Q1 2021 Earnings Call

Ladies and gentlemen, thank you for standing by welcome to the TJX companies first quarter fiscal 2021 financial results Conference call. At this time all participants are in listen only mode. Later, we will conduct a question answer session at that time. If you have a question you'll need to press star one as a reminder, this call.

Record. It may 21st 2020, I would like to turn the conference call over to Mr., Ernie Herman Chief Executive Officer, and President of the TJX companies incorporated. Please go ahead Sir.

Thanks Jordan.

Before we begin that's got some opening comments.

Thank you Ernie and good morning, the forward looking statements we make today.

These results in plans are subject to risks and uncertainties caused the actual results and the implementation of the company plans to very material.

These risks are discussed in the company, that's easy filings, including without limitation.

10-K filed March 27 2020.

Hi, there these comments in the queue and end up all of our copyrighted today by the TJX companies. It any recording retransmission reproduction or other uses the same <unk> profit or otherwise without prior consent of forget is prohibited in a violation of United States copyright and other lot. Additionally, well we have provided the pie.

Publishing of a transcript of this call by a third party, we take no responsibility for inaccurate that math here I know transcript.

Thank you and now I'll turn it back over to earn.

Good morning.

Joining me on dabble in the call is Scott Goldenberg.

Let me begin by saying that our hearts are with everyone around the world what's been affected by the Cobot 19 global pandemic.

Well my last spoke with you in February we could not have foreseen the magnitude of the impact a pandemic has had on the lives of so many.

Putting our associates and their families customers and the communities we serve across the globe.

These are unprecedented times and we have made some very difficult decisions as a management team [laughter] at the same time the.

Efforts of our associates to support each other in the business. So that's how crisis had been remarkable.

And I know, we will get through it together.

TJX has always been and remains a fundamentally very strong company.

Throughout our 43 year history, we have weathered many challenging economic and retail environments and I am convinced we will navigate through that says well.

We have a senior management team with decades of TJ Actioned off price, we tell experience and we are fully dedicated to managing through this crisis.

We are confident that our flexible business model and ability to adapt quickly to changing market conditions customer preferences are critical strength.

As we are reopening our business and planning for the continued successful growth of TJX over the long term.

In a moment.

Peak with you about the strong early results we have seen put our initial we openings, which has been great to see especially for the teams working so hard on the preparations as well as our associates, who are welcoming back our customers.

Moving to our first quarter results.

First quarter began with very strong sales and traffic trends continuing the earlier strong fourth quarter trends.

For the month in February we delivered a 5% consolidated comp increase driven by customer traffic.

All four major divisions had a subway comp increase of 5% or better.

Further the strong comp trend continued into the first week of March.

However, less than two weeks later sales and traffic trends had fallen dramatically as the impact of the cobot 19 pandemic intensified around the world.

As a result of this crisis, we closed our stores and online businesses and mid March and sought an unprecedented decline in our first quarter sales.

This rapid change to our business underscores the challenges that very healthy companies with strong foundations like ours have faced over the last couple of months.

We believe we have taken prudent proactive actions to help ensure we are well positioned to recover from the impact of the health crisis on our business in the near term.

And we try to our path for successful well in the long term.

I'll talk to you talk you through some of the significant business actions, we have taken and provide an update on where our business is today.

Scott will then give a financial and liquidity update.

Okay, I'm going to start with our store and associate actions.

Beginning in mid March as part of our response to the health crisis, we closed our stores and all nine countries and our online shopping sites as well as our distribution centers and offices around the world.

Eat some of the financial concerns about hourly store and distribution associates, we continue to provide pay and benefits to the week ending April 11th and in some cases beyond this where country regulations deferred.

After that pay cycle, we temporarily furloughed the majority of our hourly store in distribution Center associates in the U.S. in Canada and truck comparable actions, but parts of our workforce in Europe and Australia.

This has been the most difficult but the decision decisions we have had to make.

Eligible impact associates, we have committed to paying them existing benefits, including health care during the furlough.

Across the company, we kept a large number of associates active to support business continuity and to be well position. So we opened our operations.

We also established several several global task force teams that help navigate through the crisis. These teams have focused on health protocols all of our stores in buildings store and ecommerce we openings merchandising supply chain in communications for us.

So she had and customers.

I want to take a moment. Thank these teams and our global associates, who are doing excellent work in the midst of this crisis.

To help our associates were trying to work into reopen our stores in operations.

I know we are all looking forward to the day when our business is fully open again, and we can welcome our associates and customers back worldwide.

Now I'd like to update you on our Reopenings.

We are pleased that we have we opened as many stores as we have in may as well as a four of our ecommerce sites all four of our ecommerce sites as of today, we have we opened more than 1600 stores worldwide.

In the U.S., we a fully or partially we opened in 25 states.

Internationally TJX, Canada has begun we opening stores in some provinces this week.

Our stores, the mainland Europe, including Germany, Poland, Austria, and the Netherlands are open.

And stores in Australia are also open.

Our stores in the UK in Ireland remain close.

Over the coming weeks, we expect to continue we opening stores in a phased approach around the world.

Incorporating learnings from our initial store reopenings.

Well the situation continues to evolve based on the government guidance, we know today.

Currently expect that we couldn't be mostly we opened by the end of June.

I want to emphasize that a state some countries established guidelines to reopen we are opening at our own pace.

