Q1 2022 TJX Companies Inc Earnings Call

May 19, 2021

Welcome to the T. J X companies first quarter of fiscal 2022 of 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 press start need to press star 1 as a reminder of this conference call is being recorded as of today May 19 2000.

'twenty, 1 I would now like to turn the conference call over to Mr. Ernie Herrman, Chief Executive Officer, and President of the T. J <unk> companies incorporated. Please go ahead Sir.

Thanks, Ivy before we begin Deb has some opening comments. Thank you Ernie and good morning. The forward looking statements. We make today about companies 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 in the company's SEC filings, including without limitation. The form 10-K filed March 31 2021.

Further these comments and the Q&A that follows are copyrighted today by the T. J S companies, Inc. Any recording retransmission reproduction or other use of the same for profit or otherwise without prior consent of T. J X is prohibited and a violation of United States copyright and other laws. Additionally.

Well, we have approved the publishing of a transcript of this call by of third party. We take no responsibility for inaccuracy that may appear in that transcript. Thank you and now I'll turn it back over to Ernie.

Good morning.

Joining me and Deb on the call at Scott Goldenberg.

As we've done throughout the pandemic I'd like to start our call today by saying how truly grateful I am for the hard work and dedication of our global associates and their continued commitment to our health and safety protocols.

I want to give special recognition to our store distribution center and fulfillment Center associates, who continue to physically come in to work and.

In recognition of their continued efforts we awarded a vast majority of them an appreciation bonus which was the fourth of appreciation bonus that we paid during the pandemic.

While the health crisis is beginning to improve in some parts of the world. There are many areas that are still facing challenges or have become Morris.

Our Hearts go out to everyone, whose lives have been impacted by this virus. We are hopeful that more people around the world will have access to the vaccine in the coming months and then we can move past this health crisis soon.

Moving to our business operations during the first quarter, we were very pleased at our U S stores, we're able to stay open.

However, we continue to have a significant number of our stores in Europe, and Canada that were temporarily closed at certain times throughout the quarter due to government mandates.

Currently approximately 300 stores remain temporarily closed all of which are in either Canada or Europe around the world. We continue to prioritize the health and wellbeing of our associates and customers in our stores, our distribution centers and our offices.

Now I'll recap, our first quarter results.

First I am extremely pleased that our overall open only comp store sales when compared to fiscal 'twenty increased 16%, which well exceeded our plans.

We believe we saw a benefit from consumers feeling more comfortable leaving their homes visiting our stores and being happy with the brands and values. They found.

Our home businesses across all of our divisions continued their phenomenal sales trends.

Further we saw strong open only comp increases in many other categories and positive open only comp store sales and overall apparel.

Open only comp sales were also outstanding across each of our divisions, which indicates to us that our value proposition continues to resonate and all of our geographies.

I'll talk more about our divisional performance in a moment.

Next overall sales of $10 1 billion or a first quarter sales record. Despite the temporary closing of our stores for approximately 14% of the quarter.

We are extremely pleased that we are seeing our most loyal customers returned to our stores in the U S and that new shoppers are discovering our great values and exciting treasure Hunt shopping experience.

All of this gives us great confidence that we are set up extremely well to continue driving sales and gain additional market share over the medium to long term.

Third merchandize margin remains healthy the buying environment is excellent with the marketplace loaded with a great selection of merchandise across good better and best brands and trending categories.

Our buyers are doing a tremendous job sourcing quality branded merchandise to keep up with the strong consumer demand that we have been saying.

Lastly, first quarter earnings per share of <unk> 44.

We're also well above our plans despite a larger than expected sales loss as our non U S stores were temporarily closed more than we had anticipated.

Sure.

Now to our divisional performance, which is again compared to fiscal 'twenty beginning with <unk>.

<unk> opened only comp store sales increased an outstanding 12% and overall sales increased 14% versus the first quarter of fiscal 'twenty.

<unk> home business continued its excellent performance with a comp increase some of the home goods as shoppers continue to spend on their homes.

We were also very pleased to see of comp sales increase and our overall apparel business, which was driven by strong demand in select categories.

We believe our apparel sales benefited from wardrobe of refreshing as more consumers began resuming more normal activities.

We feel very good about <unk> of sales momentum and our ability to flex their merchandize mix to the category of shoppers want.

At Homegoods opened only comp store sales increased a phenomenal 40% <unk>.

During the quarter Homegoods and home center sales were remarkable across all major categories and geographic regions at.

They are eclectic mix of home fashions from around the world continue to resonate with consumers.

Similar to home sales at <unk>, we believe home goods sales continue to benefit from consumers spending more time in their homes during the health crisis.

We have been aggressively investing in the growth of our home division for many years at of convinced we are set up very well to build upon our market leadership position in the United States.

While Canada continues to face challenges with store closures. We are very encouraged with the sales trends we have seen when our stores are open T.

T J S. Canada's open only comp store sales increased 9%.

Open only comp sales at our home since banner and home sales at winners and Marshalls were also in line with the increase we saw at our Homegoods Division.

Shoppers love of our great values in Canada, and we are very confident that this division is well positioned to return to and exceed their pre pandemic sales levels. Once we are beyond this health crisis.

Now the T J <unk> international.

Like Canada, Europe faced continued store closures and we expect them to continue into the second quarter as well. However, during the limited time, our stores were permitted to be open customer excitement was very high in response to our value of values was fantastic. We were very pleased with <unk> International It was 11%.

Open only comp store sales increase.

Given the length of time of our stores were closed in Europe, we saw significant pent up demand when we reopened later in the quarter.

As the only major brick and mortar off price retailer of significant size in Europe, we see an opportunity to scale, our business and capture a bigger piece of the European retail market over the long term.

In Australia, where our stores were generally open for the entire quarter comp store sales were extremely strong for both our apparel and home categories.

As to E. Commerce overall, we saw terrific growth over first quarter fiscal 'twenty sales levels in both the U S and UK.

We are still on track to launch home goods Dot Com later this year and are looking forward to offering consumers, even more exciting home fashion items at great value online.

Moving on while the health crisis persists, we are confident that the core strength of our off price business model will continue to help us navigate through the current environment, while setting us up very well to succeed in a more normalized environment.

Let me take a moment to highlight these strengths.

First is our relentless focus on value we.

We believe our value proposition, which is a combination of brand fashion price and quality.

As important as ever to consumers.

Okay.

Second is our world class global buying organization of more than 1100 buyers.

These buyers are located in 12 countries across 4 continents and sourced from our vast network of approximately 21000 vendors.

We see our global buying offices and reach at a tremendous advantage, particularly in an environment, where travel remains limited consumer demand across our home businesses has been especially strong so our ability to successfully leverage our global buying has been of great benefit.

We believe our 500 plus home buyers around the world allow us to offer consumers a truly global differentiated merchandize mix versus other large retailers.

We strengthened our relationships with many of our vendors and have added thousands of new vendors for apparel and home product over the past year.

All of this allows us to our of our fresh and exciting mix of quality branded merchandise to our shoppers every time they visit.

Next the flexibility of our buying store format and distribution network allows us to take advantage of consumer trends and hot categories as consumer demand changes.

We also reach a very wide customer demographic and urban ex urban suburban and rural markets.

With our fast turning inventories our customers can discover something new in store and online every time they visit.

Lastly is our global presence with nearly 45 years of operating expertise in the U S 30, plus years in Canada and more than 25 years in Europe, we arent at price leader in every country we operate in.

EBITDA in Australia, a country, we have entered more recently, where an off price leader.

We have spent decades of establishing relationships with vendors and landlords and building out our global buying offices distribution network systems and infrastructure.

Further we have expansive country specific knowledge of consumer shopping habits and of earned customer loyalty.

We believe our well established global off price retail model and level of international expertise is a tremendous advantage and our size and scale would be very difficult to replicate.

Okay.

Now I'd like to walk through the reasons why we are confident that we can drive sales and traffic growth and of normalized environment.

And why we continue to see a significant opportunity to increase our market share across each of our divisions.

First we believe the appeal of our entertaining treasure Hunt shopping experience gives consumers a compelling reason to shop us.

Based on what we've seen for decades, including in the past year end store shopping is not going away.

We see our stores as of desirable destination for consumers seeking some stress relief or quote meantime, unquote and also of great place to shop, when they are seeking inspiration and looking to discover new things, which is difficult to replicate online.

Second we see a significant opportunity to grow our global store base at each of our divisions.

In total we believe we can open more than 1600 additional stores to grow to about 6275 stores in the long term just with our current banners in our current countries.

Availability of real estate is terrific and we see plenty of opportunities to open new stores relocate existing stores.

Further we believe our strategy of locating stores in convenient highly accessible locations makes it very easy for shoppers to find and visit us.

We are anticipating incremental traffic once consumers return to their workplaces and go up more as they would be passing by our stores much more frequently.

Next is our focus on marketing to attract new shoppers, while staying top of mind with our existing customers. This.

This year, we have already launched new campaigns across TV digital and social media platforms for a number of our banners. These.

Of these campaigns continue to reinforce our value leadership, while also highlighting discovery fashion and quality I hope you have seen them the creative is excellent.

Let me take a moment to highlight a couple of them.

First.

We took a unique approach for mothers day and created a multi brand music video in the U S that was highly successful and was viewed by more than 17 million times on Youtube over a 2 week period.

We also did an integration with the NBC Prime show of the voice, where each of the top 20 contestants were styled head to toe with products for Marshalls and performed a powerful segment lasting over 2 minutes.

