Q4 2021 TJX Companies Inc Earnings Call

Ladies and gentlemen, thank you for standing by welcome to the T. J Maxx companies fourth quarter of fiscal 'twenty 'twenty, One 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 one.

As a reminder, at this conference call is being recorded February 'twenty four 'twenty 'twenty, one I would like to turn the conference call over to Mr. Ernie Herrman, Chief Executive Officer, and President of the T. J Maxx companies Inc. Please go ahead Sir.

Thank you Sheila before we begin Deb has some opening comments.

Thank you Ernie and good morning.

Forward looking statements, we make today, but at the company's of results and plans are subject to risks and uncertainties that could cause the actual results and the implementation of the companies plans to vary materially. These risks are discussed and the company's SEC filings, including without limitation. The form 10-K filed March 27 two.

And in 'twenty and the form 10-Q filed December one 2020.

Further these comments and the Q&A that follows are copyrighted today by the T. J Maxx companies, Inc, and.

Any recording retransmission reproduction or other uses the same for profit or otherwise without prior consent of T. J Maxx 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 of third party, we take no response.

Instability for inaccuracy that may appear in that transcript.

And now I'll turn it back over to Ernie.

Good morning.

Joining me and Deb on the call at Scott Goldenberg.

I'd like to start our call today by expressing our sincerest gratitude to all of our associates for their hard work and dedication and 2020.

Together, our organization has successfully accomplished many monumental tasks and the most uncertain environments, we have ever faced as a company I.

I am so proud of the efforts of all of our global teams, who have worked as one T. J maxx to operate the business through this environment, while prioritizing the health and safety of our associates and of our customers.

I want to give special recognition to our store distribution center and fulfillment Center associates.

We are truly grateful for their commitment to our business and to our associate and customer safety protocols.

And recognition of their efforts, including physically coming into work and the fourth quarter. We awarded of majority of them and appreciation bonus which is the third of appreciation bonuses that we have paid during the pandemic.

We will continue to look for opportunities future opportunities to recognize associates for their important contributions to the business.

As we continue to manage through the global pandemic, we are thinking of everyone, who has been impacted by COVID-19, including our associates and their families our customers and our communities.

Also our hearts are with the people of <unk>, and Texas and other parts of the U S who have endured so much due to the sphere of weather this month.

Looking ahead, as the power and water situation improves and Texas and other areas and the rollout of vaccines is more widespread in the coming months, we are hopeful and optimistic about the future.

Turning to our business operations during the fourth quarter, we were very pleased at our U S stores were generally able to stay open.

However at certain times during the quarter, we had to temporarily closed all our stores and Europe and a majority of our Canadian stores.

And total <unk>.

Europe was closed for almost two thirds of the quarter and Canada for about one third of the quarter.

As we reopen some of these European and Canadian stores over the past couple of weeks.

We were encouraged by consumers enthusiastic response similar to what we saw last summer when we began our reopening.

We are following government mandates and our regions and at this time of approximately 690 stores remain temporarily closed.

Currently the vast majority of these closures are still in Europe, where we expect shutdowns to remain in place for a significant portion of the first quarter.

Okay moving to a recap of our fourth quarter results first I am very pleased that our overall opened only comp store sales of down 3% exceeded our plans.

During the fourth quarter, we saw a continuation of strong sales trends and our home and beauty departments as well as great customer response to our holiday gift Assortments and values.

I am, particularly pleased with the terrific assortment of brands, we offer at shoppers across all categories, which we believe was an important driver of our above plan sales.

These comp sales also exceeded our plans across each of our divisions, including at Homegoods, which once again saw a double digit increase.

While overall sales were down significantly due to the temporary closing of our stores for approximately 13% of the quarter I want to emphasize that we are very encouraged by our fourth quarter overall opened only comp sales, which improved each month of the quarter and were positive and January.

Despite operating during Covid surges with the headwinds of uncertain consumer behavior occupancy constraints and social distancing protocols, we only had a small decline in sales at our stores that were committed to be open.

It was great to see many of our best customers enthusiastically returned to our stores.

We believe this speaks to the resilience of the business and enduring appeal of our value proposition across all of our retail banners regardless of the environment.

All of this gives us great confidence and our business over the long term.

We also believe our ongoing commitment to health and safety protocols helped customers feel comfortable visiting our stores throughout the quarter.

We continue to receive positive feedback from our shoppers on our safe shopping experience.

We believe this will remain an important factor for consumers when deciding where to shop, while COVID-19 persists.

Next our merchandise margin was up the buying environment remains excellent as we continue to see a terrific selection of inventory from both existing and new vendors.

We are very pleased with the improved seasonality and mix of merchandise at our stores as our buying teams have done a great job of aggressively sourcing branded product across good better and best categories.

We achieved fourth quarter earnings per share of <unk> 27.

And maintained our strong balance sheet and liquidity position. Despite the overall sales decline.

Further we declared a quarterly dividend and refinance and refinance some of our outstanding debt to lower our borrowing costs over the long term Scott.

Scott will speak to all of these items and more detail and his financial update.

As we enter 2021.

Significant uncertainty remains around COVID-19 and its impact on consumer behavior.

While many factors remain outside of our control such as temporary store closings and customer shopping habits, and we are very confident about the areas that we can control, including buying and merchandising and store operations.

Despite the near term uncertainty, we have grown more optimistic about the medium and long term with the news of multiple effects of Covid vaccines.

And I am convinced that our business will rebound and we will capture market share. Once we are past this health crisis.

Let me highlight some of the actions we took in 2020 that we believe set us up for success going forward.

First we have strengthened our relationships with many of our existing vendors.

With all of the uncertainty and the retail landscape some vendors of look to us to buy even more of their inventory.

We have also had opportunities to buy goods across and even wider range of product categories and.

And 2020, our buyers opened thousands of new vendors across good better and best brands and source from a universe of approximately 21000 vendors around the world.

We believe all of this puts us in an excellent position and keep offering consumers and eclectic mix of branded merchandize at amazing values.

Second we're prepared to take advantage of the terrific real estate availability that we are seeing across each of our geographies and continue our global store growth.

With the increase and store closures by some other retailers and we're in an excellent position to open new stores and some of our target markets.

Further we see additional opportunities to relocate existing stores to more desirable locations and to seek out more favorable terms when leases expire.

Next upon initially reopening our stores last summer, we focused on marketing on addressing safety concerns to build the confidence of our shoppers, while highlighting value and the hunter trending categories.

And the fourth quarter, we also emphasized gifting.

And 2021, we plan to launch bold new campaigns for each banner that reinforce our value leadership, while also highlighting the elements of discovery variety and quality.

Which are all major strength for us.

Lastly, we prioritized investments and our associates stores supply chain and systems to strengthen our infrastructure and support our future growth plans.

<unk> will outline our 2021 capital plans shortly.

Looking beyond the health crisis, we are confident that more consumers will be drawn to our stores. Once they are back to more normalized routines and shopping habits.

I'd like to walk through the reasons why we believe we are strongly positioned to capture market share and the future.

First we are confident that our relentless focus on value and quality will be as important as ever for shoppers beyond the health crisis.

Second we are convinced that consumers will seek out store out of our stores for our wide assortment of branded and fashionable and merchandise.

We see our excellent selection of brands and our global buying organization as key Differentiators for our business.

Further we believe the brands we offer consumers will continue to be a major driver of incremental customer traffic and sales.

We believe our flexible closer to need volume will continue to be a tremendous advantage and.

Eventually consumers will be physically returning to work Socialising again and resuming travel.

This is what we saw happen and in Australia, where despite recent COVID-19 shutdowns life at largely returned to normal during the fourth quarter and we saw strong sales trends return and our apparel business.

Our buying organization is well positioned to shift our spending and our other geographies to meet shoppers' changing and category needs. Once we move past this health crisis.

Sure.

Third we are confident that the appeal of our treasure Hunt shopping experience will resonate for people looking to be inspired and discover new products when they shop.

We shipped to our stores several times, a week with new and different merchandise. So there is always something exciting for shoppers to see.

With a rapidly changing store assortment sharper has learned to buy something when they see it.

Does it may not be there the next time they visit.

We believe that the entertainment element of our shopping experience will continue to be important.

Customers tell us that that part of the reason they shop us as for some stress relief, particularly during these times and some quote meantime, unquote, which we expect to continue into the future.

Next we believe our convenience off mall locations and urban suburban and rural locations is an advantage of this allows us to reach a very wide customer demographic.

And the U S roughly 80% of consumers are within 10 miles of one of our stores.

This makes it very easy for shoppers to visit our stores we.

We expect to see incremental traffic once consumers return to their workplaces and go out more as they will be passing by our stores much more frequently.

We also see of great opportunity to capture share from other retailers that of shutdown completely or at close stores. We also believe this will lead to greater availability of inventory from both new and existing vendors.

Lastly, we continue to aggressively pursue the significant opportunities we are seeing and the home category just as we have for decades. This includes increasing the homegoods divisions long term target to 1500 stores and our plans to launch E Commerce on Homegoods Dot com.

And later this year.

Further we have been increasing at.

All of our banners to capture some of the incremental demand.

And 2020 hallmark counted for almost 40% of our overall sales up from 33% and the prior year.

Going forward, we are confident that the strength of our home buying teams and our global buying offices will allow us to keep bringing an eclectic mix of home merchandise at great value to our shoppers and capture additional market share.

Before I close.

I want to reiterate how great we feel about the long term and our opportunity to drive sales post pandemic at this.

Same time, we are still facing several significant expense headwinds Scott will discuss this in more detail, but the cost pressures that we had pre COVID-19, including supply chain wage and freight continue to present and Covid has made each of them worse.

Of course, we also continuing to have significant COVID-19 related costs.

I want to emphasize that we are extremely focused on our top line opportunities that could help to ease some of these pressures.

And closing.

I am so proud of the resilience and dedication of our associates, who successfully navigated at our company through and unprecedented environment and 2020.

I also want to add that as an organization and management team. This has been such an important year in terms of our global corporate responsibility efforts.

As Covid has been evolving differently in different parts of the world. We have continued to prioritize the health safety and wellbeing of our associates and customers along with the financial stability of the business.

2020 was also of critical year for our inclusion and diversity work, which includes our commitment to standing up of our ratio of justice and equity.

We are committed to listening to and learning from our associates and taking actions to do better.

I am confident as ever about the future of T J Maxx.

Longer term, we believe we have a tremendous opportunity to capture additional market share even beyond the prospect of a resurgence and consumer spending and Ribena shopping quote unquote. Once vaccines are widely available longer term. We are convinced that our flexible off price model has structural advantages with our entertaining.

And engaging treasure hunt shopping experience differentiated assortment of branded merchandise at.

And our excellent values.

Our teams are energized and laser focused on capitalizing on the opportunities we see for our company.

And I look forward to sharing our success going forward.

