Q3 2022 TJX Companies Inc Earnings Call

Very strong increase in our average basket across all divisions, driven by customers, putting more items into their cards. Overall average ticket was flat and improved for the fourth consecutive quarter.

Overall customer traffic was up driven by a mid single digit traffic increase and.

In the United States.

As Ernie mentioned, we believe our pricing initiative is working as we've rolled it out very well.

Rolling it out to very select items across categories. We're extremely pleased that sales inventory turns and the markdown rates in the third quarter remained very strong where we have select.

<unk> adjusted our retails.

Across each of our divisions third quarter opened only comp store sales increase was also excellent at <unk> open only comp store sales increased a very strong 11% and divisional profit dollars were up 21% versus fiscal 'twenty.

<unk> home business continued its outstanding performance posting a comp increase in line with Homegoods and apparel comp sales were up mid single digits. Further <unk> saw an increase in customer traffic had a very strong average basket and sales across all geographies were excellent.

At Homegoods opened only comp store sales increase the phenomenal, 34% with consistent strength across all major categories and geographic regions for both home goods and home.

Homegoods saw outstanding increases in both customer traffic and average basket. We're also very pleased.

With Homegoods divisional profit dollars, which were up 52% versus fiscal 'twenty. As a reminder, homegoods margin is disproportionately impacted by freight increases due to its product mix.

When looking at more maxx in Homegoods divisions combined versus fiscal 'twenty Taupe total opened only.

Comp store sales for the U S increased 16% and profit dollars were up 26%.

And Canada opened only comp store sales were up 8% and a T. J Maxx International comp store sales were up 10% comp sales at both divisions, who are driven by a strong increase.

And average basket.

Further similar to the U S home sales across all of our Canadian and European divisions were outstanding.

Next our overall pre tax margin for <unk> in the third quarter was 11% up 30 basis points versus fiscal 'twenty, our pre tax margin.

This reflects strong expense leverage due to our excellent sales growth. We also saw a significant increase in our merchandise margin driven by strong mark on and lower markdowns, Despite 160 basis points of incremental freight expense.

These increases more than offset.

Substantial investments to expand our distribution capacity higher incentive accruals and wage costs as well as 50 basis points of net COVID-19 costs.

Moving to the bottom line third quarter earnings per share of <unk> 84 were up an outstanding 24% versus 68 in fiscal 'twenty.

<unk>, our balance sheet inventories up 4% on a constant currency basis versus the third quarter of fiscal 'twenty.

We were very pleased that our inventory levels on a per store basis improved in the third quarter versus both the first and second quarters again, and we can't emphasize this enough availability of koala.

<unk> branded merchandize is excellent and we're confident that we have plenty of inventory in our stores and online for the holiday season.

Moving on to our liquidity and shareholder distributions during the third quarter, we generated $1 billion in operating cash flow and ended the quarter with $6 8 billion in cash in the third quarter.

We returned $1 1 billion to shareholders through our buyback and dividend programs for the full year, we have increased our range of our buyback by $500 million and now expect to repurchase $1 75 to two point <unk> billion of <unk> stock.

And now I will turn it back to Ernie.

Thanks Scott.

Now I'd like to highlight the opportunities that we see to drive sales in the fourth quarter.

First and most importantly, we will deliver great Gibson value for the holidays, we are in a terrific position to flow fresh product multiple times, a week to all of our stores and online this holiday.

<unk> season.

Since reopening our stores last year, we have been buying with longer lead times for many of our approximately 21000 vendors to compensate for supply chain delays.

Further <unk>.

Vas vendor universe is by far the largest in off price and has always allowed us to have.

Quality branded merchandise for our shoppers.

Importantly, most of the inventory we need for the holiday season has already been delivered to us or are scheduled to arrive in stores and online in time for the holidays.

This leads me to my second point, which is that we are set up extremely well as.

A gifting destination for consumers this holiday season.

Our store shelves are full with great gifting selections today, and we expect them to continue to be that way throughout the holiday shopping season.

We expect to have something for everyone on consumer shopping lists and to offer an exciting and inspiring treasure hunt shopping experience.

We also believe that our great values will resonate with consumers as much as ever in an inflationary environment.

Third our store locations are convenient for shoppers are stores are generally in Egypt access strip centers and often near other high traffic retailers like grocery stores that consumers.

It multiple times throughout the season.

Making for an efficient shopping trip.

Next we believe our holiday marketing campaigns, which started earlier this month will help drive new and existing customers to our banners. This.

This year each of our divisions will showcase our differentiated.

Vince shopping experience by reinforcing our value leadership, while also highlighting the fresh flow of merchandise throughout the holiday season with messaging such as endless selection great prices all season long.

In the U S and in Canada, we will leverage the strength of our retail brands together in multi banner campaign.

<unk>.

In Europe, we have a strong cross channel marketing plan, which includes television for the first time ever across all of our European markets.

At the E Commerce, we launched Homegoods dot com in September and are happy to offer consumers are exciting and collect the comscore.

<unk> selections 24 seven.

Looking ahead, we plan to bring more home categories to Homegoods Dot com.

On all of our e-commerce sites in the U S and in the U K, we plan to offer exciting gift selections for the holidays that complement our in store Assortments.

Like our stores Newmar.

Merchandise will be arriving frequently on our sites, making for an exciting online shock shopping experience.

Okay.

Okay beyond this year, we believe we are set up extremely well to significantly grow our market share and improve our profitability.

On the top line, we see tremendous opportunity.

With our sales and traffic driving initiatives and our global store growth plans.

We have gained significant market share this year, and we see excellent opportunities to keep attracting more consumers around the world.

Giving us confidence is the appeal of our values, great brands and treasure Hunt shopping experience.

<unk> when all of the countries, we have brought our off price concept around the world too. It has resonated with consumers seeking great brands and fashions at great value.

In terms of profitability I want to reiterate that we remain highly focused on improving our pre.

Its margin profile over the medium to long term.

We believe our topline initiatives can lead to outsized sales, which is our best opportunity to offset some of the persistent cost pressures we face.

In addition, we're very optimistic about the margin opportunity from our strategy to surgically adjust retails.

While maintaining our value proposition for consumers.

Yes.

Yeah.

Turning to our ESG efforts.

Start by saying that protecting the health and wellbeing of our associates and our customers remains a top priority as it has throughout the pandemic.

I also am pleased to share with you.

Tax at our 2021 global corporate responsibility report was published this past quarter and is available on T. J Maxx Dot com.

The report summarizes our fiscal 2021 initiatives and progress within our four areas of focus workplace communities.

And environmental sustainability and responsible business.

In addition to our report we have published an appendix of relative ESG data and frameworks and.

Including our first disclosure that is aligned to select metrics from the sustainability accounting standards Board.

<unk> <unk>.

You can learn more about our efforts in our report, but I'd like to share a few highlights of our latest work with you now.

Spoke on our last call about our commitment to inclusion and diversity and our work to help support a more inclusive and diverse organization.

Since that time, we are well on our way to.

Or set a variety of new programs for our associates, including new mentoring programs associated led inclusion and diversity of advisory boards and expanded partnerships with community based organizations to support our recruitment efforts.

We also recently completed our global associates inclusion.

Launching the survey, which will help inform our longer term priorities.

Looking ahead, we expect to publish our 2020 EEO one data by the end of the year.

And environmental sustainability, we made progress on our global science based.

The emissions reduction target.

We are pleased to report a 32% reduction at the end of fiscal 2021 and greenhouse gas emissions from our direct operations against fiscal 2017.

Our global approach to reducing our climate impact includes.

The emissions reductions actions focused on reducing our energy consumption and expense.

So investing in energy efficiency projects and sourcing low carbon and renewable energy sources for our direct operations.

I look forward to continuing to update you on our progress in this important area.

And as always there was a lot more information on T J Maxx Dot com.

In closing I want to again, thank each of our associates around the globe, who helped us achieve outstanding third quarter results.

We feel terrific about our overall execution.

Strong start to the fourth.

<unk> and our initiatives this holiday season.

We are in an excellent inventory position to flow goods to our stores and are confident our associates are in place to meet the sales demand.

I want to reiterate my confidence in the future at T J Maxx, and our ability to grow our topline and profitability over the medium.

But long term as.

As an off price leader in every country. We operate in we believe we are in an excellent position to capture additional market share for many years to come and to become a $60 billion plus revenue company.

Now I will turn the call back to Scott for a few additional comments.

And then we will.

Two quick questions.

Thanks, again, Ernie and just a few brief notes before we move to Q&A in terms of the fourth quarter. We are very pleased that overall open only comp store sales growth to start the fourth quarter is up mid teams keep in mind that comp sales growth in the fourth quarter of.

Fiscal 'twenty was a very strong 6%.

As to our fourth quarter pre tax margin, we're continuing to face significant expense headwinds specifically, we're currently expecting incremental freight costs to be about 80 to 90 basis points more than the third quarter. This is primarily due to the significantly higher market rates we are paying.

I'll open it up in order to secure capacity.

To ensure our stores continue to have plenty of inventory further we anticipate that the combination of investments to expand our distribution capacity incremental wage and net COVID-19 cost will be similar to the third quarter levels.

Looking to next year, we feel great.

About our sales and customer traffic opportunities the buying environment in our merchandise margin and our ability to surgically adjust retail.

As a reminder, this year, we've been benefiting from the huge expense leverage on our outsized double digit comp sales again, we feel great about our topline and margin opportunities, but it is still.

Too early to forecast comp sales or cost for next year I want to reiterate what we said on our second quarter call, which is despite the continuation of outsized expense pressures in the macro environment. We believe our pre tax margin can get very close to the double digits next year to be clear, we expect the level of margin Deleveraged.

Leverage from the combination of investments and distribution capacity and the incremental freight and wage costs to be higher than it was pre COVID-19, but less than this year.

In closing, we feel great about our execution and strength of the business, both operationally and financially entering the fourth quarter, we have a strong balance sheet and we.

Well positioned to take advantage of inventory opportunities, including pack away that we will believe that we believe will arise from the disruption in the supply chain. While also continuing to invest in the growth of our business and returned significant cash to shareholders. Now we are happy to take your questions as we do every.