This work continues to reflect our leadership in fashion and value and helps us show that our stores can be for everyone.

Further we continue to see strong overall customer satisfaction scores, where we are open including on our ongoing health and safety protocol measurements.

Lastly, our research tells us that overall, we continue to attract new shoppers of all ages into our stores, including a significant amount of Gen Z and millennial shoppers, which we believe bodes well for today and in the future.

Fourth we see a great opportunity to capture a bigger share of the consumer's wallet due to other retailers closing stores.

We also believe that these store closures may lead to even better product and real estate availability and more favorable lease terms.

Lastly, we are investing in new stores, and Remodels and our distribution network and systems to ensure we have the infrastructure in place to support our global growth plans.

Sure.

In closing I want to again recognize the exceptional talent that we have across this entire company.

With outsized opened only comps in the first quarter, our organization really stepped up from buyers who successfully chased the goods in the marketplace to our associates and planning and allocation distribution centers logistics and store operations.

Each of these groups has a vital role to play to ensure our merchandise flow can keep up with the consumer demand we have been seeing.

It's the collective efforts of all of our associates and their dedication to T J X.

That brings our business to life for our customers every day and.

And all kinds of retail environments.

Our outstanding first quarter results tell us that consumers are seeking out our branded quality merchandise at great values.

Clearly they are enjoying our entertaining treasure hunt shopping experience.

Overall opened only comp store sales trends for the start of the second quarter remained similar to the first quarter.

Looking ahead I am convinced at T. J <unk> is very well positioned to emerge from this health crisis in a position of great strength.

We see numerous opportunities to continue at our global growth and are excited about the runway for growth.

That we see ahead for T J Maxx.

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

Thanks, Ernie and good morning, everyone I'd like to first Echo <unk> comments and thank all of our global associates for their hard work and continued commitment to our business.

I'll start today with some additional details on our first quarter results as Ernie mentioned overall open only comp stores increased an outstanding 16% as you described in the press release, our first quarter opened only comp store sales compare fiscal 'twenty 2 sales for fiscal 'twenty.

In the first quarter, we continued to see of very strong increase in our average basket as consumers put more items into their cards.

In the U S, where we opened where we were open the entire quarter customer traffic compared to fiscal 'twenty increased for the first time since the start of the pandemic at <unk>, we saw a significant improvement in customer traffic versus the fourth quarter and at home goods customer traffic.

Remained outstanding overall.

Overall sales for the first quarter increased of 129% over fiscal 'twenty. 1 as stores were closed for approximately 50% of the first quarter last year more importantly, when comparing to fiscal 'twenty first quarter sales increased a very strong 9% despite.

The negative impact of approximately 1 1 to $1 2 billion.

Of lost sales due to the temporary closings of our stores across.

T J X for about.

For about 14% of the quarter. These closures were primarily in Europe, which was closed for about 76% of the quarter, including essentially all of February and March and in Canada, which was closed for approximately 25% of for the quarter.

Pre tax margin for the first quarter was 7 2% and merchandise margin was up slightly compared to fiscal 'twenty. During the quarter. We were very pleased with our strong mark on and lower markdowns. However, these were mostly offset by significantly higher freight costs.

We expect to persist for the remainder of the year.

Moving to the bottom line first quarter earnings per share were <unk> 44.

As detailed in our press release. This morning, we believe the temporary store closures in Europe and Canada. During the first quarter resulted in a significant loss of profit dollars with an estimated negative impact to earnings per share of approximately 21 to 24.

Additionally, I want to remind you that our first quarter pre tax margin and earnings per share reflect some significant expense headwinds compared to the first quarter of fiscal 'twenty.

These include approximately $200 million.

Of net costs related to COVID-19, approximately 40 basis points of additional interest expense and incremental costs from freight supply chain and wage pressures.

As for inventory it was up 3% last year and store levels are where we want them to be our borrowers are doing a great job sourcing merchandize and have been able to chase the goods, we need to satisfy consumer demand.

To reiterate availability of merchandise is excellent.

Moving on to our cash flow and liquidity, we ended the quarter in a very strong liquidity position with $8 8 billion in cash.

With our strong liquidity, we took several proactive actions to deleverage our balance sheet and reduce our annual interest expense first in April we paid down the $750 million note that was due to mature this coming June at par.

Secondly, this morning, we announced the make whole calls for a 125 billion principal outstanding of 3 5% notes maturing in 2025, and our $750 million outstanding 375% notes maturing in 2027, both of which were issued last April.

As a result of this action, we are expecting a pretax debt extinguishment charge of approximately $250 million in the second quarter we.

We expect the net results of both of these actions to be at $2 $7 billion reduction in our outstanding debt and over 900 and over $90 million of.

Of annualized interest expense savings further after these actions and including the tender refinancing. This past November we expect the average interest rate on our outstanding debt will be about 2 5%, which is in line with our pre COVID-19 level.

Lastly, we declared a dividend of <unk> 26 per share in the first quarter and the second quarter of fiscal 'twenty. 2 we're planning to declare a dividend at the same rate subject to board approval.

Now to the second quarter as of point of reference for the start of the second quarter overall open only comp store sales trends remain similar.

To the first quarter.

For overall sales were current we currently have approximately 300 stores that are temporarily closed based on what we know today overall, we expect stores to be closed for approximately 3% of the second quarter, which includes Canada being closed for an estimated 17% of the quarter.

And Europe being closed for about 7% of the quarter, we are planning a $275 million to $325 million negative impact to our overall second quarter sales due to these store closures.

These expectations could be negatively impacted further if current mandates of extended or new ones are put in place as they were last quarter. At this time, we are not planning any significant store closures in the back half of the year.

In closing, we feel great about our first quarter results and the momentum of our business. We believe that of growing top line and a strong merchandise margin are excellent indicators of a healthy retailer. Additionally, we are of very strong balance sheet.

We're in excellent financial position to invest in our business to support our growth plans now.

Now we're happy to take your questions as we do every quarter, we're going to ask you.

That you. Please limit your questions to 1 per person in 1 part to each question, we respectfully ask that everyone's stick with this request for both keep the call on schedule and 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 as a reminder, if you would like to ask a question. Please press star 1 if you need to withdraw. Your question you may do so at any time by using start to our first question comes from Omar Saad. Your line is open.

Thanks for taking my question good morning, really great quarter.

I would love to actually hear more on the traffic side of the equation.

We know you guys do a great job once once you get people in stores.

Can you talk a little bit about the consumer's willingness to come back at the stores. How thats been building is at vaccine related are you seeing that older customer come in at.

Net backs unaided and start to return to in person shopping again.

Thanks, Scott. Thanks, Ernie Yes, great question Omar traffic has been very healthy scuttle give you.

A little bit of a trend line discussion there.

Nothing in terms of.

Nothing standing out in terms of of difference in age age demographics by the way.

But we have such a broad based age demographics graphics across the business. So.

Probably less likely for us there, but Scott on the traffic trend, yes, it's hard to get real rates at on the age what we've been seeing at least for the last couple of quarters is a significant number of the new customers that we're getting back are skewing, even younger remarkably at home goods.

Even continuing so overall of the average age of for customers in <unk>.

Both boxes is likely when we finish up and get current results for the younger than it has been so that's really good.

The traffic patterns once we got past some of the weather issues that we called out on our last call have you been consistently.

Strong through will call at the marble of print that February March and continuing right up to as Ernie talked about similar sales today and thats at both <unk>.

Speaking really more <unk> and home goods because of the all of the closures that we've had so.

The baskets has been remarkably strong strong store.

<unk> average basket and it has not has not is not.

Really decreased at all so customers continue to put more units and the traffic continues to.

To be strong and consistent consistently.

Staying that way.

Thanks.

Thank you. Our next question comes from Matt Boss Your line is open.

Great and congrats on the improvement as well.

Thank you.

Kind of a 2 part question probably more for for Scott I guess.

First on merchandise margin so the improvement this quarter relative to pre pandemic. Despite despite the freight I thought was really impressive I guess, so first just sustainability or your ability to continue that trend in your opinion at Vince.

Second at the EBIT margin level. So I think 3 months ago, Scott you laid it out well there is a lot of moving parts, but I think you basically said at a 3 comp you see 30% to 40 basis points of underlying margin pressure and then we needed to consider free supply chain and COVID-19 costs. This year, so am I thinking about.

These pieces right and any factors or changes to these factors to think about now that we're 3 months later.

Yes, Matt.

I think youre right a lot of that is for Scott I will just jump in on the.

On the on the merchandise margin.

The healthy merchandise margin certainly what we're seeing in at Fortunately it lines up with our model and again I give the teams a lot of credit.

We went in with the right amount of liquidity and so the teams did not I would say they were right in the sweet spot of how much in this at this applies to all of the divisions, most especially obviously right now of <unk> and home goods.

Buying to the about the right level of trend and then when youre staying on trend like that with what's going on the buyers have done a great job.

Being able to buy so opportunistically in the market.

So that helped the sales being so strong has been <unk>.

Benefit on our markdown rate also helping our merchandize margin.

As I as I said in my script, it's coming across we're making.

Advantageous buys across whether it's the.

The level of good vendors.

Moderate our best vendors, that's been everywhere, but in trending categories, which has been key so we've had certain categories that are outpacing the store and the merchants have done a great job of buying into those at the right cost and at the right retail because as you know, we're ultra sensitive about where we retailer of goods at.

And so again I give them a lot of credit I will tell you we are a challenge.

