Q1 TJX Companies Inc Earnings Call

May 17, 2023

We will conduct a question 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 as of today may 17th 2023, I would now like to turn the conference call over to Mr. Ernie Herrman, Chief Executive Officer, and President of the T. J <unk> companies incorporated. Please go ahead Sir.

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

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

Risks are discussed in the company's SEC filings, including without limitation. The Form 10-K filed March 29, 2023 further these comments and the Q&A that follows are copyrighted today by the T. J X companies, Inc. Any recording retransmission reproduction or other use of the same for <unk>.

Profit or otherwise without prior consent of T. J X is prohibited and a violation of United States copyright and other laws. Additionally.

Additionally, while we have approved the publishing of a transcript of this call by a third party. We take no responsibility for inaccuracy that may appear in that transcript. We have detailed the impact of foreign exchange on our consolidated results and our international divisions in today's press release in the investors section of our website.

T J X dot com.

Reconciliations of other non-GAAP measures, we discuss today to GAAP measures are also posted on our website T. J X dot com in the investors section. Thank you and now I'll turn it back over to Ernie.

Yeah.

Good morning, joining me and Deb on the call is John Klinger.

I'd like to begin today by recognizing our global associates for their continued hard work and dedication.

It is our associates, who bring our business to life every day for our customers.

And I want to thank them for their strong commitment to our business, especially our store distribution and fulfillment Center associates.

Now to our first quarter results.

I am very pleased with our strong sales and are well above planned profitability.

Our 3% overall comp sales growth was at the high end of our plan and driven by an increase in customer traffic.

I'm, particularly pleased with the performance at <unk>, which delivered mid single digit increases in both comp store sales and customer traffic.

Further we saw comp sales and traffic increases at both of our international divisions.

I also want to highlight the continued strength of our apparel and accessories businesses across the company.

In terms of profitability, both pre tax profit margin and earnings per share increased versus last year, and well exceeded our expectations importantly.

Importantly, merchandize margin was very healthy with our strong profitability performance in the first quarter, we are raising both our full year pre tax profit margin and earnings per share guidance.

John will talk to this in a moment.

Our first quarter results are a testament to the strength and resiliency of our flexible off price business model.

I am very pleased with the excellent execution of our teams across the company, whose collective efforts brought our shoppers great values and a compelling treasure Hunt shopping experience every day.

Our buyers took advantage of amazing deals in the marketplace and the organization flood product to the right stores at the right time and did a great job of merchandising the product delivering on customer satisfaction and marketing.

We're happy with our good start to the second quarter and are in a great position to take advantage of the phenomenal buying environment and ship fresh selections to our stores and online.

Going forward, we are excited about the opportunities we see to gain market share in the U S and internationally and continuing to improve the profitability of T J X.

Before I continue I'll turn the call over to John to cover our first quarter financial results in more detail.

Thanks, Ernie and good morning, everyone.

I also want to add my gratitude to all of our global associates for their continued hard work.

Start with some additional details on the first quarter as Ernie mentioned, our overall comp store sales increased 3% at the high end of our plan.

This comp sales increase was driven by customer traffic with average ticket up for the quarter again, our overall apparel business, including accessories continued its momentum with comp growth up mid single digits. Overall home sales were down as we continue to cycle. The outsized sales we saw during the pandemic.

<unk> net sales grew to $11 8 billion.

A 3% increase versus the first quarter of fiscal 'twenty three.

On a constant currency basis first quarter sales were up 5%.

First quarter consolidated pre tax profit margin of 10, 3% was up 90 basis points versus last year's adjusted nine 4% and well above our plan.

Gross margin was up 100 basis points and driven by an increase in merchandise margin the benefit from lower freight cost was significantly more than we expected once again mark on was strong due to better buying.

Unfavorable hedges our year over year shrink accrual and supply chain investments were headwinds to the gross margin in the first quarter.

As a reminder, we are planning shrink flat in fiscal 'twenty four versus fiscal 'twenty three our plans this year assume unexpected headwind in the first second and third quarters and an expected benefit in the fourth quarter.

SG&A increased 60 basis points less than half of this increase was due to incremental store wage costs.

And net interest income benefited pre tax profit margin by 50 basis points.

I want to note that our above planned pre tax profit margin performance was primarily driven by an unanticipated benefit from a freight accrual adjustment.

Better than expected freight rates and our freight initiatives as well as the timing of some expenses.

Lastly, we are very pleased that earnings per share of <unk> 76 were up 12% versus last year's adjusted <unk> 68.

And also well above our expectations.

Moving to our first moving to our first quarter divisional performance at Mara Max first quarter comp store sales increased a very strong 5% over a 3% increase last year. We are very pleased to see a mid single digit increase in <unk> as customer traffic once again <unk> apparel business <unk>.

Trust income benefited pre tax profit margin by 50 basis points.

I want to note that our above planned pre tax profit margin performance was primarily driven by an unanticipated benefit from freight accrual adjustment better than expected freight rates and our freight initiatives as well as the timing of some expenses.

<unk> accessories had a high single digit comp increase <unk> first quarter segment profit margin was 14% up 80 basis points versus last year.

Lastly, we are very pleased that earnings per share of <unk> 76 were up 12% versus last year's adjusted <unk> 68.

We are extremely pleased with the momentum of our largest division as sales and traffic were consistent across each of <unk> regions. We continue to see an excellent opportunity for <unk> to capture additional market share across the U S.

And also well above our expectations.

Moving to our first moving to our first quarter divisional performance at Mar Max first quarter comp store sales increased a very strong 5% over a 3% increase last year. We are very pleased to see a mid single digit increase in <unk> as customer traffic once again <unk> apparel business.

Homegoods first quarter comp store sales decreased 7% as it continues to cycle. The outsized sales we saw during the pandemic specifically fiscal 2020 twos first quarter, 40% comp sales increase home goods first quarter segment profit margin was seven 3% up 130 basis.

Including accessories had a high single digit comp increase <unk> first quarter segment profit margin was 14% up 80 basis points versus last year.

Points, we expect home goods year over year comp sales to improve for the remainder of fiscal 'twenty. Four we continue to see a terrific opportunity to capture additional share of the U S home market in the first quarter. We opened our 900 home goods store and continue to see excellent opportunities to grow both our.

We are extremely pleased with the momentum of our largest division as sales and traffic were consistent across each of <unk> regions. We continued to see an excellent opportunity for <unk> to capture additional market share.

Home goods and home since banner's.

At <unk>, Canada comp store sales were up 1% and driven by customer traffic.

Segment profit margin on a constant currency basis was 11, 2%.

The only major brick and mortar off price retailer in Canada, we benefit from excellent customer awareness of our brands. We continue we are confident that we are set up extremely well to continue our growth plans and attract even more shoppers shoppers to our banner.

At <unk> International comp store sales increased 4% in customer traffic was also up it was great to see strong sales in our European business, especially in a challenging macroeconomic environment in Australia comp store sales were outstanding and continue to grow and we.

As the only major brick and mortar off price retailer in Canada, we benefit from excellent customer awareness of our brands. We continue we are confident that we are set up extremely well to continue our growth plans and attract even more shoppers shoppers to our banner.

To grow our footprint in that country segment profit margin for <unk> International on a constant currency basis was two 7% going forward. We continue to see a path to improve profitability for this division as we plan to grow our footprint in our existing countries and leverage our infrastructure.

At <unk> International comp store sales increased 4% in customer traffic was also up it was great to see strong sales in our European business, especially in a challenging macroeconomic.

As to E. Commerce overall, it remains a very small percentage of our business, we continue to add new brands and categories to our sites. So that so that shoppers can see something new every time they visit.

Moving to inventory balance sheet inventory was down 8% versus first quarter of fiscal 'twenty. Three importantly, this year over year decline is primarily due to the elevated levels. We saw last year from a larger in transit balance as a result of supply chain delays, we feel great about our balance sheet and <unk>.

<unk> inventory levels. We are confident that we are strongly positioned to take advantage of the outstanding buying or buying environment and flow fresh assortments to our stores and online this summer.

I'll finish with our liquidity and shareholder distributions.

For the first quarter, we generated $745 million in operating cash flow and ended the quarter with $5 billion in cash.

After the quarter ended we paid down 500 million of maturing debt and.

In the first quarter, we returned $841 million to shareholders through our buyback and dividend programs now I'll turn it back to Ernie.

