TJX Companies, Inc. (The)

Ladies and gentlemen, thank you for standing by. Welcome to the TJX Company's second quarter fiscal 2024 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 1. As a reminder, this conference call is being recorded August 16, 2023. I would like to turn the conference call over to Mr. Ernie Herman. Chief Executive Officer and President of the TJX Companies, Inc. Please go ahead, sir.

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

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 limitation, the Form 10-K filed March 29, 2023. Further, these comments and the Q&A that follows are copyrighted today by the TJX Company, Inc. Any recording, retransmission, reproduction, or other use of the same, for profit or otherwise, without prior consent of TJX, is prohibited and a violation of United States copyright and other laws. Additionally, while we have approved the publishing of a transcript of this call by a third party, we take no responsibility for inaccuracies that may appear in that transcript. We have detailed the impact of foreign exchange on our consolidated results and our international divisions in today's press release and the investor section of our website, TJX.com. Reconciliations of other non-GAAP measures we discussed today to GAAP measures are also posted on our website, TJX.com, in the Investors section. Thank you, and now I'll turn it back over to Ernie.

Good morning. Joining me and Deb on the call is John Klinger. I'd like to begin today by once again recognizing our global associates for their dedication to TJX. It is their hard work that brings our business to life every day for our customers. I want to extend a special thank you to our store, distribution, and fulfillment center associates for their continued very hard work and commitment to our company. I want to take a moment on the wildfires in Maui. We are grateful that our associates in Maui and the rest of Hawaii are safe and at the same time are deeply saddened by the devastation and loss. To help with the relief efforts on the ground, We have made a donation to the Maui Food Bank and our local teams are donating essential supplies. Now to our business update and second quarter results. I am extremely pleased with our second quarter performance as sales, profitability, and earnings per share were all well above our plans. I want to highlight that customer traffic drove our 6% overall comp sales increase and it increased at all of our divisions. As a reminder, for us, customer traffic represents the number of customer transactions. I am particularly pleased with the performance of our largest division, Marmax, which delivered high single-digit increases in both comp sales and customer traffic. Our overall apparel and accessory sales were very strong. and our overall home sales significantly improved in return to positive comp sales growth. Clearly, our terrific mix of branded, fashionable merchandise and great values resonated with shoppers when they visited our stores. In terms of profitability, both pre-tax profit margin and earnings per share increased significantly versus last year. Importantly, merchandise margin continues to be very healthy. With our above-plan sales and profitability performance in the second quarter, we are raising our full-year outlook for comp sales, pre-tax profit margin, and earnings per share. John will talk to this in a moment. We are very pleased with the continued momentum of our business and the excellent execution of our teams across the company. They have been laser-focused on driving sales and traffic and improving profitability. The third quarter is off to a very strong start, and we feel great about our plans for the remainder of the year. The marketplace is loaded with outstanding buying opportunities, and we are confident that we will continue to offer a terrific mix of brands and an outstanding assortment of gifts to our shoppers during the fall and holiday selling seasons. We are convinced that our differentiated treasure hunt shopping experience and excellent values will continue to serve us well and allow us to capture additional market share across our geographies for many years to come. Before I continue, I'll turn the call over to John to cover our second quarter financial results in more detail.