Down the road here as we look into probably more of like the third quarter, where last year, we were up against almost an artificial margin bump up based on what had happened in the country. During the COVID-19 shutdown and so there might be a little bit of a mark on or markdown jeopardy, and end of window there of a few months.

It's going to be a little more challenging and I think to show that merchandise margin at these rates and by the way Im talking aside from freight which has obviously gone up.

Everywhere I'm talking kind of take that out of the equation, but we might have a little challenge. There. However, we're so opportunistic.

I have faith that we can do better than what we're probably thinking of our challenges there I will now let Scott talk to.

Talk to them margins, yes, I think just goods just read a little with Ernie said on the merchandise margin in the back half. So I mean, I think if we compare it to again as we move I think the second quarter trying to make comparisons and we feel good about as Ernie.

The overall merchandize margin, especially if you take freight out of the equation compared to 2 years 2 years ago. This third quarter of last year were Ernie was comparing to 21 is really on the mark on and markdowns. We also had some technical issues, where we had some accruals which were end both on markdowns.

<unk>, which we reversed in the back half of the year, which are not of fiscal 'twenty issue, but.

Impairing for last year.

Our benefits that we saw last year in the back half of that we wont repeat that's a good point Scott. So just to clarify Matt what I was talking about on the challenge will be against that FY 'twenty, 1 not not against 20 as much.

So yes, so the other aspect is in terms of.

Some of the tone of your flow through it's hard to isolate.

When you look at the quarter. We just had when you have we of COVID-19 costs, which we're still.

Roughly in full for us and we can talk about that more but at we'd expect those to moderate and Ernie can you talk about the more as we move through the second quarter end back half of the year.

I think what at least at the moment.

Stubborn.

And we're still in the middle of assessing like everyone else, our freight cost, but probably compared to both last we talked 3 months ago end earlier and that the freight costs are probably going to be stubbornly high at least for the rest of this year as we're dealing with the same issues of.

Of drivers.

Driver shortages and rate increases likely to be higher than what we had originally thought so I think that.

That piece of it is still going at is going to be persisting having.

Having said that we had been I think as Ernie.

I mentioned, we're doing a great job of getting the goods paying more for it but we're getting goods. Our inventories are in good shape and the buyer in our planning and allocation teams have been allocating those goods and doing a great job as you can see by ourselves on the other hand of wage costs had been theres been pressure Morris.

So stubborn in the Dcs as we've had.

Number of our Dcs, where we've had wage.

Increase our wage rates, but on the positive side, both in the stores and the Dcs, Although we have pockets of challenges we have been able to hire back to our staffing close to our staffing levels, we need to staff the store, albeit at.

Of deleverage compared to prior year. So again the positive is we are we adjust as necessary, but we've been able to staff the stores at the distribution centers to meet the demand. So it's hard to compare with the lost sales in Europe and with the COVID-19 cost exactly what those breakpoints would be.

On sales at this point.

Okay.

Thank you. Our next question comes from Paul <unk>. Your line is open.

Hey, Thanks, guys.

I'll talk about more Max specifically sales.

<unk> were up about 800 million or 14, 5% versus.

The first quarter of 19.

You call it 20 of.

Margins are down 100.

30 basis points. So I'm just curious if you can talk specifically within that business, how the deleverage where thats coming from and what sort of increases you might need to see versus 19 for margins to stabilize or.

Is there some point of the year, where you see the pressure points of abating on that margin.

Yeah again, I can certainly answer to the first quarter, while the second quarter. It goes back to what.

How COVID-19 costs, how we drop how those decrease.

At what costs, we have to see what costs and Ernie can talk a little about this on in terms of of power how much of apparel sales and how that relates to expenses in average retail.

Sure.

So.

But COVID-19 costs.

Is a big reason for the deleverage as well as others, but yes, the COVID-19 costs alone to earnings point in and of itself was more than the delta of the 130 basis.

But.

I don't want to be 1 of the straightforward on that we obviously would have leveraged end did leverage on those sales, but net net those 2 kind of washed each other and then the rest has to do with which could get better again in the back half of that you are having to do we are average retails were down but they did get better as we move through the quarter as our apparel.

Sales started to improve in.

And also are in the rest of the deleverage was just due to our distribution center and wage cost. So the primary difference I would say they are more or less offset each other was the COVID-19 costs and the leverage and then we still had the deleverage of wage in the DC expenses.

Okay.

Thank you. Our next question comes from Kimberly Greenberger Your line is open.

Okay, great. Thank you so much.

I wanted to just talk a little bit about.

What's going on at international when I when I look at the profit swing here in the first quarter compared to 2 years ago. It's about a 250 million dollar negative profit swing from that $28 million operating income 2 years at kind of the $222 million loss here this quarter.

And if I.

If there is a reason to believe that international once it reopens and sort of get back to normal in the future. If it goes back to 2000 <unk> calendar year 2019 profitability at.

It would suggest that actually operating income in aggregate here in the first quarter.

Would have been up about 10% from 2 years ago, and that's even with all of the COVID-19 cost in there and all of the freight inflation in wages and everything else. So I'm just.

It looks like the wait in the P&L here in Q1, if I look at it from a different angle is really coming from the international piece and.

Sort of everything else.

You know kind of came out of the wash and delivered.

Pretty nice profit growth, if we sort of take that out.

So Tim.

To me it looks like you are probably offsetting a lot of that a lot of those cost pressures.

Am I correct in that assumption and as we move through the year and those COVID-19 costs start to come at.

Off.

Does that mean at actually margins.

Get back to and maybe of Bob.

Where you were sitting in calendar year 2019. Thanks.

Okay.

Yes.

A lot.

A lot of hypotheticals. There I think you were looking at the first quarter right, where there was significant at the 2 major de levers, where the COVID-19 costs and the loss in sales on Europe, Europe, and Canada, Europe and Canada.

Europe being the bigger piece of that.

So that is correct.

As you would expect though you would off you would offset.

Yes.

Good chunk of that on the high average comps.

That we did get.

And then again.

But the reason why we still would go down as you still have you still have higher than normal cost increases.

And the wage.

Right and the free for AUC, so not all of that will go away in the back half, so we're not giving guidance but.

I think as we've said before obviously, we don't know what the sales level, how high they could be but.

You would expect us not at this at this point still to be reaching due to that.

Some level of COVID-19 costs from some of this deleverage to be with the freight to be reaching the percent of.

2000 fiscal 'twenty or calendar at 19, so Kimberly at at a high level of the way you said that is the way that I'm look at you you can look at at that way this quarter, though that if you had had.

If we had had Europe and Canada on it we would of had a lock on the wash the differences and Scott mentioned this we at such an over achievement on the sales that you would have.

Have to be counting on of 16 opened on a comp sales and when the rest of the Europe. If we have those type of comp sales.

We'd have them for discussion.

Where maybe the margin is.

Back to more like at those levels, but that you'd have to have these way outpaced comp sales like we just did.

Now to your other point, though and Scott mentioned at the end here we are.

Looking at the COVID-19 costs is something we can take a hard look at here in the near future as we move ahead, each quarter and as the environment normalizes. We're.

We're going to make some improvements on those lines so that will help.

So I hope that answered.

Hope that answered.

We do believe there's a sales upside all along in another plus we have on the cost line is our average retail.

<unk> has been moderating at Scott I think started to allude to this as we go forward even into the back half of it we're looking like it's going to moderate even more because we're seeing some more best brands goods come.

Coming in on order as we get the third quarter, which is going to help our average ticket and that should help our expense on.

On processing.

Come down a little bit so.

Very good question a lot of moving parts.

Great color. Thanks.

Thank you.

Thank you. Our next question comes from Paul Trussell Your line is open.

Good morning, my congrats as well on the improvement I wanted to dig in a bit more on the.

Top line and maybe you can discuss a bit more of what you're seeing in terms of.

Category.

Standouts in particular is there any site of the strength in home <unk>.

Decelerating and would love to hear more about your ability to really stay in stock and to what extent, you're really out needing to case of product in the marketplace to keep up with this robust demand.

Hmm.

Yes.

No great great Pos so standout categories I start with the most obvious 1 which is our home business is remarkably consistent as I said in the script.

I mean, youre looking at 40 comps kind of what we did in the first quarter and again at that.

Basically was where we were in every division even in the full family stores and at T J Maxx and Marshalls.

Up in Canada home sense.

Sure.

So remarkable consistency in the neat thing there is we have a lot of broad based consistent throughout our entire home business of whether its big ticket.

Areas.

Mike.

Whether it's furniture's of rugs or of decorative accessories everything was good there isn't really 1 category and this is where I give our teams planning and allocation of.

And our and this is not just in the home area, our buying teams our planning and allocation teams have been getting the goods fueling at so that.

Second part of your question was the deceleration at home.

We have really not seen at I don't think we're kind of expect that to stay at that.

Almost artificially high level of that it didnt for first quarter, but I think we have opportunity over the next quarter to stay up in the round pretty close to that end.

And we're not having a problem in the home area stock staying in stock, which was of third party of your question and we're not actually having a problem where apparel has now started to improve for us.

Paul I think you were at asking what else is standing out. So we have a handful of apparel categories, which I won't give the specifics on which ones, but they are really kicking in as the quarter went on and going into the <unk>.

Going into the second quarter and the nice thing that often happens is when the weather shifts in apparel kicks in if there was a trend line prior usually our home business.

Takes more of a hit where the consumer moves off of.

Off of off of home for a little bit and yet again, our home goods isn't going to continue at 40 comps, but it did not move off hardly at all and our apparel just kicked in and Thats. 1 reason you are seeing these outpaced comps from us really at the at.

