivers behind your two to three comp forecast versus one to two, which I think is where you have started historically over the past five years, maybe just also the best way to think about the traffic and AUR components within the top line guide.
Ernie Herman
Sure. Well, Matthew, you can see from the momentum that we've been getting over specifically as the year has gone on here, it's been pretty consistent.
Matthew
And
Ernie Herman
you look across the consistency of the divisions, we had a spread from four comp to a seven comp. Almost universally across all the divisions, we have an enormous penetration and growth rate on key branded vendors and branded merchandise within the mix at every division. And I would say each division has had a significant increase in their top brands. And this doesn't necessarily mean that there are better brands. It's just all well-known brands. And in aggregate, our top brands are actually up pretty significantly across the board, which is another great indicator. But I really like to go that the name of the game here is value. And when we look at our value positioning in terms of how well we can execute going forward, and this is where it gives us confidence in the upping our comp by a point, is we are so well positioned in our ability to execute brand fashion quality and at the value pricing, right, because those are the components of our value. We have stability in merchants across the four core divisions. That is helping ensure that we're able to do that. If you look at the fourth quarter, that was our highest two-year stack of the year that we just finished. So that's a great indicator going into the new year. Our average retail you mentioned, that is moderating and actually recent has been picking up. So, again, that is something we have said repeatedly, Scott and myself, we don't keep in mind, we don't dictate that or drive that top down. But that's the nature of what our merchants do when they go after hot categories. It's kind of driven by that. But we see our flexible model and the relationships that have happened, some of that probably based on the environment work. A lot of the key brands are finding that their ability to do business with us and their desire to grow that business is very beneficial to them. It works with us because we're such a treasure hunt experience that they're able to grow their business and not do it in a way that hurts their current business. But really, when you boil it all down, I think our value positioning and the way we can execute the components of value, the brand, the fashion and the quality, as witnessed by, again, the last couple quarters. And we didn't have the stability in our teams, which are executing well, and that we've grown those teams. We've added like around a 10% growth in that merchant team, as we talked about on that number earlier. Because we had faith and confidence, that was going to help us with our two to three comps that you were just asking about. So hopefully, that gives you a lot of color on that and why we're so confident and really feeling great about this coming year in terms of driving the top line.
Operator
Thank you. Our next question comes from Chetan Malala from Barclays. You may ask your question.
spk14
Hey, good morning. Can you talk a little bit about the drivers of the merchandise margin improvement in the fourth quarter, which I think came despite continued elevated freight costs? It's a little bit of a change from what we had seen over the first quarter, three quarters of the year. And it also sounds like it's a little bit different than your expectation in fiscal 20, where I think you may be looking for the merchandise margin down a little bit. So just helpful to think about detail into the quarter there.
Scott
Sure. Yeah, the freight, so the overall gross margin down 10 basis point XFX was driven, again, with strong merchandise margin. It was primarily driven by improved markdowns. If you remember last year, again, a lot of it, which was as we planned, last year we had some flow issues at HomeGoods and some at Marmax. And so last year we had more markdown in the fourth quarter. We took advantage of this year and more and we had good markdown improvement. And a little bit offset in Canada, where we took a bit more markdowns than we had anticipated. Some of it was structural due to the timing of markdowns in the calendar, but some of it was due to some softness that we saw as there was some weather related issues in January just on that. But overall, that was the biggest drive. We did see freight pressure, but as we had said earlier in the year, our largest freight pressure was going to be in the third quarter. So we had less freight pressure in the fourth than the third, although still, you know, still was, you know, still significant. We did have some, we had continued supply chain pressure and timing, and we've talked about timing of expenses, which all came in as essentially as planned. And those were the drivers that offset the strong, some of the strong confidence. So we did see some occupancy leverage offsetting these timing of expenses, supply chain offset, some of the strong merchandise margin and comp benefit we got. We also had 10 basis points of fuel hedge that hit us in the fourth quarter. But other than that, we were really pleased with the overall performance of our merchandise margin, you know, at all the operating levels in the fourth quarter.
Operator
Thank you. Our next question comes from Lorraine Hutchison from Bank of America, Maryland. She may ask your question.
Lorraine Hutchison
Thanks. Good morning. Can you talk a little bit about average ticket trends in the fourth quarter and any expectations you have for this coming year?
