Q2 2024 TJX Companies Inc Earnings Call
Speaker 1: Ladies and gentlemen, thank you for watching.
Speaker 2: Thank you for standing by. Welcome to the TJX Company's second quarter, fiscal 2024 financial results conference call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. At that time, if you have a question, you will need to press star one. As a reminder, this conference call is being recorded August 16, 2023. I would like to turn the conference call over to Mr. Ernie Herman, Chief Executive Officer and President of the TJX Companies, Inc. Please go ahead, sir. Thanks, Sheila. 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 TJX Companies, Inc. Any recording, retransmission, reproduction?
Speaker 2: in today's press release and the investor section of our website, TJX.com. Reconciliations of other non-GAAP measures we discussed today to GAAP measures are also posted on our website, TJX.com, in the investor section. Thank you, and now I'll turn it back over to Ernie.
Speaker 3: Good morning. Joining me and Deb on the call is John Klinger. I'd like to begin today by once again recognizing our global associates for their dedication to TJX. It is their hard work that brings our business to life every day for our customers.
Speaker 3: I want to extend a special thank you to our store, distribution and fulfillment center associates for their continued very hard work and commitment to our company.
Speaker 3: I want to take a moment on the wildfires in Maui.
Speaker 3: We are grateful that our associates in Maui and the rest of Hawaii are safe, and at the same time are deeply saddened by the devastation and loss.
Speaker 3: To help with the relief efforts on the ground, we have made a donation to the Maui Food Bank, and our local teams are donating essential supplies.
Speaker 3: Now, to our business update and second quarter results.
Speaker 3: I am extremely pleased with our second quarter performance as sales, profitability and earnings per share were all well above our plans.
Speaker 3: I want to highlight that customer traffic drove our 6% overall comp sales increase and it increased at all of our divisions. As a reminder, for us, customer traffic represents the number of customer transactions.
Speaker 3: I am particularly pleased with the performance of our largest division, Marmax, which delivered high single-digit increases in both comp sales and customer traffic.
Speaker 3: Our overall apparel and accessory sales were very strong, and our overall home sales significantly improved and returned to positive comp sales growth.
Speaker 3: Clearly, our terrific mix of branded fashionable merchandise and great values
Speaker 3: resonated with shoppers when they visited our stores.
Second quarter consolidated pre tax margin of 10, 4% was up 120 basis points versus last year.
This was well above our plan due to a bigger benefit than we expected from lower freight costs as well as expense leverage on our above plan sales.
Gross margin was up 260 basis points. This increase was driven by a higher merchandise margin due to the significant benefit from lower freight costs.
This year over year freight benefit was primarily driven by lower rates as well as a benefit from our freight initiatives and the remainder of our year.
In the remainder of our year end accrual adjustments.
Gross margin also benefited from our inventory and fuel hedges and expense leverage on a 6% comp increase.
Our year over year shrink accrual and supply chain investments were headwinds to gross margin in the second quarter.
Second quarter, SG&A increased 170 basis points due to a combination of factors. These include higher incentive accruals due to above plan results a reserve related to a German government Covid program receivable incremental store wage and payroll costs and a contribution to.
The <unk> Foundation.
Net interest income benefited pre tax profit margin by 40 basis points versus last year.
Lastly, we were very pleased that earnings per share of <unk> 85 were up 23% versus last year and also well above our expectations.
Now moving to our second quarter divisional performance at.
At <unk> second quarter comp store sales increased an outstanding 8% entirely driven by customer traffic.
<unk> is apparel and home categories, both saw high single digit comp increases.
Further it was great to see comp sales and traffic increases accelerate every month throughout the quarter.
Comp sales were very strong across each of <unk> region. We also saw consistent performance across low mid and high income store demographics.
<unk> second quarter segment profit margin was 13, 7% up 80 basis points versus last year, primarily driven by a benefit from lower freight costs as.
As well as expense leverage on strong sales and strong mark on we continue to be pleased with momentum with the momentum at <unk> and are excited about the initiatives. We have planned to help us drive sales and traffic for the remainder of the year and beyond.
At Homegoods, we were very pleased to see second quarter comp store sales increased 4% and a significant increase in our in customer traffic.
Homegoods comp sales and traffic increases also accelerated every month throughout the quarter.
I also want to note that our full year plans assume that Homegoods will continue to comp positively for the second half of the year Homegoods.
Home goods second quarter segment profit margin was eight 7% up 600 basis points and entirely due to benefit a benefit from lower freight costs. We remain confident in the long term opportunities, we see to grow both our home goods and home center banners and capture additional share.
<unk> of the U S home market.
At Canada comp store sales were up 1% in customer traffic increased segment profit margin was 15, 7% as the only major brick and mortar off price retailer in Canada, we have a very loyal shopper shopper base and many value conscious shop customers.
<unk>.