We are incorporating new health and safety practices and protocols for our associates and customers some of which we are detailed in our press release. This morning and are available on our web sites and store signage.

In terms of initial trends, while it is still early and sales could fluctuate. We are pleased with the very strong sales we have seen in stores, where we have we opened so far.

In fact.

For the 1100 plus stores that have been opened for at least a week sales overall have been above last year across all states in countries, where we are open.

We believe these strong early trends speak to our values on a wide selection of merchandise serving a wide customer demographic.

Also the loyalty of our value customers and.

Went up demand.

Our treasure Hunt shopping experience has always provided retail entertainment with our constantly changing merchandise selection.

In today's environment. We believe this kind of shopping experience can serve as a break in the day and as some quote unquote meet time for our customers and in the future will continue to be a major draw for consumers to our stores.

Also with the vast majority of our stores located in strip centers and many in close proximity to grocery stores.

Our store locations are a convenient shopping because it but people, making fewer trips from home.

And our early results, we're seeing very strong demand at home goods and then our home categories across all of our banners. In addition to a couple of other categories.

Again, I want to recognize our teams and our store in DC associates, what worked so hard to reopen safely and successfully.

During the crisis, our marketing team has been thoughtfully engaging with our customers and as we open welcoming them back to our stores.

Looking forward our marketing group is focused on how consumers may want to engage with us and a new landscape and are planning strategically for our marketing campaigns and the second half of the year.

I am convinced that we will continue to be a sought after destination for value seeking consumers.

Both existing customers and new ones.

We have powerful retail brands and deep customer connections.

Further in this environment, we believe more consumers may discover our ecommerce sites, which could also drive additional visits to our stores as historically the vast majority of returns from our online sites have gone to our stores.

With all that said, we also need to think realistically around our about our business for the remainder of the year right now the majority of our stores remain closed and some states in countries have not set reopening timelines yet.

Even when we are fully reopened it will be very difficult for us to predict consumer behavior in demand.

As we will still be on a very uncertain environment.

Further we are expecting store operating guidelines to very substantially across regions state in countries, which may impact hours of operation and requires some capacity limitations.

Moving on.

I want to spend a moment on availability.

The marketplace is loaded with inventory and I am convinced that will have access to plenty of high quality branded merchandise to offer consumers a categories. They watch when they shop us.

Buyers have been in touch with many of our vendors throughout this crisis and are staying on top of market in consumer trends.

As we outlined in the press released this morning.

Given the length of time, our stores were closed we took significantly more markdowns than we normally would at this time of year. However, once we clear through this inventory, we're set up very well to start flowing pressure merchandise to our stores.

I have great confidence that our buying team will make our stores and online sites compelling for our shoppers.

As always we will stay consistent with TJ axis philosophy and offer consumers right value every day.

Before I turn the call over to Scott.

I want to emphasize that we see the strength of our flexible value based business model being as important as ever.

Both on this evolving retail landscape and over the long term.

Let me reiterate the key points.

We serve a very wide customer demographic with the categories in fashion trends they want.

We have 4500 plus stores with the flexibility to expand the contract merchandise departments are rapidly depending on consumer preferences and market trends.

I want to highlight that approximately 50% of our revenue in 2019 was from non clothing categories, which speaks to our wide assortments.

Our world class buying organization has more than 1100 associates, many with decades of experience with TJX.

We source from purchase universe of more than 21000 vendors and have buying offices around the world.

We believe that our treasure hunt shopping experience with our off price value is an ever changing selections has always been a tremendous draw as well as shopping entertainment for consumers and data will continue to be important and an evolving retail landscape.

Our distribution network is designed specifically to flex to our off price buying.

We are shut up extremely well to receive all sizes and kinds of opportunistic buys and allocate them to our stores with frequent shipments.

All of these give us great confidence in our ability to continue offering shoppers a terrific selection a branded fashionable merchandise at great value and an exciting compelling shopping experience.

Now I'll turn the call over to Scott for a financial and liquidity update.

Thanks journey and good morning, everyone I'd like to first Echo earned his comments and thank our global associates for their flexibility excellent work and dedication over the past couple of months I'll start today with a high level overview of our first quarter results, let's first quarter results were significantly impacted by the temporary closure.

Of our stores for approximately half the quarter due to the cobot 19 pandemic a revenue fell short of our plans by about 5.5 billion and we missed out.

On the merchandise margin than we expected on those sales. This accounted for the majority of our pre tax income variants to our original plan.

Additionally, as we outlined in the press release today, we had an inventory write down charge of about 500 million also as Ernie mentioned, we continue to pay all of our store and DC associates for a minimum of three weeks. After we closed our stores further we kept a large number of associates active to support.

Business continuity and to be well positioned to reopen our operations. These associate actions resulted in an additional 450 million a payroll while our well all our stores were closed from March 19th odd.

In the first quarter, we took a number of actions to reduce expenses, which resulted in about 550 million of cost reductions.

It's important to note that these actions began to benefit US later in the first quarter. Additionally expenses were reduced by approximately another $200 million due to government credits related to paying associates when stores were closed and continuing to pay benefits for for the furloughed associates.

The combination of these expense items I, just mentioned net to an additional $200 million of expense in the first quarter. This makes up the remainder of the pretax income variance to our plan after the negative impact of a loss merchandise margin.