Now I'll turn the call over to Scott for a financial update and then we'll open it up for questions Scott.

Scott.

Thanks, Ernie and good morning, everyone I'd like to first Echo Ernie as comments and thank all of our global associates for their hard work and commitment in 2020 and continued efforts in 2021.

I'll start today with some additional details of our fourth quarter results as Ernie mentioned opened only comp store sales were down just 3%.

Despite the Covid related.

Related headwinds, we faced average basket increased and was strong again as customers responded favorably to our fresh seasonable mix and put more items and their carts as to the cadence of comp sales, we saw improvement of each and each month of the quarter with our more maxx home goods.

And <unk>, Canada divisions, all achieving positive opened only comp sales in January at <unk>, Our largest division customer traffic and the fourth quarter was better than the third quarter and also improved each month of the quarter.

As to overall sales the decline was primarily due to the temporary closures of some of our stores.

These closures were primarily in Europe, which was closed for 63% of the quarter Inc.

<unk> essentially all of January and in Canada, which was closed for 32% of the quarter overall stores were closed for approximately 13% of the fourth quarter.

Fourth quarter merchandise margin was up versus the prior year. This was driven by strong mark on and a benefit from the timing of of shrink accrual. These benefits were partially offset by higher freight costs as well as higher markdowns as a result of the store closures in Europe and Canada.

Moving to the bottom line fourth quarter earnings per share were 27.

Which included of debt extinguishment charge of $312 million or <unk> 18 per share earning.

Earnings per share also included a negative impact of <unk> from our tax rate, which was significantly higher than last year. This was due to the company moving to a year to date net income position in the fourth quarter and the related impact of the jurisdictional mix of profits and losses further as detailed in our press release.

This morning, we believe the temporary store closures in Europe, and Canada during the fourth quarter negatively impacted sales by approximately 950 to 105 billion.

Resulting in a significant loss of profit dollars.

And about 18 to 21 of earnings per share.

I want to also remind you that our EPS reflects significant cost headwinds and the fourth quarter, which more than offset some of our temporary expense savings. Let me take a moment to go through a couple of the larger ones.

First our net costs related to COVID-19 accounted for approximately $300 million of incremental expense.

These costs include extra payroll to clean the store and monitor occupancy levels payroll for some store associates that we kept active to support the business while stores were temporarily closed the cost of pp and E. P.

And the fourth quarter appreciation bonus for certain associates.

The increase and our cost versus the third quarter included extra payroll as our stores were open longer hours, partially offset by increased government relief due to the European and Canadian store closures.

And we had and increased supply chain costs. This was due to a lower average ticket and processing more units as our merchandise mix continued to shift towards non apparel categories expenses related to additional distribution capacity and wage increases at our distribution facilities as for inventory our T.

And we're doing a great job procuring merchandise and adjusting logistics to get at toward distribution facilities and stores as a result of our store inventory position is close to where we want it to be to reiterate availability of merchandise and the marketplace is excellent.

Now I'd like to walk through our cash flow and liquidity first we generated $4 6 billion.

Of operating cash flow and fiscal 'twenty, one as a result, we ended the fourth quarter and a very strong liquidity position with $10 5 billion and cash next we declared a quarterly dividend of <unk> 26 per share and the fourth quarter and the first quarter of fiscal 'twenty two we plan.

We're planning to declare a dividend at the same rate subject to board approval.

Lastly, and the fourth quarter, we significantly lowered our borrowing costs by reducing our higher interest rate longer dated bonds through a cash tender offer and issuing lower interest rate bonds. The net result of these actions will lower our interest expense by approximately $32 million per year.

Now I'll spend a moment on fiscal 2022.

As we said in our press release. This morning, we are not providing a financial outlook for fiscal 'twenty two because of the continued uncertainty of the environment due to COVID-19 as a point of reference overall open only comps store sales trends for the first two three weeks of the first quarter were better than in the fourth quarter. Despite.

And the unfavorable weather and the United States and the periods before and after the unfavorable weather overall comp sales were positive.

In terms of fiscal 'twenty to profitability, we expect pre tax margins to be higher than fiscal 2021, but to de levered significantly versus our pre COVID-19 levels. This is due to a number of known headwinds that we've discussed many times before as a reminder of these include the following.

First we continue to have.

The net costs related to Covid and the first quarter. We are currently planning $225 million of net expense at this time, we do not know or by how much of these costs may moderate beyond the first quarter. As a reminder, most of these costs are and SG&A.

And based on what we know today, we expect temporary store closures will negatively impact overall first quarter sales by approximately $750 million to $850 million and will result in some level of margin deleverage. This includes our stores that are currently closed and Europe and the majority of our Canadian store.

And that are currently closed or had been closed during the first quarter based on what we know today overall, we expect stores to be closed for approximately 11% of the first quarter, which includes Europe being closed for an estimated 67% of the quarter these expectations could be negative.

Impacted further if current mandates are extended.

Extended or new ones are put in place next as Ernie mentioned, the headwinds of freight wage and supply chain that existed pre pandemic have not gone away and fact each of them has gotten worse and the current environment and freight specifically, we continue to see capacity constraints and driver shortages.

Has led to higher rates, we're also experiencing incremental freight costs due to a lower average ticket and moving more units through our supply chain.

All of that said, we remain laser focused and looking for expense savings throughout the business. We may also have an opportunity to offset some of these headwinds over the long term, if we successfully drive outside sales increases and market share gains or.

Or see demand improve for the higher ticket categories. Additionally, if and buying environment stays beneficial we could capture additional merchandise margin.

Moving on we expect capital expenditures to be and the range of one 2% of $1 4 billion and fiscal 'twenty. Two this includes opening new stores, Remodels and relocations and investments and our distribution network and infrastructure for new stores, we plan to add 122, net new stores, which would bring our year.

<unk> and total close to 4700 stores. This would represent a store growth of about 3% and the use of our plans call for us to add about 30 net stores at <unk> 34, net stores at Homegoods and 12, Sierra stores and Canada, We plan to at about 22 net stores and a T J.

And international we plan to open approximately 15 stores in Europe, and nine stores and Australia as to our long term store growth opportunity. We now see the potential to grow to 60 to 75 stores globally and in addition to the increasing homegoods by 100 stores. We've also increased the store pinch and.

For Canada, and Australia, and closing to reiterate what Ernie said, we feel great about the strength of our business in general of the stores that are open are performing well. Despite the numerous numerous COVID-19 related headwinds. Additionally, we are and a very strong financial position, which allows us.

To continue investing and our business to support our growth plans. All of this gives us that gives us great confidence that we will continue to successfully navigate this environment and be a stronger company. When we are past the pandemic now we're happy to take your questions. As we do every quarter, we're going to ask you to you. Please.

Limit your questions to one per person and one part to each question, we respectfully ask that everyone's stick with this growth to keep the call and schedule. So that we can answer questions from as many analysts as we can thanks and now we will 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 one on mute your phone and record your name clearly if you need to withdraw your question Press Star Q.

You ask a question please press star one hour.

Our first question will come from Lorraine Hutchinson Your line is open.

Thanks, and good morning.

<unk> heard a lot about difficulty getting home products through the port.

And also some concern around the shortage of apparel Lucy.

Later on and the USD economy. We opened can you just talked about the buying environment and a little more detail and your comfort and your ability to stock of stores with the inventory and.

And demand from Frank.

Sure of Lorraine.

Certainly at question near and Dear to my Heart as we talk about.

How we buy the goods and how we stock the stores as you said in terms of the.

Demands by category really.

Since the beginning when Covid, if you remember back and I know, we spoke back when Covid first hit and we could see our home business and some of our other trending categories.

We're going to clearly trend differently than apparel. For example, so we were able to adjust as you could hear what we said in the script hub of our home business has actually gotten too.

And all over the last six months, we were able to adjust the mix and our stores very appropriately to that because our model is very flexible right. So we're able to and.

And supply has been plentiful.

Even though there were little snippets of time, where and it wasn't so easy to get exactly what we what we want for the most part we got the categories that we wanted.

And when you ask about apparel.

I don't think we werent trying to communicate that we werent able to get at so apparel is pretty plentiful and the market. It's just not the the consumer demand isn't there as great. As it has been I would say it would be the way to put it.

Having said that I mentioned, Australia, where.

And where the environment is more normal and almost.

Is the lease COVID-19 impacted market that we're in there of apparel business has been very healthy. So we are predicting and there won't be and availability issue that as we start to go through this year, we're feeling that apparel.

Specifically second quarter into summer as the vaccine rollout becomes more widespread and people start to circulate out there more I and the teams are anticipating a surge and apparel Sterling Park, not every department, but a pretty big surge from where we'd been harboring.

And probably gaining back a little bit more of the share within our store no availability problem at all on us sourcing across all of the categories and in fact.

As I always say to all of you we have to at really control of our merchants from buying too much.

Specifically I would say.

Apparel has been where we've really had.

Slowdown of recent only because of the trend is and what it is and some of the other areas everything has been improving quarter by quarter. So if you look at.

Maher Maxx.

Our business and when you talk of apparel I think domestically here, because obviously, our Europe business was kind of shut in the fourth quarter I can't give you as much.

The detail there, but if you look at <unk>, we improved from a minus 10 and the third quarter.

Two of minus <unk>, seven and the fourth quarter a quarter and then each month got progressively better in the fourth quarter from our Maxx.

And barring the weather, we're starting the year off.

Starting the year off.

Improved from where we were and the <unk>.

Preceding months and the fourth quarter, so hopefully that helps you.

Thank you.

Thank you.

Our next question will come from Matthew Boss Your line is open.

Great Thanks, and congrats on the progress.

Thank you.

Ernie maybe to dig into your comp improve and.

Despite the continued COVID-19 restrictions and and your model, having little E Commerce.

Could you help elaborate on your comments around expansion of vendor relationships coming out of the price and also speak to any offense of initiatives that you are taking to capture what others in the sector of quoted is potentially more than $10 billion of potential sector of market share at <unk> for <unk>.

Coming out of this pandemic.

Yeah, no great and Matt Great question.

And we talked about this stuff all the time.

So on the what.

That's been helping us with our comp improvement and is a little and what I was talking of Lorraine about so our merchants have really done a great job and.

And shifting there and we shipped our first of all we shifted buyers around some merchants around and certain areas to go after the healthier.

And trending categories.

What's interesting is at the beginning of the pandemic when the market was non op evil we.

We took a very.

Sure.

I would call at.

Collaborate very forthright approach with all of our vendor community and they knew how important and we were then but I think what's happened and I think this is where we're getting to the second part of your question on the expansion of the vendor relationships to help us.

We talked about the 21000 vendors that we're dealing with that we've been opening up a few thousand additional vendors, but theres always vendors of falling off because we stopped buying certain categories are unfortunately, and the pandemic you have had some of their vendors kind of falling off to the side as you can imagine, but we are meaning more.