We feel great about our balance sheet in store inventory levels. We are confident that we are strongly positioned to take advantage of the outstanding buying or buying environment and flow fresh assortments to our stores and online this summer.

Yes.

Thanks, John .

Today I'd like to highlight our confidence in our growth plans and why we are convinced that we are in a great position to capture additional market share in the U S and internationally.

I'll finish with our liquidity and shareholder distributions.

For the first quarter, we generated $745 million in operating cash flow and ended the quarter with $5 billion in cash.

First we are confident that the appeal of our value proposition will continue to resonate with consumers.

Over the past 46 plus years, our continued focus on value has served us extremely well through many kinds of economic environments, including periods of inflation and through recessionary times.

After the quarter ended we paid down 500 million of maturing debt and.

In the first quarter, we returned $841 million to shareholders through our buyback and dividend programs now I'll turn it back to Ernie.

In an ever evolving retail landscape, we believe our commitment to offer great value every day will continue to attract shoppers to each of our retail banners.

Yes.

Thanks, John .

Today I'd like to highlight our confidence in our growth plans and why we are convinced that we are in a great position to capture additional market share in the U S and internationally.

Second we see our differentiated treasure hunt shopping experience as a tremendous advantage our stores received multiple deliveries each week, a fresh branded merchandize to surprise and excite our customers.

First we are confident that the appeal of our value proposition will continue to resonate with consumers.

Over the past 46 plus years, our continued focus on value has served us extremely well through many kinds of economic environments, including periods of inflation and through recessionary times.

With a rapidly changing assortment shoppers are inspired to visit us frequently to see whats new.

Third we see ourselves as leaders in flexibility the flexibility the flexibility of our buying allows us to seek out the best opportunities and the hottest trends in the marketplace, our store formats and fixtures allow us to flex our floor space to support our opportunistic buying.

In an ever evolving retail landscape, we believe our commitment to offer great value every day will continue to attract shoppers to each of our retail banners.

Further our systems and the flexibility of our supply chain allow us to merchandise stores individually with a curated mix of good better and best brands with a wide span of price points.

With a rapidly changing assortment shoppers are inspired to visit us frequently to see whats new.

All of this allows us to attract consumers across wide income and age demographics and each of the countries that we operate in.

Our broad demographic reach across income levels can open up even more opportunities for us and the product marketplace.

Further we continue to attract an outsized number of younger customers to our stores, including many gen Z and millennial shoppers, which we believe bodes well for the future.

Further our systems and the flexibility of our supply chain allow us to merchandise stores individually with a curated mix of good better and best brands with a wide span of price points.

We believe our ability to flex our product offerings across a vast array of categories and brands helps us attract a wider shopping audience than many other retailers.

All of this allows us to attract consumers across wide income and age demographics and each of the countries that we operate in.

Next we see the potential to grow our global store base by more than 1400 additional stores over the long term with just our current banners in our current countries.

Our broad demographic reach across income levels can open up even more opportunities for us and the product marketplace.

Further we continue to attract an outsized number of younger customers to our stores, including many gen Z and millennial shoppers, which we believe bodes well for the future.

Giving us confidence are the opportunities, we see for real estate and our disciplined approach to selecting locations.

Next and I can't emphasize this enough we are extremely confident that there will be more than enough inventory available in the marketplace to support our growth plans.

We believe our ability to flex our product offerings across a vast array of categories and brands helps us attract a wider shopping audience than many other retailers.

Over the last year or more than 1200 global buyers have source merchandise from a universe of approximately 21000 vendors, including many new ones.

Next we see the potential to grow our global store base by more than 1400 additional stores over the long term with just our current banners in our current countries.

Overall availability of quality branded merchandise has never been an issue for us throughout our history as vendors and brands continue to produce goods from multiple channels.

Giving us confidence are the opportunities we see for real estate.

And our disciplined approach to selecting locations.

Including in store online and direct to consumer.

Next and I can't emphasize this enough we are extremely confident that there will be more than enough inventory available in the marketplace to support our growth plans.

In fact, many vendors want to work with T. J X due to our size scale and buying power.

Over the last year or more than 1200 global buyers have source merchandise from a universe of approximately 21000 vendors, including many new ones.

As a growing global retailer with nearly 5000 stores.

We offer vendors, a very attractive way to grow their business and clear their excess inventory quickly and discreetly.

Overall availability of quality branded merchandise has never been an issue for us throughout our history as vendors and brands continuing to produce goods from multiple channels.

Lastly.

I truly believe that the depth of our off price knowledge and expertise within T. J X is on matched we have a highly differentiated global business and have developed a specialized talent and teams to support it.

Including in store online and direct to consumer.

In fact, many vendors want to work with T. J maxx due to our size scale and buying power.

We have many leaders with decades of off price experience and remain focused on developing newer associates.

As a growing global retailer with nearly 5000 stores.

And the next generation of leaders within our organization.

We offer vendors, a very attractive way to grow their business and clear their excess inventory quickly and discreetly.

We take great pride in our TGI University and other training programs.

Our deep bench allows us to deploy teams where needed and rotate talent between divisions and geographies all of which strengthens our company as we continue to pursue our goals for growth.

Lastly.

As I look at the retail industry today I believe our best in class organization is a major advantage.

We have many leaders with decades of off price experience and remain focused on developing newer associates and the next generation of leaders within our organization.

Moving to profitability again, we're extremely pleased with our well above planned first quarter performance and have increased our pre tax profit margin expectations for fiscal 2024.

We take great pride in our <unk> University and other training programs.

Our deep bench allows us to deploy teams where needed and rotate talent between divisions and geographies all of which strengthens our company as we continue to pursue our goals for growth.

We are confident about our ability to achieve our 10, 6% pretax profit margin target by fiscal 'twenty, five and we will continue to strive to exceed it over the long term.

As I look at the retail industry today I believe our best in class organization is a major advantage.

Turning to corporate responsibility, we continue to focus our global corporate responsibility reporting under four key pillars.

Moving to profitability again, we're extremely pleased with our well above planned first quarter performance and have increased our pre tax profit margin expectations for fiscal 2024.

Workplace communities, environmental sustainability and responsible business.

We recently updated our corporate website <unk> dot com with our 2022 efforts across several of these areas.

We are confident about our ability to achieve our 10, 6% pretax profit margin target by fiscal 'twenty, five and we will continue to strive to exceed it over the long term.

We encourage you to look more on our web site and we expect to release, our updated global corporate responsibility to report later this year.

I'm also proud to share that <unk> was recently named to Newsweek's list of America's greatest workplaces for diversity for 2023 as well as Forbes magazine's list of America's best employers for diversity.

Turning to corporate responsibility, we continue to focus our global corporate responsibility reporting under four key pillars.

Workplace communities, environmental sustainability and responsible business.

As always I am grateful to our teams around the globe for the work they do to support our global corporate responsibility efforts.

We recently updated our corporate website <unk> dot com with our 2022 efforts across several of these areas.

Summing up.

We encourage you to look more on our web site and we expect to release, our updated global corporate responsibility to report later this year.

Our strong first quarter results highlight the continued appeal of our branded merchandise terrific values and the excellent execution across the organization.

I want to again recognize and thank all of our global associates, whose collective efforts drove our strong performance we.

We feel great about our plans for the remainder of the year.

While our business is not immune to macro factors I am convinced that the characteristics and flexibility of our off price business model and the depth of our organizations expertise.

As always I am grateful to our teams around the globe for the work they do to support our global corporate responsibility efforts.

We will remain important advantages.

Summing up.

Our strong first quarter results highlight the continued appeal of our branded merchandise terrific values and the excellent execution across the organization.

Looking ahead I am convinced that we have a long runway for growth and are set up well to capitalize on the opportunities, we see to drive sales and traffic improved profitability and capture market share going forward.

I want to again recognize and thank all of our global associates, whose collective efforts drove our strong performance.

Now I'll turn the call back to John to cover our full year and second quarter guidance and then we'll open it up for questions.

We feel great about our plans for the remainder of the year.

While our business is not immune to macro factors I am convinced that the characteristics and flexibility of our off price business model and the depth of our organizations expertise.

Thanks again Ernie.

Before I start I want to remind you that fiscal 'twenty four calendar includes a 50 <unk> week.