At this first quarter.

Chase chasing product flow of product.

It has been a non issue.

I say, it's a non issue because of the teams of really executed so well and they are working so and I give of logistics credit.

<unk>.

Really everybody at involve credit to keep fuel, it's not easy to keep fueling of 16 comp and Thats why.

I liked your question when you asked it because it is an unusual time for us to be running an open only 16 comp end.

<unk>.

I, just again give credit to all of the T. J <unk> associates that are involved in that because they are making of happened and they havent position going into the second quarter.

But as well as we were in the first quarter.

Hopefully that answers your question.

Yes, well kudos for the team. Thank you for the color and best of luck. Thank.

Thank you Paul.

Thank you. Our next question comes from Ike <unk>. Your line is open.

Hey, Hey, everyone. Let me add my congrats Scott 2 questions for you on the cost structure at COVID-19 costs.

$200 million of thank you said this quarter, which is down from 270 per quarter, which is what youre seeing in the back end of what's your expectation for that over the remainder of the year I assume that there should be less costly.

From a model given the reopening of any vaccinations, but kind of curious your thoughts there and then.

My rough math is of your SG&A per store, if I excluded that COVID-19 is actually below where it was 2 years ago.

Are there things youre doing to run the store leader of the costs you've taken out of do you think are sustainable.

Once we kind of normalize just kind of curious how you how you talk about the cost structure of a per store basis.

Yeah, Great question in terms of the COVID-19 costs.

We would at right now, we would expect them to be coming down in the second quarter slightly and but I think as Ernie said, we're going to evaluate that based on the environment and then we would be expecting them to be coming down substantially at third and fourth quarter Your point Ike.

The world more normalizes, what we've been trying to do is keep.

Associate and customer safety scale.

I guess, we've looked at some of our and we've talked about this we of the Greeters at the front of our stores which have.

It's created of course, but it's also created a cusp.

Customer service improvement perception and of safety, which is why we do believe that some of those extra costs have allowed us to play offense to actually drive our sales Ironically and so we are going to ease our way off at not just through a pendulum swing quick move.

Because we believe it's been helping our top line.

However, we know we need to moderate on that and we will do at just like Scott said and we're going to take a hard look at especially as you get to the third quarter and fourth quarter.

So hopefully that I just wanted to give you some color on why.

We arent going to necessarily move off at as fast because it's been a top line driver at terms of your question on SG&A at I'd actually have to get back to you in terms of we're up about 4% on a per store basis versus 'twenty, but it's at this quarter is a little difficult at this segregate that out because of.

As you you don't have you have.

Still have a fair number of expenses in Europe, and Canada without the typical type of sales that you might expect.

And then we had the outside sales in <unk> and home goods. So that overall, we were up about 4% versus fiscal 'twenty.

Thanks, guys.

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

Hey, guys. Thanks for all the detail on taking a question here I guess Scott of Sim.

Question is trying to help me boil. This down can you help us think what the SG&A dollars.

Those are for the year and what do you think COVID-19 costs are for the year in the budget and then with.

With all the noise and you laid out the closures I think as we take the inputs you gave US you probably excluding the closures would have been about $2 billion higher on sales versus first quarter fiscal 'twenty and then when we add back of your 'twenty. 1 of 24 that you pointed to which was I think only for the closures you'd be at about at $9 9 of 10 4.

Margin in the quarter compared to the $10 1.

First quarter 2 years ago, so with that as a starting point I know you've been asked to go through margins of bunch of different ways, but with that as a starting point from here it sounds like the incremental puts and takes.

It gets sequentially better going forward, except for free which you said you now got visibility that it will be tough, but as you look at <unk> for Q U C.

The COVID-19 costs coming down international reopening some of the AUR tailwind some of the mix moving back towards apparel am I thinking about that right that if we kind of reorient.

For the first quarter of last year that way that we should see sequential improvement in the underlying margin going forward to the model.

Again, a lot of this will depend I think again, we're still evaluating the COVID-19 costs, so not again, not giving up the costs at other than we expect them to moderate.

For both in dollars and as a percent sales impact.

I think Ernie reiterated.

1 of a lot of it is store will depend on the merchandize margin.

In terms of what the what our mark on and markdowns will be in the level of sales so again.

If we have outsized sales and were able to.

By better.

The wildcard is freight costs and how how high they're going to be in the back half of the year.

But we didn't say there are a lot of the other cost wins are going to be there at least for now the wage and the distribution cost.

We're cycling opening up of <unk>.

Both of lot of our.

A lot of our facilities and we did a lot we opened up 6 3 pls are just additional what we'll call.

Processing.

Space last year that where we're going to go against in the back half, including Lordstown home goods distribution center. So I don't think our distribute our supply chain slash wage are going to be levering at this point based on what we know and the wildcard is really being merchandise margin for.

Right with COVID-19 with COVID-19 going down so.

I think the biggest.

Benefit to us getting better and our overall margins will be how far does COVID-19 get down and what's our level of sales and if those stay high then we would expect to go to a higher level of pre tax margin.

Yeah.

Thank you. Our next question comes from Jay sole your line is open.

Great. Thank you so much Ernie I think in 1 of your answers to questions you mentioned something about sales upside.

And I think in the press release, you mentioned that Youre seeing consumers begin to resume more normal activities can you just talk about the strength in the quarter that you've seen to date. How much you think is still a tailwind from stimulus and how much is maybe just reopening consumers really just getting you excited about going out and spend all of the things of what the implication is for sales upside in Q2 and Q3 as you look at.

The potential for sales growth rates remaining.

To your point of unusually high.

Yes, great question, yes.

Yes, so obviously when we looked at the first quarter and that's tough to measure we can't get at all of that data specifically.

Do believe the stimulus checks et cetera, where part of it end of paid.

Clearly of pent up demand issue right from people.

Not having shopped and then we have the something we talked about.

It was from last quarter, you do have that revenge shopping aspect that I think comes out of where people are passionate and wanted to get out there and we are entertaining.

So pieces of that.

But you have the store closure thing, we talked about which is going on all around us. So we believe that.

I would say.

A chunk of our has not been just the stimulus and the.

At 2 of the best of our knowledge of we wouldn't be entering the second quarter with a similar a similar trend which is why we specifically when we did the release.

We put that last bullet point there.

Which is.

I guess it is a little bit more specific than we normally would on how we start at quarter and why we wanted to say that we are entering at similarly, so you wouldn't understand that the.

The overall stimulus check thing isn't the only thing playing and it has to be some of those other issues and our business model.

Store closures I by the way I do believe our business model now resonates more than at even did pre COVID-19.

Think consumers if ever they have even more so now of all of the stress of what's happened in the last year. They appreciate the treasure Hunt entertainment.

Mean time as I mentioned in the script quote Unquote meantime day, I think our model and the fact that we talked about earlier on the call. We've delivered a lot of exciting merchandise, which plays right into this time period.

I think thats the vast majority of why we're getting the sales and to your point. That's why I think there is sales upside as we look out.

Yes, you know what I mean, it's not just from the different.

Stimulus government packages that have taken place or we wouldn't be seeing what seems to be of pretty consistent trend that I think it goes back to what Ernie said, just a couple of questions ago, where for.

For the third quarter fourth quarter and first quarter are home sales were disproportionately.

Benefiting us or the biggest piece of helping us out.

But for home sales now have continued to be strong and what's driving at is the apparel sales have gone up from the fourth quarter and as we've moved and continues to be strong to be a big benefit as we move through.

Up until as we speak today. So it's at Inc. So the stimulus as Ernie said was.

We confirm was more of a March April factor, probably waning as best we can determine but now it has to do with the wardrobe people, but they didn't buy a lot of that and buy a lot of apparel last year in the first and second quarter and Thats I think contributing to our strength right now so so jay to add 1 other thing.

In terms of market share gain as I look out here.

So that really through the balance of the year is 1 of the advantages. We continue to have in this home business. So we learnt to even improve on it is the way we lend to some of the merchants a lot of at margins launch of work virtually in a very effective manner.

And our home Division has a as I mentioned, we have over 500 plus buyers on our home division that have collaborated just beyond even what we did before.

As well as we have satellite offices for not just home.

Of that our overseas that are now buying more merchandise for us than they did before so when you are at.

Feel we can continue to actually now driving an even more eclectic mix of of home, which has the advantage that the consumer can buy at that day, if it's a piece of furniture. They can try it and buy it and think about all of the delivery issues that have taken place or.

So that's all in at a plateau.

In addition to the apparel things Scott was talking about as well as some other that are hot categories in the industry.

Such as the beauty business.

Have.

I give that team of lot of credit, we've really been doing a nice job. They collaborate strongly across division and again at some of the learnings that have taken place I think we're going to of a slight bit of advantage over what we did pre COVID-19 and the way, we're able to flex and leverage all of the different divisions merchant knowledge, so long weighted but that.

As a whole lot of piece of that.

It would make us feel even better about the future.

1 thing we've said when we're generally running well is the both at home goods and <unk>.

Of the consistency of the sales regionally the consistency of the sales.

Based on household income as best we can <unk> the consistency.

In terms of the age of our stores our stores, whether its at Homegoods and <unk> that are.

Over 10 years, and depending even going up.

All of the 20 and 30 or are doing significant comp so it's that broad base.

Uh huh.

Sales that we're doing and then the good news is at.

At home goods, almost all of our stores and at <unk>, The 90 plus percent, where our stores are in the suburban ex urban and rural area of that's where our stores are located and so theyre strong strength across all of those 3 areas in the <unk>.