Thanks, Ernie. Good morning, everyone. I also want to add my gratitude to all of our global associates for their continued hard work. I'll start with some additional details on the second quarter. As Ernie mentioned, our overall comp store sales increased 6%, well above the high end of our plan, and were entirely driven by an increase in customer traffic. We were very pleased to see that both comp store sales growth and customer traffic improved sequentially each month of the quarter. As we expected, average ticket was down due to merchandise mix. The impact of the lower ticket on sales was largely offset by an increase in units with shoppers putting more items into their cart. This is in line with what we have seen in our business historically. Our overall apparel business, including accessories, continued its momentum with high single-digit comp increase. Overall, home comp sales were up mid-single digits. TJX net sales grew to $12.8 billion, an 8% increase versus the second quarter of fiscal 23. Second quarter consolidated pre-tax margin of 10.4% was up 120 basis points versus last year. This was well above our plan due to a bigger benefit than we expected from lower freight costs as well as expense leverage on our above-planned sales. Gross margin was up 260 basis points. This increase was driven by a higher merchandise margin due to the significant benefit from lower freight costs. This year-over-year freight benefit was primarily driven by lower rates as well as a benefit from our freight initiatives in the remainder of our year-end accrual adjustment. Gross margin also benefited from our inventory and fuel hedges and expense leverage on a 6% comp increase. Our year-over-year shrink accrual and supply chain investments were headwinds to gross margin in the second quarter. Second quarter SG&A increased 170 basis points due to a combination of factors. These include higher incentive accruals due to above-planned results, a reserve related to a German government COVID program receivable, incremental store wage and payroll costs, and a contribution to the TJX Foundation. Net interest income benefited pre-tax profit margin by 40 basis points versus last year. Lastly, we were very pleased that earnings per share of 85 cents were up 23% versus last year and also well above our expectations. Now moving to our second quarter divisional performance. At Marmax, second quarter comp store sales increased an outstanding 8%, entirely driven by customer traffic. Marmax's apparel and home categories both saw high single-digit comp increases. Further, it was great to see comp sales and traffic increases accelerate every month throughout the quarter. Comp sales were very strong across each of Marmax's regions. We also saw consistent performance across low-, mid-, and high-income store demographics. MarMax's second quarter segment profit margin was 13.7%, up 80 basis points versus last year, primarily driven by a benefit from lower freight costs, as well as expense leverage on the strong sales and strong mark-on. We continue to be pleased with the momentum at MarMax, and are excited about the initiatives we have planned to help us drive sales and traffic for the remainder of the year and beyond. At HomeGoods, we were very pleased to see second quarter comp store sales increase 4% and a significant increase in customer traffic. HomeGoods comp sales and traffic increases also accelerated every month throughout the quarter. I also want to note that our full year plans assume that HomeGoods will continue to comp positively for the second half of the year. HomeGoods' second quarter segment profit margin was 8.7%, up 600 basis points, and entirely due to a benefit from lower freight costs. We remain confident in the long-term opportunities we see to grow both our HomeGoods and HomeSense banners and capture additional share of the U.S. home market. At Canada, Comp store sales were up 1% and customer traffic increased. Segment profit margin was 15.7%. As the only major brick-and-mortar off-price retailer in Canada, we have a very loyal shopper base and many value-conscious shop customers. We are confident that we are set up well to continue growing our footprint across Canada and attract more customers to our banners. At TJX International, comp store sales increased 3% and customer traffic was also up. It was great to see comp sales and traffic increases at both our European and Australian businesses. During the quarter, we also launched online shopping in Germany and Austria. Segment profit margin for TJX International on a constant currency basis was 2.1%, which was negatively impacted by over 300 basis points due to the reserve related to the German receivable I spoke to earlier. We are very happy with our overall performance in this division and are confident we can continue to grow our banners in our existing countries and improve profitability. As to e-commerce, overall, it remains a very small percentage of our business. We continue to add new merchandise to our sites so that shoppers can see something new every time they visit. Moving to inventory, Balance sheet inventory was down 7% versus the second quarter of fiscal 23. Similar to the first quarter, the year-over-year decline was primarily due to the elevated levels we saw last year from the early arrival of merchandise and a larger in-transit balance as a result of supply chain delays at that time. We feel great about inventory levels in the outstanding buying environment. As Ernie said, the marketplace is loaded with merchandise, and we are well positioned to flow fresh assortments to our stores and online this fall and holiday season. I'll finish with our liquidity and shareholder distributions. For the second quarter, we generated $1.3 billion in operating cash flow and ended the quarter with $4.6 billion in cash. In the second quarter, we paid down $500 million of maturing debt and returned $932 million to shareholders through our buyback and dividend programs. Now I'll turn it back to Ernie.