Also as we stated in our press release. This morning, we will be offering eligible former <unk> associates, who have not yet commenced their pension benefit and opportunity to receive a lump sum payout of their vested pension benefit we anticipate that the impact of this pension payout offer primarily a noncash.

We will remain important advantages.

Now I'll turn the call back to John to cover our full year and second quarter guidance and then we'll open it up for questions.

I'm in charge.

Could negatively impact fiscal 2004, EPS by approximately 1% to two pennies.

But could be higher or lower depending on participation rates and other factors.

Thanks, again, Ernie before I start I want to remind you that fiscal 'twenty four calendar includes a 50 <unk> week.

To be clear all of the guidance, we're providing today does not include the potential impact of this pension payout offer we expect to exclude the impact of this potential settlement charge from our adjusted pre tax profit margin and EPS results in the third quarter.

Now to our full year guidance, we continue to expect an overall comp store sales increase of 2% to 3% as a reminder, our comp guidance will exclude expected sales from the 50 <unk> week.

Charge could negatively impact fiscal 2004, EPS by approximately 1% to two pennies, but could be higher or lower depending on participation rates and other factors.

For the full year, we expect consolidated sales to be in the range of $52 seven to $53 2 billion.

Six for 6% to 7% increase over the prior year.

This guidance assumes approximately $800 million of additional revenue expected from the 50 <unk> week.

As Ernie said, we are increasing our full year profitability guidance. We're now planning full year pre tax profit margin to be in the range of 10 three to 10, 5%.

Now to our full year guidance, we continue to expect an overall comp store sales increase of 2% to 3%.

As a reminder, our comp guidance will exclude expected sales from the 50 <unk> week.

Excluding unexpected benefit of approximately 10 basis points from the 50 <unk> week, we now expect adjusted pre tax profit margin to be in the range of 10, two to 10, 4% on a 52 week basis. This would represent an increase of 50 to 70 basis points versus fiscal 'twenty threes.

For the full year, we expect consolidated sales to be in the range of 52, 7% to $53 2 billion.

At six 6% to 7% increase over the prior year.

This guidance assumes approximately $800 million of additional revenue expected from the 50 <unk> week.

Adjusted pre tax profit margin of nine 7%.

As Ernie said, we are increasing our full year profitability guidance. We're now planning full year pre tax profit margin to be in the range of 10, three to 10, 5% excluding unexpected benefit of approximately 10 basis points from the 50 <unk> week, we now expect adjusted pre tax.

Our full year pre tax profit margin guidance assumes that we will now see a benefit of more than 100 basis points from lower freight expenses. Our current freight assumption includes a pull forward of some of the benefit we had previously expected we expected in FY 'twenty five.

<unk> margin to be in the range of 10, two to 10, 4% on.

This includes favorable freight rates and benefits from some of our freight initiatives. These along with the freight accrual favorability in the first quarter that I mentioned earlier is driving the increase in our full year freight benefit assumption.

On a 52 week basis. This would represent an increase of 50 to 70 basis points versus fiscal 'twenty threes adjusted pre tax profit margin of nine 7%.

Our full year pre tax profit margin guidance also assumes that we will see a continued benefit from better buying and that we continue to have and that we will continue to have headwinds from incremental store and distribution center wages and supply chain investments.

Our full year pre tax profit margin guidance assumes that we will now see a benefit of more than 100 basis points from lower freight expenses.

Our current freight assumption includes a pull forward of some of the benefit we had previously expected we expected in FY 'twenty. Five this includes favorable freight rates and benefits from some of our freight initiatives. These along with the freight accrual favorability in the first quarter that I mentioned earlier.

Further this pre tax profit margin guidance continues to assume that shrink will remain similar to last year in the first quarter, we took actions to secure more of our store.

Merchandise through tagging tethering Encasing, we also increased our loss prevention presence more broadly across our banners. We are laser focused on our shrink initiatives and continue to look for additional ways to mitigate the impact as a reminder, we won't know the full effect of these actions until we do a full <unk>.

Is driving the increase in our full year freight benefit assumption.

Annual inventory count at the end of the year.

For modeling purposes. We're currently assuming a full year tax rate of 26% net interest income of about $135 million and a weighted average share count of approximately 1.1 dollars 6 billion.

Further this pre tax profit margin guidance continues to assume that shrink will remain similar to last year in the first quarter. We took actions to secure more of our store merchandise through tagging tethering in casing. We also increased our loss prevention presence more broadly across our banners we are laser.

As a result of these assumptions we are increasing our full year earnings.

We are increasing our full year earnings per share guidance to a range of $3 49 to $3 58.

We're focused on our shrink initiatives and continue to look for additional ways to mitigate the impact as a reminder, we won't know the full effect of these actions until we do a full annual inventory count at the end of the year.

Excluding unexpected benefit of approximately 10 pennies from the 50 <unk> week, we expect adjusted earnings per share to be in the range of $3 39 to $3 48.

For modeling purposes. We're currently assuming a full year tax rate of 26% net interest income of about $135 million and a weighted average share count of approximately one $1 6 billion.

On a 52 week basis. This would represent an increase of 9% to 12% versus fiscal 'twenty threes adjusted earnings per share of $3 11.

As a result of these assumptions, we are increasing our full year earnings per share.

Yeah.

Moving to the second quarter, we are planning overall comp store sales growth to be up 2% to 3%. We expect second quarter consolidated sales to be in the range of 12, three to $12 4 billion.

We are increasing our full year earnings per share guidance to a range of $3 49 to $3 58.

Excluding unexpected benefit of approximately 10 pennies from the 50 <unk> week, we expect adjusted earnings per share to be in the range of $3 39 to $3 48.

A 4% to 5% increase over the prior year.

We are planning second quarter pre tax profit margin to be in the range of nine three to nine 5%. This guidance assumes a significant benefit from lower freight costs as well as a benefit from better buying it also includes ongoing headwinds from incremental wage cost and supply chain investments.

On a 52 week basis. This would represent an increase of 9% to 12% versus fiscal 'twenty threes adjusted earnings per share of $3 11.

Moving to the second quarter, we are planning overall comp store sales growth to be up 2% to 3%.

<unk>.

When looking at our second quarter pre tax profit margin guidance sequentially versus the first quarter I want to remind you that our first quarter pre tax profit margin benefited from a favorable freight accrual adjustment that won't repeat in the second quarter.

We expect second quarter consolidated sales to be in the range of 12, three to $12 4 billion.

A 4% to 5% increase over the prior year.

Further in the second quarter, we are expecting a reversal.

Most of the first quarter timing of expenses expense benefit that as well as a bigger impact from wage costs and supply chain investments.

For modeling purposes, we are currently assuming a second quarter tax rate of 26, 2%.

<unk>.

When looking at our second quarter pretax profit margin guidance sequentially versus the first quarter I want to remind you that our first quarter pre tax profit margin benefited from a favorable freight accrual adjustment that won't repeat in the second quarter.

Net interest income of about $37 million and a weighted average share count of approximately 1.1 dollars 6 billion.

We expect second quarter earnings per share to be in the range of 72 to 75.

Further in the second quarter, we are expecting a reversal of most of the first quarter timing of expenses expense benefit that as well as a bigger impact from wage cost and supply chain investments.

Up 4% to 9% versus last year.

Lastly, on a 52 week basis, our implied guidance for the second half of the year assumes at pre tax profit margin will be in the range of $10 six to 10, 8%. Our outlook also implies that overall comp store sales growth will be up 2% to 3%.

For modeling purposes. We are currently assuming a second quarter tax rate of 26, 2% net interest income of about $37 million and a weighted average share count of approximately 1.1 dollars 6 billion.

On a 52 week basis earnings per share will be in the range of $1 91 to $1 97 for the second half of the year.

We expect second quarter earnings per share to be in the range of 72 to 75.

In closing I want to emphasize that we are in a great position.

Both operationally and financially to take advantage of the opportunities we see to grow our business. We plan to continue making important investments in our business, while simultaneously returning significant cash to our shareholders.

Up 4% to 9% versus last year.

Lastly, on a 52 week basis, our implied guidance for the second half of the year assumes at pre tax profit margin will be in the range of 10 six to 10, 8%. Our outlook also implies that overall comp store sales growth will be up 2% to 3% and on a 52 week basis.

Now we are happy to take your questions as we do every quarter. We ask that you. Please limit your questions to one per person. So we can keep the call on schedule and answer as many questions as we can.