Or what are we going to ask that you. Please limit your questions to one per person and one part to each question. We respectfully ask that everyone's stick with this request to keep the call on schedule. So that we can now answer questions from as many analysts as we can thanks and now we will open it up for questions.

It is now.

Now time for question and answer session of today's call. If you would like to ask a question. Please press star followed by one if you wish to withdraw your question you can press star two.

First question comes from Matthew Boss Your line is open.

Great Congrats on another strong quarter.

Thank you.

So Ernie I think you've made.

Crystal clear, how you feel about availability of product today and through holiday.

I'll touch on that well.

Well My question is your mid teens stacked com implies top line run rate exiting this crisis, it's nearly double your pre pandemic trends is this new customers does this.

This larger basket is it a combination of both Scott are you seeing any pushback at all on pricing and how best to think about expansion of the AUR initiative from here.

Yes, Matt.

Good question getting out the foundation of what's going on clearly the run rate, we're having is based on.

Numerous things alright, thank you.

We wouldn't be achieving these these outsized comp so yes.

Yes, we're getting new new market share new customers from the data we show, but we're also getting an increased basket.

Scott can talk to that a little bit, but thats been happening really consistently I think we mentioned that in the.

In the script.

There is also a conversion thing Thats also happening, Matt where I think when the customers come in.

We believe we're converting at a higher rate so they are making.

Purchase because they.

There are certain times, you have customers come in and they don't purchase right.

And so I believe where we're running in a successful way that in that manner, because we have such good brands and great value out there.

And the fact, obviously at the same time, we've been surgically addressing the retail is a great.

<unk> is a great indicator for the future right because if we're getting the new color.

We are getting increased visits I would also look at it this way we have a certain <unk>.

Set of our customers that are more occasional visitors and starting to get a more regular visitors and we're getting we believe.

Increased visits as well and again conversion is at a higher rate. So all cylinders are heading.

Customer I guess I would caution us not to assume that we will run kind of at a more like a triple the rate of what we used to run as you look down the road on the other hand.

The market share, we're gaining now and we think many of these customers are going to stick right, we're going to work.

I mean, we're obviously, making many of them are very happy with what they were experiencing when they come in so that bodes well for.

That.

We're acquiring and we will be retaining.

Some of these new customers as we go forward, which again all is a great indicator of your second question.

Was that or was it around them.

Capturing margin or now on the.

The average retail I guess.

Matt.

Yeah. So have you seen any pushback to pricing and where does the EUR initiatives go from here Yeah. Yeah, yeah. Okay. So no no. That's what it was no push back to pricing.

We have had I would tell.

A higher.

Hit rate of success than we even anticipated we thought there'd be a handful of items here or there that we would run into challenges with but that has not been the case, it's been very.

Few and far between where we've run into any hiccups on the adjusting of retail which means as we continue to go.

And again, we will not do anything that jeopardizes, our our mix being a better retail than any one around us on like for like product.

And we can't talk to price points, obviously on different product, we're not responsible for the quality or the brands. The way. They are retail that we don't carry from other retailers.

But on the upstairs brands, so to speak Department store brands.

We are feeling there is a lot more room for us to surgically do this well into the next few years.

So feeling very bullish about next year as well so hopefully that answers your question.

It does festival.

Taylor Thank you.

Thank you. Our next question comes from Lorraine Hutchinson Your line is open.

Thanks, Good morning, it sounds like you're really pleased with your inventory position for holiday, but as you look into calendar 'twenty. Two is there anything that you're seeing that concerns you around product availability for spring.

Lorraine.

Nothing.

So [laughter].

We are.

The teams I would like to put in a plug again for our teams where I give them. So much credit on the way. They manage I think we had more unknown and volatility given the supply chain ups and.

Dams and the way our business is trending back in and we've talked to you and many as we talked back in the first half of the year right as you could see our trends starting to take place.

The team's credit.

For stepping out and buying earlier as we said in the script buying more earlier to time, the cadence of when we'd get the delivery.

And then anticipating some of the supply chain.

Obstacles that were going to be out there now obviously as we said in the script, we have figured out a way it doesn't mean, we're not getting hit with the paying the rates of moving goods with the supply we're getting hit with all of that but the teams.

Figured out how to get the.

Deliver here, so they've established and I give the merchants the buying teams logistics as I said in the script, everyone. That's participated in making this happen planning and allocation those same teams have.

I get to see every week, what we're placing.

For further out so I get to see the calendar 'twenty two that you are asking about.

Good you can see the trend that we're on for opening up for first quarter. For example, which is the beginning of what you are talking about next year and we are already heading to a very good place.

For February and March from what I can see on the on order.

So.

Yes, I have no concern.

And I can.

One of the other things Thats happened in Covid as T. J Maxx I believe when you look at all the branded vendors in the market. We are probably more important today than we've ever been we're probably more important to the to the marketplace than we were pre COVID-19.

When you look at the amount of volume that we're doing with those upstairs brands.

And I believe that we will continue to be able to leverage those relationships.

<unk> through 'twenty, two so hopefully that answers your question.

Alright, thank you.

Thank you. Our next question comes from Mark Swagger. Your line is open Sir.

Hi, good morning, Thanks for.

My question so.

Standing.

Too early to talk specifically about sales expectations for next year. Just wondering if you could speak more generally to where you see the incremental opportunity from a category perspective at both <unk> and Homegoods as you cycle. These big multiyear comps.

Mark Great question.

So continuing obviously our home category across the board based on the behavioral changes that have taken place with Covid and the way people.

The work the workplace.

Either hybrid situations or more virtual or.

Or.

I'll give you another one the way people are very and you've probably seen a lot of data on this people outdoors more and probably that will continue which is affecting which type of apparel.

The selling including us.

I expect all of those.

Related categories to continue to stay at a I.

Disproportionate percent through our business and trend that way, which we're excited about now the home business pre COVID-19 for US was our already trending if anyone looks back it's easy to forget about it was already trending.

Very strongly now we are just trending more off the charts.

I do believe that levels off.

Leveling off when you're running 30 comps still leaves you in a extremely bullish home trend I think for quite a while and.

As we've seen and mentioned in the script, our apparel business has been re emerging.

And really some healthy.

High single digits.

And I believe we are going to be one of the consumers continue to be value.

Drug and especially on apparel.

I believe we would take more market share there as we look out so I would see but then when you look too.

More of the more of the I would call it more of the active inspired apparel.

We will continue to be something that we will.

Pink shining.

And as well as home and then there are certain.

Accessory categories, I think we will tend to outpace them. So hopefully, yes, we see a lot of opportunity there a great question.

Thanks Best of luck for holiday.

Thank you.

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

Hey, Thanks, guys. Ernie wondering if you could talk about the sourcing of inventory just maybe how it's different in the current environment relative to a more normal period, maybe talk in terms of direct source versus in season.

In verse pack away, maybe the types of vendors, you're working with how that's evolved and maybe even just frequency and size of buys amongst your different vendors. Thanks.

Yes.

Good Paul that's a multiple.

You were able to.

Scott's rule right, where you have like a five part but I like it.

I like the same topic.

Yes.

[laughter], so the sourcing of it.

Quite appropriate based on everything going on so we're sorry direct sourcing what we always do.

Let's start with where closeout driven okay. So.

We in season.

<unk> in hand to mouth by the bulk of what we do we buy very opportunistically that way. So that we're continuing I would say that we will continue the way, it's going and we've had.

All indications are again, what I said earlier that a lot of those key brands.

By the way good retail around.

As you've seen the results retail is pretty strong out there obviously right.

And what that does create though is for a lot of the public company.

Brands that are wholesalers. It allows them they want to keep chasing that business with their more regular priced accounts. So it allows them to get bullish knowing that we're.

Always there on the back side for the excess inventory so let's start with that dynamic that's happening, which will happen more as which is why we always like it when everyone's business is good in this environment as we go into next year, I think youre going to see a lot of wholesalers now stepping out to be a little more bullish on their upfront orders from those retailers.

Retailers, knowing that they have T J maxx.

For the later for the clean up so to speak so I think that whole piece, which is probably one of the biggest pieces of our business is looking forward to a a tremendous opportunity as we move forward because of that dynamic direct sourcing I think what you're getting.

At which as you know, we all do some business that way.

I think that is just the piece, where you know we'll look at you know if theres a void in our mix and we will do it very selectively.

When you talked about on pack away, though you mentioned pack of ways I think that is something we very possibly as we come.

Come out of holiday could see a tremendous amount of pack away based on the supply chain challenges that a lot of the other retailers are going to the whole market is going to run into and if they end up with some late deliveries that don't make it in for Christmas, which is very possible.

If they didnt plan their cadence correctly, then I think.

That is going to spill off a.

A great opportunity for us to have increased pack away for next year for next fall that we would be buying this January February.

And I'm anticipating that could be a a a huge benefit.

To us I think.

Kept messing around with what what's the thought there was a fourth aspect.

The frequency and size of buys that you deal with it okay, great. Yeah. So the frequent wow, so that the channel.

We've had is we're buying very frequently in the sizes of the buys vary by vendor a lot.

So it's been an interesting dynamic as we have some and obviously, we don't talk about them on the call, but we've had some amazing brands.

And one moment can have an enormous amount of goods and it's interesting because they could be trying to unload the goods now a little early.

Knowing that maybe they are running into trouble later.

And then we will have some other brands that have.

A lot less and arent necessarily.

Yielding as much as Brian who typically is comparable of size overall, we're having to slow we've had to slow down as we're getting into that time period here, because theres still more availability in total.

Then we could handle I would say, it's the tip of that piece of it Ironically is almost the same as pre COVID-19.

Youll be youll read some articles, where the brands will say certain brands that I won't mention who they are I will say Oh, we're not going to we're cutting back on the discount quote off price channel.

But they said that for years.

Total of it and then what happens is it goes in cycles, where all of a sudden they say that for three to six months and then they are.

More loaded later and then so we might do less business with a certain free after six months, but we're just going to do more with a different brand for that six months and then the cycle goes back the other way and whats interesting on this.

It is.

We watch for those situations because typically.