Thanks, John. I'll start by highlighting the key strengths that have allowed TJX to grow successfully through many kinds of retail and economic cycles for nearly five decades. I am convinced that these core strengths set us apart from many other retailers and will continue to be a tremendous advantage going forward. First is our value leadership. Our goal has always been to offer great value on every item, every day, to every customer. At TJX, value is more than just offering consumers a great price. For us, value also means delivering desirable brands, fashionable merchandise, fashionable merchandise, and great quality to our shoppers. We believe our value proposition is one of the best in all of retail and will continue to attract consumers to our retail banners all around the world. Second, we have developed one of the most flexible brick and mortar retail models in the world. The flexibility of our close-to-need opportunistic buying allows our merchants to quickly react to the hottest trends in the marketplace and adapt to changing consumer preferences. The flexibility of our supply chain and store formats allows us to ship to our stores multiple times a week, merchandise stores individually, and flex our floor space to support our ever-changing assortment. Third, we successfully operate stores across a wide customer demographic. We want to sell to everyone, and we aim to appeal to all value-conscious shoppers and inspire and excite them every time they visit us. The flexibility of our business allows us to curate an assortment of good, better, and best merchandise across our stores and to appeal to shoppers across all income demographic areas. Next, we have built an expansive vendor universe over many decades and believe we have some of the best relationships in all of retail. This vast network of changing vendors, which numbered approximately 21,000 over the last year, is the reason why we are so confident that there will always be more than enough inventory in the marketplace for us to buy. Our best-in-class buying organization of 1,200-plus merchants is does a terrific job selecting the right mix of categories and brands for the right stores to create our fun treasure hunt shopping experience. We also see the globalness of our business as a tremendous strength. We have built a highly integrated global infrastructure, supply chain, and buying organization that we believe would be difficult to replicate. This allows us to leverage our global presence to create a differentiated treasure hunt shopping experience in each country we operate in. Last but certainly not least is our talent. Teaching and talent development have always been priorities at TJX. Throughout our organization and management teams, we have deep, decades-long off-price experience in the U.S. and internationally. I believe that our global talent base will continue to be a tremendous advantage as we continue our growth around the world. I truly believe that the combination of these key strengths and the execution of them is why we are one of the strongest companies in all of retail and have a very long history of successful performance. Now, I'll briefly highlight the opportunities we see to keep driving sales and traffic in the second half of the year. First, as I said earlier, we are seeing phenomenal product availability across all categories and a wide range of brands. This gives us great confidence that we can bring consumers the right assortment at the right values throughout the fall and holiday season. Second, we feel great about our store merchandising initiatives that we have planned. We are particularly excited about our gifting initiatives as we continue to focus on being a destination for gifts throughout the year. With our rapidly changing assortment, we believe shoppers will be inspired to visit us frequently to see what's new. And third, we have very strong marketing campaigns planned. Each of our brands will continue to reinforce our value leadership position through a combination of channels, including digital, television, and social media. We believe our compelling campaigns will capture the attention of new consumers while keeping us top of mind with our existing customers. Moving to profitability, we are extremely pleased that the high end of our adjusted pre-tax profit margin plan for fiscal 2024 now exceeds our previously announced target of 10.6% for fiscal 2025. This is a testament to the hard work and commitment of the entire organization. I want to assure you that we will not be complacent and will strive to continue improving our profitability over the long term. Before I close, I'd also like to reinforce our deep commitment to acting as a responsible corporate citizen, and I am proud of the work our teams across the globe continue to do. We expect to publish our annual global corporate responsibility report this fall, and I hope you'll take some time to look at our website to learn more about what we are doing. Summing up, We're very pleased with the momentum we are seeing across the business and the very strong start to the third quarter. We've had excellent performance in the first half of the year and our teams have put us in a great position for continued success for the remainder of the year. I'm convinced that the characteristics of our flexible off-price business model and the operating expertise within our organization are unmatched. I am so proud of our culture which I believe is a major differentiator and a key component of our success. I am extremely confident about the future of TJX, and I'm excited about the opportunities we see to capture additional market share and improve profitability in the long term. Now I'll turn the call back to John to cover our full year and third quarter guidance, and then we'll open it up for questions.

