Q3 2024 TJX Companies Inc Earnings Call

November 15, 2023

It was driven by customer traffic.

Max is apparel and home categories. Both saw significant comp sales increases further comp sales increases were very consistent across low mid and high income demographic areas.

Was strong across all regions.

<unk> third quarter segment profit margin was 14% up 15 up 50 basis points versus last year.

This was driven by a benefit from lower freight costs as well as expense leverage on strong sales, partially offset by incremental store wage and payroll costs and higher incentive accruals.

We are convinced that T J maxx, and Marshalls will continue to be gift, giving destination. This holiday season.

Long term, we remain confident in our ability to capture additional market share in the U S.

At Homegoods third quarter comp store sales accelerated to an outstanding 9% increase entirely driven by customer traffic.

Comp performance was very strong across each region in the U S and across stores and different income demographic areas. We.

We were very pleased to see Homegoods third quarter segment profit margin returned to double digits, increasing 140 basis points to 10, 3%.

This increase was due to a benefit from lower freight costs and expense leverage on stronger sales, partially offset by costs related to closing our home goods online business.

With more than 900 stores today, we continue to see a significant opportunity open up more home goods and home sense stores around the country.

We were excited about our market share opportunities and bringing our eclectic home assortment and great values to even more shoppers.

At <unk>, Canada comp store sales growth was 3% and was also driven by an increase in customer traffic.

Segment profit margin on a constant currency basis was 17% up 120 basis points.

We have a very loyal shopper base in Canada and are convinced that we can capture additional market share through all three of our Canadian banners.

At <unk> International comp store sales were up 1% and customer traffic was up.

Comp sales and traffic increase both in both Europe and Australia.

In Europe, we were pleased with our performance given the high inflation impacting customer discretionary spend and the unseasonably warm weather.

Segment profit margin for T Jacks international on a constant currency basis was five 3% down 140 basis points. We are confident that we can do that.

We can keep growing our footprint across our existing European countries, and Australia and improve the overall profitability of this division.

As to E. Commerce overall, it's a very small percentage of our business and remains complementary to our very successful brick and mortar business as to Homegoods Dot com online business. When we looked at our long term projections, we do not see a path to profitability over the long term like we do.

For our other banners in terms of our other E. Commerce sites, we were very pleased with their sales trends in the third quarter.

Moving to inventory balance sheet inventory was essentially flat versus the third quarter of fiscal 'twenty three we feel great about our inventory levels and the outstanding availability in the marketplace. We are very we are well positioned to flow fresh assortments to our stores and online this holiday.

Hey season off.

Finished with our liquidity and shareholder distributions for.

For the third quarter, we generated $1 2 billion in operating cash flow and ended the quarter with $4 $3 billion in cash.

In the third quarter, we returned $1 billion to shareholders through our buyback and dividend programs now I'll turn it back to Ernie.

Alright, Thanks, John now I'd like to highlight the key opportunities, we see to keep driving sales and traffic in the fourth quarter.

First as always offering outstanding value is our top priority for the holiday selling season.

Especially in an environment, where consumers wallets are stretched.

The marketplace continues to be loaded with quality merchandise and we are set up extremely well to offer a wide range of good better and best brands to consumers.

Second we believe are strongly position, we are strongly positioned to be a top destination for gifts. This holiday season.

Our buyers have done a terrific job selecting the best merchandise available for our global vendor base to surprise from our global vendor base to surprise and excite our customers. We are confident that shoppers will find an eclectic assortment of guests to choose from for everyone on their list.

In addition, we will remain focused on being a gifting destination throughout the year.

Next will be flowing fresh product to our stores and online multiple times a week.

The holiday season, which we believe differentiates us from many other major retailers.

With our ever changing mix of merchandise shoppers can see something new every time they visit.

Further we feel great about our plans to transition our stores post holiday and offer consumers the categories and trends they want to start the year.

Lastly, we feel great about our holiday marketing campaigns across all of our brands, which launched earlier this month.

Each of our brands are emphasizing our value leadership and our greatest assortment of quality gifts for the whole family.

We believe we are set up very well to be top of mind for consumers and drive shoppers to our stores. This holiday season.

Additionally, we feel great about our in store shopping experience as our customer satisfaction scores remain very strong.

Moving on I'd like to spend a moment and list off the key characteristics of T. J X that gives us confidence that we can continue our successful growth around the world for many years to come.