And this is better post COVID-19 since we mean more to the market in general I think some of those vendors that are saying they are going to go less to discount or actually the ones that are still going to want to for.

For the future play.

Place some more orders upfront.

Pre colao them Reorders with some of our hot retailers, which in turn should come back and leave more availability hopefully that all makes sense.

More than you need to know.

But last year was very helpful. Thank.

Great question Great question. Thanks, Good luck.

<unk>.

Thank you our next.

Question from your line is open Sir.

Hey, Thanks, a lot good quarter, Hey, Scott can you just dive into the the offset you expect to see in the fourth quarter to help offset the incremental 80 to 90 basis points of supply chain pressures.

And then any color specifically on where you think pretax.

That our margins could land in <unk> specifically.

Yes, we didn't get.

That's probably going to be disappointed with my answer I think it's similar to what Ernie.

Ernie has been alluding to we feel great about.

The topline initiatives to drive sales and merchandise margin.

And.

My sense is I think the biggest thing we called out on the cost is the incremental freight for the fourth quarter.

In and around.

That 75 to 100 basis points 90 basis points more.

A lot will just depend on what the level of the comps are a we said all the other.

Cause similar too.

There's similar pressures we saw the last quarter so.

Not much more to say in terms of where we'll end up I think a lot will depend again on that level of comps that we were able to achieve.

Sure.

Our next question. Our next question comes from Kimberly Greenberger. Your line is open ma'am.

Okay, great. Thanks, so much.

Fabulous to see the momentum in the business Ernie I want to make sure I heard you correctly.

You said the surgical price increase strategy is well underway.

I'm assuming that means you just.

Executing it here in the third quarter it sounds like you've already got.

Got a reasonably good kind of level of feedback on how those price increases are.

Being with you if I can see.

<unk>.

With basically no price resistance I, just wanted to make sure I understand that correctly and then.

Scott wanted to ask you about the benefit in gross margin.

Talked about a nice expansion in merchandise margin from higher <unk>, maybe that's a piece of the pricing and strong full price selling.

I think that I I'm trying to just sort of unpack the moving parts in that gross margin line.

Okay.

Uncover or reveal just exactly how great that performance as a merchandise margin. So if you can just help us with some of the moving pieces in gross margin specifically.

Since you saw that nice nice versus 2019 that would be helpful. Thanks.

So Kimberly yes, let me go right to what you what you thought you heard from me is exactly correct. The way you said it and we did start we started very early actually as we were coming out of second quarter and.

Going into third quarter, we were starting to do this pretty aggressively but surgically. So we did a very selectively and that's how we're going to continue to do it and the merchants are doing a great job at approaching it and it's extremely analytical and as well as verifying that again our out the door retail.

Significantly below anyone else is out the door retail.

Remember the foundation of this is what's going on in this country, which is that wages and supply chain costs are hitting.

Really like never before all together and it is it is forcing retailers around us to either promote less our raise.

Their retail so it is just creating a.

A window of opportunity that we are in the wage thing I have no reason to believe that that ends.

So our teams yes started back then we had a significant amount of the selective.

Adjusting of retailers and we have had very.

<unk> has access during the third quarter.

Yes, I'd just echo on what we do a lot of customer surveys.

Our marketing group and everything and.

First.

One of the things that in the survey is our value perception remains just as strong as ever so.

Whatever we're doing it selectively the retail has had to the best we can determine no impact from a customer perspective.

I think we've said multiple times.

We were looking at the turns to sales the categories and everything has been consistent then.

Strong similar to the first and second.

Good so we cannot see any impact in <unk>.

And so that's just from that perspective in terms of the.

Merchandise margin.

We've seen similar again to the second quarter you know.

Half of our benefit is coming from reduced markdowns due to the strong sales and the other is by.

Quarter by an increased mark on.

We are seeing.

Seeing some cost increases, but we are having retailing.

<unk> that are offsetting some of that.

I think one of the benefits to having our average retail.

Can the.

Come down or.

By any over the last couple of quarters is as that happens.

Our costa it helps us on our cost structure as well as it takes.

You'll have fewer units to move our stores DC in freight so we're seeing some of the benefit.

On that as well, but to answer your question its about half of our benefit is coming.

<unk> half of it is coming from markdowns.

In total, we offset a bit even with the higher freight costs, we went up slightly in our merchandise margin this quarter versus last quarter.

Nice thanks, so much.

Thank you our next question.

For me in Siegel Your line is open Sir.

Great. Thanks, Good morning, everyone and congrats on the great results.

Sure.

Ernie just your comment earlier about the importance of the upstairs brands and you're seeing any difference in concentration of the top brands now versus historically and then sorry, if I missed it did you guys say what percentage of inventory was that was on hand versus.

Thank you.

Scott.

So.

Interesting question on the concentration of vendors.

I would say it varies by category varies by family of business.

But yes, I would say.

And train a little shifting just like the environment has shifted so.

Certain categories are performing a lot better which includes certain brands. So what's happening is in those categories that represent certain brands were ending up with more brands there.

And this won't surprise you overall.

The original saying this door Simeon we're ending up with some of the more I guess you'd call it casual brands.

That's the way the.

Market has kind of gone if you know what I mean.

Having said that as apparel has kicked back and we do have some dressier parts of apparel or.

With a more traditional brands are still.

Yes.

I would say they've ramped back up a little bit, but if you look overall.

I would say the casual brands have shifted.

Bank up a greater percentage of our mix and less less dressy, which.

Again, thats, a behavioral issue going on.

And probably that type of trend continues for a while and then I'm not going to the actual categories, but in home as you can imagine that's a greater percent of our business. So we have some home labels.

I think we're doing more business with today than we.

A couple of years ago that have ramped up.

And the complexion looks that way and what we do Simeon.

At the end of the day no matter, who the brand is the.

Buyers are there first focus is to make sure. We're at the right value. So it's interesting we won't force we.

We try not to too much pre.

Harman, which brand.

Which brands, we're going to emphasize based upon just what the brand as we kind of do it based on how exciting it is the value.

I'll, let Scott jump in.

Yes, the second question, yes, with CME on the inventory good question.

The in transit on order.

Work up.

It was it's up about little more than 5% in terms of the contribution of that total inventory that we have on our balance sheet, but it was up it was up.

It's similar to what we were up.

In the second quarter over fiscal 'twenty. So yes. It is.

It is in that 5% range more.

Is there a sense of the total than it would've been total than two years ago.

Having said that.

As we've said are both store and distribution on a per store basis.

<unk> versus.

Versus 'twenty as was improved versus the second quarter, where we ended at the end.

As at the end of the third quarter versus the second quarter, which also had improved versus the first quarter. So we've even despite our sales increases we've been continuing to improve that inventory position both in the stores in D C.

Given that we have a fair amount of inventory coming in it should bode.

Well for the threshold.

The inventory is a lot of all of this into the <unk>.

The majority of this inventory will be coming in over the next several weeks. So feel good about the fresh flow I don't know Ernie if you have anything.

Yes.

Agree with everything that Scott just said and.

We're bullish on it.

We are just bullish on.

The way, we can flow and availability as we look forward as we addressed on the other question.

Great.

Congrats again and best of luck for holiday.

Thank you. Thank you.

Thank you. Our next question comes from Dana Telsey. Your line is open ma'am.

Good morning, everyone and congratulations on the nice progress.

Thank you Dana two quick things as you think about real estate Remodels relocations, what are you seeing and how that how is that working with each of the banners and you mentioned TV in marketing for Europe. How are you planning your marketing budget this holiday compared to last year. Thank you.

Alright, I'll, let Scott.

On the real estate and then I'll jump in on the marketing yet again.

I think we're extremely bullish on the real estate, both what we've seen this year I first.

In terms of our new store openings.

Where we've been experiencing.

Uh huh.

Signet is as good as ever in terms of beating our both our.

Our pro forma.

Ross our division so that's exciting.

As we said we expect.

Approximately the ability to open up <unk>.

Third 70, plus stores next year and then historic.

Storage can we get back to that 4% growth.

Where we were over 200 stores a year.

For many many years averaging on that.

Very.

Three to five closings here, so we'd love, we love that aspect in terms of the Remodels.

We're doing over 300 this year we.

Number for next year, but it's going to be significantly higher.

Higher.

Across our divisions.

Part of that is.

That's something that's very important to us as one of the things that are.

We are just continually seen in this.

All of this year, we've seen the same thing where.

There's very little difference when you go from a store that's 10 years old to 20 years old or 30 years old. So part of that is we're just keeping these stores look fresh and that's why I think our ability to run the comps has been as good as it it's doing and then I think we are also in the in.

In the lease rates on both the.

We don't have any stores that we.

Come to a renewal period, our teams have done a great job across the board in.

And getting lease renewals at lower rates than what we had contracted at and that's continued all year long and it's starting as you get over time too.

100, and some meaningful dollars so feel real good about that and then the availability for the sites and what we're seeing.

We expect to see that for years and years to come given the amount of store closures.

That has happened in the past two years.

Yeah and on.

Marketing Great question, our marketing spend I mean, we're going after at this holiday in terms of driving continuing.

Continuing to gain market share so our marketing spend as planned up significantly in Q4 versus FY 'twenty.

With the idea to allow us to be top of mind for consumers during the holiday season.

As you know Dana it gets very noisy around marketing and we want to break through our campaigns are designed to breakthrough as best they can with it with the budget in terms of our creative campaigns. The way, we execute them by the way more than half of our marketing dollars are going to be allocated to digital advertising.

Which is where the consumers are.

And we're really I think I briefly mentioned it we're really laser focused on capturing market share and driving customer traffic.

And we will be reinforcing and a lot of the messages are really built around the competitive advantages on value that we show.

Our unique selection, we do that by showing certain product categories to remind.

To remind the customer that we're going to be in these categories for gift, giving I think that's always a key for us because sometimes customers forget that we have such a wide assortment of.

Our categories.

And and.

Our goal is really to win discovery shopping occasions.

Which is.

Roughly half of all shopping occasions, where people are seeking inspiration and a bit of our treasure Hunt.

Retail therapy that I think we can we can provide.

On the customer and then.

Well leveraged.

Power of Influencers and brand fans.

Yes.