1 area that's non.

Not doing as well would be the urban stores, but we just don't have that many of them.

Got it thank you for all of the detail.

Thank you.

Thank you and our last question comes from John Kernan. Your line is open.

Danny Congrats on managing through the quarter end congrats on the top line momentum.

Thank you.

Is the guidance for free.

<unk> costs.

Worse since you gave at the fourth quarter the outlook in the fourth quarter I think it was 50 to 60 basis points of pressure off of the Cowen for fiscal 'twenty year.

I've gotten worse and then when we think about the leverage point.

In the model and the total cost.

Continue to come out of SG&A, what do you think is debt.

Comp leverage point is at 4 to 5 in the model how do we think about getting back to that 10, 6% operating margin for fiscal 'twenty.

Yes, again, we haven't.

Been saying that for the last now more than ever and curve of too many puts and takes to get at this point what the breakeven in terms of getting back to the margins, we expect our margins to get better as we move into the back half of them, we would expect them to get.

Significantly better next year.

To be at we'll have to see what level of our sales get to in the back half.

And then what how some of these costs on freight and supply chain.

And wage pressure to determine.

What.

What level of margin, we're going to actually settle in at but other than we expect both the back half, but certainly next year at to be going up significantly and our pre tax.

Margins in terms of freight.

Yes in terms of just even versus 3 months ago, we would expect.

Finalized at this point, but we certainly expect freight costs to persist in would be higher than what we would have anticipated 3 months at a month ago.

Got it so worst in the 60 to 70 basis points of price at every day.

Dave I don't remember, giving at the basis points, but would be worth it would just be worse than what we would of thought.

Got it.

Look John around the around the industry, it's just the freight.

Rates continue to escalate.

Yeah.

Understood.

Okay.

Okay. I believe that was our last call I would like to thank you all for joining us today will be updating you again on our second quarter earnings call in August and from the team here at T. J X. We hope you all stay well and we wish you good health.

Take care.

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

Yeah.

[music].

Ladies and gentlemen, thank you for standing by and welcome to the T. J X companies first quarter of fiscal 2022 of 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 Prescott need to press star 1.

As a reminder of this conference call is being recorded as of today May 19, 2021, I would now like to turn the conference call over to Mr. Ernie Herrman, Chief Executive Officer, and President of the T. J <unk> companies incorporated. Please go ahead Sir.

Thanks, Heidi before we begin Deb has some opening comments. Thank you Ernie and good morning before at looking statements. We make today about the car companies yourself 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 in the company's SEC filings, including without limitation. The form 10-K filed March 31 2021.

Further these comments and the Q&A that follows are copyrighted today, but at the T. J <unk> companies, Inc. Any recording retransmission reproduction or other use of the same for profit or otherwise without prior consent of T. J X is prohibited and a violation of United States copyright and other laws. Additionally.

Good morning.

Joining me and Deb on the call at Scott Goldenberg.

I want to give special recognition to our store distribution center and fulfillment Center associates, who continue to physically come into work.

In recognition of their continued efforts we awarded a vast majority of them an appreciation bonus which was the fourth appreciation bonus that we have paid during the pandemic.

While the health crisis is beginning to improve in some parts of the world.

There are many areas that are still facing challenges or have become Morris.

Hearts go out to everyone, whose lives have been impacted by this virus. We are hopeful that more people around the world will have access to the vaccine in the coming months and that we can move past this health crisis soon.

Moving to our business operations during the first quarter, we were very pleased at our U S stores, we're able to stay open.

However, we continue to have a significant number of our stores in Europe, and Canada that were temporarily closed at certain times throughout the quarter.

Due to government mandates.

Currently approximately 300 stores remain temporarily closed all of which are in either Canada or Europe.

Around the World, we continue to prioritize the health and wellbeing of our associates and customers in our stores, our distribution centers and our offices.

Now I'll recap of our first quarter results.

First I am extremely pleased that our overall opened only comp store sales when compared to fiscal 'twenty increased 16%, which well exceeded our plans.

We believe we saw a benefit from consumers feeling more comfortable leaving their homes visiting our stores and being happy with the brands and values. They found.

Our home businesses across all of our divisions continued their phenomenal sales trends.

Further we saw strong open only comp increases in many other categories and positive open only comp store sales and overall apparel.

Open only comp sales were also outstanding across each of our divisions, which indicates to us that our value proposition continues to resonate and all of our geographies.

I'll talk more about our divisional performance in a moment.

Next overall sales of $10 $1 billion or a first quarter sales record. Despite the temporary closing of our stores for approximately 14% of our quarter.

All of this gives us great confidence that we are set up extremely well to continue driving sales and gain additional market share over the medium to long term.

Our buyers are doing a tremendous job sourcing quality branded merchandise to keep up with the strong consumer demand that we have been saying.

Lastly, first quarter earnings per share of <unk> 44.

We're also well above our plans despite a larger than expected sales loss as our non U S stores were temporarily closed more than we had anticipated.

Now to our divisional performance, which is again compared to fiscal 'twenty, beginning with bar Max.

Carmax is open only comp store sales increased an outstanding 12% and overall sales increased 14% versus the first quarter of fiscal 'twenty.

From our Max is home business continued its excellent performance with a comp increase similar to home goods as shoppers continue to spend on their homes.

We were also very pleased to see of comp sales increase and our overall apparel business, which was driven by strong demand in select categories.

We believe our apparel sales benefited from wardrobe for refreshing as more consumers began resuming more normal activities.

We feel very good about my mom access sales momentum and our ability to flex their merchandize mix to the category of shoppers want.

At Homegoods opened only comp store sales increased a phenomenal 40% during the quarter home goods and homes home sales were remarkable across all major categories and geographic regions at their eclectic mix of home fashions from around the world continue to resonate with consumers.

Similar to home sales at <unk>, we believe home goods as sales continue to benefit from consumers spending more time in their homes during the health crisis.

We have been aggressively investing in the growth of our home division for many years at of convinced we are set up very well to build upon our market leadership position in the United States.

Yeah.

While Canada continues to face challenges with store closures. We are very encouraged with the sales trends we have seen when our stores are open T.

T J S. Canada's opened only comp store sales increased 9%.

<unk> comp sales at our home sense banner and home sales at winners and Marshalls were also in line with the increase we saw at our Homegoods Division.

Now the T J <unk> international.

Like Canada, Europe faced continued store closures and we expect them to continue into the second quarter as well. However, given the limited time of our stores were permitted to be open customer excitement was very high in response to our valor values was fantastic. We were very pleased with T. J Maxx International It was 11%.

<unk> opened only comp store sales increase.

Given the length of time, our stores were closed in Europe, we saw significant pent up demand when we reopened later in the quarter.

In Australia, where our stores were generally all of them for the entire quarter comp store sales were extremely strong for both our apparel and home categories.

At the E. Commerce overall, we saw terrific growth over first quarter fiscal 'twenty sales levels in both the U S and U K.

We are still on track to launch home goods Dot Com later this year and are looking forward to offering consumers, even more exciting home fashion items at great value online.

Let me take a moment to highlight these strengths.

First is our relentless focus on value.

We believe our value proposition, which is a combination of brand fashion price and quality is as important as ever to consumers.

Okay.

Second is our world class global buying organization of more than 1100 buyers.

These buyers are located in 12 countries across 4 continents and source from a vast network of approximately 21000 vendors.

We believe our 500 plus home buyers around the world allow us to offer consumers a truly global differentiated merchandize mix versus other large retailers.

We strengthened our relationships with many of our vendors and have added thousands of new vendors for apparel and home product over the past year.

All of this allows us to offer of fresh and exciting mix of quality branded merchandise to our shoppers every time they visit.

Next the flexibility of our buying store formats and distribution network allows us to take advantage of consumer trends and hot categories as consumer demand changes.

We also reach a very wide customer demographic and urban ex urban suburban and rural markets.

With our fast turning inventories our customers can discover something new in store and online every time they visit.

EBITDA in Australia, a country, we have entered more recently, we are not price leader.

We have spent decades of establishing relationships with vendors and landlords and building out our global buying offices distribution network systems and infrastructure.

Further we have expansive country specific knowledge of consumer shopping habits and of earn customer loyalty.

We believe our well established global off price retail model and level of international expertise as a tremendous advantage at our size and scale would be very difficult to replicate.

Okay.

Now I'd like to walk through the reasons why we are confident that we can drive sales and traffic growth and of normalized environment.

And why we continue to see a significant opportunity to increase our market share across each of our divisions.

First we believe the appeal of our entertaining treasure Hunt shopping experience gives consumers a compelling reason to shop us.

Based on what we've seen for decades, including in the past year end store shopping is not going away.

Second we see a significant opportunity to grow our global store base at each of our divisions.

In total we believe we can open more than 1600 additional stores to grow to about 6275 stores in the long term just with our current banners in our current countries.

Availability of real estate is terrific and we see plenty of opportunities to open new stores or relocate existing stores.

Further we believe our strategy of locating stores in convenient highly accessible locations makes it very easy for shoppers to find and visit us.

We are anticipating incremental traffic once consumers return to their workplaces and go up more as they would be passing by our stores much more frequently.

Next is our focus on marketing to attract new shoppers, while staying top of mind with our existing customers. This.

This year, we have already launched new campaigns across TV digital and social media platforms for a number of our banners. These.

Of these campaigns continue to reinforce our value leadership, while also highlighting discovery fashion and quality I.

I hope you have seen them the creative is excellent let.

Let me take a moment to highlight a couple of them.

First.