Ernie Herman
Well, Lorraine, we've, you know, we talked about this. We're, it's, it's like we mentioned earlier, since we don't direct it or top down manage it as best we can from a close in on order, what's in the market and availability and based on our categories that we chase after. Again, it's bottom up driven from our merchandise managers and buyers. That's when we go after certain categories. And right now, as we continue to do, and it's working, we're going after the Huttist categories. We're fortunate as we went through this past year, some of the Huttist categories helped our ticket. And so our ticket moderators started to pick up a little. And that's how we came out of the year with it up a little. We'd like to say it would hover or maybe around there. But again, Scott and I are always hesitant to commit too far out because we buy so handsome out. So our visibility on the on order, there were certain things we can glean from it. Like for like right now, we can glean that we are highly branded on our on order and we can that our values are terrific. We can tell that the ticket looks pretty good on what's on order, but we still have a lot of open to buy our guess. So if you ask our guesses, it should moderate and pick up a little. But again, don't hold me to that if in the second quarter I'm telling you, oh, we're down on a tick. I don't think it'll be anything major like it was back a few years ago. But we're feeling like at the end of the day, our best guess would be it moderates and picks up a little.
Lorraine Hutchison
Thank you.
Ernie Herman
Welcome.
Katie
Thank you.
Operator
Our next question comes from Bob Durbel with Guggenheim Securities. You may ask your question.
Scott Goldenberg
Hi, guys. Good morning. I just wondered if in terms of product availability, I'm specifically interested in the tariff situation. Has it created any opportunities for you in certain categories?
Ernie Herman
So, Bob, we would say that right now a little bit, but not much, nothing meaningful. However, we're looking at the tariff situation as something, first of all, we're just like everybody. We're going to wait and see. We're not probably immune to certain ramifications from a tariff in the close-in situation. However, like anything in our business, we believe longer term it's probably going to be a benefit for us because any uneasiness in the market or any chaotic change for the vendor community in terms of them having to bring goods in earlier or allocate differently or resource to different countries, we believe will ultimately benefit us. It's just in the shorter term, there could be some ramifications. Right now, it's been so early, there's been probably little pockets of opportunities we've taken advantage of. But it hasn't been anything meaningful.
Bob
And I just wondered if you could provide an update and just sort of a little bit more on the wage pressures and how you're managing that and sort of what you're seeing.
Ernie Herman
Yeah, on the wage. So, our philosophy on the wage situation is we are proactive, I would say, market by market would be our approach. So, we have, in many, in like a third of the country, we're at $11 already. However, we don't believe in taking the blanket approach of upping our wages across multiple states all at the same level. Our attrition is fine. We have not had problems hiring in the stores. So, what we are doing, obviously, we will state by state go along with any of those policy changes and that will take care of those states. But in other markets, we don't feel it's the same to pay in a certain market down south as it is to pay in greater New York City area. I mean, it's just, that to us doesn't feel appropriate in terms of cost of living. And our situation with our help in the stores wouldn't tell us what that's the right thing to do.
Bob
Great. Thank you very much. The only
Scott
thing, Bob, just to add to what Ernie said, I mean, we still have the same level and that 1 to 2% impact of wage on our EPS growth. Going back to Ernie with the market conditions, we provide for a factor for what we think we will have to adjust during the year. And last year, that came in pretty close to what we thought and similarly will provide for a built into our guidance, you know, what we will have to adjust for market conditions going forward. I'd say that was a bit more than we anticipated this year was in our supply chain, some of our distribution centers where we had some more wage costs in the back half of the year that we had to adjust from a competitive point of view, but they're built into our guidance for next year.
Ernie Herman
It
Scott
does,
Ernie Herman
Bob, obviously, as Scott said, it does continue to be a headwind, obviously, for not just us, but many retailers.
Scott Goldenberg
Okay. Thank you very much. Good luck. Thank you.
Operator
Our next question comes from Jamie Maryman from Bernstein. You may ask your question.
Jamie Maryman
Thanks very much. You talked about launching e-commerce for Marshalls later this year. And I was wondering if you could just talk a little bit about how you're thinking about that. And then I know in the U.K. you have started doing the sort of click and collect option for your e-commerce. And I'm wondering if you've given much thought to potentially rolling that out in the U.S. either with this Marshalls launch or with the TGMAX. Thank you.
Ernie Herman
Great questions, Jamie. So on the – you just would like a little – I think a little call on the Marshalls launch and what we're thinking? So, again, we're shooting for the back half of this year. And the key component here, as we did with TGMAX.com and differently from most other retailers in the way they approach their e-commerce businesses, we stay – a high percentage of our mix is differentiated from online versus what's in the stores.