Giving her a choice via multichannel messaging and we're just this is how we're spending the money and I just think we're so well positioned to.

Let's start with well positioned with our store execution.

Our merchandise and then our marketing to help drive.

Them into the stores.

Thank you.

Youre welcome.

Comes from Michael Binetti Your line is open Sir.

Hey, guys. Thanks for taking our question, let me add my congrats on a great quarter guys.

Leveraging a couple I.

I wanted to ask you I know on your comment about the pre tax margin getting very close to double digit next year. I think is how you phrased. It I know pre COVID-19, it's a little too early to plan, but.

You always plan the business around it two to three comp is that how we should orient ourselves.

Related to your comment and then we flex our model up and down with.

With our own assumptions on comps, but is that a fair assumption and then.

I'm just trying to think through the puts and takes on how youre thinking about it you said deleverage on the combination of investments in distribution capacity, but.

Your COVID-19 costs were pretty big burden. This year your store volumes will be much higher than 2019, I would think freight would be a net.

Net benefit.

So the whole year next year and I know on the last call. You said you thought it would be free to be worse than second half gets a little better next year.

And then you have some pricing so I'm just trying to think through the puts and takes it would end up low double digits next year as you think about it.

Again too early to make the call. We again as Ernie said, we feel great about the.

One two we haven't made a.

The definitive call yet on what we think the comp sales will be over this year, but we will I would jump I think we're thinking it'll be slightly above a two or three.

I would I would say Michael because with it.

With this type of momentum and the amount of <unk>.

Customer acquisition.

Top will be a notch above that so I guess that means three to four.

[laughter].

In terms of the other cost Michael one thing.

I'd say is that the.

The combination of <unk>.

Great, although im not going to be at the outsized.

I think now deleverage that we're seeing this year north of 150, we still expect because of it.

At least the visibility to the first half right.

To be determined in the second to have more than the normal amount of freight deleveraged. So it's still going to be a lot less but still more than what we would've seen pre COVID-19.

<unk>.

In the first half we're hoping in the second half Michael to your point that we.

Level off on that yeah. So overall, though for the year still would expect it to be more so the combination of the supply chain wage and freight yes, less COVID-19, but we would still expect to see those.

Those to be.

What were seeing pre Covid now we will as we get closer to the end of the year and we see with the retail strategies and how we're buying and what the benefit we're going to get from a higher retail, but yes. We expect the margin to go up what would it be over this year. The question is just what we will be able to offset.

More than in.

In terms of to drive the margins even higher longer term, we again feel real good if the once we have some level of stabilization as we said that.

We would expect if we have.

Headwinds that are closer to what we saw pre COVID-19 that we.

With.

For comp as Ernie just said on a go forward basis, we would expect to to be flat or leverage our business in longer term from wherever we end up at the end of next year.

Okay. Thanks, a lot guys you are welcome.

Thank you. Our next question comes from Laura.

Three the line is open.

Thanks for taking my question I wanted to talk about availability on the luxury brands because we've seen fewer of those in stores and I know that it's tough to check a material number of stores, but it looks like there's something changing in closeouts for true luxury is that.

Am I seeing something thats consistent across the chains.

Or is that more you buying towards trend and the trend is not on the luxury brands anymore.

Laura very good question I think it's a combination of both and I think it's a fair observation.

I would say in your traditional.

Categories, where you might have seen us have a little bit more luxury brands, we have a little less of that right now, but as I mentioned earlier, it's also not where the.

Where the action is so to speak of where all the trends are which is much more.

Casual not luxury brands more.

<unk>, but.

But we do have less I don't think it's a.

I don't think this is a long term situation I think this starts to go away as we get into next year on the less luxury brands and also as the apparel cycle the more traditional slightly dressier apparel cycle comes back.

Back.

I think we'll see more and more of the luxury brands. I know you are referring to and I think it's a it's an accurate observation on your part.

In terms of total brands and best brands as we would call it.

<unk>.

By category varying by category Yeah. We're in we're in great shape there the luxury.

<unk> brands are definitely a little less valid.

Ballot.

Would not think it's a long term.

Issue.

And if I can follow on with that.

Obviously, there is not a material part of sales and obviously your traffic is great right now but is there any concern on your part that you might.

Might lose some of that treasure hunt customer traffic towards the holidays because it's.

It's not there on the luxury side.

No wild now because that side of the business. The true luxury side is it was very small to begin with as a percent of our business and it also.

Also becomes more of the salt purchased not the gift on the true luxury goods yes.

Yes, theres, some gift, giving there, but we have a lot of the gift, giving categories and items in depth.

So no concern at all on on that.

And again, no really concern as a medium term thing because.

I think the cycles back as you go into next year I could tell you.

So that's one that you've noticed I could give you a few other departments. We actually also have a lot less of right. Here's the beauty of our model is a few other departments right now.

A bigger deal than say luxury vendors that we.

It's really very low one, but we're running you know 15 comps.

So if the stores are flexing and as we mentioned in the.

We were able to flex the entire store and go after where the exciting value is and also what I mentioned earlier is again our contract to our customer is to have what we have in the stores that are exciting.

<unk> value and get ready for gift giving season.

And we do that even though we are at times going to run into pockets of either certain brands or certain departments or categories. Like I, just said that we're not actually that we're under on so.

Yes, there's just other things besides that.

That were actually light on and it won't we believe it won't impact our performance over holiday.

Great. Thank you.

Thank you.

Thank you. The final question of the day comes from Omar Saad. Your line is open Sir.

Good morning, Thanks for squeezing me in I appreciate it.

Yeah.

Hello, Luiz you Omar.

Hey can you hear me.

Now we can hear you.

Hey, sorry about that.

I wanted to ask the follow up on some of the discussions you've been having around the pricing actions you've taken given.

Inflationary environment.

Yes.

Maybe especially around the term surgical does that mean only certain a certain banner.

Did you do it across banner did you try international.

Or do you is it youre only certain products and categories.

So kind of strategically how are you thinking differently about how.

The rice your goods.

Your merchants may be used to use a cost plus mentality and you know you're now you're approaching it more from a value perspective, especially given the inflationary environment any kind of.

No philosophical change in how you think about price and value would be helpful to understand.

No.

Again very good questions Omar.

So let me let me there's two key questions Youre asking when they go both they're interesting.

No we did not isolate the strategy to any one banner or any category. So the selective retailing goods applies to maxx Marshalls homegoods or.

Every division we have in Canada Europe.

Every banner.

Failure. So it is not a by any means that we have all the merchants.

In every market place.

Looking at this and the approach to your second question and it's.

I'm glad you asked this because you could think that we actually don't approach a cost plus that is.

Formula We don't do that is a formula that a traditional retailer does and what our buyers do is they determined the retail first and almost we say forget about what the cost is what's the exciting.

Citing value retail and then we work it back from there and so that's where and how do you determine the value retail you take your.

You take your fashion in your brand and you look at where it's being sold at other retailers and from there we determine.

The significant retail.

GAAP, we need to have between us and the other retail and that's how we establish the retail not at what the cost is.

And that philosophy I just.

Discussed just now that is what.

As being.

Utilized I guess you would say in every division that is doing this and again it is.

Internationally, it's everywhere.

And that.

Is what allows us to make sure that the retail is still providing tremendous value because we are using.

A comp shopping of what is the retail on that item at other retailers. So what is it selling for and that's.

It's how we do it we don't do what the cost is to us or you're running and that's what we referred to as a markup wheel, which traditional retailers do do that we do not do that and it's a great question, though because you wanted to do one with I like the way you asked it because you want one without you don't want to go around surgically addressed in retail that if we were doing.

Off of costs that you could run into trouble.

Again good question.

Thank you Tony.

Thank you Omar.

And I believe that was our Missy.

<unk> that was our last question for the group.

You all for joining us today and.

We'll be updating you again on our fourth quarter earnings call in February.

Let me just say from the team here at T. J Maxx, We hope you all stay well and we wish you good.

Good health and a.

Happy Thanksgiving.

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

Well, thank you for participating.

[music].

[music].

Ladies and gentlemen, thank you for standing by welcome to the T. J Maxx companies third quarter fiscal 2022 financial results conference call at this time all parts.

Participants are in a listen only mode. Later, we will conduct a question and answer session at that time. If you have a question you will need to press star One as a reminder, this conference call is being recorded November 17th 2021, I would like to turn the conference call over to Mr. Ernie Herrman, Chief Executive Officer, and President of the T. J.

T J Maxx companies incorporated please go ahead Sir.

Thanks Betsy.

Before we begin Deb has some opening comments.

Thank you Ernie and good morning, the forward looking statements, we make today about the company's results and plans are subject to risks and uncertainties that could cause the actual results.

And the implementation of the company's plans to vary materially.

Risks are discussed in the company's SEC filings, including without limitation the <unk>.

<unk> 10-K filed March 31 2021.

These comments and the Q&A that follows are copyrighted today by the T. J Maxx company. Thanks.

Any recording retransmission reproduction or other use of the same for profit or otherwise without prior consent of T. J Maxx is prohibited and a violation of United States copyright and other laws.

Additionally, while we have approved the publishing of a transcript of this call by a third party, we take no responsibility.

<unk> 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 is Scott Goldenberg.

I'd love to startup called today by once again thanking our global associates for their continued hard work and commitment to T. J Maxx.

As I've said before I want to give special recognition to those associates, who have been physically coming into work in our stores and distribution centers throughout the pandemic.

In recognition of their continued efforts we have awarded a vast majority of them an appreciation bonus which was the sixth appreciation bonus we have Pedro.

Paid during the pandemic.

Yes.

Now to an overview of our third quarter results.

I am extremely pleased with both our top and bottom line performance in the third quarter.

Overall open only comp store sales when compared to fiscal 2020 for calendar year 2019.

Increased an outstanding 14%.

Importantly, our open all the comp sales growth was just the strong at the end of the quarter as it was at the start of the quarter.

Once again, we saw phenomenal comp growth in our home categories across each of our divisions as well as the.

Single digit comp increase in our overall apparel businesses.

Clearly, our great brands and amazing values continue to resonate with shoppers.