Earnings per share will be in the range of $1 91 to $1 97 for the second half of the year.

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

Thank you as a reminder, if you would like to ask a question. Please press star one if you need to withdraw. Your question you may do so at any time by pressing start to our first question comes from Lorraine Hutchinson. Please go ahead.

In closing I want to emphasize that we are in a great position.

Thank you good morning.

I was hoping you could walk through some of the specifics.

Pressure that youre seeing on SG&A this year.

Any quantification would be helpful. Because the growth rate a little bit higher than normal and then if you could perhaps comment on which of these expenses.

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

Thank you as a reminder, if you would like to ask a question. Please press star one if you need to withdraw. Your question you may do so at any time by pressing star to our first question comes from Lorraine Hutchinson.

<unk> continue into next year versus.

One time type of investment.

Thank you.

Yes, Thanks, Lorraine, so we're not giving guidance, but I will walk you through some of the components as I said in my prepared comments, we continue to have incremental store wage.

Go ahead.

Thank you good morning.

I was hoping you could walk through some of this.

Pressure that youre seeing on SG&A this year.

But for the full year, we expect this incremental wage pressure to be less than half of our anticipated SG&A increase the rest of the cost is in a number of smaller headwinds such as general cost inflation returned to normal cost that includes such things as increased travel and investments and loss prevention.

Any quantification would be helpful because the growth rate.

A bit higher than normal and then if you could perhaps comment on.

Each of these expenses will continue into next year versus.

No one time type of environment. Thank you.

Yeah.

Thank you. Thank you next we'll go.

Yes, Thanks, Lorraine, so we're not giving guidance, but I will walk you through some of the components as I said in my prepared comments, we continue to have incremental store wage.

Next we will go to the line of Matthew Boss. Please go ahead.

Great Thanks, and congrats on a really nice quarter.

Thank you. Thank you.

But for the full year, we expect this incremental wage pressure to be less than half of our anticipated SG&A increase the rest of the cost is in a number of smaller headwinds such as.

Ernie could you speak to traffic that you saw as the quarter progressed and trends that you've seen so far to start the second quarter and then can you just elaborate larger picture on new customer acquisition you cited it what stood out with notably the broadening of the income demographic reach that you cited it sounds like a young.

General cost inflation returned to normal cost that includes such things as increased travel and investments and loss prevention.

<unk> customer.

New customers. So maybe just traffic and then just.

Thank you. Thank you.

Just elaborate on new customer acquisition that Youre seeing.

Next we will go to the line of Matthew Boss. Please go ahead.

Yes traffic.

Great Thanks, and congrats on a really nice quarter.

Great questions traffic has been healthy overall was pretty consistent and.

Thank you. Thank you.

So Ernie could you speak to traffic that you saw as the quarter progressed and trends that you've seen so far to start the second quarter and then can you just elaborate larger picture on new customer acquisition you cited it what stood out with notably the broadening of the income demographic reach that you cited it sounds like.

One of the things we're looking at and this is a good opportunity for me to give you a heads up.

Our ticket has started to moderate a little bit and so.

We're doing this business off of.

Off of our traffic, which we've said in the release.

A younger customer a new customer so maybe just traffic and then.

It.

It's not being driven as much by ticket when we had our average ticket being up.

Just elaborate on new customer acquisition that Youre seeing.

It's also encouraging when we look at the way.

Yes traffic.

Great questions traffic has been healthy overall was pretty consistent and.

Our home goods business is starting to rebound a little bit we're seeing relative to the trend we had before where traffic was down quite a bit we're seeing the traffic kind of pick up there more recently as well.

One of the things we're looking at and this is a good opportunity for me to give you a heads up.

As you know our ticket has started to moderate a little bit and so.

So these are healthy signs were very.

Bullish on these signs we do not.

We're doing this business off of.

Off of our traffic, which we said in the release and it.

We do not manage our average ticket by the way obviously, we've talked about that and Matt I know, we've talked in the past, where we bottom up that in the company.

It's not being driven as much by ticket when we had our average ticket being up.

And that we wanted to just drive it off of the exciting values are in the store and the traffic.

It's also encouraging when we look at the way.

Or what you were talking about.

New customers I think that was kind of part b.

Question, new customary talking to like new customer acquisition.

That that we're getting in this environment is that where youre getting at or exactly if you could just elaborate on new customer acquisition, who youre seeing is new I think you cited a younger customer and a gap and then I think you were talking about the the demos how I had talked about the different good better best and income levels right, So, but we're getting.

So these are healthy signs were very.

Bullish on these signs we do not.

We do not manage our average ticket by the way obviously, we've talked about that Matt I know, we've talked in the past, where we bottom up that in the company.

And that we wanted to just drive it off of the exciting values are in the store and the traffic.

<unk>.

Good good amount of younger customers our percent of our new customers are on the younger age group that's been going on for a while now.

Or what you were talking about.

New customers I think that was kind of part b.

Question, new customary talking to like new customer acquisition.

We're also we don't want to be we really don't want to be pigeonholed into any group of income demographics or houses fashion looks whether conservative traditional.

That that we're getting in this environment is that where youre getting at or yes, exactly if you could just elaborate on new customer acquisition, who youre seeing is new I think you cited a younger customer and a gap and then I think you were talking about the the demos how I had talked about the different good better best and income levels right. So but we're good.

We want customers from all.

Demographics income and even fashion looks.

One thing that is a constant denominator, which all our merchants go after is quality. So we consistently talk about the quality level of the goods that are buyers buy and what we put on the floor that we never give up on that what does fluctuate is the fashion and the.

<unk>.

Good good amount of younger customers our percent of our new customers are on the younger age group that's been going on for a while now.

We're also we don't want to be we really don't want to be pigeonholed into any group of income demographics or houses fashion looks whether conservative traditional.

And the income good better best which I think has been.

<unk> advantage to us in gaining new younger customers yes.

But also customers across the board when you look at the competition around us and I'm not talking just stock price.

We want customers from all.

Demographics income and even fashion looks.

Many of them.

One thing that's a constant denominator, which all our merchants go after is quality. So we consistently talk about the quality level of the goods that are buyers buy and what we put on the floor that we never give up on that what does fluctuate is the fashion and the.

Don't trade broadly like us so they're very narrow in the scope of what they Gulf are either in the looks of the goods are in the price bracket that theyre ran they either go after a lower better.

Demographics slashed price point range.

Or are there more fashion, driven or more true than ever all of it and our strategy.

And the income good better best which I think has been a.

Positive advantage to us in gaining new younger customers yes.

And we believe by the way that this is linked with us driving more traffic is to have good better best to capture more of the potential customers that are out there and then I would throw in one other thing you didn't ask about it but our marketing teams.

But also customers across the board when you look at the competition around us and I'm not talking just stock price.

Many of them.

Don't trade broadly like us so they're very narrow in their scope of what they go for either the looks of the goods are in the price bracket that they're and they either go after a lower better.

As you know specifically and consciously do that in our marketing approach where of course, we have a.

We have upped our digital media to a much greater degree over the last handful of years.

Demographics slashed price point range.

Which gets across many demographics, but they are actually.

Or are there more fashion, driven or more true than ever all of it and our strategy.

Going for different lengths of customers and the placement of the working media that we do is meant to go after different customers as well, where some other retailers purposely place their working media and segments that are going after certain customer base, we are very strategic and conscious.

As you know specifically and consciously do that in our marketing approach where of course, we have a.

And purposeful about where we go with our media spend so.

Great question, sorry, I've, given you a lot of information there but.

We have upped our digital media to a much greater degree over the last handful of years.

You were getting to some of the meat of why we have a lot of confidence in our topline going forward.

Which gets across many demographics, but they are actually.

That's great color best of luck.

Thank you Matt.

Going for different lengths of customers and the placement of the working media that we do is meant to go after different customers as well, whereas some other retailers purposely place their working media and segments that are going after certain customer base, we are very strategic and conscious.

And next we'll go to the line of.

Paul Lajoie.

Please go ahead.

Hey, Thanks, guys just a follow up on that last bit Ernie can you talk about the performance of your higher income demographic stores versus your lower income demographic stores and I'm curious if you would say that you are seeing a trade down customer at this point and then just anything you could add on regional performance any differently.

And purposeful about where we go with our media spend so.