<unk> two <unk>.

I would say that.

And the more branded vendor community across the board and so if you listen to the script.

Made a conscious effort I made a conscious effort to really highlight that one of the key differentiators of T. J Maxx and I think this applies from us against other retailers.

And maybe against other off price formats is our focus on brand is really second to none so we.

And if you listen if you look back at my script, I mentioned and across good better and best. So we have had all of our teams on a mission to continue to open more brands.

Brands continue always continuing to do that because you get more newness that way and you get more excitement and the mix and then that combined with the market share Thats out that you mentioned at $10 billion up for grabs I think the weighted do it at some of the other think of the retailers who have struggled during this it's not your.

It's not your essential retailers right. It's not that people you know customer is willing to go to right now very task based.

Missions that they have to go on it's really the.

At the more impulse or more fashion, driven and our case.

We're an impulse driven retailer and you can ask for a better situation for us to have more brands and the future because we mean more to those brands and the fact that when consumers start to get more comfortable they want to shop our entertainment.

It's a perfect storm and I just think.

The expression I would like to use right now and we're feeling as of Tiger by the tail and the business here, meaning.

And once things start to open up and the consumer goes back to normalcy I, just think we're really going to be and a strong position to continue to improve which we as you can see from the sales we've been doing every quarter. So at <unk>.

Great question.

Really at a high level of one of the most important aspects of our strong strategy medium term and long term.

Great to hear best of luck.

Thank you.

Okay.

Our next question will come from Paul Lajoie. Your line is open.

Hey, Thanks, guys, just two quick ones and one high level, Scott and maybe can you just quantify the shrink benefit during the quarter also on the payables to inventory ratio inventory down payables up just curious how long that might continue that relationship and just higher level just given all of the changes that have occurred and.

And <unk> from a cost perspective.

And you could frame for us what the EBIT margin would look like if you were at a return to EF 19 sales levels.

Whether that be and F 'twenty one or.

22, well quicker.

Quickly not address unfortunately, the last one we at this point, we're not giving guidance in terms of a lot will depend on.

And just as you can see what we've had and the fourth quarter and the first quarter with a significant number of store closures, how much we're going to have for COVID-19 costs.

I think we need a little more time and Ernie probably will address this as we move forward in terms of how much of the mix switch switches back to power all of which will then help us both on the average retail freight some of the other productivity measures.

I think theres a lot of uncertainty, although we think we will be getting it will have a first half second half impact in terms of freight costs.

Certainly spiked as we moved from the third quarter of fourth quarter will likely remain high at <unk>.

On a both T.

T Y O Y basis, as we move through the first half of the year and we would hope to do two things that we're going to be doing and market conditions be moderating, but we don't know where that's going to level off and that does relate a little to the mix of the merchandise as well.

Yes.

And we've been buying very good and the other thing Ernie I think will touch on.

And at level, we'll be able to maintain and extend on that is to be determined.

Also and certain things we've had very good markdown performance, but as we've been at chasing.

Chasing inventory at a very high level, particularly at Homegoods.

And so.

So again I think the big cost pressures are going to be the ones that we've had in the past where we've now had two years of deleverage on due to wages supply chain costs and <unk>.

Wages.

Turning up a bit we are opening a couple of facilities this year.

But a lot will depend on when we get back to our sales because we still have to cap recapture of lot of the sales that we lost last year and get to the level and and get back and hopefully surpass where we were going to be so a lot of uncertainty of when we're going to get we know we feel comfortable we're going to get back to sales but is it.

And the back half of this year is it going to be over a little longer period of time, so putting all of that it's just too early to give it to be giving a number.

In terms of the fourth quarter.

And what we're seeing is at the shrink number was really just at time or shrink.

Came in slightly lower than our last year number, but we had we thought early on with Covid with all of the closing and opening of the stores. The movement of merchandise that we had accrued for higher levels and the second and third quarter and it came in better than what we thought.

But that was offset by our freight when you net net look at all of them ins and outs. We also had to accrue for additional markdowns this quarter due to the Europe and Canadian.

Closures that overall, our merchandize margin when you strip at all away.

Was still up and.

And then let's call it and that.

30, 30 basis points range for the quarter after all of the ins and outs and.

Again that.

Largely be determined on how we do on our Mark on and markdowns for next year, whether we can continue that.

Got it thanks, Scott Good luck cash.

Thank you Paul.

Okay.

Next we will hear from Kimberly Greenberger you May proceed.

Okay, great. Thank you so much.

I wanted to ask Ernie about two comments that you made.

And in your and your prepared remarks, you mentioned.

But youre seeing a lot of real estate opportunities and in particular, both opportunities for new stores and relocations and I'm wondering if you can share any sort of preliminary information on what kind of changes and rent rates youre seeing on those new leases and maybe give us some examples of.

What would be the factors that would motivate you to relocate a store just so we can think forward about the real estate strategy and.

And then I think you mentioned that inventory in store is close to where you want at TB.

I'm, assuming not every category of alike, and if you can just give us some.

Seale, who or where you feel like there is.

More inventory available then really you would like and the stores right now and where maybe inventory levels are a little tighter. Thanks so much.

Sure.

Kimberly what I'll do is let me just comment on the real estate quickly and I'm going to turn over some of the when you were asking about the rate on the leases I'll turn it over to Scott, but.

And when we look at for the opportunity as the and the business, we do want to get back to.

Even things such as Remodels, because our business.

One of the things we've seen over the years is our shopping experience is.

And comprises many things.

Certainly the merchandise is number one but our consumers have come to appreciate the environment, there and as well as the shopping centers. So when you asked about a relocation.

Sometimes we arent in the the.

Most happening shopping center and many we have found that some of our best uses of capital have been relocations. So Scott will talk to all of that at a high level I would just say it keeps us healthy and keeps our.

Existing stores preceding and staying up to date, so for the long term health of TJ Maxx, It's very important and every geography, we're in.

To keep spending appropriate obviously, we had curtailed that at the beginning of Covid, but Scott will talk to why that's important and by the way why we're excited about opportunities.

Inventory, where that falls of course and the store.

First of all we don't.

And for I don't give out information as far as where we are versus where we'd want to be but I would just say that.

At the high level of the reason, we've been very happy with where our sales have been proceeding and you can tell what we did give is our home area our beauty area.

Which have grown and percentage.

As we're obviously that's not a secret those areas are healthy and the world around us we have been getting.

Plenty of availability and where we would run into pockets of categories within those worlds our buyers have done a great job of shifting around and we buy and different ways. So sometimes they are buying goods that are landing within a week or two and sometimes they are buying some goods that are landing of a couple of months out.

But we have overall as you can see we've been.

Happy of what our overall inventory level, Scott and I have talked about that recently and.

In terms of where we are with each division and in total T J Maxx.

From where we were if you remember back and the third quarter second quarter of the third quarter, we will and a major major scramble mode.

And which probably somewhat impacted our sales and vs.

The healthier open only comps where we are now.

We will run into some little pockets, there, obviously, where we we were probably missing some departments of little bit more and we couldnt get by the way some of that was really transportation of the goods it wasn't necessarily availability.

So right now I would tell you across the board availability pretty much in any way and we want it theres more definitely more apparel out there than we would want to use.

Across most every category.

So hopefully that gives you color in terms of.

And where we're headed we're just feeling really.

Balanced on the way our inventory levels are right now heading into February and into March.

Every division and the only place that we are not happy is in Europe, where were closed because clearly we have inventory there and we can't do anything in terms of selling at.

Scott do you want to share go into capital and some of the things that <unk> talked about on the new stores rents et cetera, I think overall of the big picture is that we're starting to spend some of the obviously now that we're in a position of strength on the both the cash and on our balance sheet, we're spending going to spur.

And then.

<unk>.

The $500 million to $700 million more and capital than we did last year and more than we did even two years ago. I think we have and open to buy to spend more capital as we move through the year as we would if we see opportunities for and we see how our business recovers for either new new more real estate than the 122 I talked about.

And or more remodels that Ernie talked about is something to be using our cash for and from a time and we're going to be doing.

North of 350, Remodels I think last year, we did several hundred remodels less than what we had planned so we would be viewing that over the next several years as we could be getting up even to 400 and.

Remodels of year or more to try to catch up and.

And take advantage of that too in terms of new stores.

The.

We would say, we're not giving out a number but it's going to be it will be more than the.

122, probably at 150 plus.

For the next several years I think there's great opportunity with all of the.

Unfortunate disruption and retail.

We are already starting to see and all of our geographies.

And when we are signing leases.

And store closures that have already happened in the past year, and we would view it doesn't happen overnight, but we would see that as a big opportunity for.

Calendar 'twenty, two and 23 to get sites, but I think part of the the bigger part of that is the quality of the sites.

And without having to necessarily get them at rents that we would've paid just a year or two ago. So it's not that it's necessarily cheaper than our current cost base, but it will be cheaper than what we would've paid and probably locations that we otherwise would not been able to get in more maxx divvy.

Vision, particularly but of course all of our stores.

And the relocations as an opportunity as we have hundreds of leases.

Coming to renewal and so we see a great opportunity to open again to better real estate and potentially.

I think the number one thing is to drive higher sales, but potentially even to keep our cost the same or lower I think where we've seen.

Fantastic opportunity.

In Europe in terms of cost reductions of lot of it is the environment. There is as you could imagine worst and it is here from our real estate with all of the closures and.

And.

On a lot of our rent renewals.

We are seeing increases.

Decreases in terms of the overall cost that we have to pay.

North of 25% on a per store basis. So that's a combination of either the capital that youre going to get when we want to move into a store or.

Benefit we're going to get or just the actual reduction in the rent. So we're seeing significant.

Decreases there we're doing we're seeing decreases before but not to the level that we're currently seeing we're also seeing some phenomenal deals so I'm not going to name the specific sites, but and.

And the last.

Couple of weeks, we've seen stores, where we were paying 900000 and rent go down to 600 or 500000 to less than 200, just phenomenal decreases and renewals.

And also even landlords, who want us, giving us extended rent free periods, because we're an anchor tenant and a strip and they very much want us to be there. So yes, I think that's a tremendous opportunity for us.

All great color. Thanks, so much.

Thank you.

Our next question will come from Janine Stichter. Your line is open.

Alright, thanks, so much for taking my question and congrats and the momentum.

Alright, and wanted to ask a bit about home goods.

Greece, and the target there and curious what went into it how much of this was analysis you've contemplated at pre Covid and how much is more of the strength youre staying at home right now and then maybe some color on where these new stores are they and new markets existing markets and then just lastly at home from.

Thank you.

Sure.

All good Janine so we were already contemplating pre COVID-19.

Upping that target because of our home goods business has just been consistent and end up by the way I'll just throw these together you asked about homes.