First we had the largest brick and mortar off price retailer in the world, we leverage our global infrastructure and share best practices across all of our divisions.

So that we can deliver the best merchandise values and shopping experience to our customers.

Second we have one of the most flexible business models and retail.

Allows us to buy close to need and quickly adjust our store assortment to meet changing consumer preferences and offer the hottest trends.

Third we successfully operate stores across a very wide demographic and we curate our store mix to appeal to shoppers across all income demographics. Importantly, we continue to attract an outsized number of Gen Z and millennial shoppers to our stores, which we believe.

<unk> bodes well for the future.

Next we source from an average changing universe of approximately 21000 vendors in more than 100 countries.

As a growing retailer with almost 5000 stores. We believe many vendors want to work with T. J Maxx, because we offer them a very attractive way to grow their business.

All of this gives us great confidence that there will be plenty of quality branded merchandise available for us.

Fifth we believe our best in class buying organization is a tremendous advantage.

Many of our more than 1300 buyers have multiple decades of off price buying experience, which we believe has allowed us to establish some of the best mutually beneficial vendor relationships in all of retail.

Next we continue to have a significant opportunity to grow our global store base.

Long term, we see the potential to open an additional 1300 plus stores with just our current banners in just our current countries.

Lastly, but most important is our talent.

Throughout T J X our management teams have deep decades long off price expertise in the U S and internationally, which we believe is unmatched.

Additionally, we are laser focused on teaching and training to develop the next generation of leaders for our company.

Finally, I am so proud of our culture, which I believe is a major differentiator and another key component of our success.

We believe that the combination of all of these characteristics is why we have such a long history of successful growth and many types of economic and retail environments.

We're convinced that these aspects of our business are a tremendous advantage and will allow us to continue offering shoppers inspiring merchandise outstanding value and an exciting treasure Hunt shopping experience every day.

Turning to corporate responsibility.

I am pleased to share with you that we recently published our 2023 global corporate responsibility report.

The report summarizes our fiscal 2023 initiatives in progress within the four areas we focus on.

Workplace communities.

Environmental sustainability and responsible business.

We are proud to continue to make progress in our programs and initiatives and we aim to provide our stakeholders with relevant information to our report and website.

I'm grateful to our teams around the globe for the work that they do to support our global priorities.

As always we invite you to visit <unk> dot com to read our full report and our updates throughout the year.

Summing up we.

We were very pleased to deliver another quarter of strong sales and profitability.

Fourth quarter is off to a strong start and we are excited about the initiatives. We have planned to drive sales and traffic this holiday season.

Going forward I want to assure you that we are laser focused on further improving the profitability of T. J X over the long term.

Further I am convinced that the key characteristics of our business have set us up extremely well to take advantage of the market share opportunities. We see ahead in the United States and internationally.

Now I'll turn the call back to John to cover our fourth quarter and full year guidance.

And then we will go onto to open it up for questions.

Thanks again earnings.

Before I start I wanted to remind you that our fiscal 'twenty four calendar includes an extra week in the fourth quarter.

Now starting with our fourth quarter guidance, we will continue to expect overall comp store sales growth to be up 3% to 4% as a reminder, our comp guidance for the fourth quarter excludes our expected sales from the extra week in the quarter.

For the fourth quarter, we expect consolidated sales to be in the range of $15 nine to $16 $1 billion, which includes approximately $800 million of revenue expected from the extra week.

We now expect fourth quarter pre tax profit margin to be in the range of $10 four to 10, 6%.

Excluding unexpected benefit of approximately 40 basis points from the extra week, we expect adjusted pre tax profit margin to be in the range of 10 points zero to 10, 2% on a 13 week basis. This would represent an increase of 80 to 100 basis points versus last year's pre tax profit.

Margin of nine 2%.

The decrease in the fourth quarter pre tax profit margin guidance is due to the expected reversal of approximately 40 basis point benefit we saw in the third quarter from the timing of expenses.

Next we expect fourth quarter gross margin on a 13 week basis to be in the range of 28, 2% to 28, 4% up 210 to 230 basis points versus last year.

We're planning a significant benefit from lower freight costs as well as the benefit from our year over year shrink accrual, partially offset by headwinds from our ongoing supply chain investments.

On a 13 week basis, we're planning fourth quarter SG&A to be approximately 18, 5% up 150 basis points versus last year.

This expected increase is primarily driven by incremental store wage and payroll costs and higher incentive accruals.