Great question, sorry, I've, given you a lot of information there but.

You were getting to some of the meat of why we have a lot of confidence in our topline going forward.

Is there thanks.

Yes.

Paul.

What we're seeing in the first quarter is what we're seeing similar to the first quarter of last year. So through the first three quarters of last year. As we said, we're seeing stores in higher demographic areas being more of the driver of our comp.

That's great color best of luck.

Thank you Matt.

Next we will go to the line of.

Paul Lajoie. Please go ahead.

Hey, Thanks, guys just to follow up on that last bit Ernie can you talk about the performance of your higher income demographic stores versus your lower income demographic stores and I'm curious if you would say that you are seeing a trade down customer at this point and then just anything you can add on regional performance any different.

As we.

That's what we're seeing in the first quarter as well as far as by geography, more Max by geography was pretty consistent.

Is there thanks.

So it was really nice to see the consistency that we're seeing in the business.

Yes, Paul.

No.

Yeah.

And any more any detail you can give by state like from your larger space.

In terms of I mean, outperformers or underperformers by geography. It was it was pretty consistent.

And again, it's hard for us to read into trade down and what we're seeing.

There's just so many moving things that are going on right now that its just tough to read but like I said, we are seeing the higher demographic stores stores in higher demographic areas.

As we.

And that's what we're seeing in the first quarter as well as far as by geography, more Max by geography was pretty consistent.

Performing.

So it was really nice to see the consistency that we're seeing in the business.

Being being more of the driver of our comp in <unk>.

Got it thanks, guys. Good luck.

And any more any detail you can give by state like from your larger states.

Thank you Paul.

Next we will go to the line of Alex <unk>. Please go ahead.

In terms of outperformers or Underperformers.

Great. Thanks, so much for taking the question and congrats on the corner I wanted to zoom in on <unk> here. It looks like the margin outpaced expectations also it looks like it was one of the highest you guys have delivered therefore, our first quarter in a number of years. So I'm. Just wondering is that a function of some of the price increase strategy throwing flowing through or what would you attribute that result, Tim.

Geography, it was it was pretty consistent.

And again, it's hard for us to read into trade down and what we're seeing.

There's just so many moving things that are going on right now that its just tough to read but like I said, we are seeing the higher demographic stores stores in higher demographic areas.

Thanks.

Performing.

I'll start off and John will jump in as well I think it's a multi pronged.

Being being more of the driver of our comp in <unk>.

We've had yes.

Got it thanks, guys. Good luck.

Our pricing strategy.

Thank you Paul.

Next we will go to the line of Alex <unk>. Please go ahead.

Sales being healthy.

Great. Thanks, so much for taking the question and congrats on a corner I wanted to zoom in on <unk> here. It looks like the margin outpaced expectations also it looks like it's one of the highest you guys have delivered there for first quarter in a number of years. So I'm. Just wondering is that a function of some of the price increase strategy throwing flowing through or what would you attribute that result too.

Mark markdowns, certainly a part of that margin.

John do you want to.

Lower freight costs lower freight favorability drive credit cost favorability.

That's essentially yes.

Honestly.

And what we reiterate we feel good about the expected level of freight expense recapture and the continued opportunity we havent better buying.

Thanks.

I'll start off and John will jump in as well I think it's a multi pronged.

We've had yes.

Pricing strategy.

Yeah.

Yeah, and Alex I'll throw something else and on <unk> is as you could see by the strong performance.

Sales being healthy.

Mark markdowns, certainly a part of that margin.

On sales that we show it as a five it was a very strong five.

John do you want to.

And we really like the positioning on the open to buy there.

Lower freight costs lower freight favorability drive credit cost favorability.

They are the big ships, we'd like the open to buy that we have there and the liquidity because of the markets as.

That's essentially yes.

Honestly.

As we talked about have been they're just really flooded with a lot of inventory across many brands.

And what we reiterate we feel good about the expected level of freight expense recapture and the continued opportunity we havent better buying.

And so that.

That combined with the fact of the good better best advantage that we have and our teams are we have so much long tenured merchants in.

Yeah, and Alex I'll throw something else and on <unk> is as you could see by the strong performance.

And that rolled in planning and allocation teams that were really able to leverage the market I think better than a lot of other retailers to to achieve some of these merchandise margins that are driving their profit performance again, a lot of the other retailers can't.

On sales that we show it as a five it was a very strong five <unk>.

And we really like the positioning on the open to buy there.

They are the big ships, we like the open to buy that we have there and the liquidity because of the markets.

Bob and weave as much because they are not as broad as we are so it gives us more retailing play I think.

As we talked about have been they're just really flooded with a lot of inventory across many brands and so that.

And surgically addressing the retails as we do.

That combined with the fact of the good better best advantage that we have and our teams are we have so much of long tenured merchants.

Thank you.

Next we will go to the line of Brooke Roach. Please go ahead.

Good morning, and thank you for taking our question I was wondering if you could provide a bit more color on the drivers of the freight outperformance and what youre seeing between ocean and domestic freight as you enter the new contract here how much of this better outlook for the fiscal year is a pull forward from FY 'twenty five and how does this impact your view on the recapture ability.

Bob and weave as much because they are not as broad as we are so it gives us more retailing play I think.

Of the approximately 300 bps of pressure versus pre COVID-19 levels. Thank you.

And surgically addressing the retails as we do.

Yes, so we're not going to get into the detail of the pull forward other than to say that we did have.

Thank you.

Next we will go to the line of Brooke Roach. Please go ahead.

Some operational initiatives that gave us some benefit earlier than expected.

But basically where we're seeing the freight favorability versus last year is primarily an ocean rates.

So the ocean rates have come down significantly the freight initiatives that we've implemented such as more intermodal more premier carriers on our routes.

Of the approximately 300 bps of pressure versus pre COVID-19 levels. Thank you.

And we're seeing less port congestion as well.

Yes, so we're not going to get into the detail of the pull forward other than to say that we did have.

And we're seeing at the beginning of the year when we did our plans we put something in our plans.

Some operational initiatives that gave us some benefit earlier than expected.

On the as I said in the fourth quarter.

The domestic contracts, but honestly the majority is coming from the ocean the domestic.

But basically what we're seeing the freight favorability versus last year is primarily an ocean rates.

The costs are a little stickier.

So the ocean rates have come down significantly the freight initiatives that we've implemented such as more intermodal more premier carriers on our routes.

The wage rates that have have been implemented particularly in.

On rail and truck.

Those arent going to come back out.

And we're seeing less port congestion as well.

So we don't anticipate.

And we're seeing at the beginning of the year. When we did our plans we put something in our plans on the as I said in the fourth quarter.

At this time huge domestic freight favorability, but again the initiatives that we're putting in place to mitigate.

Our freight expenses, we're very happy with.

The domestic contracts, but honestly the majority is coming from the ocean the domestic.

Yeah.

So as far as the recapture.

We don't expect to recapture the full 300 basis points of incremental freight that we saw over the last three years.

The costs are a little stickier.

The wage rates that have have been implemented particularly in.

Thank you very much.

On rail and truck.

Next we'll go to the line of Laura Champine. Please go ahead.

Those arent going to come back out.

So we don't anticipate.

Thanks for taking my question I wanted to get a little bit of clarity on the expense shift given the Q1 margins were better but the Q2 guide is a little bit lighter. So can you help quantify the drivers that are just timing related.

At this time huge domestic freight favorability, but again the initiatives that we're putting in place to mitigate.

Our freight expenses, we're very happy with.

So as far as the recapture.

Yeah. So.

We don't expect to recapture the full 300 basis points of incremental faith that we saw over the last three years.

As far as Q2.

So we did have.

We did have favorable.

Thank you very much.

Timing of costs in the first quarter.

Next we will go to the line of Laura Champine. Please go ahead.

<unk>.

And those the.

The majority of those will reverse out in the second quarter.

We are planning, we are planning 330 basis points improvement over last year.

And again the lower freight.

Yeah. So.

Right lower freight benefit in the second quarter, because the first quarter we had.

As far as Q2.

The accrual reversal that benefited us in the first quarter and then of course <unk>.

So we did have.

We did have favorable.

Wage and supply chain investment costs.

Timing of costs in the first quarter.

Start in the second quarter.

So those are the those are the main reasons for the.

<unk>.

And those the.