Overall sales were $12 $5 billion, which was over $2 billion more than the third quarter of fiscal 2020.

And total segment profit increased by $285 million over the same period.

Our strong results are a testament to our flexible off price business model and our associates.

I truly believe we have the best business model and the best people in.

Retail.

Throughout the third quarter in the midst of uncertainty in the marketplace around supply chain delays and consumer behavior or buying planning and allocation logistics and store operations teams. All did an outstanding job. They ensured our stores had plenty of merchandise for.

Our shoppers every time they visited.

Our flexible model has been a tremendous advantage in this environment.

We have been able to expand and contract categories and merchandise in our stores, so that customers have full racks and shelves to shop when they visit.

I am very happy with our third quarter pre.

Margin increase.

Our excellent sales growth and strong merchandise margin increase more than offset the outside outsized expense headwinds that we have been facing.

Our strategy to surgically raise retails on select items is well underway and we believe it is working very effectively.

Tax shoppers continue to see outstanding value every day.

Lastly, third quarter earnings per share increased an outstanding 24% to 84.

As we look to the fourth quarter overall open only comp sales are off to a very strong start.

We continue to see excellent availability of merchandise in the marketplace and are extremely happy with the mix of good better and best brands that we are offering consumers.

We are confident that we'll have plenty of great merchandise in our stores and online this holiday season, and we will be emphasizing this in our marketing.

As talked more about the fourth quarter in a moment.

But first I'll turn it over to Scott to cover our third quarter financial results in more detail.

Scott.

Thanks, Ernie and good morning, everyone I'd like to Echo <unk> comments and express our sincere gratitude to all of our global associates for their continued hard.

I would work and dedication to our business I will start today with some additional details of our third quarter results as Ernie mentioned overall opened only comp store sales increased 14% over fiscal 'twenty and overall sales increased 20% over the same period this quarter.

The third straight quarter that overall comp sales increased mid teens or better.

I want to recognize the excellent execution on the part of our teams for managing through the supply chain issues facing all of retail and ensuring a consistent flow of exciting merchandise to our stores to support.

Mark outsized comp sales, we've seen all year.

In the third quarter, we saw consistent strength in our overall comp sales every month. Once again, we saw strong a very strong increase in our average basket across all divisions, driven by customers, putting more items into their cards overall.

Port the average ticket was flat and improved for the fourth consecutive quarter.

Overall customer traffic was up driven by a mid single digit traffic increase in the United States.

As Ernie mentioned, we believe our pricing initiative is working as we've rolled it out very well.

Rolled it out to very select.

All items across categories. We're extremely pleased that sales inventory turns and the markdown rates in the third quarter remained very strong where we have selectively adjusted our retails.

Across each of our divisions third quarter opened only comp store sales increase was also excellent.

At <unk> opened only comp store sales increased a very strong 11% and divisional profit dollars were up 21% versus fiscal 'twenty.

<unk> home business continued its outstanding performance posting a comp increase in line with Homegoods and apparel comp sales were up.

Single digits further <unk> saw an increase in customer traffic had a very strong average basket and sales across all geographies were excellent.

At Homegoods opened only comp store sales increase the phenomenal, 34% with consistent strength across all major categories.

Mid since geographic regions for both home goods and home.

Homegoods outstanding increases in both customer traffic and average basket. We're also very pleased with Homegoods divisional profit dollars, which were up 52% versus fiscal 'twenty as a reminder, homegoods margin is.

And proportionately impacted by freight increases due to its product mix.

When looking at more maxx in Homegoods divisions combined versus fiscal 'twenty Taupe total opened only comp store sales for the U S increased 16% and profit dollars were up 26%.

In Canada.

His disciplined only comp store sales were up 8% and a T. J Maxx International comp store sales were up 10% comp sales at both divisions, who are driven by a strong increase in average basket.

Further similar to the U S home sales across all of our Canadian and European divisions were outstand.

Hope next our overall pre tax margin for <unk> in the third quarter was 11% up 30 basis points versus fiscal 'twenty. Our pre tax margin increase reflects strong expense leverage due to our excellent sales growth. We also saw a significant increase in our merchandise margin driven by strong.

Mark on and lower markdowns, despite a 160 basis points of incremental freight expense.

These increases more than offset substantial investments to expand our distribution capacity higher incentive accruals and wage costs as well as 50 basis points of net COVID-19 costs.

Moving to the bottom line third quarter earnings per share of <unk> 84.

Were up an outstanding 24% versus 68 in fiscal 'twenty, our balance sheet inventories up 4% on a constant currency basis versus the third quarter of fiscal 'twenty.

We were very pleased that our inventory levels on a per.

Stronger basis improved in the third quarter versus both the first and second quarters again, and we can't emphasize this enough availability of quality branded merchandise is excellent and we're confident that we have plenty of inventory in our stores and online for the holiday season.

Moving on to our liquidity and shareholder.

<unk> distributions during the third quarter, we generated $1 billion in operating cash flow and ended the quarter with $6 8 billion in cash in the third quarter, we returned $1 1 billion to shareholders through our buyback and dividend programs.

For the full year, we have increased our range of our buyback by $500 million and now expect.

Or just to repurchase $1 75 to two <unk> billion of <unk> stock.

And now I'll turn it back to Ernie.

Thanks Scott.

Now I'd like to highlight the opportunities that we see to drive sales in the fourth quarter.

First and most importantly, we will deliver.

<unk> at Gibson value for the holidays, we are in a terrific position to flow fresh product multiple times, a week to all of our stores and online this holiday season.

Since reopening our stores last year, we had been buying with longer lead times for many of our approximately 21000 vendors to comp.

Compensate for supply chain delays.

Further <unk>.

Vast vendor universe is by far the largest in off price and has always allowed us to have quality branded merchandise for our shoppers.

Importantly, most of the inventory we need for the holiday season has already been delivered to us.

Ever greater is scheduled to arrive in stores and online in time for the holidays.

This leads me to my second point, which is that we are set up extremely well as a gifting destination for consumers this holiday season.

Our store shelves are full with great gifting selections today, and we expect them to continue to be that way.

Or go up the holiday shopping season.

We expect to have something for everyone on consumer shopping lists and to offer an exciting and inspiring treasure hunt shopping experience.

We also believe that our great values will resonate with consumers as much as ever in an inflationary environment.

Third.

Wait our store locations are convenient for shoppers are stores are generally in Egypt access strip centers and often near other high traffic retailers like grocery stores that consumers visit multiple times throughout the season, making for an efficient shopping trip.

Next we.

We believe our holiday marketing campaigns, which started earlier this month will help drive new and existing customers to our banners.

Each of our divisions will showcase our differentiated shopping experience by reinforcing our value leadership, while also highlighting the fresh flow of merchandise throughout the holiday season with messaging.

<unk> such as endless selection, great prices all season long.

In the U S and in Canada, we will leverage the strength of our retail brands together in multi banner campaigns.

In Europe, we have a strong cross channel marketing plan, which includes television for the first time ever across.

Across all of our European markets.

As the E Commerce, we launched Homegoods dot com in September and are happy to offer consumers are exciting and collect the comp selections 24 seven.

Looking ahead, we plan to bring more home categories to Homegoods Dot com.

On all of our <unk>.

Commerce sites in the U S and in the U K, we plan to offer exciting gift selections for the holidays that complement our in store Assortments.

Like our stores, new merchandise will be arriving frequently on our sites, making for an exciting online shock shopping experience.

Beyond this year, we believe we are set up extremely well to significantly grow our market share and improve our profitability.

On the top line, we see tremendous opportunities with our sales and traffic driving initiatives and our global store growth plans.

We have gained significant market share this year and we see.

Okay and opportunities to keep attracting more consumers around the world.

Giving us confidence is the appeal of our values, great brands and treasure Hunt shopping experience.

And all of the countries, we have brought our off price concept around the world too it has resonated with consumers seeking great brands.

C <unk> fashions at great value.

Okay.

In terms of profitability I want to reiterate that we remain highly focused on improving our pre tax margin profile over the medium to long term.

We believe our top line initiatives can lead to outsized sales, which is our.

And if the opportunity to offset some of the persistent cost pressures we face.

In addition, we're very optimistic about the margin opportunity from our strategy to surgically adjust retails, while maintaining our value proposition for consumers.

Turning to our ESG efforts I'll.

Our best by saying that protecting the health and wellbeing of our associates and our customers remains a top priority as it has throughout the pandemic.

I also am pleased to share with you that our 2021 global corporate responsibility report was published this past quarter and is available on T.

I'll start on stock comp.

The report summarizes our fiscal 2021 initiatives and progress within our four areas of focus.

Workplace communities and <unk>.

<unk> sustainability and responsible business.

In addition to our report we have published in.

T J, thanks of relative ESG data and frameworks <unk>.

Including our first disclosure that is aligned to select metrics from the sustainability accounting standards board or SaaS fee.

You can learn more about our efforts in our report, but I'd like to share a few highlights of our latest work with you now.

I spoke on our last call about our commitment to inclusion and diversity and our work to help support a more inclusive and diverse organization.

Since that time, we are well on our way to launching a variety of new programs for our associates, including new mentoring programs associated led inclusion and diversity of advisory.

<unk> and expanded partnerships with community based organizations to support our recruitment efforts.

We also recently completed our global associates inclusion and diversity survey, which will help inform our longer term priorities.

Looking ahead, we expect to publish our 2000.

'twenty EEO one data by the end of the year.

And.

<unk> sustainability, we made progress on our global science based emissions reduction target.

We are pleased to report a 32% reduction at the end of fiscal 2021 and.

And greenhouse gas emissions from our direct operations against fiscal 2017.

Our global approach to reducing our climate impact includes emissions reductions actions focused on reducing our energy consumption.

<unk> expense.

We're also investing in energy.

Efficiency projects and sourcing low carbon and renewable energy sources for our direct operations.

I look forward to continuing to update you on our progress in this important area and as always there was a lot more information on T. J Maxx Dot com.

In closing I want.

I think each of our associates around the globe, who helped us achieve outstanding third quarter results.

We felt terrific about our overall execution.

Strong start to the fourth quarter and our initiatives this holiday season.

We are in an excellent inventory position to flow goods to our stores.