We are confident that we are set up well to continue growing our footprint across Canada and attract more customers to our banners.
At <unk> International comp store sales increased 3% in customer traffic was also up it was great to see comp sales and traffic increases at both our European and Australian businesses. During the quarter. We also launched online shopping in Germany and Austria.
Segment profit margin for T Jacks international on a constant currency basis was two 1%, which was negatively impacted by over 300 basis points due to the reserve related to the German receivable I spoke to earlier.
We are very happy with our overall performance in this division and are confident we can continue to grow our banners in our existing countries and improve profitability.
As to E. Commerce overall, it remains a very small percentage of our business. We continue to add new merchandise to our sites. So that shoppers can see something new every time they visit.
Moving to inventory balance sheet inventory was down 7% versus the second quarter of fiscal 'twenty three similar to the first quarter of the year over year decline was primarily due to the elevated levels. We saw last year from the early arrival of merchandise and a larger in transit balance as of <unk>.
Result of supply chain delays at that time.
We feel great about inventory levels and the outstanding buying environment.
As Ernie said the marketplace is loaded with merchandise and we are well positioned to flow fresh assortments to our stores and online this fall and holiday season.
I'll finish with our liquidity and shareholder distributions for the second quarter, we generated $1 3 billion in operating cash flow and ended the quarter with $4 6 billion in cash.
In the second quarter, we paid down $500 million of maturing debt and returned $932 million to shareholders through our buyback and dividend programs now I'll turn it back to Ernie.
Thanks, John I'll start by highlighting the key strengths that have allowed T. J X to grow successfully through many kinds of retail and economic cycles for nearly five decades.
I am convinced that these core strengths set us apart from many other retailers and we will continue to be a tremendous advantage going forward.
First is our value leadership, our goal has always been to offer great value on every item every day to every customer.
At T. J X value is more than just offering consumers a great price for us value also means delivering desirable brands fashion merchandise fashionable merchandise and great quality to our shoppers.
We believe our value proposition is one of the best in all of retail and we will continue to attract consumers to our retail banners all around the world.
Second.
We have developed one of the most flexible brick and mortar retail models in the world.
The flexibility of our close to need opportunistic buying allows our merchants to quickly react to the hottest trends in the marketplace and adapt to changing consumer preferences.
The flexibility of our supply chain and store formats allows us to ship to our stores multiple times, a week merchandise stores individually and flex our floor space to support our ever changing assortment.
Third we successfully operate stores across a wide customer demographic.
We want to sell to everyone and we aim to appeal to all value conscious shoppers and inspire and excite them every time they visit us.
The flexibility of our business allows us to curate an assortment of good better and best merchandise across our stores and to appeal to shoppers across all income demographic areas.
Next we have built an expansive vendor universe over many decades and believe we have some of the best relationships in all of retail.
This vast network of changing vendors, which numbered approximately 21000 over the last year is the reason why we are so confident that that will always be more than enough inventory in the marketplace for us to buy.
Our best in class buying organization of 1200, plus merchants does a terrific job selecting the right mix of categories and brands for the right stores to create our fun treasure Hunt shopping experience.
We also see the global most of our business as a tremendous strength.
We have built a highly integrated global infrastructure supply chain and buying organization that we believe would be difficult to replicate.
This allows us to leverage our global presence to create a differentiated treasure hunt shopping experience in each country, we operate in.
Last but certainly not least is our talent.
Teaching and talent development have always been priorities at T. J maxx throughout our organization and management teams, we have deep decades long off price experience in the U S and internationally.
I believe that our global talent base will continue to be a tremendous advantage as we continue our growth around the world.
I truly believe that the combination of these key strengths and the execution of them as.
Is why we are one of the strongest companies in all of retail and have a very long history of successful performance.
Now I'll briefly highlight the opportunities we see to keep driving sales and traffic in the second half of the year.
First as I said earlier, we are seeing phenomenal product availability across all categories and a wide range of brands.
This gives us great confidence that we can bring consumers the right assortment at the right values throughout the fall and holiday season.
Second.
We feel great about our store merchandising initiatives that we have planned we are particularly excited about our gifting initiatives as we continue to focus on being a destination for gifts throughout the year.
With a rapidly changing assortment, we believe shoppers will be inspired to visit us frequently to see whats new.
And third we have a very strong marketing campaigns plant.
Each of our brands will continue to reinforce our value leadership position through a combination of channels, including digital TV and social media.
We believe our compelling campaigns will capture the attention of new consumers, while keeping us top of mind with our existing customers.
Moving to profitability.
We are extremely pleased that the high end of our adjusted pre tax profit margin plan for fiscal 2024 now exceeds our previously announced target of 10, 6% for fiscal 2025.
This is a testament to the hard work and commitment of the entire organization.
I want to assure you that we did not be that we will not be complacent and we'll strive to continue improving our profitability over the long term.