The majority of those will reverse out in the second quarter.

When you look at Q1 versus Q2.

And did you quantify what the Q1 impact was from the freight accrual reversal.

We're planning, we're planning 330 basis points improvement over last year.

No we did not.

And again the lower freight.

Okay got it.

Right lower freight benefit in the second quarter, because the first quarter we had.

Next we'll go to the line of an Isa Sherman. Please go ahead.

The accrual reversal that benefited us in the first quarter and then of course <unk>.

Thank you.

I wanted to ask a little bit more about your traffic patterns through the quarter. I know you talked about overall seeing an increase in not seeing differences by geography, what about through the quarter and your exit rate at the end of the quarter did you see it pick up throughout the quarter and last Q2, you talked about traffic.

Wage and supply chain investment costs.

Start in the second quarter.

So those are the those are the main reasons for the.

When you look at Q1 versus Q2.

And did you quantify what the Q1 impact was from the freight accrual reversal.

Being down and basket being up.

It sounds like now Youre seeing those trends reversed where your traffic is often your basket is coming down a little bit. We're taking is starting to moderate is that consistent into Q2 as well. Thank you.

No we did not.

Okay got it.

Next we will go to the line of an Isa Sherman. Please go ahead.

Thank you.

Yes, we havent given any guidance on Q2 as far as what we're seeing other than we've got a good start.

I wanted to ask a little bit more about your traffic patterns through the quarter I know you talked about overall being an increase in not seeing differences by geography, what about through the quarter and your exit rate at the end of the quarter did you see it pick up throughout the quarter and last Q2, you talked about traffic.

And we've said that.

The sales in March Max we're pretty consistent by month.

Does that does that answer your question.

Being down and basket being up.

It sounds like now Youre seeing those trends reversed where your traffic is up in your basket is coming down a little bit. We're taking are starting to moderate is that consistent into Q2 as well. Thank you.

Yeah, well could you give a bit more color on the components of that the traffic in the basket through others, all consistent by month as well.

No, we're not giving that detail other than to say on the quarter. The pass the transactions drove the comp.

Yes, we havent given any guidance on Q2 as far as what we're seeing other than we've got a good start.

Got it okay. Thank you.

In Asia, maybe part of this question is related to win before I talked about.

And we've said that.

The sales in Mar Max we're pretty consistent by month.

We could have.

I guess I'm, giving you a little preview that we could have our ticket coming down a notch from where it's been a point or two but thats related that's going forward.

Does that does that answer your question.

And that's just a bit of a heads up for everybody that ticket could come down I don't know a couple of points.

Yes could you give a bit more color on the components of that the traffic in the basket through are those all consistent by month as well.

More based on our merchandise mix.

No, we're not giving that detail other than to say on the quarter, the paas or the transactions drove the comp.

Variance within that within this within the store so when our mix as certain mixes.

We get more growth at a lower ticket area, which which is happening and again, that's what I was trying to say before we don't drive the bus on we don't determine that we wanted to do whatever drives our top line sales. The most that's our priority.

Got it okay. Thank you yeah I think in Asia, maybe part of this question is related to one before I talked about.

We could have.

I guess I am giving you a little preview that we could have our ticket coming down a notch from where it's been a point or two but thats related that's going forward.

And the pricing throughout the store is a bottom up pricing strategy, where our buyers literally they make the deals at the right and they assign the right value there, but I understand the question because Scott we were talking about the traffic and then the ticket. The ticket is really just me, giving you a heads up that it could come down a couple of points based on what.

And that's just a bit of a heads up for everybody that ticket could come down.

A couple of points.

More based on our merchandise mix.

The variance within that within this within the store so when our mix as certain mixes.

We're seeing and some of our other businesses are tending to be our lower ticket and that mix just could bring our ticket down a little over the next.

We get more growth and a lower ticket area, which which is happening and again, that's what I was trying to say before we don't drive the bus on we don't determine that we wanted to do whatever drives our topline sales, but most of that's our priority.

A quarter or two.

Very helpful color. Thank you.

And the pricing throughout the store is a bottom up pricing strategy, where our buyers literally they make the deals at the right and they assign the right value there, but I understand the question. We go to Scott we were talking about the traffic and the ticket that ticket is really just may giving you a heads up that it could come down a couple of points based on what.

Next we will go to the line of Chuck Grom. Please go ahead.

Thanks, Great quarter I, just wanted to focus in on Homegoods Homegoods, a little bit you talked about a recovery throughout the quarter. There. So I just wanted to if we could dive into that a little bit and then giving the pending closing of some of these bed Bath stores I'm wondering if you decided to reposition the business to pursue that market share opportunity in greater quantity going forward.

We're seeing and some of our water businesses are tending to be our lower ticket and that mix just could bring our ticket down a little over the next.

Okay. So yes, so the Chuck.

What's happening is we're seeing.

A quarter or two.

An improvement in the business as we were coming out of Q1.

Very helpful color. Thank you.

Next we'll go to the line of Chuck Grom. Please go ahead.

And.

Going into Q2 on a year over year comp basis, and if you look what you actually commented on seeing that seeing continuous improvement there as the year goes on over the next three quarters and so we do feel that opportunity based on what were actually experiencing with with our sales more recently.

Hey, Thanks, Great quarter I, just wanted to focus in on Homegoods Homegoods, a little bit you talked about a recovery throughout the quarter. There. So I just wanted to if we could dive into that a little bit and then giving the pending closing of some of these bed Bath stores I'm wondering if you decided to reposition the business to pursue that market share opportunity in greater quantity going forward.

Okay. So yes, so the Chuck yeah, what's.

Again, we don't give out exactly what we did by month in the quarter, but I can only say that as we got to the end of the quarter and as we started off this quarter it was improving the trend.

Bidding is we're seeing.

An improvement in the business as we were coming out of Q1.

And the bed Bath <unk> beyond situation. What's interesting is a lot of articles. Many of you have probably seen them that have come out that are referring directly to us has been in homegoods as being beneficiaries.

And.

Going into Q2 on a year over year comp basis, and if you look we actually commented on seeing that seeing continuous improvement there as the year goes on over the next three quarters and so we do feel that opportunity based on what were actually experiencing with with our sales more recently.

We believe and we always thought we never like to name the other retailers where it's happening.

But we do.

Strongly believe that that creates market share opportunities and market grab for us and I think what you are talking about it as are we.

Again, we don't give out exactly what we did by month in the quarter, but I can only say that as we got to the end of the quarter and as we started off this quarter it was improving the trend.

Youre asking about are we doing anything in our stores to capitalize what we do do within our own systems here and home goods is very diligent on this strategically will go in.

And we were able to do this with our with our planning and allocation system.

Where we can look at which categories in our bed Bath <unk> beyond store, obviously, we know what they did for category business and we can go in and re ramp our homegoods stores and inventory at the nearby location, where they have just vacated.

We believe and we always thought we never like to name the other retailers where it's happening.

But we do.

Strongly believe that that creates market share opportunities and market grab for us and I think what you are talking about it as are we.

And that's how we we don't artificially change proactively without we don't just go in and say Oh, we should do more of this category of business, because thats, what bed Bath and beyond that we did with by location and by and by the category of businesses. We think they stood for and we say, yes. It is more market share opportunity for us in those categories.

You're asking about are we doing anything in our stores to capitalize what we do do within our own systems here and home goods is very diligent on this strategically will go in.

And we were able to do this with our with our planning and allocation system.

Where we can look at which categories in our bed Bath <unk> beyond store, obviously, we know what they did for category business and we can go in and re rank, our homegoods stores and inventory at the nearby location, where they have just vacated.

So we are taking advantage of that situation to your point so great question.

We but we do it very selective we do it very strategically like that we don't just broad brush across the Homegoods store so to speak.

And that's how we we don't artificially change proactively without knowing that we don't just go in and say Oh, we should do more of this category of business, because thats, what bed Bath and beyond that we did with by location and by and by the category of businesses. We think they stood for and we say, yes. It is more market share opportunity for us in those categories.

Great. Thank you.

Next we'll go to the line of Dana Telsey. Please go ahead.

Good morning, everyone and congratulations on the nice results as you think of the international business Hi.

As you think of the international business, we had talked about strong sales in Europe and very good sales in Australia, how does that business compare to the U S and what you are seeing anything by category to note and just lastly on the shrink side keeping it flat for the year how much of a benefit are you seeing do you expect to see in Q4 versus the <unk>.