Matthew
And we
Ernie Herman
find that that is the number one reason that we can get an incremental build off the business and not have cannibalization or lose visits to the store. Because we look at it as complementary. And we want Marshalls.com to be very complementary. And we want to encourage on returns and in shopping for first time consumers to go to both the website and the store. So we will stay as rigorous on Marshalls.com and making sure the mix online is as differentiated as TGMAX.com has been. And that has worked really well for us. Conversions, customer awareness, returns to stores, conversion rates have been healthy for us. And we're going to look to – we've learned a lot with TGMAX.com. So all of those learnings we've had in terms of building customer awareness and building incremental trips to our store, we're going to apply that to Marshalls. We really believe that it helps to drive incremental store traffic given that a large, large percentage of our returns online go back to our stores. And so it's going to encourage cross shopping. And by the way, I think based on how we execute it, the fact that we're going to now be in both is probably – there's probably a little build on that by having both of them involved. The click and collect overseas is a little bit of a different animal. Because in the UK, they are set up in many situations. You have to – you can't leave packages actually at the flats or the apartments. And so a large percentage of that business innately would tend to be click and collect differently than here. Having said that, we are taking a look down the road here, probably doing some tests on it. We don't believe for our assorted business or click and collect where – if you're a retailer, brick and mortar that has the exact same skews in their stores they have online, you can do a click and collect and pick up the goods the same day. That's one of the big benefits to those retailers that have a high click and collect business. That unfortunately will never be something we can do because of the nature of our treasure hunt and our quick turns. Having said that, we're probably going to test something about that here in the near future and find out what type of business it could be for us here. So great questions.
Operator
Thank you. Our next question comes from John Kernan with Cowen. You may ask your question.
John Kernan
Good morning, everyone. Thanks for taking my question. So Scott, just curious. There was a significant upside throughout the year to comps. You came in at the high end of the EPS guide. I'm just wondering, is there some type of variable cost or some type of other cost that kind of came in above your expectations throughout the year?
Scott
Well, I guess just to be clear, our EPS, if we went back to our original guidance, was a 6% EPS growth. And we came in at a 9% EPS growth. And we were hit primarily with headwinds on the freight of 2% to 3% of EPS growth over what we had expected. And also we had some additional costs as we talked on supply chain and incentive corals. So not that you want to say what your number would have been, but even if just freight, we would have had low double digit EPS growth versus our 6% EPS growth on the sales that we flowed through. So we would have thought that is pretty good and would have been great. Probably would have felt 3
Matthew
or 4. 3
Scott
or 4 points even with that. So having said, yeah, so we feel real good about that. In terms of just in recent, so the freight was a contributor to each quarter that we had not anticipated. It didn't change much from once we saw what was happening by the time we got to the first quarter call. So I would say it was pretty much has come in as we had anticipated from that point in time. The only thing I would call out is in the last quarter we had the, you know, we had a bit of the timing of expenses and supply chain pretty much came in. But as I said earlier, we had the truing up of our incentive corals because we had a great fourth quarter and you threw up the whole year in your fourth quarter, made for the incentive corals being a piece a bit more than we would have expected. And as I talked about early, we had some wage, DC wage impact. Other than that, everything pretty much came in as we thought. And again, to clear up any confusion that may have happened today, that we did beat our adjusted guidance by two pennies, you know, all due to operating performance. You know, the fiscal, you know, the true up was in our tax reform, you know, which was worth two pennies less than what we had contemplated. So we felt again real good about the operating performance that we did have.
John Kernan
Absolutely. Congrats on all the momentum. Good luck.
Operator
Our next question comes from Kimberly Greenberger from Morgan Stanley. You may ask your question.
Lorraine Hutchison
Great. Thank you so much. Good morning. I thought it was intriguing that you're looking out to the second, third and fourth quarter and getting back to that sort of high single digit to 10% EPS growth. Once we get through Q1 with some of those unique pressures. And if I reflect back on the past couple of years, we've been sort of stuck in the mid single digit EPS range. There has been a confluence of factors that have driven that. But I'm wondering if this foreshadows perhaps a stronger trend in your go forward EPS growth kind of looking out to 2020 and 2021. So I'm wondering if you can sort of reflect on where you think the more medium term outlook for the company might sit and if this is, you know, an opportunity to see that that sustainable EPS growth rate reaccelerate. Thank you so much.