Why don't we get our confidence our associates are in place to meet the sales demand.

I want to reiterate my confidence in the future at T J Maxx, and our ability to grow our topline and profitability over the medium to long term.

As an off price leader in every country. We operate in we believe we are in an excellent position to capture additional.

And could share for many years to come and to become a $60 billion plus revenue company.

Now I'll turn the call back to Scott for a few additional comments and then we'll open it up for questions.

Thanks, again, Ernie and just a few brief notes before we move to Q&A in terms.

The fourth quarter, we're very pleased that overall open only comp store sales growth to start the fourth quarter is up mid teens keep in mind that comp sales growth in the fourth quarter of fiscal 'twenty was a very strong 6%.

As to our fourth quarter pre tax margin, we are continuing to face significant expense headwinds.

Winds specifically, we're currently expecting incremental freight costs to be about 80 to 90 basis points more than the third quarter. This is primarily due to the significantly higher market rates, we are paying in order to secure capacity.

To ensure our stores continue to have plenty of inventory further we anticipate.

But the combination of investments to expand our distribution capacity incremental wage and net COVID-19 cost will be similar to the third quarter levels.

Looking to next year, we feel great about our sales and customer traffic opportunities the buying environment in our merchandise margin and our ability to surgically adjust retail.

As a reminder, this year, we have been benefiting from the huge expense leverage on our outsized double digit comp sales again, we feel great about our topline and margin opportunities, but it is still too early to forecast comp sales or cost for next year.

I want to reiterate what we said on our second quarter call, which is.

The continuation of outsized expense pressures in the macro environment. We believe our pre tax margin can get very close to the double digits next year to be clear, we expect the level of margin deleverage from the combination of investments and distribution capacity and the incremental freight and wage costs to be higher than it was pre COVID-19, but less.

Despite this year.

In closing, we feel great about our execution and strength of the business, both operationally and financially entering the fourth quarter, we have a strong balance sheet and we are well positioned to take advantage of inventory opportunities, including pack away that we will believe that we believe will arise from the disruption.

And then supply chain, while also continuing to invest in the growth of our business and returned significant cash to shareholders. Now we are happy to take your questions. As we do every quarter, we're going to ask that you. Please limit your questions to one per person in one part to each question, we respectfully ask that everyone's stick with.

This request to keep the call on schedule. So that we can now answer questions from as many analysts as we can thanks and now we will open it up for questions.

[laughter].

Okay.

A question and answer session of today's call. If you would like to ask.

Question. Please.

Your question you can press star.

And the first question comes from Matthew Boss Your line is open.

Great Congrats on another strong quarter.

Thank you.

So Ernie I think you've made it crystal clear, how you feel about availability of product today in and through holiday.

I'll touch on that but my question is.

Your mid teens stacked comp implies top line run rate exiting this crisis, it's nearly double your pre pandemic trends is this new customers does this larger basket is it a combination of both.

Scott are you seeing any pushback at all on pricing and how best to think about expansion of.

The AUR initiative from here.

Yes, Matt.

Good question getting out the foundation of what's going on clearly the run rate. We're having is based on numerous things are I think we wouldn't be achieving these these outsized comp so.

Yes, we're getting new new market share new customers.

From the data we show, but we're also getting an increased basket.

Scott can talk to that a little bit, but thats been happening really consistently I think we mentioned that in the.

In the script.

There is also a conversion thing Thats also happening Matt right.

Customers come in.

We believe we're converting at a higher rate so theyre, making the.

Purchase because.

There are certain tons, you have customers come in and they don't purchase right and so I believe we're running in a successful way in that manner, because we have such good brands and great value out there.

And the fact that obviously at the same time, we've been surgically addressing the retail is a great.

As a as a great indicator for the future right because if we're getting the new customer forgetting increased visits I would also look at it this way we have a certain <unk>.

Set of our customers that are more occasional visitors and starting to that or.

We get more visitors and we're getting we believe.

Increased visits as well and again conversion is at a higher rate. So all cylinders are hitting.

I guess I would caution us not to assume that we will run kind of at a more like a triple the rate of what we used.

More Ron as you look down the road on the other hand.

The market share, we're gaining now and we think many of these customers are going to stick right. We're going to we're capturing we're obviously, making many of them are very happy with what they were experiencing when they come in so that bodes well for.

Where.

Use that we're acquiring and we will be retaining.

Some of these new customers as we go forward, which again all is a great indicator of your second question.

Was that or was it around them.

Margin or now on the.

The average retail I guess.

Matt.

So have.

Were any pushback to pricing and where does the AUR initiatives go from here Yeah, Yeah, yeah. Okay. So no no thats, what it wasn't no push back to pricing.

We have had I would tell you a higher <unk>.

Rate of success than we even anticipated we thought there'd be a handful of items here or there that we.

Have you seen a run into challenges with but that has not been the case, it's been very.

Few and far between where we run into any hiccups on the adjusting of retail which means as we continue to go ahead and again, we will not do anything that jeopardizes, our our mix being a better retail than any one around us on.

We wouldn't have felt like product and we can't talk to price points, obviously on different product, we're not responsible for the quality or the brands. The way. They are retail that we don't carry from other retailers, but on the upstairs brands So to speak Department store brands.

We are feeling there's a lot more room.

Unlike us to surgically do this.

Well into the next few years.

So feeling very bullish about next year as well so hopefully that answers your question.

It does best of luck.

Thank you.

Thank you. Our next question comes from Lorraine Hutchinson Your line is open.

Thanks, Good morning, it sounds like you're really pleased with your inventory position for holiday, but as you look into calendar 'twenty. Two is there anything that you're seeing that concerns you around product availability for spring.

Lorraine.

Nothing.

So [laughter].

We are.

<unk>.

The teams I would like to put in a plug again for our teams where I give them. So much credit on the way. They manage I think we have more unknown and volatility given the supply chain ups and downs and the way our business is trending back in and we've talked to you and many as we talked back in the first.

Half of the year right as you can see our trends starting to take place.

I give the teams credit.

Stepping out and buying earlier as we said in the script buying more earlier to time, the cadence of when we'd get the deliveries and then anticipating some of the supply chain.

Obstacles that were going to be all done the obvious.

Obviously as we said in the script, we have figured out a way it doesn't mean, we're not getting hit with the paying the rates of moving goods with the supply we're getting hit with all of that but the teams.

Figured out how to get the goods here. So we they've established and I give the merchants the buying teams logistics as I said in the script everyone has participated.

In making this happening planning and allocation those same teams have I get to see every week, what we're placing.

For further out so I get to see the calendar 'twenty two that you're asking about and I can see the trend that we're on for opening up for first quarter. For example, which is the beginning of what you are.

<unk> about next year, and we are already heading to a very good place.

For February and March from what I can see on the on order.

So.

I have no concern and then.

One of the other things Thats happened in Covid as T. J Maxx I believe when you look at all the branded.

<unk> in the market, we are probably more important today than we've ever been we're probably more important to the to the marketplace than we were pre COVID-19 when.

When you look at the amount of volume that we're doing with those upstairs brands.

I believe that we will continue to be able to leverage those relationships well through 'twenty two.

Did that hopefully that answers your question.

Alright, thank you.

Thank you. Our next question comes from Mark Your line is open Sir.

Hi, good morning, Thanks for taking my question so.

Standing.

Too early to talk specifically about sales expectations for next year.

So I'm wondering if you could speak more generally to where you see the incremental opportunity from a category perspective at both <unk> and Homegoods as you cycle. These big multiyear comps.

Yes, Mark Great question.

So continuing obviously our home category across the board.

Year based on the behavioral changes that have taken place with Covid and the way people.

The work.

<unk> place.

Either hybrid situations or more virtual or.

I'll give you another one the way people are very and you've probably seen a lot of data on this people are outdoors more in Prague.

I will continue which is affecting which type of apparel.

The world selling including us.

I expect all of those.

Related categories to continue to stay at a I guess disproportionate percent through our business and trend that way.

We're excited about now the home business pre COVID-19 for us.

That already trending if anyone looks back it's easy to forget about it was already trending.

Very strongly it now we are just trending more off the charts.

I do believe that levels off by leveling off when you're running 30 comps still leaves you in a extremely bullish.

It was our home trend I think for quite a while and as.

As we've seen and mentioned in the script, our apparel business has been re emerging and really some healthy high.

High single digits here and I believe we're going to be one of the consumers continuing to be value.

Dragon.

Actually on apparel.

I believe we can take more market share there as we look out so I would see but then when you look too yes.

More of the more of the I would call it more of the active inspired apparel.

Continue to be something that we will I think shining.

As well as home and.

And as far as certain.

Accessory categories, I think we will tend to outpace them. So hopefully we see a lot of opportunity there a great question.

Thanks Best of luck for holiday. Thank you.

<unk>.

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

And then.

Thanks, guys Ernie I Wonder if you could talk about the sourcing of inventory just maybe how it's different in the current environment relative to a more normal period, maybe talk in terms of direct source versus in season versus pack away.

The types of vendors, you're working with how that's evolved and maybe even just frequency.

Size of buyers amongst your different vendors. Thanks.

Yes.

That was good Paul that's a multiple you were able to finesse Scott's rule right.

<unk> part, but I like it I like the same topic.

Okay.

So the sourcing.

And kids.

Quite appropriate based on everything going on so we're sorry direct sourcing we always do.

Let's start with where closeout driven okay. So.

We in season hand to mouth by the bulk of what we do we buy very opportunistically that way so that.

We're continuing I would say that we will continue the way, it's going and we've had.

All indications are again, what I said earlier that a lot of those key brands.

And by the way good retail around the board as you've seen the results retail is pretty strong out there, obviously right and what that does create.

So as for a lot of the public company.

Brands at our wholesalers it allows them they want to keep chasing that business with their more regular price accounts. So it allows them to get bullish knowing that we're always there on the back side for the excess inventory. So let's start with that dynamic that is happening which.

Create it'll happen more as which is why we always like it when everyone's business is good in this environment as we go to next year I think youre going to see a lot of wholesalers now stepping out to be a little more bullish on their upfront orders for those retailers knowing that they have T J maxx.