<unk> Similarly was heading to a good place, but obviously when COVID-19 is <unk>.

Impacted us everything that tide Roes overall with both of these businesses and.

And we're just seeing as as the world changes and lifestyle and focus even.

When the of vaccines I'll hit Youre still going to have a dynamic change around us all in terms of how many people are spending.

More time still and the home environments and focused on that regardless of whether theres an X percent that goes back to work of course, there will be there'll be a majority of going back to offices.

But all you need is a small percent go and the other way and with a focus on the environment of homes. So.

Yeah, we just feel like there's way more market opportunity as we move forward. If you look at the amount of home business being done on line and let's go back to the market share mission one.

And we feel and of course home goods dotcom, which will be later in the year, we saw bats, and operated take online business, but we feel our home center business specifically.

Really pulls from categories that are significantly done online, we felt <unk> kind of really eat into that online business and.

Recently anecdotally.

I've had friends.

At goods at a home center and they've used our delivery service, which again in many cases of third party, but you are trying that.

For example of the sofa or that share youre trying that actual software share there and that is what shows up at your house within the next day or two.

Again, we of same day delivery.

And many of those sites and I think that is an interesting dynamic, which obviously the business is extremely healthy right now.

But we felt like there's just so much more upside.

And as you can tell by the number we gave you is the percent of T. J Maxx at home has been most recently.

The momentum is so strong to think otherwise that we wouldn't continue to just grab more market share. So I hope that answers your question.

We are bullish on we're very bullish on Scott I think yes.

Just a brief address little on home sense, yes.

We're I think what we've seen everything that we've seen and and the overall home business has been a little of I'd say, even up a notch on home sense. So.

Comps are proportionally, even higher and higher at home.

And then they had been in the Homegoods and the fourth quarter.

Our retail has been.

Average retail has been strong our average basket has been strong and I think the operational folks where we may have talked about at for the first year or two because it's a it's obviously a mix of business, where the payroll and other aspects of at or a bit more challenging they've done a great job of working through the head of <unk> business.

More efficient so our four wall profits on home sense of increased substantially this year with our volumes and it's made us much more optimistic and and.

We are opening up five homes and stores this year as well.

It is of Great question, Janine and the other thing is to Scott's point and I give the teams a lot of credit because they've also managed to not as we open the home centers with the home sense of surging theyre not stealing the homegoods sales as you can tell are still very healthy nearby.

And I give our merchants and that management team a lot of credit.

And the field, there as well and keeping the stores looking different and differentiated between home and.

Home goods, so they start with having a great mix and both the teams have done a great job on that but they've managed to do this and locations where they're almost right next to each other.

And so really bodes well for the future.

Thanks, that's helpful color and best of luck. Thank.

Thank you.

Thank you. Our next question will come from Michael Binetti. Your line is open.

Hey, guys. Thanks for taking my questions here.

At the simple question with all the noise and trying to model. This is you guys mentioned significant deleverage and the model and this year relative to pre pandemic is there anything any color you can give us of what that means.

Yes.

If we look at the 10, 6% margin in 2019.

You say give us some thoughts on one of normalized comp would mean as far as.

How much headwind from it from freight from unit volume is going through wages and those kinds of things is there anything you can help us to contextualize that comment for this year.

Well again, the biggest costs on this year will depend will be on the COVID-19 costs and there'll be significant as we talked and the first quarter and I'll, let Ernie address it but it'll be at.

To be determined as we move through the on the Covid costs.

So Michael on the Covid costs, we wanted to do is not.

We're not going to go on with a notion of ahead of it and have a preconceived notion as to when we will start pulling them out as.

And as we see as we see the vaccine said and the safety and start to get in the line. We will start maybe in the back half of second quarter, we think little by little we'll start pulling them down.

Okay.

Right, Yeah, yeah, yeah.

So we're feeling that definitely opportunity there too.

We've looked at it is just so you know up till now it's of sales driver for us and we've gotten on our on our customer.

Reports, we do surveys we're getting huge.

Credit.

On our level.

Our level of service and safety impact by the Greeters and we've had at the front of the store if you've been and our store, you'll see that and most of those we have to readers.

Theyre really.

Cleaning the carts as well as welcoming asking do you need help.

And where they treat at okay, and safely and and so that's at huge impact and I'm looking at that as a form of marketing to help us with our top line for the future and so that is.

We want to be very careful as we pull that back because all the indicators are that has been a big help on our reputation.

During COVID-19 so.

And a very good question so Michael to get to your question a lot of it goes back of unfortunately too so to.

To your point and at the end of fiscal 'twenty. We were at 10, six all things being equal and if again, saying a lot right now if we had guided to approximately 10 two to $10 three last year on of three comp.

You would had the similar level of headwinds of of supply chain wage et cetera, you would've gone down 30% to 40 basis points for another year or so.

As we've said nothing has really changed in terms of store wage.

And in terms of that.

And the DC to the two components that are a bit larger right now are the DC supply chain and the DC wage and we've had both and our Homegoods and <unk> Dcs wage increases this year, which.

Are are going to be annualizing for most of this year of those impacts and.

And significant freight costs, what would have been over fiscal 'twenty.

The last result, so those will largely depend on what level of sales because you have of natural delever on the sales until you got back and recapture of those sales so.

So if the de lever was 30 to 40, it's clearly going at it would clearly be.

Significantly higher than that without that Covid costs, and then those we would expect to start recapturing some of that as we get our sales levels up so it's a book.

But at that 10, six would have been going down and then on top of that is the deleverage of the sales and the higher freight and other supply chain costs.

And.

And then kind of following of the quick model question on.

Would you mind, helping us with what the change was and the corporate expense line in the fourth quarter and maybe soon is quite different than and.

And there was some benefit.

The biggest benefit which.

And in effect at that thank you. It's a good point that's another necessarily of go will hopefully not a go forward benefit was.

This year, we did not have bonus accruals or incentive accruals up to the level last year, it's actually.

And went both went the wrong way last year, we had a very good end of the year and increased our incentive accruals and the fourth quarter. This year. We obviously are not meeting our our plans and so we at the incentive accruals go the other way. So it was a benefit of almost 90 basis points in the quarter. That's obviously.

Next year, we would hope to have a normal level of bonus accruals.

And so that's the biggest difference there was there was some of the rest of it's just noise between fuel hedges and.

And there was expense savings as a lot of companies as many of you haven't talked about at that much on metal costs and others is due to.

Less people being sick that we had a benefit as well.

Thanks, a lot of guys.

Thank you.

Thank you. The final question of the day comes from Adrian Day. Your line is open.

Great. Thank you very much for taking my question. Ernie This is a bit of a clarification and something that we've gotten for probably a couple of years so as the.

Global apparel brand manufacturers are reducing their footprint and off price.

It sounds like you're finding sort of more disparate newer fresher bran that of replacing those stores, making it and even better overall treasure hunt experience versus focused on these.

Handful or a dozen of these historical brands does that is that clear at is that is that right and interpretation.

Yes, It is and I will tell you to go along with that Adrian as we at Cowen.

It's funny, you mentioned that and and it's one thing I thought.

And didn't get to mention on and one of the earlier questions. We are buying significantly more from our satellite.

Buying offices, this year, which actually speaks to a little about what you just asked.

Because.

Probably because of availability of right, it's not always with the same vendors and maybe what's going on with Europe.

So we have satellite offices, we have offices in Italy and in Europe and.

And the far east and.

California and.

And so we we've had a disproportion of growth and purchases from those offices recently relative to our total during COVID-19.

And then I mean, the good news and the vendor. This is not unusual when we specifically and the home business Adrian.

If you have of go to our store one week and you go to the next week for example, and some of our.

Categories, where theres a lot of there's a lot of newness. So if you look at our food business and.

And you'll see lots of new.

Brands that will go in there and they may be werent, there a few months ago.

And you don't tend to think of that area, but there's a lot of special labels and there that really become heart and lung quality and country of origin from Italy too.

And to domestic brands and that happens throughout the store, but there are definitely more areas, where I think brands of become.

It's really going to be of big differentiator of of us from I think everybody else because so many of the retail is around us and apparel by the way of the apparel World is going very specialty private label driven.

And.

And what will be neat about our businesses is the customer she or he can walk in and see and assortment of different brands that you would find them and depth and other stores, but theyre all going to be under one roof and a treasure hunt format.

At that makes sense and totally does and then Scott very quickly we've been watching these container prices spiking over 5000.

And I guess the issue for us.

And to go back and look at 2015 West Coast Port issue, but that was a U S. Specific issue. This is a global kind of demand or supply issue.

Are there any parallels to draw from that can you help us in the P&L what at freight as a percentage of sales and I would imagine you're better positioned because you have a lot more land at good versus imports. So any color there would be helpful. Thank you.

Yes ill, let Ernie address the piece of what you eat and obviously as vendors and others have to bring the goods and what they'll pass on and not pass on because.

Everybody has to pay the increased ocean container costs, one way or the other just right and what gets passed through right. Yes. So I would say some of that gets mitigated and when we buy the through the brands.

So a chunk of that gets mitigated because we go our buyers look at what they can retail of goods at.

And they back at into what the cost should be and regardless of.

At the vendor of whatever they pay per freight is I don't want to say, it's not our concern but.

That's kind of not our concern when our buyers as they are pretty straightforward about how they work at something where we're importing which we do some of that business and then we're going to get hit with that.

And just like Scott said earlier, yes in terms of the big picture on freight it's it's very difficult to start and you'll see that when we're just going to be starting to compare.

Against our numbers and the first and second quarter, because we were and open for business for such large chunks of the business of.

At the time, but if youre in a compare fiscal 'twenty.

Fiscal 'twenty, 2% of fiscal 'twenty.

It is.

And 50% of us north of 60 basis points, however of two year impact of incremental basis points on freight, but it's really going to be a tale of two stories, it's going to be significantly.

Weighted towards the first half of the year versus the second half of the year because most of it we had the big Spike ups.

A lot of for US is we'll be renegotiating.

Domestically, our rail or truck and our ocean.

And middle of the second quarter. So we would hope to contract more and more capacity because of a lot of what impacted us and others is having to go to more spot rates and just pay through the nose that happened in the fourth quarter and a little what will be happening still and also the mix of those goods.

Was not ideal because the number one priority I think Ernie would agree with day make sure we were getting the goods and our teams did a great job to get the goods, but we were paying we had to pay a premium and in many cases and we're working on a lot of of issues.

Issues and our logistics area to reduce cost and we think there will be opportunities, we'll be able to take advantage of as we move forward through the next year and beyond.

Very helpful. Thank you best of luck. Thank you Adrian.

Alright, I would like to thank all of you for joining us today.

We'll be updating you again on our first quarter earnings call in May.

And from the team here at T. J Maxx, we hope you all stay well and we wish you good health and talk to you down the road.

Thank you.