Thanks again, Ernie. Before I start, I want to remind you that fiscal 24 calendar includes a 53rd week. Also, as we stated in our press release this morning, we have offered eligible former TGX associates who have not yet commenced their pension benefit an opportunity to receive a lump sum payout of their vested pension benefit. We anticipate that the impact of this pension payout offer, primarily a non-cash settlement charge, could negatively impact fiscal 24 EPS by approximately one to two pennies, but could be higher or lower depending on participation rates and other factors. To be clear, any of the guidance we are providing today does not include the potential impact of this pension payout offer. We expect to exclude the impact of this potential potential settlement charge from our adjusted pre-tax profit margin and EPS results in the third quarter. Now to our full-year guidance. We are now planning an overall comp store sales increase of 3% to 4%. As a reminder, our comp guidance excludes our expected sales from the 53rd week. For the full year, we now expect consolidated sales to be in the range of $53.5 to $53.8 billion. This guidance includes approximately $800 million of additional revenue expected from the 53rd week. As Ernie said, we're increasing our full-year profitability guidance. We're now planning full-year pre-tax profit margin to be in the range of 10.7 to 10.8%. Excluding an expected benefit of approximately 10 basis points from the 53rd week, we now expect adjusted pre-tax profit margin to be in the range of 10.6 to 10.7%. On a 52-week basis, this would represent an increase of 90 to 100 basis points versus fiscal 23's adjusted pre-tax profit margin of 9.7%. Regarding shrink, we continue to be laser-focused on our in-store initiatives while making sure we maintain an enjoyable shopping experience for our customers. At this time, our shrink indicators are leading us to believe that we can continue to plan shrink flat in fiscal 24. As a reminder, we will not know the full effect of our shrink initiatives or the accuracy of our indicators until we do a full annual inventory count at the end of the year. Moving on, We're planning full-year adjusted gross margin on a 52-week basis in the range of 29.4% to 29.5%, a 180 to 190 basis point increase versus last year. We expect virtually all of this increase to be driven by a benefit from lower freight costs. We are also planning a benefit from merchandise margin. This guidance also assumes a continuation of headwinds from our supply chain investments and incremental distribution center wages. We are very pleased with the level of freight recapture we are seeing given the significant pressure we saw over the prior three years. Our expected freight benefit this year includes a pull forward of most of the benefit we were expecting in fiscal 25. We remain laser-focused in looking at ways to reduce our freight costs. Moving on, we're expecting full-year SG&A on a 52-week basis to be approximately 19.1%, a 120 basis point increase versus last year. This expected increase is primarily driven by incremental store wage and payroll costs, and higher incentive accruals. For modeling purposes, we're currently assuming a full-year tax rate of 26%, net interest income on a 52-week basis of about $157 million, and a weighted average share count of approximately 1.16 billion shares. As a result of these assumptions, we're increasing our full-year earnings per share guidance to a range of $3.66 to $3.72. Excluding an expected benefit of approximately 10 pennies from the 53rd week, we expect adjusted earnings per share to be in the range of $3.56 to $3.62. On a 52-week basis, this would represent an increase of 14% to 16% versus fiscal 23's adjusted earnings per share of $3.11. Lastly, we now expect to open about 125 net new stores in fiscal 2024, an increase of approximately 3%. This reflects a shift of some of our planned fall openings into next year. Moving to the third quarter, we're planning overall comp store sales growth to be up 3% to 4%, Similar to the second quarter, we expect the comp increase to be driven by customer traffic. We're planning for average ticket to be down less than it was in the second quarter, again due to merchandise mix. We're also expecting an increase in units sold. We expect third quarter consolidated sales to be in the range of $12.9 to $13.1 billion, a 6% to 7% increase over the prior year. We're planning third quarter pre-tax profit margin to be in the range of 11.3% to 11.5%. We're expecting third quarter gross margin in the range of 30.3% to 30.5%, up 120 to 140 basis points versus last year. We're planning a significant benefit from lower freight costs, partially offset by headwinds from supply chain investments, inventory cap, and our year-over-year shrink accrual. We're planning third-quarter SG&A of approximately 19.3%, up 130 basis points versus last year. This expected increase is driven by incremental store wage and payroll costs and higher incentive accruals. For modeling purposes, we're currently assuming a third-quarter tax rate of 25.3%, net interest income of about $40 million, and a weighted average share count of approximately 1.15 billion shares. We expect third quarter earnings per share to be in the range of 95 to 98 cents, up 10 to 14%, versus last year's adjusted 86 cents. For the fourth quarter, on a 13-week basis, we're planning comp store sales to be up 3 to 4%. adjusted pre-tax margin in the range of 10.3% to 10.5%, and adjusted earnings per share in the range of $1 to $1.03. We will provide more detailed guidance for the fourth quarter on our third quarter earnings call. Before I close, I want to echo Ernie's comments that we continue to see opportunities to further improve profitability over the long term. As always, the best way for us to drive profitability is with outsized sales. We continue to see opportunities to grow sales and traffic and capture additional market share. Further, we remain laser-focused on being even better on buying and retailing the goods and driving merchandise margin. At the same time, we expect to continue to face headwinds from incremental wage costs and supply chain investments. As usual, we'll give you a detailed annual guidance beyond this year on our call in February. In closing, I want to reiterate that we are very pleased with the execution of our teams across the company and are confident in our sales and profitability plans. Further, we have a strong balance sheet and are in an excellent financial position to simultaneously invest in the growth of our business and return significant cash to our shareholders. Now we are happy to take your questions. As we do every quarter, we're going to ask that you please limit your questions to one per person so we can keep the call on schedule and answer as many questions as we can. Thanks, and now we'll open it up for questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1, unmute your phone, and record your name clearly. If you need to withdraw your question, press star 2. Again, to ask a question, please press star 1. Our first question will come from Matthew Boss. Your line is open.

Great. Good morning, and congrats on a really nice quarter. Thanks, Matt. Thank you. So, Ernie, you cited the third quarter off to a very strong start and tremendous off-price buying opportunities. Could you just elaborate on how traffic and demand progressed over the course of the second quarter, maybe what you've seen in August? across both apparel and home. And then, John, could you just elaborate on the improved bottom line full-year outlook as we think about AUR and freight relative to shrink in wages?