Before I move on I want to mentioned that in general approximately 65% up our total cost excluding merchandise cost are fixed and about 35% of variable on lost sales were not able to reduce most of our fixed cost. Therefore, the majority of our expense savings will come from variable components of our cost structure.

Sure.

Now I will walk you through several financial actions, we have taken as a result with the cobot 19 crisis. We started the year with a very strong balance sheet and these actions have further strengthened our financial position and allow us to maintain liquidity and flexibility. During this period I want to emphasize that our priority has been oh longer.

Cash flow and liquidity. So we can emerge from this as strong as possible as Ernie mentioned, we started to see sales and customer traffic traffic trends declined significantly by mid March as a result, we immediately focused on shoring up our liquidity through the following actions first we suspended our share buyback program.

Up to that point, we had bought back about $200 million worth of TJX years, we do not anticipate repo Reaper repurchasing additional stock for the remainder of fiscal 2021 second a march 17th we notified the banks in our revolving credit facilities that we were drawing down the full amount of 1 billion.

Dollars next we successfully issued $4 billion of senior notes.

With maturities out 510.

710 in 30 years at an overall weighted average of 3.85%.

As we've discussed in our 10-K, we did not declare a dividend in the first quarter as a company with a deck with decades long history of paying dividends. This was another difficult decision, but we saw it as appropriate and prudent given we were furloughing associates, raising capital and focused on preserving liquidity at this time, we do not expected to close.

Our dividends in the second quarter either.

But I want to be very clear that we remain fully committed to paying shareholder dividends over the long term when the environment and our business stabilize.

Next well taking the actions I just described we will simultaneously reviewing all of our operating expenses and about <unk> Valuating, our fiscal 2021 capital expenditure plans.

The capital spending we're now planning it to be in the range of 400 to 600 million versus our original 1.4 billion dollar plant most of our capital spending has been delayed.

Moving to operating expenses as you would expect we cannot immediately suspend the most of our expenses upon temporarily closing our stores one of our initial priorities was to continue paying associates for a period of time, while also focusing on preserving liquidity. We also took other actions not first quarter two.

Or do some ongoing variable and discretionary expenses. These included rightsizing items, such as advertising and other non business critical expenses in the short term going forward, we're planning for incremental expenses, specifically related to cope with 19 basis. These include new payroll investments.

Front of our stores, including monitoring capacity and enhance cleaning as well as investments and personal protective equipment for associates. We're also expecting some lower productivity during the time through the implementation of new social distancing measures in our stores and distribution centers.

The last action I wanted to discuss this ramp we paid most of our rent through April over the last few months, we've worked with many of our landlords and negotiated for all of some of our April and a meaningful portion of our second quarter rent payments until later dates the prudent and productive financial measures. We have taken so far have reduced our key.

Cash burn going forward, we believe that we have adequate cash.

Even if sales were to be down close to 50% over the last nine months of fiscal 2021 to be clear. This is not our current sales expectation.

Just direction to give you a sense of our liquidity position.

Now I'd like to walk you through our first quarter cash flow and a reconciliation of our ending cash balance we ended the fourth quarter with approximately 3.2 billion in cash.

As I mentioned earlier, we added another 5 billion through our note issuance and credit facility drawdown.

Let me take a moment and walk you through the significant cash outflows during the quarter that got us to our 4.3 billion first quarter cash.

Ending balance.

First as Ernie mentioned, we're seeing a very strong sales trends to start the first quarter. So buyers were buying into these trends.

In our stores close temporarily we still had a significant amount of Mt of committed merchandise on its way to us and in our distribution centers that needed to be paid for their or even though sales have stopped completely we were still paying for merchandise that we were intending to sell in the first and second quarter. These merchandise payments.

And for the biggest outflow of cash during the first quarter net next even though we reduced expenses that we as we moved into April we still pay the vast majority of our normalized expenses payable in the first quarter, while the expense reductions benefited our PM that you know in the first quarter most of our castle benefits get.

Late into the second quarter.

In summary, given the timing of our store closings, we still pay the vast majority of our originally planned merchandise cost expenses payable and payroll in the first quarter. However, our revenue was lower than our plan by 5.5 billion. These items.

These three items alone accounted for most of the decline in their cash belt.

Further on the shareholder distribution side, we saw an outflow of approximately 480 million, which included a fourth quarter dividend payment and our first quarter share bye bye bye.

Well I just suspending the program.

I want to be clear that are significant operating cash flow in the first quarter is not indicative of our expected cash flow for the remainder during quarters of the year. Many of the actions we took as a company in response to the credit crisis, what into full effect at the end of the first quarter and will be more beneficial to cash flow beginning in the.

Second quarter lastly, given the high level of uncertainty in the environment and many factors outside of our control, we're not providing a financial outlook for the second quarter for the remainder of the year.

I want to reiterate that we have made swift and decisive actions to strengthen our liquidity and reduce our expenses. We're confident that steps, we've taken position us well emerged from the crisis and a strong financial position now I'd like to turn it over the earning for some final comments.

Thanks Scott.

I want to reiterate my gratitude for our global Associates, who have persevered through these challenging times and have supported each other and the company.

On our last call I spoke with you about our corporate responsibility programs I want to mentioned that in this environment our commitment to corporate responsibility remains core to our company and our work in this area continues.