For the later for the cleanup so to speak so.

No.

Well I think that whole piece, which is probably one of the biggest pieces of our business is looking forward to a tremendous opportunity as we move forward because of that dynamic direct sourcing I think what you're getting at which is we all do some business that way.

I think that is just a piece where.

There, we'll look at if theres a void in our mix and we will do it very selectively.

When you talked about on pack away, though you mentioned pack of ways I think that is something we very possibly as we come out of holiday could see a tremendous amount of pack away based on the supply chain challenges that a lot.

Our retailers are going.

<unk> market is going to run into and if they end up with some late deliveries that don't make it in for Christmas, which is very possible.

If they didnt plan their cadence correctly, then I think that is going to spill off a.

A great opportunity for us to have increased pack away.

For next year for next fall that we would be buying this January February.

And I'm anticipating that that could be a huge benefit.

To us I think.

Pick up missing what's the fourth there was a fourth aspect.

The frequency and size of box.

Bye.

Deal with it.

Great Yeah, so the frequent wow so that's.

The challenge we've had is we're buying very frequently in the sizes.

The bis vary by vendor a lot. So it's been an interesting dynamic as we have some and obviously, we don't talk about them on the call, but we've had some.

Amazing brands.

And one moment can have an enormous amount of goods and it's interesting because they could be trying to unload the goods now a little early.

Knowing that maybe they're running into trouble later.

And then we will have some other brands that have.

A lot less and arent necessarily.

Okay.

Yielding.

As much as a Brian who typically is comparable of size overall, we're having this slowed we've had the slowdown as we're getting into that time period here, because there's still more availability in total than we could handle.

I would say, it's the tip of that piece of it Ironically is almost the same.

Several pre COVID-19.

You'll you'll youll read some articles where the brands will say certain brands that I won't mention who they will say well, we're not going to we're cutting back on the discount quote off price channel.

But they have said that for years pre Covid and then what happens is it goes in cycles, where all of a sudden they say that for three to six months.

And they are.

More loaded later and then so we might do less business with a certain frame up to six months, but we're just going to do more with a different brand for that six months and then the cycle goes back the other way and whats interesting on this is.

We watch for those situations because typically.

And this is better post COVID-19 since we mean more to the market in general I think some of those vendors that are saying they are going to go left or discount are actually the ones that are still going to want to.

For the future play.

Place some more orders upfront that allow them reorders with some of the hot retailers, which in turn should come back and leave more availability.

That all makes sense, probably more than you need to know.

But.

Fair enough. Thanks. Thank.

Thank you Tony Great question, Great question. Thanks, Good luck.

<unk>.

Thank you. Our next question comes from Chuck Grom. Your line is open Sir.

Hey, Thanks, a lot good quarter Hey.

Hopefully they can just dive into the the offset you expect to see in the fourth quarter.

Offset the incremental 80 to 90 basis points of supply chain pressures.

And then any color specifically on where you think pretax margins could land in <unk> specifically.

Yeah, we didn't get that.

Scott, you're probably going to be disappointed with my answer I think it's similar to what.

Ernie has been alluding to we feel great about.

The topline initiatives to drive sales in our merchandise.

<unk> margin.

And the cost is I think the biggest thing we called out on the cost is the incremental freight.

Fourth quarter.

In and around.

<unk>.

75 to 100 basis points 90 basis points more.

A lot will just depend on what the level of the comps are a we said all the other costs are similar to theirs.

Similar pressures, we saw the last quarter so.

Not much more to say in terms of where we'll end up I think a lot will depend again on that level of comps that we're able to achieve.

Yeah.

Okay.

Next question. Our next question comes from Kimberly Greenberger. Your line is open ma'am.

Okay, great. Thanks, so much.

He wants to see the momentum in the business.

Ernie I want to make sure I heard you correctly I think you said the surgical price increase strategy is well underway.

I'm assuming that means you.

We started executing it here in the third quarter it sounds like you've already.

Got a reasonably good kind of level of feedback on how those price increases are being received by consumers.

Basically no price resistance I, just want to make sure I understand that correctly and then.

Scott wanted to ask you about the benefit in gross margin you talked about a nice expansion in our merchandise margin.

<unk>, maybe that's a piece of the pricing and strong full price selling.

I'm trying to just sort of unpack the moving parts.

Parts in that gross margin line.

To uncover or reveal just exactly how great that performance as a merchandise margin. So if you can just help us with some of the moving pieces in gross margin specifically.

And she saw that nice nice.

2019 that would be helpful.

So Kimberly yes, let me go right to what you what you thought you heard from me is exactly correct. The way you said it and we did start we started very early actually as we were coming out of second quarter and going into third quarter. We were starting to do this pretty aggressively but.

Surgically. So we did a very selectively and that's how we're going to continue to do it and the merchants are doing a great job at approaching it as extremely analytical and as well as verifying that again our out the door retail is significantly below anyone else is out the door retail.

Remember the foundation.

<unk> of this is what's going on in this country, which is that wages and supply chain costs are hitting.

Really like never before all together and it is it is forcing retailers around us to either promote less or raise the retails. So it is just creating.

A window of opportunity that we have.

The wage thing I have no reason to believe that that ends.

So our teams yes started back then we had a significant amount of the selective.

Adjusting of retailers and we have had very good success during the third quarter.

Yes, just to echo on wood.

We do a lot of customer surveys.

Our marketing group and everything and.

First.

One of the things that in the survey is our value perception remains just as strong as ever so whatever we're doing selectively the retail has had to the best we can determine no.

Impact from a customer perspective, and I think we've said multiple times.

We were looking at that turns the sales the categories and everything has been consistent and strong similar to the first and second quarter. So we can't see any impact in <unk>.

And so that's just from that perspective.

Perspective in terms of the.

Merchandise.

Margin.

We've seen similar again to the second quarter.

Half of our benefit is coming from reduced markdowns due to the strong sales and the other is by and <unk> by an.

Creased Mark on.

We are in.

Seeing some cost increases, but we are having retailing.

Creases that are offsetting some of that.

I think one of the benefits to having our average retail.

The.

Come down or improve over the last couple of quarters is as that happens.

Our cost helps.

And our cost structure as well as it takes.

You'll have fewer units to move our stores D. C. In freight so we're seeing some of the benefit.

On that as well, but to answer your question its about half of our benefit is coming from mark on and half of it is coming from markdowns.

And in total.

<unk> set a bit even with the higher freight costs, we went up slightly in our merchandise margin this quarter versus last quarter.

Nice thanks, so much.

Thank you. Our next question comes from Simeon Siegel Your line is open Sir.

Great. Thanks, Good morning, everyone. Congrats.

It's on the great results.

Thank you.

Ernie just to your comment earlier about the importance of the upstairs brands and you're seeing any difference in concentration of the top brands now versus historically and then sorry, if I missed it did you guys say what percentage of inventory was that was on hand versus in transit. Thank you.

Scott.

So.

We are.

Interesting question.

Question on the concentration of vendors.

I would say it varies by pattern varies by family of business.

But yes, I would say there is a little shifting just like the environment has shifted.

So.

Certain categories are performing a lot better which includes certain brands. So what's happening is in those categories that represent certain brands were ending up with more brands. There and this won't surprise you overall I would say in the store Simeon we're ending up with some of the more I guess.

So a casual brands.

Because that's the way the market has kind of gone if you know what I mean.

Having said that as apparel has kicked back and we do have some dressier parts of apparel or some of the more traditional brands are still.

I would say they've ramped back up a little bit, but if you look overall.

I would say the casual brands have shifted to make up a greater percent of our mix and less less dressy, which again, that's a behavioral issue going on.

And.

You'd probably that type of trend continues for a while and then I'm not getting into the actual academies, but in home as you can imagine that's a greater percent of our business. So we have some home labels.

I think we're doing more business with today than we were a couple of years ago that have ramped up.

And the complexion.

<unk> looks that way and what we do Simeon as at the end of the day no matter, who the brand is.

Buyers are there first focus is to make sure. We're at the right value. So it's interesting we won't force.

Try not to too much pre determined.

Which brand.

Which brands, we're going to emphasize based.

Just what the brand as we kind of do it based on how exciting is the value.

I'll, let Scott jump in.

Yeah on the second question, yes, so assuming on the inventory good question.

The in transit on order is up.

It's up about little more than 5% in terms.

<unk> contribution of that total inventory that we have on our balance sheet, but it was up it was up.

It's similar to what we were up.

In the second quarter over fiscal 'twenty. So yeah. It is it is in that 5% range more as a percent of the total than it would've been total than two years ago.

Terms of them, having said that.

As we've said are both store and distribution on a per store basis.

<unk> versus.

Versus 'twenty as was improved versus the second quarter, where we ended at the end of the end of the third quarter versus the second quarter, which also had improved versus the first quarter.

So we've even despite our sales increases we've been continuing to improve that inventory position both in the stores in D. C. Given that we have a fair amount of inventory coming in it should bode well.

Well for the fresh flow of inventory is a lot of all of this.

Best majority of this.

There will be coming in over the next several weeks so feel good about the fresh flow I don't know Ernie if you have anything.

Yes.

I agree with everything that Scott just said.

We're bullish on it.

We are just bullish on the way, we can flow and availability as we look forward.

As we.

Inventory on the other question.

Great Congrats again and best of luck for holiday. Thank.

Thank you. Thank you.

Thank you. Our next question comes from Dana Telsey. Your line is open ma'am.

Good morning, everyone and congratulations on the nice progress. Thank you Dana.

Quick things as you think about realistic.

Real estate Remodels relocations, what are you seeing and how that how is that working for each of the banners and you mentioned TV in marketing for Europe. How are you planning your marketing budget this holiday compared to last year. Thank you.

Alright, I'll, let Scott.

On the real estate and then we'll.

We addressed that on the marketing yet again.

We're extremely bullish on the real estate, both what we've seen this year.

First.

In terms of our new store openings.

We are we've been experiencing.

Signet is as good as ever in terms of.

I'll jump in Europe are.

Our pro forma is across our divisions. So that's exciting.

As we said we expect.

Approximately the ability to open a 170 plus stores next year, and then historically get back to that 4% growth.