Before I close I'd also like to reinforce our deep commitment to acting as a responsible corporate citizen and I am proud of the work our teams across the globe continue to do.
We expect to publish our annual global corporate responsibility report this fall and I Hope you will take some time to look at our website to learn more about what we are doing.
Summing up we're very pleased with the momentum we are seeing across the business and the very strong start to the third quarter.
Had excellent performance in the first half of the year and our teams have put us in a great position for continued success for the remainder of the year.
I am convinced that the characteristics of our flexible off price business model and the operating expertise within our organization are unmatched.
I am so proud of our culture, which I believe is a major differentiator and a key component of our success.
I am extremely confident about the future of T. J Maxx and I'm excited about the opportunities we see to capture additional market share and improved profitability in the long term.
Now I'll turn the call back to John to cover our full year and third quarter guidance and then we'll open it up for questions.
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 have offered 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 settle.
<unk> charge could negatively impact fiscal 2004, EPS by approximately one to two pennies, but could be higher or lower depending on participation rates and other factors.
To be clear any of the guidance. We are providing today does not include the potential impact of this pension payout offer we expect to exclude the impact of this potential potential settlement charge from our adjusted pre tax profit margin and EPS results in the third quarter.
Now to our full year guidance.
We are now planning and overall comp store sales increase of 3% to 4% as a reminder, our comp guidance excludes our expected sales from the 50 <unk> week.
For the full year, we now expect consolidated sales to be in the range of $53 five to 53 8 billion.
This guidance includes approximately $800 million of additional revenue expected from the 50 <unk> week.
As Ernie said, we're increasing our full year profitability guidance.
We're now planning full year pre tax profit margin to be in the range of 10, 7% to 10, 8%.
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 six to 10, 7% on a 52 week basis. This would represent an increase of 90 to 100 basis points versus fiscal 'twenty threes adjusted pre tax profit margin of nine 7%.
Regarding shrink we continue to be laser focused on our in store initiatives, while making sure we maintain an enjoyable shopping experience for our customers.
At this time, our shrink indicators are leading us to believe that we can continue to plan shrink flat in fiscal 'twenty four as a reminder, we will not know the full effect of our shrink initiatives or the accuracy of our indicators until we do a full annual inventory count at the end of the year.
Moving on we're planning full year adjusted gross margin on a 52 week basis in the range of 29, 4% to 29, 5% a 180 to 190 basis point increase versus last year, we expect virtually all of this increase to be driven by a benefit.
From lower freight costs. We are also planning a benefit from merchandise margin.
This guidance also assumes a continuation of headwinds from our supply chain investments and incremental distribution center wages.
We are very pleased with the level of freight recapture we are seeing given the significant pressure we saw over the prior three years.
Expected freight benefit this year includes.
Pull forward of most of the benefit we were expecting in fiscal 'twenty five we remain laser focused and looking at looking at ways to reduce our freight costs.
Moving on we're expecting full year SG&A on a 52 week basis to be approximately 19, 1%, a 120 basis point increase versus last year. This.
This expected increase was primarily driven by incremental store wage and payroll costs and higher incentive accruals.
For modeling purposes. We're currently assuming a full year tax rate of 26% net interest income on a 52 week basis of about $157 million.
And a weighted average share count of approximately 116 billion shares.
As a result of these assumptions were increasing our full year earnings per share guidance to a range of $3 66 to $3 72.
Excluding an expected benefit of approximately 10 pennies from the 50 <unk> week, we expect adjusted earnings per share to be in the range of $3 56 to $3 62.
On a 52 week basis. This would represent an increase of 10 to excuse me, 14% to 16% versus fiscal 'twenty threes adjusted earnings per share of $3 11.
Lastly.
We now expect to open about 125 net new stores in fiscal 2024, an increase of approximately 3%.
This reflects a shift of some of our planned fall openings into next year.
Moving to the third quarter.
We're planning overall comp store sales growth to be up 3% to 4% similar to the second quarter, we expect the comp increase to be driven by customer traffic.
We're planning for average ticket to be down less than it was.
Less than it was in the second quarter again due to merchandise mix. We're also expecting an increase in units sold.
We expect third quarter consolidated sales to be in the range of 12 nine to $13 1 billion.
A 6% to 7% increase over the prior year.
We're planning third quarter pre tax profit margin to be in the range of 11, three to 11, 5%, we're expecting third quarter gross margin in the in the range of 33% to 35% up 120 to 140 basis points versus last year.
We're planning a significant benefit from lower freight costs, partially offset by headwinds from supply chain investments inventory cap and our year over year shrink accrual.
We're planning third quarter SG&A of approximately 19, 3% up 130 basis points versus last year. This expected increase was driven by incremental store wage and payroll costs and higher incentive accruals.