Clearly we are very much looking forward to the time when we are fully open again.

Our teams have been working very hard to make our reopening safe and successful.

And it has been great to be able to welcome back our associates and customers as various regions we open.

While posted 19 is currently causing significant uncertainty in the world TJX remains a very strong company throughout a long successful track record, we have navigated through many different environments and challenges as a company, which gives us great confidence in today's environment.

In recent years, we have gained significant market share across the United States, Canada, Europe, and Australia, and we believe we can continue to grow our market share and the long term as the retail environment evolves.

We are convinced that our value mission, which has been core to our business since the beginning.

Well continue to resonate with consumers as much as it ever has and continues to be aren't growing retail formula over the short term medium term and long term.

Now we are happy to take your questions to keep the call on schedule, we're going to ask that you. Please limit your questions to one per person.

Thanks, and now we'll open it up for the questions.

Thank you we will now begin your question answer session. If you would like to ask a question over the phone lines. Please press star one from your phone on mute. Your line is speaker name clearly when prompted your name is required to introduce your question.

Withdraw your question Please press star too.

If you would like to ask a question over the phone lines. Please press star one.

My first question comes from Ma'am. Your line is now open.

Great, Thanks, and great color and congrats on the initial reopening strength.

Thank you Ernie maybe to break down your overall store reopening productivity can you just elaborate on some of the performance you're seeing between Marmaxx and Homegoods and any material differences you're seeing in the U.S. relative to Europe has stores reopened.

Sure Matt well there are some some color I can give you to that we mentioned in the script our home business has been particularly strong and I would say that's consistent you can you can extrapolate from that that our home goods business has been even stronger than our marmaxx business.

Having said that both are clearly exceeding what we had expected would happen.

What happened when we opened up a these bought these boxes.

Also Europe same I would say not much of a difference is similar dynamic in Europe.

Kind of one and a little bit of a different order, Matt So kind of let let me give me a little of how this all transpired. So you got it got a viewpoint on what I'm talking about with some of these sales trends on May 2nd we had only opened in the U.S. with 46 stores in South Carolina Okay.

And then after that shortly thereafter, we had about 13 stores in the Netherlands that opened 13 stores in Austria.

A very strong out of the box.

And then what happened is around May nine.

We had about 490 stores open between the U.S. and Poland, We actually opened up in Poland, There about 46 stores.

That brought us up to as of May 9th about 562 stores.

May 11th we had another chunk 500 stores 503 to be exact opened that was a combination of threeq 54 in the U.S. and almost 150 in Germany.

And again same dynamics of selling over there I would say in all of those or whether it was Austria in Netherlands, Germany.

But what is what what has happened is when you have these strong trends and we haven't been able to get the flow back in some of the earlier stores such as in South Carolina. The first state that I talked about with you is that those initial 46 stores. So what will happen and as happened in Europe as well is the stores.

The year out you start dropping against the last year, a little bit and doing a little bit less than last year volume. After a number of days because we don't have we don't have any EM.

Exaggerate, we have a lot less inventory in the store because we couldn't ship back quickly enough. Our Dcs have just been getting open kind of as we speak and so once we get the flow back to all of those locations in Europe and in the Carolinas by the way North Carolina came shortly after South Carolina, we had similar dynamic but in every.

Case, when we first open and have the merchandise Clarence and regular price we were opening up out of the box, you've probably seen on social media it aligns outside the stores.

Year over year, we were running in those locations.

Our initial question home was better than the non home.

Areas, having said that we had a number of categories also as I mentioned in the script that were doing doing well and marmaxx and helping to drive those the out Oh this year over al why performance. So overall again just very much.

More sales and traffic than we had expected on these reopenings and I hope that answers. Your question. It does and I've definitely seen the pictures Scott maybe to fall in the pictures yes.

Yeah, Scott maybe to follow up what timeframe are you targeting for a return to clean inventory levels at your concepts and then how do you balance clearing excess inventory versus taking advantage of the opportunistic closeouts that are clearly in the channel.

Okay, well I'll take I'll take that art, Matt the.

The.

So first of all we went in right away. When we were opening the stores and we took our markdowns on that the goods that had been sitting there that were seasonally oriented if pledged if goods were more commodity based or basic and warrants seasonal we did not have to mark them down. So we addressed aggressively all of the categories that we felt with seasonal and we took an initial.

On market down on those but they turned very well in our business on our clearance.

And all of the stores, we opened has been extremely successful.

Also I would tell you.

Better than expectations Ironically.

So we attacked the markdowns and not and then when the process now Matt of getting the flow from because remember we Scott mentioned it we had inventory in the Dcs, we were buying to the plus five comp sales trend early in the quarter. So we had goods in the Dcs that we still can use to ship back to this.

Stores, which isn't which were in process now going here and in Europe. So.

Then we we will get into the process of talking about of course is.

Incredible and availability in the market. So now were we will be in phase or step see of looking at what's in the market, but only doing that as we ship what was in the warehouses already to the stores.

So.

I think that's kind of the steps were taking the Mark Downs.

As you know as a company were aggressive on clearing goods. That's why our turns are always show healthy.

So we were ready going and if those aren't moving on the first mark down we will sub them quickly and bring into the second markdown.

We haven't had to do that very often yet and this initial reopenings.

Perfect basket.