Sure. Matt, good question. Obviously, looking at it as the indicator I gave when I said very strong for the Q3 start, which is, you know, coming out of Q2 where each month got a little stronger. So we were sequentially stronger throughout Q2 as the quarter went on. And that momentum has now continued into Q3. And I think you were asking about, you know, any differentiator between apparel or home. I would tell you, well, when you have comps like this and you have Marmax running such a high comp as they did, as you can imagine, we are experiencing health across just about every category in the store. In fact, the power across the board has been very healthy, as has the home area. And I'm talking within Marmax, you know, because you've seen that HomeGoods from Q – remember, Q1 in HomeGoods, we were down seven. And now we were up four in HomeGoods for Q2, which is really a terrific – you know, we had signaled to all of you that we thought there would be incremental improvement. Clearly, it was – even exceeded our expectations. And we are feeling very good about that business also. as we go into Q3. So I hope that answered your question.

And Matt, just to answer the question you had for me, I mean, as far as the, you know, the back half and full year guidance, you know, we continue to see freight opportunity in our initiatives, obviously increasing our, you know, the confidence we have to increase our top line sales gives us, you know, the confidence to increase our back half guidance. You know, as far as AUR, you know, look, you know, as far as pricing and merchandise margin, they were in line with our expectations. And the buying environment is fantastic, as Ernie said. We continue to see opportunities to take price in certain areas and merchandise margin improvement. You know, we're really pleased at how our strategies this quarter drove our top line and, again, gave us the confidence to increase our full-year comp.

Yeah, that's great. Don was touching on it, and your question is we talked, remember there was a little bit of confusion last call, and we talked about how our Our ticket might be down slightly, and pretty much it was on our expectations. Right in line. Right in line. And as a result, we drove our top line, as we had explained in some of our meetings, about you can't judge the average ticket and its sales relationship because some of the categories that we were growing in the mix of departments create multiple purchases. Right. And so, you know, we're pleased to see it all really went along the lines of what we had discussed back at the end of Q1.

Great color. Congrats again on the momentum. Thank you. Thanks, Matt.

Thank you. Our next question comes from Lorraine Hutchinson. You may proceed.

Thank you. Good morning. I just wanted to confirm what I think you just said, which was the like for like price increases are working and the ticket decline was just mixed. And then my question is if you think you're seeing any signs of a trade down customer coming into any of your banners.

Yes, the like-for-like pricing continues to work. We continue to see opportunity there as we move forward. Again, we do that, as we said from the very beginning, we do that very selectively in certain areas, in certain categories, in certain items. as witnessed by our performance, as well as we have another data point which we measure qualitatively where we measure customer perception of our values. First of all, we can tell from our turns as well as our sales, but we have another perception point where consumers right now are actually seeing our value perception versus a year ago has actually ticked up a couple of matches. So we're viewed against ourselves as value perception has improved, which tells you it's working. And then a second thing, ironically, is against the category average we have improved. So those are good barometers. We can see it in the metrics, though, Lorraine. when you look at our turns and our sales. And where, again, as we've also said, is where we have ever found an item where it didn't work, we adjust, and then we, you know, we bring that item back to where we think if it needs to work. But our hit rate has been, you know, 90-plus percent. So the second part of your question, again, Lorraine, was on the – Any signs of a trade-down consumer? Trade-down, which, you know – Hard for us to measure trade down. What I think we would say is store closures as well as I would say because in some cases it's not a trade down or it's a trade over based on the category. So hard for us to measure trade down. What we can feel is capturing market share from – are the retailers that have closed or downsized in some of their store counts. And I am sure we are getting increased market share because we can see it in some of the categories that we carry.

Yeah, I mean, there's been a lot of volatility, you know, in the retail environment for a while. And we think, you know, we've got strong execution. We feel that we continue to, you know, to gain that market share.

Thank you.

Thank you.

Next, you will hear from Brooke Roach. Your line is open.

Thank you, and good afternoon. Thank you for taking our question. With greater visibility to your previous long-term 10.6% FY25 margin target, can you help contextualize the key drivers of future profit improvement? How are you thinking about the rate and pace of that potential improvement beyond some of these freight recapture opportunities that you've seen this year? Thank you.

Yeah, Brooke, we're not giving guidance long-term right now, but I can say that, you know, as always, you know, we strive to improve, you know, all the time, whether it's, you know, better buying or, you know, expense control. We continue to strive to do better.

Great. Thank you so much.