We took a unique approach for mothers day and created a multi brand music video in the U S that was highly successful and was viewed by more than 17 million times on Youtube over a 2 week period.

This work continues to reflect our leadership in fashion and value and helps us show that our stores can be for everyone.

Further we continue to see strong overall customer satisfaction scores, where we are open including on our ongoing health and safety protocol measurements.

Fourth we see a great opportunity to capture a bigger share of the consumer's wallet due to other retailers closing stores.

We also believe that these store closures may lead to even better product and real estate availability and more favorable lease terms.

Lastly, we are investing in new stores, and Remodels and our distribution network and systems to ensure we have the infrastructure in place to support our global growth plans.

In closing I want to again recognize the exceptional talent that we have across this entire company.

With outsized opened only comps from the first quarter, our organization really stepped up from buyers who successfully chased the goods in the marketplace to our associates and planning and allocation distribution centers logistics and store operations.

Each of these groups has a vital role to play to ensure our merchandise flow can keep up with the consumer demand we have been seeing.

It's the collective efforts of all of our associates and their dedication to T. J X that brings our business to life for our customers every day and all kinds of retail environments.

Our outstanding first quarter results tell us that consumers are seeking out our branded quality merchandise at great values.

Clearly they are enjoying our entertaining treasure hunt shopping experience.

Overall open only comp store sales trends for the start of the second quarter remained similar to the first quarter.

Looking ahead I am convinced at T. J Maxx is very well positioned to emerge from this health crisis in a position of great strength.

We see numerous opportunities to continue at our global growth and are excited about the runway for growth.

That we see ahead for T J X.

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

Thanks, Ernie and good morning, everyone.

Like to first Echo Ernie as comments and thank all of our global associates for their hard work and continued commitment to our business.

Okay.

Quarter, we continued to see of very strong increase in our average basket is consumers put more items in 2 of their cards in the U S, where we opened where we were open the entire quarter customer traffic compared to fiscal 2008 increased for the first time since the start of the pandemic at <unk>.

<unk>, we saw a significant improvement in customer traffic versus the fourth quarter and at home goods customer traffic remained outstanding.

Overall sales for the first quarter increased 129% over fiscal 'twenty, 1 as stores were closed for approximately 50% of the first quarter last year more importantly, when comparing to fiscal 'twenty first quarter sales increased a very strong 9% despite.

The negative impact of approximately $1, 1 to $1 $2 billion.

Of lost sales due to the temporary closings of our stores across.

T J X for about for.

Expect to persist for the remainder of the year.

Moving.

To the bottom line first quarter earnings per share were <unk> 44 cents as detailed in our press release. This morning, we believe the temporary store closures in Europe and Canada. During the first quarter resulted in a significant loss of profit dollars with an estimated negative impact to earnings per share of approximately 21.

<unk> to 'twenty 4.

Additionally, I want to remind you that our first quarter pre tax margin and earnings per share reflect some significant expense headwinds compared to the first quarter of fiscal 'twenty.

These include approximately $200 million.

Dollars of net costs related to COVID-19, approximately 40 basis points of additional interest expense and incremental costs from freight supply chain and wage pressures.

As for inventory it was up 3% last year and store levels are where we want them to be our borrowers are doing a great job sourcing merchandise and had been able to chase the goods, we need to satisfy consumer demand.

To reiterate availability of merchandise is excellent.

Moving on to our cash flow and liquidity, we ended the quarter in a very strong liquidity position with $8 8 billion in cash with.

Secondly, this morning, we announced the make whole calls for a 1.25 billion principal outstanding of 3 5% notes maturing in 2025, and our $750 million outstanding 375% notes maturing in 2027, both of which were issued last April.

As a result of this action, we are expecting a pretax debt extinguishment charge of approximately $250 million in the second quarter we.

We expect the net results of both of these actions to be at $2 $7 billion reduction in our outstanding debt and over 900 and over $90 million of annualized interest expense savings further after these actions and including the tender refinancing this past November.

We expect the average interest rate on our outstanding debt will be about 2 5%, which is in line with our pre COVID-19 level.

Lastly, we declared a dividend of <unk> 26 per share in the first quarter and the second quarter of fiscal 'twenty. 2 we're planning to declare a dividend at the same rates subject to board approval.

Now to the second quarter as of point of reference for the start of the second quarter overall open only comp store sales trends remain similar to the first quarter.

<unk> and Europe being closed for about 7% of for the quarter. We are planning a $275 million to $325 million negative impact to our overall second quarter sales due to these store closures.

These expectations could be negatively impacted further if current mandates are extended or new ones are put in place as they were last quarter.

At this time, we are not planning any significant store closures in the back half of the year.

Lance.

Now we're happy to take your questions as we do every quarter, we're going to ask you that.

That you. Please limit your questions to 1 per person in 1 part to each question, we respectfully ask that everyone's stick with this request of both keep the call on schedule and so that we can answer questions from as many analysts as we can thanks and now we will open it up for questions.

Okay.

Thanks for taking my question good morning, really great quarter.

I would love to actually hear more on the traffic side of the equation.

We know you guys do a great job once once you get people in stores.

Can you talk a little bit about the consumer's willingness to come back at the stores. How that's been building is at vaccine related are you seeing that older customer come in as they get vaccinated and start to return to in person shopping again.

Thanks, Scott. Thanks, Ernie Yeah, Great question of them are traffic has been very healthy Scott I'll give you.

A little bit of a trend line discussion there, but nothing in terms of.

Nothing standing out in terms of of difference in age age demographics by the way.

But we have such a broad based age demographics graphics across the business, so probably less likely for us there, but scott on the traffic trends yeah, it's hard to get real rates at on the age what we've been seeing at least for the last couple of quarters is a significant number of new the new customers that we're getting.

Adding back you are skewing, even younger remarkably at home goods at even continuing so.

Overall, the average age of for customers in both boxes is likely.

When we finish up and get current results probably younger than it has been so that's really good.

The traffic patterns once we got past some of the weather issues that we called out on our last call have you been consistently.

Strong through will call at the marble. The front you know that February March and continuing right up to as Ernie talked about similar sales today and that's at both.

Speaking really more <unk> and home goods because of the all of the closures that we've had so.

The baskets you know has been remarkably strong strong strong average basket and Omar and has not has not is not really a decreased at all so customers continue to put more units and the traffic continues to be.

Strong and consistent consistently.

Staying that way.

Thanks.

Thank you.

Our next question comes from Matt Boss Your line is open.

Great and congrats on the improvement as well.

Thank you it's kind of a 2 part question probably more for for Scott I guess first non merchandise margin. So the improvement this quarter relative to pre pandemic. Despite despite the freight I thought was was really impressive I guess, so first just sustainability of or your ability to us to.

Continue that trend in your opinion and then second at the EBIT margin level. So I think 3 months ago. Scott you you laid it out well theres a lot of moving parts, but I think you basically said at a 3 comp you see 30 to 40 basis points of underlying margin pressure, but then we needed to consider of freight supply chain and COVID-19 cause.

This year, so am I thinking about.

These pieces right and any factors or changes to these factors to think about now that we're 3 months later.

Yeah, Matt I.

I think youre right a lot of that is for Scott I will just jump in on the.

On the on the merchandise margin.

The healthy merchandise margin certainly what we're seeing and unfortunately of lines up with our model and again I give the teams a lot of credit.

We went in with the right amount of liquidity at.

And so the teams did not I would say they were right in the sweet spot of how much in this at this applies to all of the divisions, most especially obviously right now of Mara Max end and home goods.

Buying to the about the right level of trend and then when youre staying on trend like that with what's going on the buyers have done a great job at.

At being able to buy so opportunistically in the market.

So that helped the sales being so strong has been a big benefit on our markdown rate also helping our merchandize margin.

As I as I said in my script at it's coming out of cross where we're making.

Advantageous buys across whether it's at the level of good vendors.

Moderate our best of vendors, that's been everywhere, but in trending categories, which has been key so we've had certain categories that are outpacing the store and the merchants have done a great job of buying into those at the right cost and at the right retail because as you know we're ultra sensitive about where we retailer of goods at end, so again I get it.

A lot of credit I will tell you we have a challenge a.

And so there might be a little bit of a mark gone or markdown jeopardy, and end of window. There of a few months, where its going to be a little more challenging and I think to show that merchandise margin at these rates and by the way I'm talking aside from freight which has obviously gone up.

Uh huh.

Everywhere I'm I'm I'm talking kind of take that out of the equation, but we might have a little challenge. There. However, we're so opportunistic.

I have faith that we can do better than what we're probably thinking our challenges there I will now let Scott talk to.

Talk to them margins, yes, I think at just good just read a little with Ernie said on the merchandize margin in the back half. So net I think if we compare it to.

Again, as we move I think the second quarter trying to make comparisons and we feel good about as Ernie.

At the overall merchandize margin, especially if you take freight out of the equation compared to 2 years 2 years ago. This third quarter last year, where Ernie was comparing to 21 is really on the mark on and markdowns. We also had some technical issues, where we had some accruals which would end both on markdowns.

And shrink, which we reversed in the back half of the year, which are not of fiscal 'twenty issue, but when comparing to last year.

You know of.

Our benefits that we saw last year in the back half of that we wont repeat that's a good point Scott So just to clarify Matt when I was talking about and the challenge will be against at FY 'twenty, 1 not not against 20 as much.

So yes, so the other aspect is in terms of.

Some of the tone of your flow through it's hard to isolate.

Especially when you look at the quarter. We just had when you have we of COVID-19 costs, which we're still.