Where.

A beating over 200 stores a year.

For many many years averaging on that.

Very three to five closings a year. So we love we love that aspect in terms of the Remodels.

We're doing over 300. This year, we don't have a number for next year, but it's going to be significantly.

We were higher.

Across our divisions.

Part of that is.

Thats something thats very important to us as one of the things that.

We are just continually seen in this.

All of this year, we've seen the same thing where.

There's very little difference when you go from a store thats.

Hans Ole to 20 years old to 30 years old. So part of that is we're just keeping these stores look fresh and that's why I think our ability to run the comps has been as good as it it's doing and then I think we are also in the in.

And the lease rates on both the hundreds of stores that we can.

Come to a renewal period.

10 years, Jim has done a great job across the board in.

Getting lease renewals at lower rates than what we had contracted at and that's continued all year long and.

It's starting as you get over time to being some meaningful dollars so feel real good about that.

<unk> ability for the sites and what we're seeing.

We expect to see that for years and years to come given the amount of store closures.

That has happened in the past two years.

Yes.

The marketing great question, our marketing spend.

And then after it this holiday in terms of driving.

Continuing to gain market share so our marketing spend as planned up significantly in Q4 versus FY 'twenty.

With the idea to keep that allow us to be top of mind for consumers during the holiday season.

As you know Dana it gets very noisy around.

We're going getting in and we want to break through our campaigns are designed to breakthrough as best they can with the budget in terms of our creative campaigns. The way, we execute them by the way more than half of our marketing dollars are going to be allocated to digital advertising.

Which is where the consumers are.

Ron Mark and we're really I think I briefly mentioned that where we're really laser focused on capturing market share and driving customer traffic.

And we will be reinforcing and a lot of the messages are really built around the competitive advantages on value that we show our unique selection, we do that by showing certain product categories.

As to remind.

To remind the customer that we're going to be in these categories for gift, giving I think that's always a key for us because sometimes customers forget that we have such a wide assortment of.

Top categories and and our goal is really to win discovery shopping occasions.

Great.

Which is.

Roughly half of all shopping occasions, where people are seeking inspiration and a bit of our treasure Hunt.

Retail therapy that I think we can we can provide.

For the customer and then.

We're leveraging the power of Influencers and brands.

Yes.

Giving her a choice via multichannel messaging and we're just all you know this is how we're spending the money and I just think we're so well positioned to.

Let's start with well positioned with our store execution, our merchandise and then our marketing to help drive.

Them into the stores.

Thank you.

Youre welcome.

Question comes from Michael Binetti. Your line is open Sir.

Hey, guys. Thanks for taking our question, let me add my congrats on a great quarter guys.

Got a couple.

I wanted to ask you I know on your.

And the pre tax margin getting very close to double digit next year. I think is how you phrased. It I know pre COVID-19, it's a little too early to plan, but pre Covid you always plan the business around it two to three comp is that how we should orient ourselves.

Related to your comment on that.

Flex or models up and down with our own assumptions on comps, but is that a fair assumption and then.

Comment.

I'm just trying to think through the puts and takes on how youre thinking about it you said deleverage on the combination of investments in distribution capacity, but.

Your COVID-19 costs were pretty big burden. This year your store volumes will be much higher than 2019, I would think freight would be a net benefit.

So the whole year next year and I know on the last call.

You.

You thought it would be free to be worse in the second half gets a little better next year.

And then you have some pricing so I'm just trying to think through the puts and takes it would end up at the low double digits next year as you think about it yes.

Again too early to make the call again as Ernie said, we feel great about the top line too we haven't made a.

Definitive call yet on.

On what we think the comp sales will be over this year, but we will I would jump I think were thinking.

It'll be slightly above a two or three.

I would say Michael because with.

With this type of momentum and the amount of.

Customer acquisition, I think will be a notch above that so I guess that means three to four.

You said.

[laughter].

In terms of the other costs, Michael one thing.

I would say is that the.

The combination of freight although im not going to be at the outsized deleverage that we're seeing this year of north of 150.

I still expect because of.

At least the visibility to the first half right.

To be determined in the second to have more than the normal amount of freight deleveraged. So it's still going to be a lot less but still more than what we would've seen pre COVID-19.

And in the first half we're hoping in the second half Michael to Europe.

With that we.

Level off on that yeah. So overall, though for the year still would expect it to be more so the combination of the supply chain wage and freight yes, less COVID-19, but we would still expect to see.

Those to be more than what were seeing pre COVID-19 now we will as we get closer.

To the end of the year and we see with the retail strategies and how we're buying and what the benefit we're going to get from a higher retail, but yes. We expect the margin to go up what would it be over this year. The question is just what we will be able to offset.

In terms of to drive the margins even higher.

Longer term, we again feel real good if the once we have some level of stabilization as we have said that.

We would expect if we have.

Headwinds that are closer to what we saw pre COVID-19 that we.

With a three to four comp as Ernie just said on a go forward basis, we would.

Two to be flat or leverage our business in longer term from wherever we end up at the end of next year.

Okay. Thanks, a lot guys.

Youre welcome.

Thank you. Our next question comes from Laura Shanghai. Your line is open.

Thanks for taking my question.

Would expect I wanted to talk about availability on the luxury brands because we've seen fewer of those in stores and I know that it's tough to check a material number of stores, but it looks like there's something changing in closeouts for true luxury is that.

Am I seeing something thats consistent across the chain.

<unk> or is that more you buying towards trend and the trend is not on the luxury brands anymore.

Very good question I think it's a combination of both and I think it's a fair observation.

I would say in your traditional categories, where you might have seen us have a little bit more luxury.

And we have a little less of that right now, but as I mentioned earlier, that's also not where the.

Where the action is so to speak of where all the trends which is much more.

Casual not luxury brands more active.

But we do have less I don't think it's a.

He brings a I don't think this is a long term situation I think this starts to go away as we get into next year on the less luxury brands and also as the apparel cycle the more traditional slightly dressier apparel cycle comes back.

I think we will see more and more of the luxury.

<unk> trends I know you are referring to and I think it's a it's an accurate observation on your part.

In terms of total brands and best brands as we would call it.

Uh huh.

By category varying by category Yeah. We're in we're in great shape. There the luxury brands are definitely a little less.

Valid but I.

Luxury I think it's a long term.

Issue.

And if I can follow on with that.

Obviously, there is not a material part of sales and obviously your traffic is great right now but is there any concern on your part that you might lose some of that treasure hunt customer traffic.

Towards the holidays because it's.

It's not there on the luxury side.

No wild now because that side of the business. The true luxury side is it was very small to begin with as a percent of our business and it also becomes more of the salt purchased not the gift on the true.

Luxury goods, yes.

Yes, theres, some gift, giving there, but we have a lot of the gift, giving categories and items in depth.

So no concern at all on on that.

And again, no really concern as a medium term thing because I think this cycles back as you go to next year I could tell you.

So that's one that you've noticed I could give you a few other departments. We actually also have a lot less of right. Here's the beauty of our model is a few other departments right now.

A bigger deal than say luxury vendors that we are actually very low one, but we're running 15 comps.

So it's the stores are flexing and as we mentioned in the.

We're able to flex the entire store and go after where the exciting value is and also what I mentioned earlier is again our contract to our customer is to have what we have in the stores to have exciting value and get ready for gift giving season.

And we.

[laughter] do that even though we are at times gonna have run into pockets of either certain brands or certain departments or categories. Like I, just said that we're not actually that we're under on.

So.

Yes, there's just other things besides that were actually light on and it won't we believe it won't impact our.

Our performance over holiday.

Great. Thank you.

Thank you.

Yeah.

Thank you. The final question of the day comes from Omar Saad. Your line is open Sir.

Good morning, Thanks for squeezing me in I appreciate it.

Yes.

Hello, Luiz you Omar.

Hey can you hear me now.

Now we can hear you.

Hey, sorry about that.

I wanted to ask the follow up on some of the discussions you've been having around the pricing actions you've taken given the inflationary environment.

Maybe especially around the term surgical.

Does that mean only certain a certain banner.

You do it across banner did you try international.

Or is it youre only certain products and categories and also kind of strategically as you know.

You're thinking differently about how you price your goods.

Your merchants may be used to use a cost plus.

Mentality.

Approaching it more from a value perspective, especially given the inflationary environment any kind of.

Philosophical change in how you think about price and value would be helpful to understand.

Yeah, No again very good questions Omar So let me let me.

Two key questions Youre asking when they go go up both there.

You're saying.

No we did not isolate the strategy to any one banner or any category. So the selective retailing goods applies to maxx Marshalls Homegoods or every division we have in Canada Europe.

Every banner.

Australia. So it is not a by any means that we have all the merchants.

And every market place looking at this and the approach to your second question and I'm glad you asked this because you could think that we actually don't approach.

Jay cost plus that is.

Formula We don't do that his appointment that a traditional retailer does and what our buyers do is they determined the retail first and almost we say forget about what the cost is what's the exciting value retail and then we work it back from there.

And so that's where and how do you determine the value retail you take your <unk>.

You take your fashion in your brand and you look at where it's being sold at other retailers and from there we determine.

The significant retail gap, we need to have between us and the other retail and that's how we establish.

What's the retail not at what the cost is.

And that philosophy I just discussed.

Discussed just now that is what.

As being.

Utilized I guess you would say in every division that is doing this and again it is international and it's everywhere.

And that.

Is what.

Allows us to make sure that the retail is still providing tremendous value because we are using.

A comp shopping of what is the retail on that item at other retailers and what is selling for and that's how we do it we don't do what the cost is to us or you're running that's what we referred.

Two is a markup wheel, which traditional retailers do do that we do not do that and it's a great question, though because you wanted to do one with I like the way you asked it because you want one without you don't want to go around surgically addressed in retail that we've been doing it off of costs that you could run into trouble.

Again good question.

If you have any.

Yes.

Omar.

And I believe that was our.

Missy that was our last question for the group.

Thank you all for joining us today, and we'll be updating you again on our fourth quarter earnings call in February.

Let me just say from the team here at T J Maxx.

We hope you all stay well and we wish you.

Good health and happy.

Happy Thanksgiving.

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