So we are taking advantage of that situation to your point so great question.

We but we do it very select we do it very strategically like that we don't just broad brush across the Homegoods store so to speak.

First three quarters. Thank you.

Great. Thank you.

Alright, Dana so I'll start off with the merchandize cat or anything and then John and I have gotten into the shrink after that a little bit.

Next we'll go to the line of Dana Telsey. Please go ahead.

Good morning, everyone and congratulations on the nice results as you think of the international business Hi.

So the.

Clearly what we've been seeing is <unk> has been.

The most consistent sales performer, but internationally, we are seeing strong and by the way.

Mark do we get data on market share, we are picking up a major market share across the board and actually all three of those geographies, if you mention Europe or Australia.

Our Canada.

First three quarters. Thank you.

We are outperforming by my guess on average one hundreds of basis points. So it's not just the little outperformance.

Alright, Dana so I'll start off with the merchandize Catamaran thing and then John and I are getting into the shrink after that a little bit.

Theres also.

So the the clearly what we've been seeing is mom acts as Ben.

Helping that a little as the store closures are those geographies I don't know as much about Australia, Canada, and Europe have a fair amount of store closures going on.

The most consistent sales performer, but internationally, we are seeing strong and by the way.

Mark do we get data on market share, we are picking up a major market share across the board and actually all three of those geographies, if you mention Europe or Australia.

So that will plant they are not necessarily like a bed bath and beyond but they have other store closures that will create ongoing tailwind I think for market share grab.

Little tough to read on the ups and downs because of those areas, having our compare rates are a little funky as to when they were.

Our Canada.

We are outperforming by my guess on average one hundreds of basis points. So it's not just a little outperformance.

Opening right, John or opening up coming out and then there were some shutdowns and so when we look at our one or two year stacks. It gets a little funky when we look at it correct.

There's also AR.

Helping that a little as the store closures are those geographies I don't know as much about Australia, Canada, and Europe have a fair amount of store closures going on.

Timing of the openings and closings.

We're not consistent by geography.

But yes.

So that will plant they are not necessarily like a bed bath and beyond but they have other store closures that will create ongoing tailwind I think for market share grab.

Yes to your point the <unk>.

Sure Rod numbers arent arent.

Well arent as good as <unk>.

<unk>, obviously, a homegoods is a whole different animal.

A little tough to read on the ups and downs because of those areas, having our compare rates are a little funky as to when they were.

But Europe Europe in the first quarter was really well was very close yes. It was a strong strong quarter second quarter.

Opening right, John or opening up coming out and then there were some shutdowns and so when we look at our one or two year stacks. It gets a little funky when we look at it correct.

And so we're excited about the <unk>.

By the way the way they are positioned in terms of liquidity and the branded market availability in both those regions as well.

Timing of the openings and closings.

We're not consistent by geography.

Also going to bode well I think for the balance of the year.

But yes.

Yes to your point the <unk>.

Shrink as far as shrink goes.

Sure Rod numbers arent arent.

We didn't give guidance on shrink for the full year, but just to remind we are laser focused on our shrink initiatives.

Well arent as good as <unk>.

<unk>, obviously, a homegoods is a whole different animal.

But Europe Europe in the first quarter was really well was very close yes. It was a strong strong quarter second quarter.

Which are the increasing tagging tethering, the using abuses of hard cases and.

The increased loss prevention presence, we're continuing to look for newer ways to protect our merchandise.

And so we're excited about the on and.

By the way the way they are positioned in terms of liquidity and the branded market availability in both those regions as well.

And then of course, we are.

We're also very focused on.

The employee and customer safety in our stores.

Also going to bode well I think for the balance of the year.

That along with the customer satisfaction. So anything we do we want to make sure that our customers and employees are protected and that is the the.

Shrink as far as shrink goes.

We didn't give guidance on shrink for the full year, but just to remind we are laser focused on our shrink initiatives.

To customers, it's an easy experience for them to shop in the store.

Which are the increasing tagging tethering, the using abuses of hard cases and.

Thank you I'm going to Dan I'm going to just jump back in also as we're talking about the international and we've been talking about.

The increased loss prevention presence, we're continuing to look for newer ways to protect our merchandise.

Ticket et cetera.

Want to make sure everybody is clear.

And then of course, we are.

We're also very focused on.

That we have.

We're still extremely bullish on our ability to do our pricing strategy.

The employee and customer safety in our stores.

That along with the customer satisfaction. So anything we do we want to make sure that our customers and employees are protected and that is the.

The ticket to haul ticket discussion, which is going to have a slight moderation has nothing to do with our pricing strategy that is really just based on the mix of categories within the store that could affect that our pricing strategy, where we have been selectively addressing prices and retails on certain items here or there.

To customers, it's an easy experience for them to shop in the store.

Thank you I'm going to Dan I'm going to just jump back in also as we're talking about the international and we've been talking about.

There is continuing in full force and one is not connected with the other actually there are two different things. So I just wanted to make sure that that's clear there and by the way internationally, which you were talking about they have been having terrific success on the pricing strategy in Canada and in Europe , and domestically, we contend to continue it.

Ticket et cetera.

Want to make sure everybody is clear.

That we have.

We're still extremely bullish on our ability to do our pricing strategy.

The ticket the whole ticket discussion, which is going to have a slight moderation, but it has nothing to do with our pricing strategy that is really just based on a mix of categories within the store that could affect that our pricing strategy, where we have been selectively addressing prices and retails on certain items here or there.

From our E comm business through our.

<unk> to our Homegoods businesses, so wanted to make sure that was clear.

Very helpful. Thank you.

<unk>.

Next we'll go to the line of Adrian.

Please go ahead.

Great. Thank you very much congratulations tremendous execution.

Ernie.

Paul you had you're welcome.

We will get there you.

You had mentioned sort of the cadence capacity of the model is now fully functional and really allowing the off price model to shine. So can you just go into more detail about how much better.

From our E comm business through our.

Year is from an open to buy and how is that going.

<unk> to our Homegoods businesses, so wanted to make sure that was clear.

I just think the ability for the buyers.

And then just a follow on to that we get a lot of questions about availability, which you addressed the inventory online claims can you then explain the net fee rate and the longevity of the off price comparative advantage at EUR frontline move up and then the value side alright. Thanks.

Very helpful. Thank you.

<unk>.

Next we'll go to the line of Adrian.

Please go ahead.

Great. Thank you very much congratulations tremendous execution.

Ernie.

Paul You had you are welcome.

Are you there.

You had mentioned sort of the case capacity of the model it sort of now fully functional and really allowing the off price model to shine. So can you just going to see kind of some more detail about how much better.

Okay very good adrianne.

Right, well, you're hitting right on the crux of what we do here. So the chase. The first thing you were talking about as the chase culture. So to speak of what we have going there versus a year ago. While we are we are coming as witnessed by some of these inventories.

Year is from an open to buy and how do you think.

I think the ability for the buyers.

And then just a follow on to that we get a lot of questions about availability, which you addressed the inventory online claims can you then explain the net fee rate the longevity of the off price comparative advantage at EUR frontline move up and then the value shines through on all right. Thanks.

You can see in last year part of what was happening last year is it was a bigger challenge for the merchants to kind of guesstimate our sales trends are.

And the timing of availability that was going to be in the market.

And we were finding that the.

Okay very good adrianne.

The transportation inbound transportation was moving faster than we thought it would be so of all of those dynamics we're intersecting.

Right, well, you're hitting right on the crux of what we do here. So that chase. The first thing you were talking about as the chase culture. So to speak of what we have going there versus a year ago. While we are we are coming as witnessed by some of these inventories.

Which for a period of time had us chasing a little bit less awards this year.

We are in I would call it a textbook situation to take advantage of the quote unquote phenomenal availability that's out there. So I think thats what youre, that's why we feel great about it and I do feel we are in more of the chase mode and actually every division.

You can see in last year part of what was happening last year is it was a bigger challenge for the merchants to kind of guesstimate our sales trends are.

And the timing of availability that was going to be in the market.

And that combined.

And we were finding that the.

It's not tricky to picture why that combined will help our profits by the way and we mean the other dynamic going on.

The transportation inbound transportation was moving faster than we thought it would be so all all of those dynamics we're intersecting.