Brooke, I would just also jump in. What John said earlier in his notes was is that sales have been a driver in helping us to also leverage. And so as we are capturing these sales, we do believe, because we've tried to make our store environment sticky for the customer in terms of he or she really having a great experience there, as well as the merchandise. These are the two primary components of what captures new customers and gets customers back. So we believe, you know, momentum doesn't just turn off overnight. So I think part of what we're all feeling internally here is as we've captured new and increased additional visits amidst the market share gain we're getting, that that will be also a margin driver for us as we move forward.

Thank you.

Thank you.

Our next question will come from Mark Altschwager. Your line is open.

Great. Good morning. Thanks for taking my question. So maybe just first for John, with respect to the margin guide, if we look at the high end of the guide for Q3 and Q4, it does seem to imply a nice acceleration in Q4. Now, I know you've got the benefit from the extra week. You're cycling the shrink accrual, so those are some big factors. But I guess beyond that, Maybe what are some of the other factors that we should be mindful of there?

Yeah, so as you saw, we did increase the comp. We feel confident about, you know, continuing to drive that top line. The other thing that is benefiting us, so in the second quarter and third quarter, we comment on the shrink. So we have just in line with how we accrue, there is a there's an unfavorable impact in the second and third quarter, first, second, and third quarter, and then we have a favorable impact in the fourth quarter. That, along with, you know, we continue to, you know, work on our freight initiatives and continue to try to control those costs as much as we can.

Thank you.

Maybe a follow-up for Ernie. You know, this is the first quarter in a while where both Marmax and HomeGoods are contributing to the positive comps. I know there's some noise still with the comparisons and home goods in the back half, but just the bigger picture, how should we be thinking about the contribution from home goods versus MARMAX and a normalized comp algorithm moving forward? Thank you.

Yeah. So, Mark, obviously we won't give the exact comp we're thinking further out. However, we do feel we are really hitting pretty much an inflection point In the home goods business, and we're pretty bullish on the back half here, that home will continue to improve on the trend versus the trend that you just saw. We're feeling good about the opportunity to continue to improve on our home mix. And to your point, we'll continue to contribute to the TJX comp with a combination of home goods and MARMACs. Also, just, again, we tend to talk about home goods specifically, but our home business within our full family stores, so that's whether in Europe or in Canada, and then clearly in TJ Maxx and Marshalls, our home business there has also, and those businesses, has also improved. Also a good indicator, because we used to talk a few years ago about the fact that home, when you roll it all up, is a key component of the TJX business. So, again, another reason why, you know, John and I have talked about, as we move forward, that home will continue to be a traffic and sales driver for us over the long term.

Thank you, and best of luck. Thank you.

Our next question will come from Marnie Shapiro. Your line is open.

Hey, guys. Congratulations on a great quarter. If you could just talk a little bit, you know, traffic remains your biggest driver, and your marketing has been very, very strong. Can you talk a little bit about has it changed the frequency of how often the shopper is coming to your stores, and are you seeing an increase in your shopper shopping across your different boxes? I know you continue to co-locate, but I'm curious if you're seeing that shopper really move from, you know, one concept to the next more than usual.

Yeah, it's hard for us to read that in detail. Just generally looking at the transaction increases that we have, we believe that we are attracting more new customers to our brands. And when you look at how we're attracting those customers, they tend to be more younger customers, the more Gen Z customers that we're attracting, which we're really excited about. because that speaks to, you know, the longevity that we see.

Yeah, Marnie, the thing I can tell you, even though we can't get some of that info, the ones that are cross-shopping do spend more. So it is the goal of ours to go after that. As John said, we have been attracting a disproportionate number of new Gen Z and millennial shoppers, which – is what we really look at in terms of future growth because that's the future higher spend. So when we look out on our strategies for five to seven years, and by the way, we purposely go after that, we do compare what we do get at. We can compare our shoppers against some of the competition. There's some general data on that that we look at, and we've been feeling really good about all gender and age groups to our stores and all the customers that are skewing younger. And that includes in Europe, Australia, domestically. Yeah.

And then just a quick follow-up, though I do – John must be watching Alabama Rush on TikTok because you guys are all over it, and they all shop there, those Gen Zers. But could you just clarify the 53rd week revenue number? I think you said it pretty quickly. I want to make sure I got it down right.

Yeah, so the 53rd week is worth 10 basis points to our pre-tax profit and 10 pennies to our earnings per share, and it's about $800 million on the top line.

Great. Thanks so much, guys.

Thank you, Marnie.

Our next question will come from Alex Stratton. Your line is open.