For modeling purposes. We're currently assuming a third quarter tax rate of 25, 3% net interest income of about $40 million and a weighted average share count of approximately 1.15 billion shares.
We expect third quarter earnings per share to be in the range of 95% to 98.
Up 10% to 14% versus last year's adjusted <unk> 86.
For the fourth quarter on a 13 week basis, we're planning comp store sales to be up 3% to 4% adjusted pre tax margin in the range of 10, three to 10, 5% and adjusted earnings per share in the range of $1 to $1. Three we will provide more detail.
<unk> for the fourth quarter on our third quarter earnings call.
Before I close I want to Echo <unk> comments that we continue to see opportunities to further improve profitability over the long term as always the best way for us to drive profitability as with the outsized sales, we continue to see opportunities to grow sales and traffic and capture additional market share further.
We remain laser focused on being even better on buying and retailing the goods and driving merchandise margin.
At the same time, we expect to continue to face headwinds from incremental wage costs and supply chain investments as usual, we will give you a detailed annual guidance beyond this year on our February call in February .
In closing I want to reiterate that we are very pleased with our with the execution of our teams across the company and are confident in our sales and profitability plans.
Further we have a strong balance sheet and are in an excellent financial position to simultaneously invest in the growth of our business and returned significant cash to our 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. So we can keep the call on schedule and the answer as many questions as we can.
And now we'll open it up for questions.
Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star one on your phone and record your name clearly if you need to withdraw your question Press Star two.
Again to ask a question please press star one.
Our first question will come from Matthew Boss Your line is open.
Great Good morning, and congrats on a really nice quarter.
Thanks, Matt Thank you.
So Ernie you cited the third quarter off to a very strong start and tremendous off price buying opportunities could you just elaborate on how traffic and demand progressed over the course of the second quarter, maybe what you've seen in August across both apparel and home and then John could you just elaborate on the <unk>.
Proved bottom line full year outlook, as we think about AUR and freight relative to shrink and wages.
Sure.
Matt Good question, obviously looking at is the.
The indicator I gave when I said very strong for the Q3 start which is.
Coming out of Q2, where each month got a little stronger so we were sequentially stronger throughout Q2.
As the quarter went on.
And that momentum has now continued.
Into Q3, and I think you were asking about any differentiator between apparel are.
I would tell you when it well when you have comps like this and you have mom acts running.
Such a high comp as they did as you can imagine we are.
We are experiencing health across just about every category in the store and in fact, the power across the board has been very healthy.
<unk> has at the home area.
And I'm talking with and Mara Max.
Because <unk> seen that home goods from Q.
Remember Q1, and Homegoods, we were down seven and now we were up four and home goods for Q2, which is really a terrific. We had we had signaled to all of you that we thought there'd be incremental improvement.
Clearly it was even exceeded our expectations.
And we are feeling very good about that business also as we go into Q3, So I hope that answered your question.
And Matt just to answer the question you had for me as far as the <unk>.
Half and full year guidance, we continue to see freight.
Great opportunity in our initiatives, obviously, increasing or the.
The confidence we have to increase our top line sales.
It gives us you know.
The confidence to increase our back half guidance.
As far as AUR.
Look.
<unk>.
As far as pricing and merchandise margin they were in line with our expectations.
And the buying environment as fantastic as Ernie said, we continue to see opportunities.
To take price in certain areas in merchandize margin improvement.
We're really pleased at how our strategies this quarter drove our top lining again gave us the confidence to increase our full year comp.
Yes, that's great color John with Paciotti did in Europe and your question is we talked around where there was little bit of confusion on last call and we talked about how our our our ticket.
Be down slightly and pretty much it was on our expectations right in line right in line and.
As a result, we drove our our topline.
As we had explained in some of our meetings about you can't judge the average ticket and a sales relationship because some of the categories that we were growing in the mix of departments create multiple purchases and so.
We're pleased to see it at all really went along the lines of what we had discussed.
<unk> discussed back at the end of.
Q1.
That's great color Congrats again on the momentum. Thank you thanks, Matt.
Thank you. Our next question comes from Lorraine Hutchinson you May proceed.
Thank you good morning.
Just wanted to confirm what I think you just said, which was the like for like price increases are working and the ticket decline with Jeff.
And then my question is if you think youre seeing any signs of a trade down customer coming into any of your banners.
Lorraine Guy or so he got so yes, the like for like.
Pricing continues to work we continue to.
See opportunity there as we move forward.
And again, we do that as we said from the very beginning we do that very selectively in certain areas in certain categories and certain items.
As witnessed by our.
Our performance.
As well as we have another data point, which we measure.
Qualitatively, where we measure customer perception of our values first of all we can tell from our turns as well as our sales, but we have another perception point.
Where consumers right now, we're actually seeing our value perception versus a year ago as actually ticked up.
A couple of modules. So we're viewed.