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

[music].

[music].

[music].

Ladies and gentlemen, thank you for.

Standing by welcome to the T. J Maxx companies fourth quarter of fiscal 'twenty 'twenty, One 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 one at that.

Reminder, at this conference call is being recorded February 'twenty four 'twenty 'twenty, one I would like to turn the conference call over to Mr. Ernie Herrman, Chief Executive Officer, and President of the T. J Maxx companies Inc. Please go ahead Sir.

Thank you Sheila before we begin Deb has some opening comments.

Thank you Ernie and good morning before at looking statements. We make today about the companies yourself kind of plans are subject to risks and uncertainties that could cause the actual results and the implementation of the companies plans to vary materially. These risks are discussed and the company's SEC filings, including without limitation.

Form 10-K filed March 27th of 'twenty, and 'twenty and the form 10-Q filed December 1st 'twenty and 'twenty.

Further these comments and the Q&A that follows are copyrighted today by the T. J Maxx companies, Inc, and.

Any recording retransmission reproduction or other uses at the same for profit or otherwise without prior consent of T. J Maxx 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 of third party, we take no response.

The ability for inaccuracies that may appear in that transcript.

And now I'll turn it back over to Ernie.

Good morning.

Joining me and Deb on the call at Scott Goldenberg.

I'd like to start our call today by expressing our sincerest gratitude to all of our associates for their hard work and dedication and 2020.

Together, our organization has successfully accomplished many monumental tasks and the most of uncertain environment, we have ever faced as a company.

I am so proud of the efforts of all of our global teams, who have worked as one T. J maxx to operate the business through this environment, while prioritizing the health and safety of our associates and of our customers.

I want to give special recognition to our store distribution center and fulfillment Center associates.

We are truly grateful for their commitment to our business and to our associate and customer safety protocols.

And recognition of their efforts and.

Including physically coming into work and the fourth quarter, we awarded of majority of them and appreciation bonus which is the third of appreciation bonuses that we have paid during the pandemic.

We will continue to look for opportunities future opportunities to recognize associates for their important contributions to the business.

As we continue to manage through the global pandemic, we are thinking of everyone, who has been impacted by COVID-19, including our associates and their families our customers and our communities.

Our hearts are with the people of <unk>, and Texas and other parts of the U S web and Deutsche So much due to the severe weather this month.

Looking ahead at.

The power and water situation improves and Texas and other areas and the rollout of the vaccine and just more widespread in the coming months we.

We are hopeful and optimistic about the future.

Turning to our business operations during the fourth quarter, we were very pleased at our U S stores were generally able to stay open.

However at certain times during the quarter, we had to temporarily closed all our stores and Europe and a majority of our Canadian stores.

And total euro.

Europe was closed for almost two thirds of a quarter and Canada for about one third of the quarter.

As we reopen some of these European and Canadian stores over the past couple of weeks.

We were encouraged by consumers enthusiastic response similar to what we saw last summer when we began our reopening.

We are following government mandates and our regions and at this time of approximately 690 stores remain temporarily closed.

Currently the vast majority of these closures are still in Europe, where we expect shutdowns to remain in place for a significant portion of the first quarter.

Okay moving to a recap of our fourth quarter results first I am very pleased at our overall opened only comp store sales of down 3% exceeded our plans.

During the fourth quarter, we saw a continuation of strong sales trends and our home and beauty departments as well as great customer response to our holiday gift Assortments and values.

I am, particularly pleased with the terrific assortment of brands, we offered at shoppers across all categories, which we believe was an important driver of our above plan sales.

These comp sales also exceeded our plans across each of our divisions, including at Homegoods, which once again, sorry of double digit increase.

While overall sales were down significantly due to the temporary closing of our stores for approximately 13% of the quarter.

I want to emphasize that we are very encouraged by our fourth quarter overall opened only comp sales, which improved each month of the quarter and were positive and January.

Despite operating during Covid surges with the headwinds of uncertain consumer behavior occupancy constraints and social distancing protocols, we only had a small decline in sales at our stores that were committed to be opened.

It was great to see many of our best customers enthusiastically returned to our stores.

We believe this speaks to the resilience of the business and enduring appeal of our value proposition across all of our retail banners regardless of the environment.

All of this gives us great confidence and our business over the long term.

We also believe our ongoing commitment to health and safety protocols pulp customers feel comfortable visiting our stores throughout the quarter.

We continue to receive positive feedback from our shoppers on our safe shopping experience.

We believe this will remain an important factor for consumers when deciding where to shop, while COVID-19 persists.

Next our merchandise margin was up.

At buying environment remains excellent as we continue to see a terrific selection of inventory from both existing and new vendors.

We are very pleased with the improved seasonality and mix of merchandise at our stores as our buying teams have done a great job of aggressively sourcing branded product across good better and best categories.

We achieved fourth quarter earnings per share of <unk> 27.

And maintained our strong balance sheet and liquidity position. Despite the overall sales decline.

Further we declared a quarterly dividend and refinance and refinance some of our outstanding debt to lower our borrowing costs over the long term Scott.

Scott will speak to all of these items and more detail and his financial update.

As we enter 2021.

Significant uncertainty remains around COVID-19 and its impact on consumer behavior.

While many factors outside of our control such as temporary store closings of customer shopping habits, and we are very confident about the areas that we can control, including buying and merchandising and store operations.

Despite the near term uncertainty, we have grown more optimistic about the medium and long term with the news of multiple effect of Covid vaccines.

I am convinced that our business will rebound and we will capture market share. Once we are past this health crisis.

Let me highlight some of the actions we took in 2020 that we believe set us up for success going forward.

First we have strengthened our relationships with many of our existing vendors.

With all of the uncertainty and the retail landscape some vendors of looks to us to buy even more of their inventory.

We have also had opportunities to buy goods across and even wider range of product categories.

And 2020, our buyers open thousands of new vendors across good better and best brands and sourced from a universe of approximately 21000 vendors around the world.

We believe all of this puts us in an excellent position and keep operating consumers and our collective mix of branded merchandize at amazing values.

Second we're prepared to take advantage of the terrific real estate availability that we're seeing across each of our geographies and continue our global store growth.

With the increase and store closures by some other retailers, we are and in excellent position to open new stores and some of our target markets.

Further we see additional opportunities to relocate existing stores to more desirable locations and as we got more favorable terms when leases expire.

Next upon initially we opening our stores last summer, we focused our marketing on addressing safety concerns to build the confidence of our shoppers, while highlighting value and the hotter trending categories.

And the fourth quarter, we also emphasized gifting.

And 2021, we plan to launch a bold new campaigns for each banner that reinforce our value leadership, while also highlighting the elements of discovery variety and quality.

Which are all major strength for us.

Yeah.

Lastly, we prioritized investments and our associates stores supply chain and systems to strengthen our infrastructure and support our future growth plans.

Scott will outline our 2021 capital plan shortly.

Looking beyond the health crisis, we are confident that more consumers will be drawn to our stores. Once they are back to more normalized routines and shopping habits.

I'd like to walk through the reasons why we believe we are strongly positioned to capture market share and the future.

First we are confident that our relentless focus on value and quality will be as important as ever for shoppers beyond the health crisis.

Second we are convinced that consumers will seek out store out of our stores for a wide assortment of branded and fashionable of merchandise.

We see are excellent and selection of brands and our global buying organization as key differentiators for our business.

Further we believe the brands we offer consumers will continue to be a major driver of incremental customer traffic and sales.

We believe our flexible cost and the buying we will continue to be a tremendous advantage and.

And actually consumers will be physically returning to <unk> to work Socialising again and resuming travel.

This is what we saw happen and in Australia, where despite recent COVID-19 shutdowns life at largely returned to normal during the fourth quarter and we saw strong sales trends return and our apparel business.

Our buying organization is well positioned to shift our spending and our other geographies to meet shoppers' changing and category needs. Once we move past this health crisis.

<unk>.

Third we are confident at the appeal of our treasure Hunt shopping experience will resonate for people looking to be inspired and discover new products when they shop.

We shipped to our stores several times, a week with new and different merchandise. So there is always something exciting for shoppers to see.

With a rapidly changing store assortment shoppers learned to buy something and when they see it.

It may not be there the next time they visit.

We believe that the entertainment element of our shopping experience will continue to be important.

Customers tell us that that part of the reason they shop us as for some stress relief, particularly during these times and some quote meantime, unquote, which we expect to continue into the future.

Next we believe our convenient off mall locations and urban suburban and rural locations is an advantage of this allows us to reach a very wide customer demographic.

And the U S roughly 80% of consumers are within 10 miles of one of our stores.

This makes it very easy for shoppers to visit our stores.

We expect to see incremental traffic once consumers return to their workplaces and go out more as they will be passing by our stores much more frequently.

We also see of great opportunity to capture share from other retailers that of shutdown completely or at closed stores. We also believe this will lead to greater availability of inventory from both new and existing vendors.

Lastly, we continue to aggressively pursue the significant opportunities we are seeing and the home category just as we have for decades. This includes increasing the homegoods divisions long term target to 1500 stores and our plans to launch E Commerce on Homegoods Dot com.

And later this year.

Further we have been increasing.

At all of our banners to capture some of the incremental demand.

And 2020 hallmark counted for almost 40% of our overall sales up from 33% and the prior year.

Going forward, we are confidence at the strength of our home buying teams and our global buying offices will allow us to keep bringing an eclectic mix of haul merchandise at great value to our shoppers and capture additional market share.

Before I close.

And I want to reiterate how great we feel about the long term and our opportunity to drive sales post pandemic at the same time, we are still facing several significant expense headwinds and Scott will discuss this in more detail, but the cost pressures that we had pre COVID-19, including supply chain wage and freight continue to present.

And Covid has made each of them worse of course, we also continuing to have significant COVID-19 related costs.

I want to emphasize that we are extremely focused on our top line opportunities that could help to ease some of these pressures.

And closing.

And I'm, so proud of the resilience and dedication of our associates, we successfully navigate at our company through and unprecedented environment and 2020.

I also want to add that as an organization and management team. This has been such an important year in terms of our global corporate responsibility efforts.

As Covid has been evolving differently in different parts of the world. We have continued to prioritize the health safety and wellbeing of our associates and customers along with the financial stability of the business.

2020 was also of critical year for our inclusion and diversity work, which includes our commitment to standing up at a ratio of justice and equity.

We are committed to listening to and learning from our associates and taking actions to do better.

I am confident as ever about the future of T J Maxx.

Longer term, we believe we have a tremendous opportunity to capture additional market share even beyond the prospect of a resurgence and consumer spending and rip and shopping quote unquote. Once vaccines are widely available longer term. We are convinced that our flexible off price model has structural advantages with our entertaining.

And engaging treasurer and have shopping experience differentiated assortment of branded merchandise and our excellent values.