Jump in yeah, not really not much stand in terms of what we did it in terms of just that there were giving guidance, but color on the second quarter, we would still expect to have incremental markdowns in the second quarter, but not to the level of the first quarter, primarily due to really that same thing that you know that even by the end of.

May we're still going to have more than 50% of our stores not open and depending on the timing of some of those stores. When they were opened obviously some of them are large markets potentially like California, New York and in the UK Mark we could you know to be determined if we need to take incremental markdowns to move those good.

I mean normally we you know how many times, we turn on average our store inventory close to 12 and overall six times, so effectively when we're going to be opening many of the most of these stores that we would have already had no inventory in the stores and distribution center they'd all be would have already turned so we still have.

Some potential liability there.

Matt I would just jump in Echo something Scott just said, which is a key point, we wouldn't want anyone to forget during this call is that the amount were anticipating right now.

Having about 48, 49% of our stores opened by the end of May because as a few other tranches gone in Canada is opening as we speak about 100 stores today. That's a portion of the 1600 and then we have other states that we know we're going we get to about that point that Scott mentioned.

Unfortunately, we can't control our own destiny.

On the fact that help the other stores still aren't opened that's not up to us so.

That could create an issue on the Mark Downs, which is what I think Scott was getting at that is a little out of our control I'm confident when we open.

We're going to do the business and we'll figure out how to address all the non.

Current merchandise it's just.

The getting open is still the thing that again isn't under our control.

Great. Thanks again.

Our next question comes from Alexander Waldis. Your line is now open.

Good morning. Thanks, so much for taking the question. My question follows up a little bit on any color on some of the trends you're seeing and reacts in stores. What are you seeing is the strongest is it traffic are you seeing strengths in the in the basket size within.

Marmaxx are there any categories that are resonating, particularly well. Thank you can't perhaps at home is performing particularly well within those banners and is there anything you can comment on at this stage in terms of whether there are differences between stores that opened fitting runs that she says that does that haven't.

He said you would think sit fitting rooms and candidates it perhaps no no color on not just yet.

Okay. So we'll.

Scott and I will tag team here I will Alexander give you the first part which is traffic.

While the traffic is.

Is strong and most of the locations, but some of it is about a we're getting a higher conversion a bigger basket also and some locations. So in Europe. For example, that's been or more of a dynamic there Tropic is obviously and here's the funky thing we are doing capacity limits.

So we are right now limiting.

The amount of traffic and most of our locations that we allow any one time, so it's difficult for us to measure what the actual traffic would be.

Scott our average basket span healthy right. If you want to jump in on Yeah. I think the most important thing that we've seen is that the average basket, particularly in the United States, but also in Europe has been significantly higher.

And it we're putting several more units in the basket and I again.

Some of that is maybe due to those were selling more clearance merchandise, but we're overall the there's just more significantly more units in the basket for an overall across all both Europe and the United States, but now we do.

Wonder and believe some of that's due to pent up demand because when you have the pent up demand in there they haven't been shopping when you get that's you know that first one job to shop.

You are likely going to get a bigger basket they have them at all for a while however.

Summit relative to some of our first openings here. We are a couple of weeks later and it's still been really strong so that at first we thought it might have in that and now we're saying that might be part of it but not as much as we thought and part of it it probably just relates to the fact that customers who are coming to the stores in making the you know to go out.

You know in this new environment, a really wanted the shopping and buying so I think that goes to earn is points on you know why the conversion like where we measure it in Europe, we know is significantly higher mhm.

And and answer to your question regarding certain categories years, clearly, we're calling out home, we don't opt to give the information on the other categories are really for competitive reasons as to what what there, but there are definitely I would say there are definitely category trends.

Ends which will be different.

We will sell families of business differently post cobot now than we did pre coal bed and that's okay.

For us specifically, because our business model a so flexible our merchants are able to and are planning and allocation teams, which on our last call I gave a lot of credit too because they were able to tailor the store to the right mixes for last fourth quarter and really they were a key player in doing that they will be key as well and this post cobot time between the.

Buying teams and our planning and allocation teams planning the families of business appropriately based on these trends is what I'm very confident and we will be able to do and Fortunately, we buy so much hand to mouth here and the way the market has so much availability.

A a that's why go to I would just like more of our stores to get open and I think we can strategically a accomplish that.

That's super clear. Thanks, so much and then one more question if I may on E. Commerce, you mentioned that the E. Commerce sites had been strong since you. Since you reopened then any change to how you're thinking about the potential so E commerce.

We then within the business over time.

[noise] so.

Great question and and of course, our instinct would be to think during this time third as many ecommerce businesses in the market have.

Have catapulted their sales of recent understandably with people being at home.

It has been for us a basically 2% business so.

Do I think in the short term, we could over index on that I do.

And long term I think once all our stores are open and we forgot how to operate obviously differently and a in a more safe manner in the environment, we need to operate I think it'll settle back down to probably it'll probably still be healthy we're getting very healthy well, we're getting very healthy reads on it but.

We are we have having a we've been shutting it down early in the day. So any of you have shopped. Our sites you will see in our TJ, Max or marshals dot com sides. After a few hours in the morning, we have had to shut the site down because when we started the sites up and the same is in Europe.

We insured safety for our associates went in with a.

More limited capacity output due to safety standards, social distancing et cetera, many other things and so we consciously new we wouldn't be at full capacity and we would let it evolve over the next month.