<unk> ourselves as a value perception has improved which tells you. It's working and then a second thing Ironically is against the category average we have improved.
So those are good barometers, we can see it in the metrics, though Lorraine when you when you look at our turns in our sales and were again as we've also said is where we have ever found an item where it didn't work we adjust and then we we bring that item back to where we think if it needs to work by our hit rate has been.
90 plus percent.
So.
The second part of your question Mike M. Bahrain was on the.
Any signs of a trade trade.
Trade down which.
Hard for us to measure trade down what I think we would say is store closures as well as <unk>.
I would say.
Because in some cases, it's not a trade down or it's a trade over based on the category.
So hard for us to measure trade down what we can feel is capturing market share from other.
Other retailers that have closed or downsized and some of their store counts and I am sure we are getting.
Increased market share because we can see it in some of the categories that we carry I mean theres been a lot of volatility in the retail environment for a while and we think we've got strong execution, we feel that we continue to.
To gain that market share.
Okay.
Thank you.
Next we will hear from Brooke Roach Your line is open.
Thank you and thank you.
Afternoon. Thank you for taking my question with greater visibility to your previous long term 10, 6% FY 'twenty five margin target can you help contextualize the key drivers of future profit improvement how are you thinking about the rate and piece of that potential improvement.
Some of these freight recapture opportunities that you've seen this year. Thank you.
Yes, we're not giving guidance long term right now, but I can say that as always we strive to constitute to improve all the time whether it's.
Better buying or expense control, we continue to strive to do better.
Great. Thank you so much.
Brook I would just also jump in what John said earlier in his notes is that sales have been.
A driver in helping us to also leverage and so as we are capturing these says we do believe because we've tried to make our store environment sticky for the customer in terms of.
Here, she really having a great experience there as well as the merchandise. These are the two primary components of our get customers Wildwood captures new customers and get customers back.
So we believe momentum doesn't just turn off overnight. So I think part part about we're all feeling internally here is as we've captured new and increased additional visits amidst the market share gain we're getting that that will be a also a margin.
The driver for us as we move forward.
Thank you.
Thank you.
Our next question will come from Mark called Sugar. Your line is open.
Great. Good morning, Thanks for taking my question. So maybe just first for John with respect to the margin guide.
If we look at the high end of the guide for Q3 and Q4, it does seem to imply.
A nice acceleration in Q4 now I know you've got the benefit from the extra week, you're cycling the shrink accrual. So those are some big factors, but I guess beyond that.
Maybe what are some of the other factors that we should be mindful of there.
Yes so.
As you saw we did increase the comp we feel confident about continuing to drive that topline.
The other thing that is benefiting us so in this in the second quarter and third quarter, we comment on on the shrink. So we have just in.
In line with how we accrue.
There is a there was an unfavorable impact in the second and third for a second and third quarter and then we have a favorable impact in the fourth quarter.
That along with we continue to.
Work on our freight initiatives and continue to try to control those costs as much as we can.
Thank you and maybe a follow up for Ernie.
In the first quarter in a while where both <unk> and homegoods or contributing to the positive comps I know, there's some noise with the comparisons in homegoods in the back half, but just bigger picture how should we be thinking about the contribution from home goods versus more Max in a normalized comp algorithm moving forward. Thank you.
Yeah, So mark obviously, we won't give the.
You know the exact comp we're thinking further out however, we do feel we are really hitting pretty much an inflection point.
The Homegoods business and we're pretty bullish on the back half here at home.
We will continue to improve on the trend versus the versus the trend that you just saw we're feeling good about the opportunity to continue to improve in our home mix and to your point.
We will continue to contribute to the T J <unk> comp with a combination of.
With home goods and <unk>.
Also just again, we tend to talk about.
Homegoods, specifically about our home business with an our full family stores. So that's whether in Europe or in Canada, and then clearly and T J Maxx and Marshalls, our home business. There has also.
And those business has also improved also good indicator because we used to talk a few years ago about the fact that home when you roll it all up as a key component of the T. J <unk> business. So again another reason why.
John and I have talked about as we move forward.
At home will continue to be a traffic and sales driver for us over the long term.
Okay. Thank you and best of luck.
Thank you.
Yes.
Our next question will come from Marni Shapiro. Your line is now open.
Hey, guys congratulations on a great quarter.
Just talk a little bit traffic remains your biggest driver and your marketing has been very very strong could you talk a little bit about has it changed the frequency of how often the shoppers coming to your stores and are you seeing an increase in your shopper is shopping across your different.
You have different boxes, I know you continue to co locate but im curious if youre seeing that shopper really move from one concept to the next more than usual.
Yes, it's hard for us to read that in detail.
Just generally looking at the transaction increases that we have.
We believe that we are attracting more new customers to our brands and when you look at how work attracting those customers they tend to be <unk>.
More younger customers the more gen Z customers that we're attracting which we're really excited about.