Our teams are energized and laser focused on capitalizing on the opportunities we see for our company and I look forward to sharing our success going forward.

Now I'll turn the call over to Scott for a financial update and then we'll open it up for questions Scott.

Scott.

Thanks, Ernie and good morning, everyone I'd like to first Echo Ernie comments and thank all of our global associates for their hard work and commitment in 2020 and continued efforts in 2021.

I'll start today with some additional details of our fourth quarter results as Ernie mentioned open only comp store sales were down just 3% despite.

Despite the Covid related headwinds, we faced average basket increased and was strong again as customers responded favorably to our fresh seasonable mix and put more items and their carts as to the cadence of comp sales, we saw improvement of each and each month of the quarter.

With our more Maxx, Homegoods and <unk>, Canada divisions, all achieving positive opened only comp sales in January at <unk>, Our largest division customer traffic and the fourth quarter was better than the third quarter and also improved each month of the quarter at.

As to overall sales the decline was primarily due to the temporary closures of some of our stores.

These closures were primarily in Europe, which was closed for 63% of the quarter, including essentially all of January and then Canada, which was closed for 32% of the quarter overall stores were closed for approximately 13% of the fourth quarter.

And fourth quarter merchandise margin was up versus the prior year. This was driven by strong mark on and a benefit from the timing of of shrink accrual. These benefits were partially offset by higher freight costs as well as higher markdowns as a result of the store closures in Europe and Canada.

Moving to the bottom line fourth quarter earnings per share were 27.

Which included of debt extinguishment charge of $312 million or <unk> 18 per share.

Earnings per share also included a negative impact of <unk> from our tax rate, which was significantly higher than last year. This was due to the company moving to a year to date net income position and the fourth quarter and the related impact of the jurisdictional mix of profits and losses further as detailed in our press release.

This morning, we believe the temporary store closures in Europe, and Canada during the fourth quarter negatively impacted sales by approximately 950 to one point of $5 billion, resulting in a significant loss of profit dollars and about 18 to 21 of earnings per share.

I want to also remind you that our EPS reflects significant cost headwinds and the fourth quarter, which more than offset some of our temporary expense savings. Let me take a moment to go through a couple of the larger ones.

First our net costs related to Covid accounted for approximately $300 million of incremental expense. These costs include extra payroll to clean the store and monitor occupancy levels payroll for some store associates that we kept active to support the business while stores were temporarily closed the cost of pp and E.

And <unk> and the fourth quarter appreciation bonus for certain associates, the increase and our cost versus the third quarter included extra payroll as our stores were open longer hours, partially offset by increased government relief due to the European and Canadian store closures second we had an increase of.

<unk> chain costs. This was due to a lower average ticket and processing more units as our merchandise mix continued to shift towards non apparel categories expenses related to additional distribution capacity and wage increases at our distribution facilities as for inventory. Our teams are doing a great job.

And procuring merchandise and adjusting logistics to get at toward distribution facilities and stores as a result of our store inventory position is close to where we want it to be to reiterate availability of merchandise and the marketplace is excellent.

Now I'd like to walk through our cash flow and liquidity.

First we generated $4 6 billion of operating cash flow and fiscal 'twenty. One as a result, we ended the fourth quarter and a very strong liquidity position with $10 5 billion and cash.

Next we declared a quarterly dividend of <unk> 26 per share and the fourth quarter and the first quarter of fiscal 'twenty two we plan.

Planning to declare a dividend at the same rate subject to board approval lastly, and the fourth quarter, we significantly lowered our borrowing costs by reducing our higher interest rate longer dated bonds through a cash tender offer and issuing lower interest rate bonds. The net result of these actions will lower our inter.

Just expense by approximately $32 million per year.

Now I'll spend a moment on fiscal 2022.

As we said in our press release. This morning, we are not providing a financial outlook for fiscal 'twenty two because of the continued uncertainty of the environment due to COVID-19 as a point of reference overall open only comps store sales trends for the first three weeks of the first quarter were better than in the fourth quarter. Despite the.

Unfavorable weather and the United States and the periods before and after the unfavorable weather overall comp sales were positive in terms of fiscal 'twenty to profitability, we expect pre tax margins to be higher than fiscal 2021, but to deleverage significantly versus our pre COVID-19 levels.

This is due to a number of known headwinds that we've discussed many times before as a reminder of these include the following.

First we continue to have the net costs related to Covid and the first quarter. We are currently planning $225 million of net expense at this time, we do not know or by how much. These costs may moderate beyond the first quarter. As a reminder, most of these costs are and SG&A.

And based on what we know today, we expect temporary store closures will negatively impact overall first quarter sales by approximately 750 day $850 million and will result in some level of margin deleverage. This includes our stores that are currently closed and Europe and the majority of our Canadian store.

And that are currently closed or had been closed during the first quarter based on what we know today overall, we expect stores to be closed for approximately 11% of the first quarter, which includes Europe being closed for an estimated 67% both of the quarter these expectations could be negative.

Impacted further if current mandates are extended by extended or new ones are put in place next as Ernie mentioned, the headwinds of freight wage and supply chain that existed pre pandemic have not gone away and fact each of them has gotten worse and the current environment on freight.

<unk>, we continue to see capacity constraints and driver shortages, which has led to higher rates. We're also experiencing incremental freight costs due to a lower average ticket and moving more units through our supply chain.

All of that said, we remain laser focused on looking for expense savings throughout the business. We may also have an opportunity to offset some of these headwinds over the long term, if we successfully drive outside sales increases and market share gains.

Or see demand improve for the higher ticket categories. Additionally, at them buying environment stays beneficial we could capture additional merchandise margin.

Moving on we expect capital expenditures to be and the range of 1.2 to $1 4 billion and fiscal 'twenty. Two this includes opening new stores, Remodels, and relocations and investments and our distribution network and infrastructure.

For new stores, we plan to add 122, net new stores, which would bring our year end total close to 4700 stores. This would represent a store growth of about 3% and the use of our plans call for us to add about 30 net stores at <unk> 34, net stores at Homegoods and <unk>.

<unk> and Canada, we plan to at about 22 net stores and at T. J Maxx International we plan to open approximately 15 stores in Europe, and nine stores and Australia as to our long term store growth opportunity. We now see the potential to grow to 60 to 75 stores globally and addition to the.

Increasing homegoods by 100 stores. We've also increased the store pinch at Gill for Canada, and Australia and closing to reiterate what Ernie said, we feel great about the strength of our business in general of the stores that are open are performing well. Despite the numerous numerous COVID-19 related headwinds.

Additionally, we are and a very strong financial position, which allows us to continue investing and our business to support our growth plans. All of this gives us that gives us great confidence that we will continue to successfully navigate this environment and be a stronger company. When we are past the pandemic now.

Happy to take your questions as we do every quarter, we're going to ask you. Please limit your questions to one per person and one part to each question, we respectfully ask that everyone's stick with this growth to keep the call and schedule. So that we can answer questions from as many analysts as we can thanks and now we will 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 one Amit your phone and record your name clearly if you need to withdraw your question Press Star Q again kiosk.

To ask a question please press star one hour.

Our first question will come from Lorraine Hutchinson. Your line is now open.

Thanks, and good morning.

Oh, Yeah, we've heard a lot about difficulty getting cold product to the port.

And also from concern around a shortage of apparel receipts.

Later on in the year day economy. We opened can you just talked about the buying environment and a little more detail and your comfort and your ability to stock of stores with the inventory and.

Demand from bank.

Sure of Lorraine.

And there's certainly a question near and Dear to my heart as we talk about.

How we buy the goods and how we stock the stores as you said in terms of the demands by category really.

Since the beginning when Covid, if you remember back and I know we spoke of.

Back when Covid first hit and we could see our home business and some of our other trending categories.

We're going to clearly trend differently than apparel. For example, so we were able to adjust as you could hear what we said in the script, how big of at home business has actually gotten too.

Over the last six months, we were able to adjust the mix and our stores very appropriately to that because our model is very flexible right. So we're able to and supply has been plentiful evenly.

Even though there were little snippets of time when it wasn't so easy to get exactly what we what we want for the most part we got the categories that we wanted.

And when you ask about apparel.

I don't think we werent trying to communicate that we werent able to get at so apparel is pretty plentiful and the market. It's just not the <unk>.

The consumer demand isn't there as great as it has been I would say it would be the way to put it.

Having said that I had mentioned Australia.

Where.

And where the environment is more normal and almost.

Is the lease COVID-19 impacted market that we're in there of apparel business has been very healthy. So we are predicting and there won't be and availability issue that as we start to go through this year, we're feeling that apparel.

Specifically second quarter and into summer as as the vaccine rollout becomes more widespread.

And people start to circulate out there of more I and the teams are anticipating a surge and apparel certainly pipe not every department, but a pretty big surge from where we'd been harboring and probably gaining back a little bit more of the share within our store no availability problem they'll want us sourcing of.

Across all of the categories and in fact.

As I always say to all of you we have to really control of our merchants from buying too much.

Specifically I would say.

Apparel has been where we've really had.

Slowdown of recent only because of the trend is and what it is and some of the other areas everything has been improving quarter by quarter. So if you look at.

Maher Maxx.

Our business and when you talk of apparel I think domestically here, because obviously, our Europe business was kind of shut in the fourth quarter and I can't give you as much.

The detail there, but if you look at <unk>, we improved from a minus 10 and the third quarter.

Two of minus seven and the fourth quarter a quarter and then each month got progressively better in the fourth quarter from our IMAX at.

And barring the weather, we're starting the year off of.

Starting the year off.

Improved from where we were and the <unk>.

Preceding the months of in the fourth quarter. So hopefully that helps you.

Thank you.

Thank you.

Your next question will come from Matthew Boss Your line is open.

Great Thanks, and congrats on the progress.

Thank you.

Ernie maybe to dig into your comp and prove and despite the continued COVID-19 restrictions and and your model having little E Commerce.

Could you help elaborate on your comments around expansion of vendor relationships coming out of the crisis and also speak to any offensive initiatives that you are taking to capture what others in the sector of quoted is potentially more than $10 billion of potential sector of market share it cut out for GAAP.

Coming out of this pandemic.

Yeah, no great and Matt Great question, and we talk about this stuff all the time.

And so on that what's what's been helping us with our comp improvement and is a little and what I was talking of Lorraine about so our merchants have really done a great job and.

And shifting there and we shipped our first of all we shifted buyers around some merchants around and certain areas to go after the healthier and.

And trending categories.

Hum.

What's interesting is at the beginning of the pandemic one of the market with and op evil.

We took a very.

I would call at.

Collaborate very forthright approach with all of our vendor community and they knew how important we were then but I think what's happened and I think this is where we're getting to the second part of your question on the expansion of the vendor relationships that help us.