So right now we within a few hours are hitting our capacity the which is Oh I guess you would call it a high class problem.

And our intention is obviously keep building as we're learning how to operate safely for our associates, we will keep ramping that up further to the point, we hope to be back to the growth over the last year a significant numbers.

But I would say strategically nothing will change in terms of the totaled TJX.

We will not look to E commerce as our major leveraging point to get us through co bad and out the other side it will be complementary as it always is one of the nice things, though again as it will probably grow a little disproportionally on the returns at a high rate go back to our stores, which is still one of the silver linings.

And it is complementary to us.

Again as would looking for market share going after younger customers, whether in cobot 19 environment. After just like we will before.

And I think that's it.

Great. Thank you so much.

Welcome.

Our next question comes from Omar Saad Your line is now open.

Thanks for all the information Thanks for taking my question one of the little bit more color on the inventory landscape.

Is it how are you think about Packaway you know in this unusual time versus your typical period.

Any issues in the home supply or supply chain. That's obviously, an incredibly strong category. We're hearing from number of retailers not sure if there's.

Any any issues there we should be thinking about and then one quick follow up on E. Commerce, maybe you could talk a little bit more why you shut down the ecommerce business. During the quarantine period is that the logistical operational answer that question. Thanks.

Sure I'll, let me start with the inventory supply availability in the market Omar pretty straight forward here in that what <unk> first of all there will be an unusual amount of packaways available.

Some of these goods based on the way. So many stores were shot wouldn't necessarily have to be packed away.

For a long period of time that could be something that's that we buy and we ship it in a little off season, we ship it to our southern stores. This strange dynamic is there's so much goods out there right now.

That a lot of us we're not able to use a that we believe there's going to be a lot of packaways or holdover being done by actually the vendor community. So up for the first time. Obviously this is a strange environment and we hope we don't run into this again for numerous reasons.

There will be packaways at the vendor level, if that makes sense to you a lot of holdover goods that will probably be showing up in the first quarter of next year. So that's what really will be happening from what we can see with inventory.

Out there on supply is a non issue for us we have so many what's not going to be happening from where we can see in home and even in our off all apparel categories, whether in Marmaxx or winners are a t. K. Max is we we will have a a dynamic that already was starting to happen last the last couple of years.

As it seems based on our temperature checks with many of our vendors.

Because all of our buyers and merchandise managers have been working from home and staying in touch with the vendor community throughout this process.

There's a strong feeling that we will.

Probably be even more important to the vendors and that applies to the home area as well.

Coming out of this as we reopened if more important than perhaps we were even going into it just because the nature of what's going on so we've all seen it before what happens to off price and what happens to to TJX during.

You know chaotic times I would say it that way that we.

We we totally trust the model and that model has always shown us and this will be no different that there will be a lot of goods it may not.

Omar may not fall perfectly by home category. The way, we would ideally want it. So we're prepared for that and that's why at a home goods or a marmaxx home or a winters home Teekay Max Homesense up there.

These guys are good at flexing their categories based on where the trends are in the trends are going to different a lot also people being more at home or people may be getting it to cooking more at home you can imagine what that would mean for some of the trends around around the board.

So I think that answers that E commerce.

Real simple on E Commerce. It was about it was about associates safety.

Health and safety is our associates and <unk> and our situation again going back to it was only 2% of our business. So.

We did not want a risk associated safety on what is a very small it it was never that meaningful for our cash flow war, all our customer in Iraq. It was more important to me that are associated stay safe, especially when this was just a you know erupting so to speak.

Thanks, certainly best.

Thank you Omar.

Our next question comes from Michael Binetti. Your line is now open.

Hey, guys. Thanks for taking my questions here and thanks for all the detail.

You talked about this a little bit with Omars question, but I know you guys always try to front run this and talking about inventory being available in the marketplace, but are you taking any actions other than what would be normal that suggest you expect to be making bigger buys in the near term other off prices have noted some actions to.

For I would say significantly more inventory to pack and hold and then I'm also curious.

You.

What you what you think when you hear some of the vendors some of the bigger vendors that are public companies mentioning on conference calls that they may.

During the business models, a bit to packaway, some inventory reprice re purpose pop products for what seems like the first time to hold it given the unique dynamics of this period.

<unk>.

Sure Michael So the first question the big so.

There are clearly bigger buys out there.

Our mode of operation right now he has been with the merchants to take it we're really taking a week by week right. Now so we have all of our teams they communicate.

I'm very regularly or a group president Richard sure has been a really helping to spare had a lot of the communication with our division presidents across all the division. So there were approaching the market strategically.

With a current Mont of information so what we've been doing is regardless of the availability out there we don't want to buy too much too soon the temptation would be for us as and remember what I said at the beginning of the culinary as we are right now utilizing a lot of the on order that has already hit us that is in our Dcs. So.

Current window, we're using some of that and yes, we do need to now supplement.

With these stores being better than we planned on we are going to supplement with some buying but we're trying to do it in a very methodical surgical approach.

And so we're taking it you know taking a step by step to keep an eye on the environment and where does the retail by one of the product by the way because our we wont buy anything if we can't show significant enough savings against the out the door or out the online door of the other retailers so I.

I would say, we're probably going to be a little different and by the way to your second question what the.