Because that speaks to.
The longevity.
That we see so.
Yes, good morning.
The thing I can tell you, even though we can't get some of that info. They are the ones that are cross shopping do spend more yes. So it is a goal of ours to go after that as John said, we are we have been attracting a disproportionate number of new Gen Z and millennial shoppers, which.
Is what we really look at in terms of future growth.
That's the future of higher spend so when we look out on our strategies for five to seven years that it and by the way we purposely go after that.
We do compare.
What we do get out we can compare our shoppers against some of the competition. There is some general data on that that we look at and we've been feeling.
Really good about.
All gender and age groups to our stores and all the customers that are skewing younger and what that includes in Europe .
Australia domestically.
Yes, Joe.
And then.
A quick follow up though I do John .
John must be watching Alabama rush on tick tock, because you guys are all over it and they all shop there those gen Z ers, but could you just clarify the 53rd week revenue number I think you said it pretty quickly I want to make sure I got it down right.
Yeah, So the 50 <unk> week.
Is worth 10 basis points to our.
Our pre tax profit and 10 pennies to our earnings per share and it's about $800 million on the topline.
Great. Thanks, so much guys.
Thank you Mike.
Our next question will come from Alex <unk> your.
Your line is open.
Great. Thanks for taking the question and congrats on another great quarter, Ernie and John I think just starting with the guidance from like zooming out here it looks like you're improving the full year by more than what you guys beat by so it seems like youre more optimistic on the back half than maybe you were when we spoke a few months.
[noise] ago. So can you just talk about what the key drivers are there to that increased optimism.
Thanks, a lot.
Leasing.
We beat Q2 by <unk>, and we're beating we're increasing the back half.
By four pennies and Thats on increasing the comp from a two to three two or three years to four given the.
The strength, we see in our sales.
And then as far as our.
Trade initiatives, we feel.
The opportunities that we took in Q2, we are assuming that we continue in the back half of the year and again, we're pulling forward a lot of what we would've expected in FY 'twenty five, but we're really happy to be gaining that.
That benefit this year.
Thanks, a lot.
Thank you.
Our next question comes from Bob <unk>. Your line is open.
Hi, good morning.
Just a couple of questions on apparel and accessories in terms of what youre seeing and sort of what the consumers responding to is there a big change in sort of the good better best mix.
That is sort of helping you throughout this quarter and the rest of the year.
Great question Bob.
Not really a big change.
Again, there has been an amazing what are they using a script phenomenal.
Phenomenal availability across our across really all of the areas I would tell you there are pockets.
Sometimes in categories, where we don't get good better best.
As proportional as we'd like but thats our business. So we always know that we're not going to be exact because we're opportunistic in our buying.
Our buyers are great on in terms of strategically and knowing that they want that mix to be a shortened balance depending on the category by the way. So for example.
Our buyer in handbags doesn't necessarily want the same ratio of good better best determined by brands et cetera.
As the buyer in womens tops, okay. So that that varies but we have been pretty healthy I would say other than in certain pockets of certain areas in accessories.
Spent a little bit more of an up and down in an imbalance.
So we always look at that as opportunity for the following year because when we have those pockets as you can see we just ran a six comp and we still have those pockets of opportunity, where we don't have the mix balanced exactly the way we want it to be.
And even in some apparel areas.
We ran into that in second quarter that they werent as strong as they could be if the mix was more balanced and good better best the way that we'd want it to be so it's funny. Your question brings we could spend a couple of hours on it because we and the merchants we love to talk about how we go about doing that and.
We also know that shorten.
Certain quarters, we look better than other quarters, but as you can see in the in the total picture.
Really strong and the merchants have done across a vast array and you could never find a quarter, where there isn't one area that doesn't have a little unbalanced for the most part really strong balance of good better best Nothing's really changed strategically on that front and just a great question you asked and by the way I'll just add to what Ernie said our.
<unk> to offer a good better and best I mean really differentiates us from our competition and we feel is a real competitive advantage.
That's a great point I didn't get to.
Get into that as much on the script and I know sometimes in our <unk>.
Different investor means we get to talk more about it but it is I think one of the most key strategic advantages we have a the fact that that our organization is set up to deliver a good better best.
Scenario and if you look most retailers around us very few do that they're not they're zeroing in on certain demographic segments or certain.
Which could include age or fashion looks or different price levels, and we don't do that and I think that will continue to be a benefit to us over the next five to 10 years huge.
Thank you.
Thank you.
Next we will hear from Dana Telsey you May proceed.
Hi, good morning, everyone and congratulations on the terrific results.
Think about the real estate as you think about the real estate profile of the store and you've been a beneficiary of any of the bed Bath <unk> beyond locations and is there at all the difference in performance of the stores suburban or urban and then lastly, with the improving trend in home goods.
How much of that or is there anything you can.