Roughly in full for us and we can talk about that more but we would expect those to moderate and already you can talk about the more as we move through the second quarter end back half of the year I think what at least at the moment.

Stubborn.

And we're still in the middle of that.

Assessing like everyone else, our freight costs, but probably compared to both last what we talked 3 months ago end early on that the freight costs are probably going to be stubbornly high at least for the rest of this year as well.

<unk> with the same issues of of <unk>.

Driver shortages and rate increases likely to be higher than what we had originally thought so I think that you know.

That piece of it is still going to is going to be persisting having.

Having said that we had been you know I think as Ernie.

You know mentioned, we're doing a great job of getting the goods paying more for it but we're getting goods. Our inventories are in good shape and the buyer in our planning and allocation teams had been allocating those goods and doing a great job as you can see by ourselves on the other hand of wage costs had been theres been pressure Morris at still.

All of stubborn in the D. C is as we've had a number of our D. C is where we've had wage increase our wage rates, but on the positive side. Both in the stores in the D. C is although we have pockets of challenges we have been able to hire back to our stepping close to our staffing levels, we need to staff the store.

Albeit at a.

On sales at this point.

Okay.

Thank you. Our next question comes from Paul Lajoie. Your line is open.

Hey, Thanks, guys for.

Can you talk about from our Mac specifically.

Sales were up about 800 million or 14, 5% versus the.

First quarter of 19 for them.

You called out in 'twenty, but margins are down 130 basis points. So I'm. Just curious if you can talk specifically within that business, how the deleverage where that's coming from and what sort of increases you might need to see versus 19 for margins to stabilize or.

Is there at some point in the year, where you see the pressure point debating on that margin.

Yeah, Yeah, again, I can certainly answered for the first quarter, while the second quarter goes back to what you know how COVID-19 costs, how we drop how those decrease.

What costs, we have to see what costs and Ernie can talk a little about this on in terms of a power of how much apparel sales and how that relates to expenses in average retail.

So but.

But COVID-19 costs.

Is a big reason for the deleverage as well as others, but yeah. The COVID-19 costs alone to earnings point in and of itself was more than the Delta of the 130 right base of at Hawaiian day.

But.

I don't want to be 1 of the straightforward on that we obviously would've leveraged end did leverage on those sales, but net net those 2 kind of washed each other and then the rest has to do with you know which could get better again in the back half of you having to do we are average retails were down but they did get better as we move through the quarter as our apparel.

Sales started to improve in.

And also are in the rest of the deleverage was just due to our distribution center and wage cost. So the primary difference I would say they are more or less offset each other with the COVID-19 costs and the leverage and then we've just still had the deleverage of wage and the DC expenses.

Okay.

Thank you. Our next question comes from Kimberly Greenberger Your line is open.

Okay, great. Thank you so much.

I wanted to just talk a little bit about.

What's going on at international when I when I look at the profit swing here in the first quarter compared to 2 years ago at its about a 250 million dollar negative profit swing from that $28 million operating income 2 years at kind of the $222 million loss here this quarter.

And if I E. If theres a reason to believe that international once it reopens and sort of gets back to normal in the future. If it goes back to 2000, you know calendar year 2019 profitability.

It would suggest that actually operating income in aggregate here in the first quarter.

It would have been up about 10% from 2 years ago, and that's even with all of the COVID-19 cost in there and all of the freight inflation in wages and everything else. So I'm just.

It looks like the wait in the P&L here in Q1, if I if I look at it from a different angle, it's really coming from the international piece and sort of everything else.

You know kind of came out at the wash and end delivered.

Pretty nice profit growth, if we sort of take that out.

So Tim.

To me it looks like you are probably offsetting a lot of that a lot of those cost pressures.

Am I correct in that assumption and as we move through the year and the COVID-19 costs start to come off.

Does that mean at actually margins.

Get back to end maybe of bonds.

You were sitting in in calendar year 2019. Thanks.

Yeah.

A lot of.

Europe being the bigger piece of that.

So that is correct.

As you would expect that you would off you would offset of you know.

A good chunk of that on the high average comps.

That we did get.

And then again.

But the reason of why we still would go down as you still have you still have higher than normal cost increases.

Both in the wage.

At the rate in the free Tracy so not all of that will go away in the back half so.

Not giving guidance but.

I think as we've said before obviously, we don't know what the sales level how high they could be but you know you would expect us not at this at this point still to be reaching due to that.

Some level of COVID-19 costs, and some of this deleverage to be with the freight to be you know of reaching the percent of.

2000 in fiscal 'twenty or for COVID-19, so Kimberly at at a high level of the way you said that is the way that I'm looking at you you can look at at that way this quarter, though that if you had had.

If we had had Europe and Canada on it we would've had a lock on the wash that differences and Scott mentioned this we at such an over achievement on the sales that I mean, you'd have you'd have to be counting on of 16 open on a comp sales and when the rest of the Europe at if we have those type of comp sales.

Yeah, we'd have a different discussion.

Where maybe the margin is back to more like at those levels, but that you'd have to have these way outpaced comp sales like we just did.

Now to your other point, though and Scott mentioned at the end here we are.

Looking at the COVID-19 costs is something we can take a hard look at here in the near future as we move ahead, each quarter and as the environment normalizes. We're.

We're going to make some improvements on those lines some of that Wilhelm.

So I hope that answered.

Hope that answered I wear.

We do believe there's a sales upside at all along in another plus we have on the cost line is our average retail.

<unk> has been moderating at Scott I think started to allude to this as we go forward even into the back half of them were looking like it's kind of moderate even more because we're seeing some more best brands goods come.

Coming in on order as we get the third quarter, which is going to help our average ticket and that should help our expense on hum on processing.

Come down a little bit so.

Very good question a lot of moving parts.

Great color. Thanks.

Thank you.

Thank you. Our next question comes from Paul Trussell Your line is open.

Good morning, my congrats as well on the improvement I wanted to dig in a bit more on the top.

Top line at.

And maybe you can discuss a bit more of what you're seeing in terms of.

Category.

Standouts in particular is there any site of the strength in home are deep.

<unk> celebrating end and we'd love to hear more about your ability to really stay in stock and to what extent, you're really out of needing to case of product in the marketplace.

But what's this robust demand.

<unk>.

Yeah.

No great great Pos so standout categories I start with the most obvious 1 which is our home business is remarkably consistent of as I said in the script.

I mean, you're looking at 40 comps kind of what we did in the first quarter and again at that.

Basically was where we were in every division even in the full family stores and a T J Maxx and Marshalls.

Up in Canada home sense.

Hum.

So remarkable consistency in the neat thing there is we have a lot of broad bay is consistent throughout our entire home business of whether its big ticket.

Areas.

Like.

Whether it's furniture's of rugs or of decorative accessories everything was good there isn't really 1 category and this is where I give our teams planning and allocation of.

And our and this is not just in the home area.

Our buying teams are planning allocation teams have been getting the goods fueling at so that you you know your the second part of your question was the deceleration of at home.

We have really not seen at you know I don't think were kind of expect that to stay at that.

Almost artificially high level of that it did in the first quarter, but I think we have opportunity over the next quarter to stay up in the round pretty close to that end and we're not having a problem and end the home area of stock D&O staying in stock, which was a third part of your question and we're not.

Actually having a problem where apparel has now started to improve for us.

Paul I think you were at you know asking what else is standing out. So we have a handful of apparel categories, which I won't give the specifics on which ones, but they are really kicking in as the quarter went on and going into the.

Going into the second quarter and the nice thing that often happens is when the weather shifts in apparel kicks in if there was a trend line prior usually our home business.

Takes more of a hit where the consumer moves off.

Off of off of home for a little bit and yeah again, our home goods isn't going to continue at 40 comps, but it it did not move off of hardly at all and our apparel just kicked in and that's 1 reason you are seeing these outpaced comps from us.

Really at the at at this first quarter.

Chase chasing product flow of product has been a non issue I say, it's a non issue because of the teams of really executed so well and they are working so and I give of logistics credit I give.

Really everybody at involve credit to keep fuel, it's not easy to keep fueling of 16 comp.

And that's why I liked your question when you asked it because it is an unusual time for us to be running an open only 16 comp and I just again give credit to all of the T. J <unk> associates that are involved in that because they're making of happened and they havent position going into the second quarter.

Every bit as well as we were in the first quarter.

Hopefully that answers your question.

Yes, well kudos for the team. Thank you for the color and best of luck.

Thank you Paul.

Thank you. Our next question comes from Ike <unk>. Your line is open.

Hey, everyone of them add my congrats Scott 2 questions for you on the cost structure at Kobe calls.

$200 million of thank you said this quarter, which is down from 270 per quarter, which is what youre seeing in the backend of what's your expectation for that over the remainder of the year on standard.

Be less cost.

From a model will give them of reopening of congratulations but kind of curious your thoughts there and then.

My rough math is of your SG&A per store at when we exclude about COVID-19 of course is actually below where it was 2 years ago.

Just kind of things youre getting into romel store leaner of the costs you've taken them. What do you think are sustainable.

Once we kind of normalize just kind of curious how you how you talk about the cost structure of a per store basis.

Yeah, Great question in terms of the COVID-19 costs.

We would at right now where do you expect them to be coming down in the second quarter slightly and but we're I think as Ernie said, we're going to evaluate that based on the environment and then we would be expecting them to be coming down substantially at third and fourth quarter Your point.

The world more normalizes, what we've been trying to do is keep.

Associate and customer safety still.