With the vendors doing their own Pat that's kind of what I referred to at the beginning of a omarska. Yes. We think there will be all there's going to be in addition to us doing a X amount of packaways, there's going to be a lot of vendor packaways, where the vendors are going to carry over and we or re purpose. I think was the word used and we do.

I believe I think thats an accurate.

Color that were hearing as well.

And we'll we'll approach those deal by deal brand by brand and item by item.

Let me so good questions.

Thank you and let me follow that you mentioned in the press release and on the commentary taking some social distancing actions.

I guess, if you get some parts of the year with the stores are typically very very crowded and thinking about back to school and holiday.

Will there be challenges and driving positive traffic in those periods at these restrictions are still in place.

Yes, they are well and so we have teams right now working at how to minimize those challenges.

So you could have something like I'm, not saying today, we're definitely in a do it one of one of the options as you expand your store hours. So you can get you don't have to crunch try to clients during the busiest time periods and.

The amount of people know what's interesting dynamic as we have gone into our earliest stage, we use either 20 or 25% capacity limits.

And South Carolina, and we were still running over the last year.

Numbers, because again you have to orderly it creates lines outside that we have to space coming in.

And you can do it and it consistent manner, but it definitely will create pressure and there will be operating costs.

That Scott and I talk about all the time that that will be baked in to having to operate at different types of a paces like that so right. Now for example, we have we don't allow we don't have are fitting rooms open.

[music].

So that's one thing that creates helps with efficiency or we did it for safety, though that as our motive there, but I have faith in our teams figure out how to deal with the safety issues that they come up but it will be it will be a challenge.

Yeah, I think as Ernie said the.

I think it's more towards the very end to the year in your November December timeframe, and its I think only in to be determined will obviously.

Only been doing this for a few weeks.

The other a large majority of our stores will not be impacted at all it's the higher volume stores and potentially some of the stores in Europe than others, where the you know where the.

For the do a lot more sales per square foot than we've been doing the U.S. So I think it's something that we self several months to figure out I think also we don't know what did the dwell times and others could be less and less yep average baskets are higher we'll have to see does that stick as Ernie said are not before so.

I think we have some time to work it out, but I think it's more toward.

The end of the you where that will be impacted if it doesn't impact us Michael to Scott's 0.1 that we don't that's a good point back to school for us It doesn't.

As you know where more of a consistent retail volume like month I'm on the weak, but we don't have that type of spike really toll holiday, yes. So our back to school would be manageable I should have pointed that out and yeah. One other thing just to add on that and again. This is early days couple of weeks just as you know, particularly in Europe.

More of that would be more of an issue than in the U.S. given the number of high streets and shopping mall and the high volume locations. We have we have seen a flattening leased where people are working more you know at home, where the shopping patterns of more flattened over the week then on the week than on the Saturday Sunday, which could help.

Could help with deal with some of those occupancy limits that are any talked about the one dynamic which globally I'm sure. This will apply to many so we're seeing right now.

Yes, if the customer wants to kind of cut back on how much he or she goes out shopping we could continue to see that average basket the higher.

With a little less visits and you're doing it off of I'm not as many people coming through so it'll be interesting to see I don't know how that weve never been for this how that translates at holiday it'll be interesting to watch that dynamic as well.

Interesting. Thanks, Thanks for all the detail goes.

Thank you.

[noise]. Our next question comes from keeps it Simmons your line is now open.

Yes, hi, Thank you very much for taking my question I guess, that's we're trying to think about some of that traffic dynamic that you alluded to in holiday you guys had noted previously success with some our omnichannel capability in markets such as the UK with click and collect I understand obviously E. Com is still a small percentage the business but is there.

Any view on maybe evaluating more omnichannel capability just across a greater percent at the store base or more regions, just as you're trying to get that traffic and then secondly, my question would be on marketing dollars, we've seen them be cut back across the industry, just give and certainly the sales pullback, but you guys.

Had alluded to you know marketing message into the back half out. So just kind of curious on your thoughts on marketing you know as we come out of that you know how are you going to communicate to the customer you know the values and trying to gain that marketshare. Thank you very much.

Sure, let me well so for holiday with E commerce with click and collect.

That is something in the state I think we're still more prepared for that and in Europe, where it's almost like you have to do that where the mail service will not leave it at many flats or apartments or houses. So oh, we are not I don't think we would be.

Paired here.

And the states to to do the click and collect as readily and that would just be an operational logistics challenge for us. We're just not ready to handle that right now and based on this year. The way, we're trying to get up and running just in terms of fulfilling orders on the side I would think that would be something for down the road, we would take a look at.

So I'm good question I understand where that that would come from we love click and collect is creating a visit to the store.

So I think you'll see us continue to ramp that up in Europe by the way I'm just not domestically here.

Marketing is interesting.

And it just you triggered something K when you asked the question. The other thing we had to do with all of our store set we opened here. Ironically is we got these like we did not market.

And in fact, because our capacity was getting.

Hi hit and we're trying to learn from it as we opened during cold that our capacity was getting hit a two early like in South Carolina and some of the other markets, we have actually or minimize our marketing and.

We've actually gone to in most cases, we have opted to not do Saturday openings, because we're getting so many customers and it was difficult for our associates to manage were moving our openings to monday's.

And as well as not doing any substantial marketing as well so right now in the short term and I know your questions about later I just wanted to point that out to everybody if things normalize Scott and I have talked about this.