Scott
Hi, Kimberly. I would love to. I think we'd love to state that. But I think just to be fair, I think our overall guidance of four to six percent based on what we're seeing now is more indicative, at least at this point in time, we were mostly more or less we were calling out the seven to 10% due to the again, I don't want to overstate timing and other factors that the way things were flowing within the between the we're trying to call out the first quarter to the rest of the year. And so we did get some benefits of that. We did have some higher incentive accruals and some other restructuring costs last year, which we clearly called out. And obviously, we're getting some of that benefit as we cycle over that in the back half of the year. So I don't, you know, don't want to overstate it. I'll just go back. I think both Ernie and I are comfortable, you know, with our overall guidance. We would, you know, there are a lot of wild cards, as we've always talked about on FX and, you know, Brexit, Paris, wage and we'll have to and supply chain freight. We think hopefully we'll get better. But too early at this point, too early to make a call on that.
Lorraine Hutchison
Understood. Thanks so much.
Operator
My next question comes from John Morris from D.A. Davidson. You may ask your question.
John Morris
Hey, thanks. My congratulations as well. One for Scott and one for Ernie. Scott, can you, I mean, given the comp quarter, given the comp compares, the tough comparison next year by quarter, can you give us a feel for how that would flow? You know, would it just, would it be evenly? Just want to make sure we're getting a read there by quarter. And then Ernie on, let's see, we got Payless, Jimberry, I guess, Macy's streamlining their inventory planning, Saks Offfit, potential closings. You know, I know that's a lot, but can you give us, you know, the puts and takes and what you think about that from your experience? How do you read each of those in terms of potential positive benefits? Thanks. Got it.
Scott
Hi, John. Not much to say on the comp, other than we're two to three for the year, two to three for the quarter, and by definition, two to three for the back. So that's about all we're
Matthew
going to say.
Scott
Yeah, I know that helps.
Ernie Herman
So, John, so your question, clearly over the last couple of years, what we've been seeing is if stores haven't closed, they've been in some cases decreasing from, their sales have been decreasing specifically in brick and mortar. As you know, some of the departments, as you've had increased online business, but decreasing brick and mortar. And so we tend to, we do, and I know Scott's talked about this before, we measure it and we look at the benefits to us potentially. Ironically, it hasn't been in either direction as much as we would think. So it's tough for us to get a handle on the store closures of mint market share. What we do know at the end of the day is we've, and clearly domestically here where you're talking about those specific stores, we have clearly this last year gained major market share given those comps and new store growth. Do I believe indirectly there's probably market share pieces here? I do. We tend to look at it by category, for example. So in some of these cases, if it's a category, for example, if it's a retailer who's more private label and the retailer is, they may be one of our categories, but if they're private label based, it's not like necessarily we're going to get that same customer trading up to us. It's more to me if it was a category that overlaps with us and some more demo brand oriented customer, then I think although tough to measure, we have to believe we're picking up some of that market share. And that's kind of how Scott and I have looked at it across the board. We have done analyses because we don't even have to look at these few. We've done analyses the last couple of years on all the different stores that have closed. Because by the way, you've had a lot of retailers have closed a chunk, 20% of their stores, even though they haven't closed all their stores. And we've looked at those. They haven't really seen the visibility to it.
Scott
Yeah. Yeah. Just to jump in there for a minute. The uniformity of our comps, whether it's in Canada, as we call that in the prepared remark, the UK, and particularly in Marmax, you know, in the US, you know, there's very little differential between urban, rural, suburban, ex-urban, and by geographic region at a pretty minute level. So it just feels like it's, as Ernie has always talked about, we're due to the overall execution and then, you know, and less, you know, that has to be the vast majority of it. Not that in certain locales and store by store we're not certainly picking up, but it's too broad based in terms of how we're doing. Right.
Ernie Herman
So one thing, John, though, and it's to your question that we have seen is whenever this type of thing happens, the event we do, and this is probably something we have also felt with our influx of even more brands and more availability is we end up with some of those vendors that supply them reaching out to us. So that ends up being, even though at the retail level you can't measure it, we end up with more goods served up to us because obviously all those vendors that are serving those, any of those retailers, they want to call us when they know that they're not going to have those outweighed. Does that make sense?
John Morris
Yeah, no, it totally does. You know, maybe in a way to read at this, because you're focused on toys at holiday, how was the toy category for you guys?
Ernie Herman
Well, so you know us, well, you know we can't give you that, but... Well, qualitatively. Were you happy? Well, qualitatively, if you looked in the stores, I think we had a good mix across the store, and certainly I think toys looked also like a good mix, but I can't give you how things performed. Yeah, understood. All right, great. Good luck for spring. Another question I would look at is it's an opportunity for a supply chain for us of additional vendors.