Green Dot and the elimination of the departure of bed Bath and beyond that's also an additive in a share enhancement for your home results. Thank you.
Thanks for the question as far as the real estate opportunity we've been.
We've been on this.
The beginning of when retailers start to close stores and we take the best locations that fit our profile and we will continue to do that as we see stores close.
As far as.
The sales and what we've seen.
Particularly for <unk>, we saw very consistent.
Sales performance across income demographic across geography.
And we.
We see ourselves, especially in some of these markets that.
Our more rural is is the.
As you see more and more closures as the.
Yeah.
The department store of those areas and see opportunity.
So as far as the the bed Bath <unk> beyond gain.
Gaining market share.
They've been losing market share for quite a while and we think we've gained it along the way so it's sometimes a little bit hard to read that but we feel that our execution in home has been outstanding and.
And we've been able to take that market share.
As you know as it comes up yes.
So Dana we think to Johns point tough to measure, but we feel as though yes, we are getting.
From a from a bed bath <unk> beyond our but.
But not just those guys even some of the.
I believe we are getting.
Some business from the online home retailers as well that you know have been a little.
Inconsistent in their execution I think that just creates other opportunities and then everyone.
That's at the store and for demand were talking the other great not great. The other good thing.
As it creates additional supply of buying opportunities.
We've been talking today about at the retail level customers need another place to shop, but for our merchants they get to take advantage of additional supplies and we mean, even more now to certain vendors because now they have less.
Less places for them to sell their goods. So that's been a equally.
I guess beneficial.
Okay.
Thank you congratulations thank you.
Our next question comes from Cory Tarlow Your line is open.
Hi, good morning, and thanks for taking my question.
Follow up on the AUR commentary or ticket.
I know that it moderated a little bit this quarter is the expectation in the guide that it should moderate throughout the rest of the year or perhaps inflect.
Positively as we head into the fourth quarter and then just as a follow up on wages. How are you thinking about wages John in the outlook throughout the remainder of this year.
You won't.
So I'll start with actually wages and I'll start with the way yet.
We continue to see that as a headwind in our wages.
We're going to be competitive.
Our wages.
Every market that we're in.
And when we look at.
Our attrition rates our attrition rates are.
In line or improving with where they were last year. So we feel really good at it.
There are wage is right now and our ability to attract.
Attract associates to our to our company.
On the ticket Corey.
So yes in Q2, we actually.
Didn't moderate it kind of came in pretty much where we expected. It is as we move to the back half.
The ticket, we think is going to moderate which is to be down a little less than we were in Q2.
However, I always like to qualify this that we do not.
Again I've talked this way for you as we do not top down drive our average ticket. So the average ticket, which is really ultimately voted on by the customers, who determine which categories we need to.
Drive hard and the store by supply and we can tell by the way they are selling and by the way the market looks so that will go after them.
It's driven by down at the buyer and merchandise manager level, which is where we generate really generate we don't dictate those teams.
Which categories to have more or less that's really driven by consumer demand, which then drives our ticket sometimes because of the mix of departments.
So right now we look like we're moderating based on the on order, but if certain opportunities or certain categories get hotter that could be.
Lower or higher ticket that could move a little on US obviously Q3, we can project a little better than Q4.
So it's always a it's always a bit of a touchy, one where we don't want to.
Overcommit how firm we are on where the AUR is heading.
Because it's so bottom up by customer demand and buyer driven does that makes sense.
Yes, that's very helpful. Thank you very much yeah right right now it looks like it is moderating for certainly Q3, and what we mean by moderating down less.
And you can see the impact of our top line on the strategy that we've had.
We're offering the customers what they want and they are coming back.
Yep.
Great. Thank you so much thank you.
And our final question today comes from Adrian <unk>. Your line is open.
Great. Thank you very much.
And it's great to see the acceleration and all divisions actually.
Thank you Lee.
Youre welcome.
Hi, good evening.
Sorry, I, so I actually want to ask not so much about the composition of it but the buying strategy.
Off price buys.
You've got great visibility on the open to buy forward looking and then you do a lot of buying intra season.
So can you contextualize sort of how that is no different from last year and the advantages position that is putting you in as you head into holiday. Thank you very much.
Sure Adrian.
I like the way you framed it all up so we do not obviously, we won't give.
The percentages by those types of buying patterns the way we buy by each one however, we do buy all those different ways.
Right now we are a mission as always is to pace ourselves on the buying of the NCS and closeouts because the market is so loaded so as we move forward right now what we're thinking Adrian is we will pull back even a little bit more on any of the buys that we tend to buy earlier our upfront.
Because all indicators are there will be a continued.
Additional supply at least over the next six to 12 months.
Of what you were just referring to is the in season close out type of situation.
The pathways as kind of vary that.
That has become a smaller percent of our business only because.