Great. Thanks for taking the question. Congrats on another great quarter, Ernie and John. I think just starting with the guidance from like zooming out here, it looks like you're improving the full year by more than what you guys just beat by. So it seems like you're more optimistic on the back half than maybe you were when we spoke a few months ago. So can you just talk about what the key drivers are there to that increased optimism?

Thanks a lot. We beat Q2 by 10 pennies, and we're increasing the back half by 4 pennies, and that's on increasing the comp from a 2 to 3 to a 3 to 4, given the strength we see in our sales. And then as far as our freight initiatives, we feel the opportunities that we took in Q2, we're assuming that we continue in the back half of the year. And, again, we're pulling forward a lot of what we would have expected in FY25, but we're really happy to be gaining that benefit this year.

Thanks a lot.

Thank you.

Our next question comes from Bob Durbel. Your line is open.

Hi. Good morning. Just a couple questions. On apparel and accessories, in terms of what you're seeing and sort of what the consumer is responding to, is there a big change in sort of the good, better, best mix that is sort of helping you throughout, you know, this quarter and the rest of the year?

Great question, Bob. Not really a big change. Again, there has been an amazing – what did I use in the script? Phenomenal. Phenomenal availability across really all the areas. I would tell you there are pockets sometimes in categories where we don't get good, better, best as proportional as we'd like, but that's our business. So we always know that we're not going to be exact because we're opportunistic in our buying areas. Our buyers are great in terms of strategically and knowing that they want their mix to be a certain balance, depending on the category, by the way. So, for example, our buyer in handbags doesn't necessarily want the same ratio of good, better, best determined by brands, et cetera, as the buyer in women's tops. Okay, so that varies. But we have been pretty healthy, I would say. Other than in certain pockets of certain areas and accessories, it's been a little bit more of an up and down and an imbalance. So we always look at that as opportunity for the following year because when we have those pockets, as you can see, we just ran a six comp, and we still have those pockets of opportunity where we don't have the mix balanced exactly the way we want it to be. And even in some apparel areas, again, We ran into that in the second quarter that they weren't as strong as they could be if the mix was more balanced and good, better, best the way that we'd want it to be. So it's funny your question brings – we could spend a couple hours on it because we – and the merchants, we love to talk about how we go about doing that. And we also know that certain quarters we look better than other quarters. But as you can see in the total picture – We look really strong in the merchants and done across a vast array. And you could never find a quarter where there isn't one area that doesn't have a little imbalance. For the most part, really strong balance of good, better, best. Nothing's really changed strategically on that front end. Just a great question you asked.

And, by the way, I'll just add to what Ernie said. You know, our ability to offer good, better, and best, I mean, really differentiates us from our competition and we feel is a real competitive advantage here.

That's a great point. You know, I didn't get to get into that as much on the script, and I know sometimes in our different investor meetings we get to talk more about it. But it is, I think, one of the most key strategic advantages we have. A, the fact that our organization is set up to deliver a good, better, best scenario. And if you look, most retailers around us, very few do that. They're zeroing in on certain things. demographic segments or certain, you know, which could include age or fashion looks or different price levels. And we don't do that, and I think that will continue to be a benefit to us over the next five to ten years. Huge.

Thank you.

Thank you.

Next, we will hear from Dana Telsey. You may proceed.

Hi. Good morning, everyone, and congratulations on the terrific results. As you think about the real estate profile of the store, have you been a beneficiary of any of the Bed Bath & Beyond locations? And is there at all a difference in performance of the stores, suburban or urban? And then lastly, with the improving trend in home goods, how much of that or is anything you can – from the elimination or the departure of bed, bath, and beyond, that's also an additive and a share enhancement for your home results. Thank you.

Yeah, Dana, thanks for the question. You know, as far as the real estate opportunity, you know, we've been on this, you know, from the beginning of when retailers start to close stores, and we take the best locations that fit our profile. And we'll continue to do that as we see, you know, stores close. As far as, you know, the sales and what we've seen, particularly for Marmax, you know, we saw very consistent sales performance across income demographic, across geography, you know, and we, you know, we see ourselves, you know, especially in some of these markets that, are more rural is the, you know, you see more and more closures as the, you know, the department store of those areas and see opportunity. So as far as the Bed Bath & Beyond gaining market share, you know, they've been losing market share for quite a while, and we think we've gained it along the way. So it's sometimes a little bit hard to read that, but we feel that You know, our execution in home has been, you know, outstanding. And, you know, and we've been able to take that market share as, you know, as it comes up.