I guess, we've looked at some of our and we've talked about this we of the Greeters at the front of our stores which have.

It's created of course, but it's also created a <unk>.

Customer service improvement perception in our safety, which is why we do believe that some of those extra costs have allowed us to play offense to actually drive our sales ironically at.

And so we are going to ease our way off at and not just do a pendulum swing quick move.

We believe it's been helping our top line.

However, we know we need to moderate on that and we will do at just like Scott said and we're going to take a hard look at especially as you get sort of a third quarter and fourth quarter.

So hopefully that that that I just wanted to give you some color on why.

We arent going to necessarily move at that as fast because of it it's been a top line driver at terms of your question on SG&A at I'd actually have to get back to you in terms of we're up about 4% on a per store basis versus 'twenty, but it's at this quarter, it's a little difficult at I have to segregate that out because.

As you you don't have you have.

Still have a fair number of expenses in Europe, and Canada without the typical type of sales that you might expect.

And then we had the outside sales in <unk> and home goods. So the overall, we were up about 4% versus our fiscal 'twenty.

Hey, guys.

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

Hey, guys. Thanks for all of the detail I'm, taking a question here I guess Scott of Sim.

A question of trying to help me boil. This down can you help us think what the SG&A dollar.

Those are for the year and what do you think COVID-19 costs are for the year in the budget and then with.

With all the noise and you laid out the closures I think as we take the inputs you gave us probably excluding the closures would've been about 2 billion higher on sales versus first quarter fiscal 'twenty and then when we add back of your 'twenty. 1 of 24 cents of you pointed to which was I think only for the closures you'd be at about at $9 9 to 10 point for.

Margin in the quarter compared to the 10.1.

First quarter 2 years ago. So at that starting point I know you've been asked to go through margins of bunch of different ways, but with that as a starting point from here it sounds like the incremental puts and takes.

It gets sequentially better going forward, except for free which you said you now got visibility that it would be tough, but as you look at <unk> for Q C of the COVID-19 costs coming down international reopening some of the AUR tailwind some of the mix moving back towards apparel am I thinking about that right that if we kind of reorient.

For the first quarter of last year that way that we should see sequential improvement in the in the underlying margin going forward to the model.

Again, a lot of this will depend I think again, we're still evaluating the COVID-19 costs, so not again, not giving up the costs at the other than we expect them to moderate.

Both in dollars and as a percent sales impact.

And I think Ernie reiterated.

1 of a lot of it is store will depend on the merchandize margin.

And in terms of what the.

What our mark on and markdowns will be in at the level of sales so again.

If we have outsized sales and were able to.

You know by better the quality of real wildcard is freight costs and how how high they're going to be in the back half of the year.

But we didn't say there are a lot of the other cost wins are going to be there at least for now the wage and the distribution cost.

We're cycling opening up of both of a lot of our of.

A lot of our facilities and we did a lot we opened up 6 3 pls are just additional what we'll call a.

Processing.

Space last year that we're we're going to go against in the back half of including Lordstown of home goods distribution center. So I don't think our distribute our supply chain slash wage are gonna be levering at this point based on what we know and the wildcard is really being merchandise margin.

Freight with COVID-19 with COVID-19 going down so.

I think the biggest you know.

Okay.

Thank you. Our next question comes from Jay sole your line is open.

Great. Thank you so much Ernie I think in 1 of your answers to questions you mentioned something about sales upside.

And I think in the press release, you mentioned that Youre seeing consumers begin to resume more normal activities can you just talk about where the strength in the core of that you've seen to date. How much you think is still a tailwind from stimulus and how much is maybe just reopening consumers really just getting you excited about going out and spend other things of what the implication is for sales upside in Q2 and Q3.

Look out and the potential for sales growth rates remaining.

To your point unusually high yes.

Yes, great question, yes.

Yeah. So obviously when we looked at the first quarter of and that's top of the measure we can't get at all of that data specifically.

We do believe the stimulus checks et cetera, where we're part of it end of paved clearly of pent up demand issue right from people.

Not having shopped end and then we have the something we talked about I think it was from last quarter. You do have that revenge shopping aspect that I think comes out of where people are passionate and wanted to get out there and we are entertaining.

So pieces of that but you have the store closure of thing we talked about which is going on all around us. So we believe that Ah I would say.

A chunk of our has not been just the stimulus and the.

At 2 of the best of our knowledge of we wouldn't be entering the second quarter with a similar a similar trend which is why we specifically when we did the release.

We put that last bullet point there.

Which is.

I guess is a little bit more specific than we normally would on how we start of quarter and why we wanted to say that we are entering at similarly, so you wouldn't understand that the.

The overall stimulus check thing isn't the only thing playing and it has to be some of those other issues and our business model.

Store closures I by the way I do believe our business model now resonates more than at even did pre COVID-19.

I think consumers if ever they have even more so now of all of the stress of what's happened in the last year. They appreciate the treasure Hunt entertainment.

My time as I mentioned in the script quote Unquote meantime day.

Inc. Our model and the fact that we talked about earlier on the call. We've delivered a lot of exciting merchandise, which plays right into this time period.

I think thats the vast majority of why we're getting the sales and to your point. That's why I think there is sales upside as we look out at.

Yes, what I mean at.

It's not just from the different.

Stimulus government packages that have taken place, but we wouldn't be seeing what seems to be of pretty consistent trend that I think it goes back to what Ernie said, just a couple of questions ago, where.

For the third quarter fourth quarter and first quarter are home sales were disproportionately.

Of benefiting us or the biggest piece of helping us out.

But for home sales now have continued to be strong and what's driving at is the apparel sales have gone up from the fourth quarter and as we've moved and continued to be strong you know to be a big benefit as we move through.

Until as we speak today. So it's at Inc. So the stimulus as Ernie said was.

As best we confirm was more of a March April factor.

Robley waning as best we can determine but now it has to do with the wardrobe people, but they didn't buy a lot of they didn't buy a lot of apparel last year in the first and second quarter and Thats I think contributing to our strength right now so so Jay to add 1 other thing in terms of market share gain as I look out here.

Really through the balance of the year is 1 of the advantages. We continue to have in this home business, what we learned to even improve on it is the way we lend to some of the merchants a lot of at merchants with a launch of work virtually in a very effective manner.

And our home Division has a as I mentioned, we have over 500 plus buyers on our home division that have collaborated just beyond even what we did before.

As well as we have satellite offices for not just home.

At our overseas that are now buying more merchandise for us than they did before.

So when you are at.

Feel we can continue to actually now driving at and even more eclectic mix of of home, which has the advantage that the consumer can buy at that day, if it's a piece of furniture. They can try it and buy it I mean think about all of the delivery issues that have taken place or.

So that's all in at at Plateau.

In addition to the apparel things Scott was talking about as well as some other that are hot categories in the industry.

Such as the beauty business.

Have.

Ah I give that team of lot of credit, we've really been doing a nice job. They collaborate strongly across division and again at some of the learnings that have taken place I think we're going to have a slight bit of advantage over what we did pre COVID-19 and the way, we're able to flex and leverage all of the different divisions merchant knowledge. So long.

Long weighted but that's a whole lot of piece of that.

Is make us feel even better about the future and 1 thing we've said when we're generally running well is the both at home goods and <unk>.

For the consistency of the sales regionally the consistency of the sales.

Based on household income as best we can <unk> the consistency.

In terms of the age of our stores our stores, whether it's at home goods and mom acts that are.

Over 10 years end, depending even going up as is all of the 20 and 30 or are doing significant comp. So it's that broad base.

Sales that we're doing and then of the good news is at.

At home goods, almost all our stores in EMR, Max the 90 plus percent, where our stores are in the suburban ex urban and rural area of that's where our stores are located and so they're strong strength across all of those 3 areas.

1 area, that's not doing as well would be the urban stores, but we just don't have that many of them.

Got it thank you for all of the detail.

Thank you.

Thank you and our last question comes from John Kernan. Your line is open.

Danny Congrats on managing through the quarter end congrats on the top line momentum.

Got it thank you.

Is the guidance for great.

<unk> costs gotten worse since you gave at the fourth quarter at the outlook in the fourth quarter. I think it was 50 to 60 basis points of pressure off of the Cowen for fiscal 'twenty year.

Has that gotten worse and then when we think about the leverage point.

In the model and the COVID-19 task.

You know continue to come out of SG&A, what do you think is there.

Comp leverage point is at port of 5 in the model how do we think about getting back to that 10, 6% operating margin for fiscal 'twenty.

Yeah, we had again we have to.

We've been saying this for the last down more than ever and COVID-19 too many puts and takes to get at this point what the breakeven in terms of getting back to the margins, we expect our margins to get better as we move into the back half of them, we would expect them to get.

Significantly better next year.

To be at we'll have to see what level of our sales get to in the back half.

And then what how some of these costs on freight and supply chain.

And wage pressure to determine.

What.

What level of margin, we're going to actually settle in at but other than we expect both the back half, but certainly next year it could be going up significantly and our pre tax you know.

Margins in terms of freight.

Yes in terms of just even versus 3 months ago, we would expect.

Finalized at this point, but we certainly expect freight costs to persist in would be higher than what we would have anticipated 3 months at a month ago.

Got it so worst in the 50 to 70 basis points of credit you've ever day, but I don't remember, giving at the basis points, but would be worth it would just be worse than what we would of thought at all.

If you look John around the around the industry. It's just the freight.

Rates continue to escalate.

Yeah.

Understood.

Yeah.

Take care.

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

Q1 2022 TJX Companies Inc Earnings Call

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