In terms of our buyers who are so talented and so experienced again, we have very little turnover in that group.

Which for a period of time had us chasing a little bit less whereas this year. We are in I would call. It a textbook situation to take advantage of the quote unquote phenomenal availability that's out there. So I think thats what youre, that's why we feel great about it and I do feel we are in more of the chase mode and actually every.

As we mean more to and I think I've talked about this before we mean more to vendors today than we did a few years ago, and we mean to lots of them a few years ago. It just since Covid has gone this way and as you can imagine the decrease in branded retail out there, whether it's online or at brick and mortar has.

Division.

And that combined.

It's not tricky to picture why that combined will help our profits by the way and we mean the other dynamic going on.

Created more of a reliance on our partnership on the key brands in the market to want to do more business with us so add that into the chase and it has allowed us to make sure. We have a lot of available a lot of open to buy and we have a vendor community that is loaded with merchandise that also knows we're more important to them today than we've ever had.

In terms of our buyers who are so talented and so experienced again, we have very little turnover in that group.

As we mean more to and I think I've talked about this before we mean more to vendors today than we did a few years ago, and we mean a lot to them a few years ago. It just since Covid has gone this way and as you can imagine the decrease in branded retail out there, whether it's online or at brick and mortar has.

Ben.

That's why.

Excited about where we are currently excited about the potential future increase in profitability as we move forward and continued top line market share grab.

So I think that answers that first part.

Created more of a reliance on our partnership on the key brands in the market to want to do more business with us so add that into the chase and that has allowed us to make sure. We have a lot of available a lot of open to buy and we have a vendor community that is loaded with merchandise that also knows we're more important to them today then.

Then I think are you asking on availability, where theyre talked with the.

The vendor community talks about maybe cleaning up their inventories.

Exactly.

Well back to that so that is.

We've ever been.

That has been set for.

That's why.

Years and years and years decades.

Excited about where we are currently excited about the potential future increase in profitability as we move forward and continued top line market share grab.

And what happens now is again no matter, who they are we have we're dealing with 21000 vendors, but even if you look at our top couple thousand vendors think about that one yes, one vendor one year cut out less but most of them are public companies that.

So I think that answers that first part.

Then I think are you asking on availability, where theyre talking with the.

Certainly and rightfully so need to grow their earnings and show growth. So they are almost no matter what they do they have to still.

Vendor community talks about may be cleaning up their inventories.

Exactly.

Jason inventory are driving inventory situation, a little to try to get reorders and maximize their business.

So that is.

That has been set for.

Years and years and years decades.

So that's always going to be there I see no signs of that changing.

And what happens now is again no matter, who they are we are dealing with 21000 vendors, but even if you look at our top couple thousand vendors think about that one yes, one vendor one year cut out less but most of them are public companies that.

To your point I know certain vendors will come out and say theyre going to clean up their inventory, but what typically happens is they're clean for a season or two and then the other vendor in a similar category just happens to have more at that time and it all dovetails rather nicely so again.

Shortly and rightfully so need to grow their earnings and show growth. So they are almost no matter what they do they have to still.

Zero issue and a constant and availability of desirable merchandise.

<unk> inventory or drive an inventory situation, a little to try to get reorders and maximize their business.

Super helpful.

And best of luck.

So that's always going to be there I see no signs of that changing.

Thank you.

Thank you and our final question comes from Ike Marsha. Please go ahead.

Your point I know certain vendors will come out and say theyre going to clean up their inventory, but what typically happens is they are clean for a season or two and the other vendor in a similar category just happens to have more at that time and it all dovetails, rather nicely. So again I see zero issue and.

Hey, guys, let me add my congrats.

Two modeling questions I'm, sorry, if I missed this can you.

Give us the freight benefit you got in the first quarter I know you said, it's like a 100 bps for the year plus for the year, but what was in Q1 and then Ernie.

So youre, taking the pre tax margin of 20 basis points I think on the last call. The grocery gross margins up 140, <unk> should we assume that that now means gross margins up 160 is that where that upside comes from just kind of curious on the gross margins for the year with a pump.

Our constant and availability of desirable merchandise.

Super helpful insight.

And best of luck.

Thank you.

Thank you and our final question comes from Ike Marsha. Please go ahead.

The planets.

Okay, we will.

Answer answer both so.

Hey, guys. Let me add my congrats just two modeling questions I'm, sorry, if I missed this can you.

On the gross margin.

John I'll, let John jump in here as well on the gross margin Youre.

Give us the freight benefit you got in the first quarter I know you said, it's like 100 bps for the year $100 plus for the year, but what was it in Q1 and then Ernie.

Youre talking about where we guided for the year now we're raising it.

The operating margins of 10, 4%.

We're taking the pre tax margin up 20 basis points I think on the last call you had grocery gross margins up 140 should we assume that that now means gross margins up 160 is that where that upside comes from just kind of curious on the gross margins for the year.

Yes, I was just I was trying to understand is that.

The upside to the gross margin you did prior year.

What about new annual plan on gross margin.

We didn't give guidance on a full year gross margin.

Just to say that we had a significant benefit right.

The planets.

Okay, we will.

Answer answer both so.

Okay.

On the gross margin.

Great.

Right.

John I'll, let John jump in here as well on the gross margin you.

I guess I thought in the <unk>.

Prior call you guys had said 140 basis points gross margin out of the year.

Youre talking about where we guided for the year now we're raising it.

Yes, we're not giving fray.

The operating margins of 10, 4%.

Or gross margin other than to say that.

Yes, I was just I was trying to understand is that does that.

No.

The upside to the gross margin you did prior year.

We feel good about the freight benefit that we've gotten in the <unk>.

What about new annual plan on gross margin.

Buying that we're seeing as well.

Yeah, we didn't give guidance on a full year gross margin.

Got it okay. Thank you.

Okay.

Just to say that we had a significant benefit right.

Yeah.

And then what was your other question another question sorry on shrink.

Okay.

Mainframe.

Fantastic.

Tailwind on shrink in the first quarter.

I guess I thought on the prior call you guys had said 140 basis points gross margin out of the year.

Great freight tailwind month rate right.

Yes.

Yeah, we're not giving fray.

We talked about that.

Or gross margin other than to say that.

Right. So you had a two part question one was on the gross margin I think one was on.

No.

We feel good about the freight benefit that we've gotten and the.

On something else.

Yes, I was just.

Better buying that we're seeing as well.

If you could tell us the fruit tailwind margin in the first quarter and then if you could give us the gross margin guide for the year, but it sounds like we're not going to do the second part of it.

Got it alright, thank you.

Okay.

And then.

Okay.

What was your other question another question sorry on shrink.

[laughter], Yeah, I mean as far as the first quarter goes I mean, we had a.

Tailwind on shrink in the first quarter.

Great freight tailwind.

We had a benefit from unanticipated freight accrual.

Right.

Yes.

We talked about that.

And then we had.

Right. So you had a two part question one was on the gross margin I think one was.

Some of our freight initiatives were.

Coming.

On something else.

We were getting a benefit earlier than we anticipated and that those are the real two items.

I was just asking if you could tell us the tailwind to margin in the first quarter and then if you could give us the gross margin guide for the year, but it sounds like we're not going to do the second part of it.

Okay. Thank you and we are.

The one thing we'd like to leave you with on that.

Okay.

[laughter], Yeah, I mean as far as the first quarter goes I mean, we had a.

As we're feeling very confident about the 10, 4% for the year, though which I think was the original catalyst of why you're asking so we are feeling good about where we're heading on achieving that for the year.

We had a benefit.

From unanticipated freight accrual.

For the bottom line pre tax profit margin.

And then we had.

Some of our freight initiatives were.

Got it thank you.

Thank you.

Coming.

Okay that was our that was our last question and I would like to thank you all for joining us today.

We were getting a benefit earlier than we anticipated and that those are the real two items.

Okay. Thank you and we are.

I'll be updating you again on our second quarter earnings call in August everybody take care.

<unk>.

The one thing we'd like to leave you with on that.

Thank you gentlemen.

That concludes your conference call for today, you may all disconnect. Thank you for participating.

So the bottom line pre tax profit margin.

Got it thank you.

Thank you.

Okay.

Okay that was our that was our last question and I would like to thank you all for joining US today, we will be updating you again on our second quarter earnings call in August .

Take care.

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

[music].

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