We talked about the 21000 vendors that we're dealing with that we've been opening up a few thousand additional vendors, but theres always vendors of falling off because we stopped buying certain categories are unfortunately end of pandemic you have had some of their vendors kind of falling off to the side as you can imagine, but we are meaning more.

<unk> two <unk>.

I would say that.

The more branded vendor community across the board and so if you listen to the script.

Made a conscious effort I made a conscious effort to really highlight that one of the key differentiators of T. J Maxx and I think this applies from us against other retailers.

And maybe against other off price formats is our focus on brand is really second to none so we.

And if you listen if you look back at my script I mentioned across good better and best So we have had all of our teams on a mission to continue to open more brands continue always continuing to do that because you get more newness that way and you get more excitement and the mix and then that combined with the market share thats out that you.

And that $10 billion.

For grabs I think the weighted do it at some of the other think of the retailers who have struggled during this it's not your it's not your essential retailers right. It's not that people you know customer is willing to go to right now of very task base.

<unk> that they have to go on it's really the.

And the more impulse or more fashion, driven and our case.

We're an impulse driven retailer and you can ask for a better situation for us to have more brands and the future because we mean more to those brands and the fact that when consumers start to get more comfortable they want to shop our entertainment.

It's a perfect storm and I just think.

The expression I would like to use right now and we're feeling as of Tiger by the tail and the business here of meaning.

Once things start to open up and the consumer goes back to normalcy I, just think we're really going to be and a strong position to continue to improve which we as you can see from the sales we've been doing every quarter.

Great question.

It's really at a high level of one of the most important aspects of our strong strategy medium term and long term.

Great day here best of luck.

Thank you.

Our next question will come from Polish way your line is open.

Hey, Thanks, guys just two quick ones and then one of high level, Scott and maybe can you.

<unk> quantified the shrink benefit during the quarter also on the payables to inventory ratio and tore down payables up just curious how long that might continue that relationship and just higher level just given all of the changes that have occurred and F 'twenty and from a cost perspective.

Any way you could frame for us what the EBIT margin would look like if you were at a return to EF 19 sales levels are and whether that be and F. 'twenty, one or we're at 20.

<unk> 22, while.

While I'll quickly not address unfortunately, the last one we at this point, we're not giving guidance in terms of a lot will depend on.

Just as you can see what we've had and the fourth quarter and the first quarter with a significant number of store closures, how much we're going to have for COVID-19 costs.

I think we need a little more time and Ernie probably will address this as we move forward in terms of how much of the mix switches back to power all of which will then help us both on the average retail freight some of the other productivity measures.

I think theres a lot of uncertainty, although we think we will be getting it will have a first half second half impact in terms of trade costs, certainly spiked as we moved from the third quarter of fourth quarter will likely remain high at least on a both a.

T Y O Y basis, as we move through the first half of the year and we would hope due to things that we're going to be doing and market conditions be moderating, but we don't know where that's going to level off and that does relate a little to the mix of the merchandise as well.

We've been buying very good and another thing Ernie I think will touch on.

At level, we'll be able to maintain and extend on that is to be determined.

Also and certain things we've had very good markdown performance, but as we've been at chasing.

Chasing inventory at a very high level, particularly at Homegoods.

So.

So again I think the big cost pressures are going to be the ones that we've had in the past where we've now had two years of deleverage on due to wages supply chain costs, and DC wages and opening up a bit we're opening a couple of facilities. This year.

But a lot will depend on when we get back to our sales because we still have to cap recapture of lot of the sales that we lost last year and get to the level and and get back and hopefully surpass where we were going to be so well a lot of uncertainty of when we're going to get we know we feel comfortable we're going to get back to sales, but is it going to be and.

And the back half of this year is it going to be over a little longer period of time.

So putting all of that it's just too too early to give it you know to be giving a number in terms of the fourth quarter.

And what we're seeing is at the shrink number was really just at time or shrink.

Came in slightly lower than our last year number, but we had we thought early on with Covid with all of the closing and opening of the stores. The movement of merchandise that we had accrued for higher levels and the second and third quarter and it came in better than what we thought.

But that was offset by our freight when you net net look at all of them ins and outs. We also had to accrue for additional markdowns this quarter due to the Europe and Canadian <unk>.

Closures that overall, our merchandize margin when you strip at all away.

Was still up and.

And then let's call it and that.

And 30 30 basis points range for the quarter after all of the ins and outs and.

Again, we.

Largely be determined on how we do on our Mark on and markdowns for next year, whether we can continue that.

Got it thanks, Scott Good luck cash.

Thank you Paul.

Okay.

Next you will hear from Kimberly Greenberger you May proceed.

Okay, great. Thank you so much.

And I wanted to ask Ernie about two comments that you made.

And in your in your prepared remarks, you mentioned.

But youre seeing a lot of real estate opportunities and in particular, both opportunities for new stores and relocations and I'm wondering if you can share any sort of preliminary information on what kind of changes and rent rates youre seeing on those new leases and maybe give us some examples of.

What would be the factors that would motivate you to relocate and store just so we can think forward about the real estate strategy and.

And then I think you mentioned that inventory in store is close to where you want at TB.

I I'm, assuming not every category as of like and if you can just give us some feel for where you feel like there is.

For inventory available then really you would like and the stores right now and where maybe inventory levels are a little tighter. Thanks so much.

Sure Kimberly what I'll do is let me just comment on the real estate quickly and I'm going to turn over some of the when you were asking about the rate on the leases I'll turn it over to Scott.

When we look at for the opportunity as the end of business, we do want to get back to.

Even things such as Remodels because our.

One of the things we've seen over the years is our shopping experience is.

And comprises many things.

Certainly the merchandise is number one but our consumers have come to appreciate the environment, there and as well as the shopping center and so when you asked about a relocation.

Sometimes we arent in the <unk>.

Most happening and shopping center and many we have found that some of our best uses of capital and have been relocations. So Scott will talk to all of that at a high level I would just say it keeps us healthy and keeps our.

Existing stores preceding and staying up to date, so for the long term health of T. J Maxx, it's very important and every geography, we're in.

To keep spending appropriate obviously, we had curtailed at at the beginning of Covid, but Scott will talk to why that's important and by the way why we're excited about opportunities.

Inventory and where that falls across and the store.

First of all we don't.

And I don't give out information as far as where we are versus where we'd want to be but I would just say that.

At the high level of the reason, we've been very happy with where our sales have been proceeding and you can tell what we did give is our home area our beauty area.

Which have grown and percentage.

As we're obviously that's not a secret those areas are healthy and the world around us we have been getting.

Plenty of availability and where we would run into pockets of categories within those worlds our buyers have done a great job of shifting around and we buy and different ways. So sometimes they are buying goods that are landing within a week or two and sometimes they are buying some goods that are landing of a couple of months out.

But we have overall as you can see we've been.

Happier with our overall inventory level, Scott and I have talked about that recently and.

In terms of where we are with each division and in total T J X.

From where we were if you remember back.

And the third quarter second quarter of the third quarter, we will and a major major scramble mode.

It's probably somewhat impacted our sales and vs.

The healthier open only comps where we are now.

We will run into some little pockets, there, obviously, where we we were probably missing some departments a little bit more and we couldnt get by the way some of that was really transportation of the goods it wasn't necessarily availability.

So right now I would tell you across the board availability pretty much in any area and we wanted theres more definitely more apparel out there than we would want to use.

At cross most every category.

So hopefully that gives you color in terms of.

Where we're headed we're just feeling really.

Balanced on the way our inventory levels are right now heading into February and into March.

Every division I mean, the only place that we are not happy is in Europe, where were closed because clearly we have inventory there and we can't do anything in terms of selling at.

Scott do you want to share of all go into capital and some of the things that <unk> talked about on the new stores rents et cetera, I think overall of the big picture is that we're starting to spend some of that obviously now that we're in a position of strength on the both the cash and on our balance sheet. We're spending you know going to spur.

And.

<unk>.

The 500 to 700 million more and capital than we did last year and more than we did even two years ago. I think we have and open to buy to spend more capital as we move through the year as we would if we see opportunities for and we see at how our business recovers for either new new more real estate than the 122 I talked about.

And or more remodels that Ernie talked about is something to be using our cash for and you know from a ton and we're going to be doing.

Well north of 350, Remodels I think last year, we did several hundred remodels less than what we had planned so we would be viewing that over the next several years as we could be getting up even to 400 and.

Remodels of year or more to try to catch up and.

And take advantage of that too in terms of new stores.

The.

We would say, we're not giving out a number but it's going to be it will be more than the.

122, probably at 150 plus.

And for the next several years of I think theres, great opportunity with all of the.

Unfortunate disruption and retail.

We are already starting to see and all of our geographies.

When we are signing leases.

And store closures that have already happened in the past year, and we would view it doesn't happen overnight, but we would see that as a big opportunity for.

Calendar 'twenty, two and 23 to get sites. So I think part of that the bigger part of that is the quality of the sites.

And without having to necessarily get them at rents that we would've paid just a year or two ago. So it's not that it's necessarily cheaper than our current cost base, but it will be cheaper than what we would've paid and probably locations that we otherwise would not been able to get in more maxx divvy.

Vision, particularly but of course of all of our stores.

At the relocations as an opportunity as we have hundreds of leases.

Coming to renewal and so we see a great opportunity to open again to better real estate and potentially of.

I think the number one thing is to drive higher sales, but potentially even to keep our cost the same or lower I think where we've seen.

Fantastic opportunity and.

And Europe in terms of cost reductions of lot of it is the environment. There is as you could imagine worst and it is here from our real estate with all of the closures and.

On a lot of our rent renewals.

We are seeing increases.

Decreases in terms of the overall cost that we have to pay you know north of 25% on a per store basis. So that's a combination of either the capital that youre going to get when we want to move into a store or <unk>.

Benefit we're going to get or just the actual reduction in the rent and so we're seeing significant.

Decreases there we're doing we're seeing decreases before but not to the level that we're currently seeing we're also seeing some phenomenal deals so I'm not going to name the specific sites, but and.

And the last.

Couple of weeks, we've seen stores, where we were paying 900000 and rent go down to 600 or 500000 to less than 200, just phenomenal decreases and renewals.

And also even landlords, who want us, giving us extended rent free periods, because we're an anchor tenant and a strip and they very much want us to be there. So yes, I think thats a tremendous opportunity for us.

All of great color. Thanks, so much.

Thank you.

Our next question will come from Janine Stichter. Your line is open.

Hi, Thanks, so much for taking my question and congrats on the momentum and.

Wanted to ask a bit about home goods, the increase and the target there and curious what went into it how much of this was analysis contemplated at pre Covid and how much is more of the strength of Youre staying at home right now and then maybe some color on where these new stores are there and new markets existing markets and then just lastly on and at the at home.

Thank you.

Sure.

All good Jeanine.

So we were already contemplating pre COVID-19.