Yeah, so, Dana, we think, to John's point, tough to measure, but we feel as though, yeah, we are getting, you know, from a Bed Bath & Beyond. But not just those guys, even some of the – I believe we're getting some business from the online home retailers as well that, you know, have been a little inconsistent in their execution. I think that just creates other opportunities. And then everyone, you know, that's at the store end for demand we're talking. The other great – not great. The other good thing – is it creates additional supply of buying opportunities. You know, we've been talking today about, you know, at the retail level, you know, customers need another place to shop. But for our merchants, they get to take advantage of additional supplies. And we mean even more now to certain vendors because now they have less places for them to sell their goods. So that's been equally, I guess, beneficial.

Thank you. Congratulations.

Thank you.

Thanks. Our next question comes from Corey Tarlow. Your line is open.

Hi. Good morning, and thanks for taking my question. To follow up on the AUR commentary or ticket, I know that it moderated a little bit this quarter. Is the expectation in the guide that it should moderate throughout the rest of the year or perhaps inflect positively as we head into the fourth quarter? Just as a follow-up on wages, how are you thinking about wages, John, in the outlook throughout the remainder of this year?

I'll start with wages. We continue to see that as a headwind in our wages. We're going to be competitive in our wages in every market that we're in. When we look at You know, our attrition rates are in line or improving with where they were last year. So we feel really good at, you know, where our wage is right now and our ability to attract associates to our company.

On the ticket, Corey, so, yeah, in Q2, we actually – didn't moderate. It kind of came in pretty much where we expected. It's as we move to the back half, the ticket we think is going to moderate, which is to be down a little less than we were in Q2. However, I always like to qualify this, that we do not, and again, I've talked this way for years, we do not top-down drive our average ticket. So the average ticket, which is really ultimately voted on by the customers who determine which categories we need to drive hard in the store by, you know, supplying. We can tell by the way they're selling and by the way the market looks so that we'll go after them. It's driven by down at the buyer and merchandise manager level, which is where we really generate. We don't dictate to those teams that. which categories to have more or less of. That's really driven by consumer demand, which then drives our ticket sometimes because of the mix of departments. So right now, we look like we're moderating based on the on order. But if certain opportunities or certain categories get hotter, that could be lower or higher ticket. That could move a little on us. Obviously, Q3, we can project a little better than Q4. So it's always a bit of a touchy one where we don't want to overcommit to how firm we are on where the AUR is heading because it's so bottom-up by customer demand and buyer-driven. Does that make sense?

Yes, that's very helpful. Thank you very much.

Yeah, but right now it looks like it is moderating for certainly Q3.

And what we mean by moderating is down less. And you can see the impact of our top line on the strategy that we've had. I mean, you know, we're offering the customers, you know, what they want, and they're coming back.

Yep. Great. Thank you so much. Thank you.

And our final question of the day comes from Adrian Yee. Your line is open.

Great. Thank you very much. And it's great to see the acceleration in all divisions, actually. So, Ernie, you're welcome. Obviously, my question is probably going to be inventory. So I actually want to ask not so much about the composition of it, but the buying strategy, you know, off-price buys, a little bit up front. You've got great visibility on the open-to-buy forward-looking. And then you do a lot of buying sort of intra-season. And so just can you contextualize sort of how that is so different from last year and the advantageous position that it's putting you in as you headed to holiday? Thank you very much.

Sure, Adrienne. I like the way you framed it all up. So we do not – obviously, we won't give the percentages by those types of buying patterns the way we buy each one. However, we do buy all those different ways. Right now, our mission, as always, is to pace ourselves on the buying of the in-season closeouts because the market is so loaded. So as we move forward, right now what we're thinking, Adrian, is we will pull back even a little bit more on any of the buys that we tend to buy earlier or up front because all indicators are there will be a continued increase additional supply at least over the next six to 12 months of what you were just referring to, the in-season closeout type of situation. The, you know, packaways is kind of varied. That has become a smaller percent of our business only because in many cases the fashion there, if it isn't right, we don't tend to pack it away. But the pattern of what we're seeing right now would tell us we're going to be even a little bit, and now I'm talking massaging these by just a couple of points. We don't do pendulum swings on our open to buyer, how much we do up front versus leave for closeouts. Again, the closeouts and the opportunistic side of our business, that's the bulk of our business, and that's what we prioritize. And we see that, I would think, kicking up a notch over the next six to 12 months. I hope that answers your question.

That definitely did. Thank you very much. Fantastic, you know, momentum.

Thank you, Adrian.

Thank you.

Thank you. That was our final question of the day.

Okay. Thank you. I would like to thank everybody for joining us today. We look forward to updating you all again. on our third quarter earnings call in November. Take care, everybody.

Ladies and gentlemen, that concludes your conference call for today. You may all disconnect. Thank you for participating.