John Morris
Yeah, for sure. All right, good luck for spring. Thanks, guys. Thank you, John.
Operator
Our final question today comes from Dana Tesley from Tesley Advisors Group. You may ask your question.
Dana Tesley
Hi, good afternoon, everyone, and congratulations on the nice results. Thank you, Dana. As you think about the capex spend, remodels have been a part of the equation. What's in the pipeline from remodels, and can you just remind us about the list that you saw on remodels? And you also mentioned about marketing and how there's new initiatives coming. Is the penetration moving higher? What should we see on marketing? Thank you.
Scott
Thank you. I'll jump in first, and then we'll jump in on the second part of that, Dana. Thanks, Dana. A couple things you reminded me of that I didn't address. One, remodels, we don't really specifically talk about the list. I would say that certainly what we do is we adjust, and each round of remodels that we do, we think we take the best from what we're doing across all of our banners. And so we do think it's been a positive, but not like when we used to talk about it eight, nine years ago when we were doing a lot of things different. But we have increased our remodels this year by almost 20 remodels, getting close to the 300 level, a little over north of 275. And that number will continue to go up, and we'll keep our stores fresh. Also, it's an opportunity. We do a lot of relocations as we have a lot of leases coming due each year, and we tend to move. We've talked about this, and we do get a significant benefit from relocations. We're going to be doing a substantial number of relocations this year, greater than 50, the most we've ever done. So we feel good about that. So that's those two things in terms of marketing and advertising. I'll turn it over to
Matthew
Ernie.
Scott
Yeah,
Ernie Herman
Dan, a great question. So our marketing spend, if you want to look at it that way, is pretty much in line with where it's been. Nothing of substance moving. Having said that, we have, as you know, over the last few years been moving a greater portion of our working media to digital. And we continue to find that, obviously, we are going to go where the customers are looking and spending their time. Most importantly, I am so proud of all of the marketing executives across all the divisions as well as the head of our marketing and corporate. And all of the creative execution that we have done, I think you've probably seen some of it. I don't know if you've seen some of the international, but our creative, I think, has really gone to a new level. And that's at every division, whether it's Marmax or HomeGoods or Sierra, Canada, Europe, you know, things like the Max Life campaign, Marshall Surprise campaign, HomeGoods Go Finding. These have all resonated very strongly with consumers. And I give our guys credit because there's a spend. We are never going to be one of the big spenders because of our word of mouth, everyday traffic type of retail. But we have had a lot of breakthrough campaigns that I really give our teams a lot of credit. And we review these constantly throughout the year. In fact, we had just had a big review about a month ago with the teams. And when I looked out for this coming FY20, I loved the different iterations we have going for the campaigns. So I would say it's a smarter use, obviously more effective use of the dollars that we're spending. And we're feeling really good about it. And obviously we've been measuring a lot of the effectiveness over the last year or two and clearly including capturing some more younger customers as a greater percent of the new customers has been a big benefit. And that has been a focus, you know, that I've talked about before. So in addition to just, you know, driving traffic, we're also trying to drive traffic, which is setting a foundation for us for the future with younger customers. Yeah.
Scott
And just to jump in, going back to your other comment related to the new customers, but also our customer satisfaction scores continue to be strong and going up virtually across all of our banners, which I think is a, you know, an important, you know, important thing. And I think a lot of that has to do with, as Ernie has talked from time to time, we've done and related to remodels, keeping the stores fresh, but also being prudent and not cutting back on our store operating hours and other things, you know, when it, you know, when it affects the standards of the store. And I think we've been pretty consistent about keeping that, you know, the store, our store standards healthy. And I think all that relates to, you know, keeping our customer satisfaction stores good, obviously with a great, great mix of product that the customer wants.
John Kernan
Yeah.
Ernie Herman
So it's a great question, Dan, because, you know, we struggle with all of the challenges in terms of how do you balance how much you put. So for now, basically our marketing dollars are pretty much a flattish, I would say, this year to last year, but our creative, I would say, is more effective. And it has been, by the way.
Dana Tesley
Okay. Thank you very much.
Ernie Herman
All right. That is the end of the call. Thank you all for joining us today. And I look forward to updating you on our first quarter earnings call in May. Have a good day, everybody. Thank
Operator
you. Ladies and gentlemen, that concludes your conference call for today. You may all disconnect. Thank you for your participation.
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