Upping that target because of our home goods business has just been consistent and end up by the way I'll just throw. These together you asked about home sense <unk>. Similarly was heading to a good place, but obviously when COVID-19 has impacted us everything that tide Roes overall with both of these businesses.

And we're just seeing as as the world changes and lifestyle and focus even.

And when the of vaccines I'll hit Youre still going to have a dynamic change around us all in terms of how many people are spending.

And more time still and the home environments and focused on that regardless of whether there is and X percent that goes back to work of course, there will be there'll be a majority of going back to offices.

But all you need is a small percent going the other way and with a focus on the environment of homes. So.

Yeah, we just feel like there's way more market opportunity as we move forward. If you look at the amount of home business being done on line and let's go back to the market share mission one.

<unk>.

And of course on goods dotcom, which will be later in the year, we saw bats, and operated take online business, but we feel our home center business specifically.

Really pulls from categories that are significantly done online, we felt <unk> kind of really eat into that online business and.

And.

And our recently anecdotally a iPad.

I've had friends that have of white goods at a home center and they've used our delivery service, which again in many cases of third party, but you are trying that.

For example of the sofa or that share you're trying that actual software of chair there and that is what shows up at your house within the next day or two.

Again, we of same day delivery.

And many of those sites and I think that is an interesting dynamic, which obviously the business is extremely healthy right now.

But we felt like there's just so much more upside.

And as you can tell by the number we gave you is the percentage of T. J Maxx at home has been most recently.

The momentum is so strong to think otherwise that we wouldn't continue to just grab of our market share. So I hope that answers your question.

We are bullish on and we're very bullish on Scott I think Joe said is really just a brief address little on home sense, yes.

And we're I think what we've seen everything that we've seen and and the.

Overall home business has been a little of I'd say, even up a notch on home sense. So.

The comps are proportionally, even higher and higher at home.

And then they had been and the Homegoods and the fourth quarter are our retail has been.

Average retail has been strong our average basket has been strong and I think the operational folks where we may have talked about at for the first year or two because it's a it's obviously a mix of business, where the payroll and other aspects of at or a bit more challenging they've done a great job of working through the head of <unk> business.

More efficient so our four wall profits on home sense of increased substantially this year with our volumes and it's made us much more optimistic and and where we're opening up five homes 10 stores this year as well.

It's a great question and Janine and the other thing is to Scott's point and I give the teams a lot of credit because they've also managed to not as we opened the home centers with the home centers surging theyre not stealing the homegoods sales as you can tell are still very healthy nearby.

And I give our merchants and that management team a lot of credit.

And the field, there as well on keeping the stores looking different and differentiated between <unk> and <unk>.

Home goods, so they start with having a great mix and both the teams have done a great job on that but they've managed to do this and locations where they're almost right next to each other.

And so really bodes well for the future.

Thanks, that's helpful color and best of luck.

Thank you.

Thank you. Our next question will come from line with Lindsay.

Your line is open.

Hey, guys. Thanks for taking my questions here Scott.

And the simple question with all the noise and trying to model. This as you guys mentioned significant deleverage and the model.

And this year relative to pre pandemic.

There anything any color you can give us of what that means.

If we look at the 10, 6% margin in 2019.

Use of give us some thoughts on what a normalized comp would be and as far as.

How much headwind from it from freight from a unit volume is going through wages and those kinds of things is there anything you can help us contextualize that comment for this year.

Well again, the biggest costs on this year will depend will be on the COVID-19 costs and there'll be significant as we talked and the first quarter and I'll, let Ernie address it but it'll be at at.

To be determined as we move through the on the Covid costs.

So Michael and the Covid costs, where we wanted to do is not.

We're not going to go on with a notion of ahead of it and have a preconceived notion as to when we will start pulling them out as.

And as we see as we see the vaccine said end of safety start to get in line. We will start maybe in the back half of second quarter, we think little by little we'll start pulling them down.

Yes.

Right, Yeah, yeah, yeah.

So we're feeling that definitely opportunity there too.

We've looked at it is just so you know up till now it's of sales driver for us and we've gotten and on our on our customer.

Reports, we do surveys we're getting huge.

Credit.

On our <unk>.

Our level of service and safety impact by the Greeters, we've had at the front of the store if you've been and our store, you'll see that and most of those we have to readers.

Theyre really.

Cleaning the carts as well as welcoming asking do you need help.

And where they treat at okay, and safely and and so that's at huge impact and I'm looking at that as a form of marketing to help us with our top line for the future and so that is.

And we want to be very careful as we pull that back because all the indicators are that has been a big help on our reputation.

During COVID-19 so.

And a very good questions, so and Michael to get to your question a lot of it goes back of unfortunately too so to.

To your point and at the end of fiscal 'twenty. We were at 10, six all things being equal and if again, saying a lot right now if we had guided to approximately 10 two to $10 three last year on of three comp.

You would have a similar level of the headwinds of of supply chain wage et cetera, you would have gone down 30% to 40 basis points for another year or so.

As we said that nothing has really changed in terms of store wage.

And in terms of that.

And the DC did the two components that are a bit larger right now are the DC supply chain and the DC wage is we've had both and our Homegoods and <unk> Dcs wage increases this year, which.

And.

Are are going to be annualizing for most of this year those impacts.

And significant freight costs, what would have been over fiscal 'twenty.

The last results. So those will largely depend on what level of sales because you have of natural delever on the sales until you got back and recapture of those sales so.

So if the Delever was 30 to 40, it's clearly going at it would clearly be.

And significantly higher than that without that COVID-19 costs and then those we would expect to start recapturing some of that as we get our sales levels up so it's a but at that $10 six would have been going down and then on top of that is the deleverage of the sales and the higher freight and other supply chain cost.

And.

And.

Good day kind of falling out of the quick model question and.

Would you mind, helping us with what the change was from the corporate expense line in the fourth quarter and it makes it is quite different and.

And there was some benefit there as well.

The biggest benefit which.

And in effect at that thank you. It's a good point that so not necessarily of go well hopefully not a go forward benefit was.

This year, we did not have bonus accruals or incentive accruals up to the level last year, it's actually.

And went both went the wrong way last year, we had a very good end of the year and increased our incentive accruals and the fourth quarter. This year. We obviously are not meeting our our plans and so we at the incentive accruals go the other way. So it was a benefit of almost 90 basis points in the quarter. That's obviously.

Next year, we would hope to have a normal level of bonus accruals.

And so that's the biggest difference there was there were some of the rest of it's just noise between fuel hedges and.

And there was expense savings as a lot of companies at many of you haven't talked about at that much and metal costs and others as due to.

Less people being sick that we had a benefit as well.

Thanks, a lot of guys.

Thank you.

Thank you and your final question of the day comes from Adrian Day. Your line is open.

Great. Thank you very much for taking my question. Ernie This is a bit of a clarification and something that we've gotten sort of probably a couple of years so as the.

Global apparel brand manufacturers are reducing their footprint and off price.

It sounds like you're finding sort of more disparate newer fresher bran that of replacing those so it's making it an EBIT better overall treasure hunt experience versus focused on these.

Handful or a dozen of these historical brands does that is that clear at isn't that if that's the right interpretation.

Yes, It is and I would tell you to go along with that Adrian as we go.

It's funny, you mentioned that and its one thing I thought I didn't get to mention on and one of the earlier questions. We are buying significantly more from our satellite.

Buying offices, this year, which actually speaks to a little about what you just asked.

Because of.

Probably because of availability of raw, it's not always with the same vendors and maybe what's going on with Europe.

We have satellite offices, we have offices in Italy, and in Europe and.

And the far east and.

California and.

So we we've had a disproportion of growth and purchases from those offices recently relative to our total during COVID-19.

And then I mean, the good news and the vendor. This is not unusual when we specifically and the home business Adrian.

If you ever go to our store one week and you go to the next week for example, and some of our <unk>.

Categories, where theres a lot of there's a lot of newness. So if you look at our food business and.

And you'll see lots of new.

Brands that will go in there and they may be werent, there a few months ago.

And you don't tend to think of that area, but there's a lot of special labels and there that really become heart and lung quality and country of origin from Italy too.

To domestic brands and that happens throughout the store, but there are definitely more areas, where I think brands of become it's.

It's really going to be of big differentiator of all of us from I think everybody else because so many of the retailers around us and apparel by the way of the apparel World is going very specialty private label driven.

And what it would be neat about our businesses is the customer she or he can walk in and see and assortment of different brands that you would find them and depth and other stores, but theyre all going to be under one roof and of treasurer of Hutch format.

At that makes sense and totally.

Totally does and then Scott very quickly we've been watching these container prices breaking over 5000.

And I guess the issue for us at.

We've tried to go back and look at 2015, a west coast port issues, but that was a U S specific issue this take global kind of demand and supply issue.

Are there any parallels to draw from that can you help us in the P&L what at freight as a percentage of sales and I would imagine you're better positioned because you have a lot more land at good versus imports and.

Any color there would be helpful. Thank you.

Yeah, I'll, let Ernie address the piece of what you eat and obviously as vendors and others have to bring the goods and what they'll per pass on or not pass on because everybody has to pay the increased ocean container costs, one way or the other just right and what gets passed through right. Yes. So I would say some of that gets mitigated.

When we buy the through the brands.

So a chunk of that gets mitigated because we go our buyers look at what they can retail of goods at.

And they back at into what the cost should be and regardless of.

And if the vendor of whatever they pay per freight is I don't want to say, it's not our concern Budd.

Kind of not our concern when our buyers as they are pretty straightforward about how they work that it's something where we're importing which we do some of that business and we're going to get hit with that.

Just like Scott said earlier, yes in terms of the big picture on freight at.

It's very difficult to start and you'll see that when we're just going to be starting to compare.

And against our numbers and the first and second quarter, because we were and open for business for such large chunks of the business.

Of the time, but if youre in a compare fiscal 'twenty two and.

Fiscal 'twenty, 2% of fiscal 'twenty.

And.

50% of us north of 60 basis points, however of two year impact of incremental basis points on freight, but it's really going to be a tale of two stories, it's going to be significantly.

Weighted toward the first half of the year versus the second half of the year because most of it we had the big Spike ups.

A lot of for US is we'll be renegotiating.

Domestically our.

Our rail or truck and our ocean.

And middle of the second quarter. So we would hope to contract more and more capacity because of a lot of what impacted us and others is having to go to more spot rates and just pay through the nose that happened in the fourth quarter and a little what will be happening still and also the mix of the goods.

And was not ideal because the number one priority I think Ernie would agree with day make sure we were getting the goods and our teams did a great job to get the goods, but we were paying we had to play of premium and in many cases, but we're working on a lot of of issues and our logistics area to reduce cost and we think there is we will be up.

The attunity as we'll be able to take advantage of as we move.

Forward through the next year and beyond.

Very helpful. Thank you best of luck. Thank you Adrian.

Alright.