In many cases the can the fashion there if it isn't right, we don't kind of pack it away, but the pattern of of what we're seeing right now would tell us we're going to be even a little bit and now I'm talking massaging. These by just a couple of points, we don't do pendulum swings.
On our open to buy or how much we do upfront versus leave for Closeouts again, the closeouts in the opportunity side of our business. That's the bulk of our business and Thats, what we prioritize.
And we see that I would think ticking up a notch over the next six to 12 months I hope that answers your question.
Well, thank you very much not a fantastic momentum. Thank you Adrian Thank you.
Thank you that with our final question of the day.
Okay. Thank you.
Like to thank everybody for joining us today, we look forward to updating you all again on our third quarter earnings call in November .
Care everybody.
Ladies and gentlemen that concludes your conference call for today you may all disconnect. Thank you for participating.
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Ladies and gentlemen, thank you for standing by welcome to the Gtx companies second quarter fiscal 2024 financial results Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session at that time. If you have a question you will need to press star one.
As a reminder, this conference call is being recorded August 16 2023.
I'd like to turn the conference call over to Mr. Ernie Hermann.
<unk> officer, and President of the T. J X companies Inc. Please go ahead Sir.
Thanks, Sheila before we begin Deb has some opening comments. Thank you Ernie and good morning before 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 disk.
Just 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 <unk> companies, Inc. Any recording retransmission reproduction or other uses the same for profit or otherwise without prior consent of T. J X it's true.
Pivoted 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 for inaccuracies 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, and 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 P. J X dot com in the investors section. Thank you and now I'll turn it back over to Ernie.
Good morning, joining me and Deb on the call is John Klinger.
I'd like to begin today by once again, recognizing our global associates for their dedication to T J X.
It is their hard work that brings our business to life every day for our customers.
I want to extend a special thank you to our store distribution and fulfillment center associates for their continued very hard work and commitment to our company.
I wanted to take a moment on the wildfires in Maui.
We are grateful that our associates in Maui and the rest of Hawaii are safe and at the same time are deeply saddened by the devastation and loss to.
To help with the relief efforts on the ground, we have made a donation to the Maui food bag and our local teams are donating essential supplies.
Now to our business update on second quarter results.
I am extremely pleased with our second quarter performance as sales profitability and earnings per share were all well above our plans.
I wanted to highlight that customer traffic drove our 6% overall comp sales increase and it increased at all of our divisions.
As a reminder for us customer traffic represents the number of customer transactions.
I am, particularly pleased with the performance of our largest division Maher, Max which delivered high single digit increases in both comp sales and customer traffic.
Our overall apparel and accessories sales were very strong and our overall home sales significantly improved and returned to positive comp sales growth.
Clearly our terrific mix of branded fashionable merchandise and great values resonated with shoppers when they visited our stores.
In terms of profitability, both pre tax profit margin and earnings per share increased significantly versus last year.
Importantly, merchandise margin continues to be very healthy.
With our above plan sales and profitability performance in the second quarter, we are raising our full year outlook for comp sales pre tax profit margin and earnings per share.
John will talk to this in a moment.
We are very pleased with the continued momentum of our business and the excellent execution of our teams across the company.
They have been laser focused on driving sales and traffic and improving profitability.
The third quarter is off to a very strong start and we feel great about our plans for the remainder of the year.
The marketplace is loaded with outstanding buying opportunities and we are confident that we will continue to offer a terrific mix of brands.
And an outstanding assortment of gifts to our shoppers during the fall and holiday selling seasons.
We are convinced that our differentiated treasure hunt shopping experience and excellent values will continue to serve us well and allow us to capture additional market share across our geographies for many years to come.
Before I continue I'll turn the call over to John to cover our second 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.
I will start with some additional details on the second quarter.
As Ernie mentioned, our overall comp store sales increased 6% well above the high end of our plan and were entirely driven by an increase in customer traffic we.
We were very pleased to see that both comp store sales growth and customer traffic improved sequentially each month of the quarter.
As we expected average ticket was down due to merchandise mix the impact of the lower ticket on sales was largely offset by an increase in units with shoppers putting more items into their cart.
This is in line with what we have seen in our business historically, our overall apparel business, including accessories continued its momentum with high single digit comp increase overall home comp sales were up mid single digits.
<unk> net sales grew to $12 $8 billion, an 8% increase versus the second quarter of fiscal 'twenty three.
Second quarter consolidated pre tax margin of 10, 4% was up 120 basis points versus last year.
This was well above our plan due to a bigger benefit than we expected from lower freight costs as well as expense leverage on our above plan sales.
Gross margin was up 260 basis points. This increase was driven by a higher merchandise margin due to the significant benefit from lower freight costs.
This year over year freight benefit was primarily driven by lower rates as well as a benefit from our freight initiatives and the remainder of our year.
In the remainder of our year end accrual adjustments.