We want to in marketing is one of those places where we would certainly bring back some of our discretionary spending.

Right when things normalize so we'd be looking at should not just marketing in the big picture, we'd be looking at.

Capital, which obviously, we put a halt on spending.

I'm sure we'd look at we'd reassessed our dividend.

We'd we'd pay back our revolving credit and one that key things after that as we'd be looking at what do we do with our marketing budgets in terms of the fall and bringing that spend back to a normal.

And because I think you remember Kate I've talked on this why it's a great question I've talked to many calls about how effective our marketing I think has been over the last year or two and helping us gain the market share and we would have a great messaging campaign, which I would tell you right in our marketing teams are working on a of course, there chomping at the bit waiting for us to to say.

They go when we get to that day when were opening enough locations to start marketing at a different levels. So we will be there we'll have our usual creative messaging, I think which will speak across all the different demographics.

It's just we have two I think wait for another couple of months here, Yeah. I think the Ernie is point. The you know right now it's a.

We still have the lion share western stores still the open so we're doing most of it digitally.

And you know through social media email or E mail, and our Influencers and going forward. The clearly as Ernie said, we'd depending on the where we're at we would obviously do re shifts to do more national advertising and other other things that we traditionally do for building awareness getting new customers into the store.

Or et cetera, but the.

Little too early for us to be committing exactly on the timeframe, but.

That would be the generally how it would go.

Our next quarter final question of today comes from Paul limits. Your line is now open.

Hey, Thanks, guys.

And on the bar on your buyers on their buying organization I'm curious what percent of your buyers are back in active in the market, where they all completely shut down for a period of time, if so how long and then separate as you as you think you mentioned 21000 vendors that.

You do business with where where can that go I'm, just just want to get a sense of tend to the size of the pool that that's 21000 out of how many folks can you, possibly have relationships with where do you stand today and how do you expect that number to grow or shrink maybe during this during this period. Thanks.

Great questions Paul on let's start with the first one buyers were so the buyers have never been disconnected I'd I'd say everybody has been working from home in fact, many of the things we had to do.

When when Tobin hit where we had to talk to vendors about on many different things our buyers will all engage in dealing with the vendors are they have not yet and you are the second thing you mentioned, where they shut down yes. They were shut down we shut them down completely from buying anything.

When when we got to that when you are this is never happened before and you get to the point, where you have to shut down 4500 stores.

You have to stop buying.

As you would just be eating through cash like crazy and we didn't want to caused more strain on vendors are ross or et cetera. When we didn't know what the light was at the under the tunnel Lincoln, we sell the product so having said that they're all in touch with their manager in all ready to go.

In fact some of the.

Some of the surgical buying that we've talked about doing based on the recent sales trends that we have and the limited in the basically I know were saying we have 1600 stores open I, we really had 1100 through yesterday, it's with the recent batch today that gets us to 1600, we had about 400 and the states and 100 and Canada.

I'll just jump up to 1600, so but off that 1100, we will getting some clear reads on a product categories that the buyers are now starting to be involved and us surge of managed very surgical and only certain areas were starting to buy a little bit there and we're very financially.

Aware of what we're doing in total as we place those orders lastly on the 21000 vendors. The its it this is a little like the question when we used to have it on how long ago was 10000, then on went to a 15 then it it's really grown from I. I count over the exact down from 10 to 21 and.

Like seven to 10 years, I think and I do not I do not think it's going to go up on 21 that 30000.

Based on the the virus I would think that would hold back the.

The quick that's what which this would grow however, I don't think it will shrink I think there will continue to grow just at a slower rate because.

What's tends to happen in these times and this is an extreme time is more vendors are still looking for who who's the retailer that I should try to do business with and were very consistent and we are still a healthy brick and mortar retailer that more and more vendors event. They weren't doing business with us I think over the next year are going to.

Want to open up to doing business with us. So I would guess this will grow a little bit I can't put a number on it though so just the one thing going back to store openings that I just mentioned in that is that although we don't have from dates you know and we said we have approximately 50% open.

Based on what we know from different the.

The different government the.

Okay, you know government agencies and stuff like dictate these things around the around the country and around the you. The rest of our were globally, we have stores, where we estimate that will be open for approximately 65% of the quarter or you know compared to what we would originally.

Our normal 100%.

Just two minor caveats to that is one a lot of locations, where we have not open.

The California, New York or high or low higher borrowing a locations, whether it's the UK Toronto, Montreal, California, New York et cetera, and also just not that it's a big deal, but the spread of our quarter now the first six seven weeks of the quarter, our high of higher volume per day quarter than the back half. So when you guys.

They're trying to think about that it's not in our control, but that's just the way it flows and so just wanted to get that on it at the same time, because we're going to be we're still close for much of the quarter. We're still paying as we said a large number of associates, who are still not fully working.

Thanks, similar that we'd not as the same extent of as the first quarter, but still paying associates and we think again as Ernie said, it's been critical is very effective for us being able to jumpstart beak position than we continue to believe that over the at least what will hopefully be just a few more short weeks before we have a lot of our stores or mature.

The majority opened so again just wanted to get that out.

Okay. Thank you all for joining US today, we will be updating you again on our second quarter earnings call in August.

The team here at TJX, We hope you all stay well and we wish you good health.

For you and your families. Thank you.

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