For modeling purposes, we're currently assuming a fourth quarter tax rate of 26% net.

Net interest income on a 13 week basis of about $49 million and a weighted average share count of approximately 1.15 billion shares.

As a result of these assumptions we are not we now expect fourth quarter earnings per share to be in the range of $1 70 to $1 10, excluding an.

Unexpected benefit of approximately 10 pennies from the extra week, we expect fourth quarter adjusted earnings per share to be in the range of 97 to $1.

On a 13 week basis. This would represent an increase of 9% to 12% versus last year's earnings per share of <unk> 89.

I wanted to be clear that our assumptions for comp sales pre tax profit margin and earnings per share for the fourth quarter are unchanged versus our previous guidance. The decrease in the fourth quarter pre tax profit margin and earnings per share guidance is due to the expected reversal of the approximately.

<unk> 40 basis point and three penny benefit.

From the timing of expenses that we saw in the third quarter.

Now to the full year.

We are now expect expecting overall comp store sales increase of 4% to 5% 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, 7% to $53 9 billion.

Which includes approximately $800 million of revenue expected from the 50 <unk> week.

We expect full year pre tax profit margin to be approximately 10, 8%.

Excluding unexpected benefit of approximately 10 basis points from the 50 <unk> week, we expect adjusted pre tax profit margin to be approximately.

10, 7%.

On a 52 week basis. This would represent an increase of 100 basis points versus fiscal 'twenty three pre tax profit margin of nine 7%.

Regarding shrink our.

Our indicators are still leading us to believe that we can continue to plant shrink flat for 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 January.

Moving to full year adjusted gross margin on a 52 week basis, we now expect it to be approximately 29, 6%, a 200 basis point increase versus last year.

We expect virtually all of this increase to be driven by a benefit from lower freight costs.

This guidance also assumes a continuation of headwinds from our supply chain investments.

We are very pleased with the level of freight recapture we've seen so far this year and remain focus on looking for ways to reduce our freight costs going forward.

For the full year adjusted SG&A on a 52 week basis we.

We are now expecting it to be approximately 19, 2% a 130 basis point increase versus last year. This is expect this expected increase is 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 25, 7% net interest income on a 52 week basis of about $165 million.

And our weighted average share count of approximately $1 6 billion shares.

As a result of our above plan third quarter earnings performance, we are increasing our full year earnings per share guidance to a range of $3 71 to $3 74.

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 61 to.

To $3 64.

On a 52 week basis. This would represent an increase of 16% to 17% versus fiscal 'twenty threes adjusted earnings per share of $3 11.

It is important to understand that we did not flow through the entire third quarter earnings per share B two to the fourth quarter.

To the fourth quarter, because the three pennies of costs related to closing of the E Commerce.

Business.

In closing I want to reiterate that we are very pleased with the execution of our teams across the company in the third quarter and are confident in our plans for the fourth quarter.

Long term I want to reiterate that we will not be complacent when it comes to looking at ways to improve our profitability.

We have a very strong balance sheet and are in an excellent financial position to invest in the growth of our business and simultaneously return 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 answer as many questions. As we can 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 at any time you may do so by pressing star to our first question comes from the line of Lorraine from Bank of America. Please go ahead.

Thank you good morning.

Your gross margins are now trending nicely above pre COVID-19 levels. You. Just said you won't be complacent about finding opportunities for margin expansion. So can you talk about the two or three factors that you're most excited about to expand your gross margin in the coming years.

Yes, I mean.

The top thing is.

Continuing to drive our top line sales is important.

And where we see opportunities as and as other retailers increase.

Their average retails, we can hold our 20% to 60% value gap and raise ours as well.

Yes, Lorraine, it's obviously.

Top of mind for all of our merchant teams in terms of how we're retailing the goods and managing our inventory flow and like anything else. Those teams of just continuing to get better and better in terms of how we flow the merchandise and one reason our merchandise has been a healthy margin.

Year to date and in last year is not only because of the way. We bought it's also the way our planning and allocation teams have have flowed the goods, which has helped with our sales of course, having the right goods in the right.

<unk> stores at the right time, but also in the way we floated we have saved markdowns appropriately and categories. So we're very bullish on that I think the.

We mean more to the vendors today than ever before and I think thats a another facet of why we're very bullish on where our merchandise margins can go and I think John when he.

<unk> mentioned that Youre ultimately talking about market share with.

Store closures et cetera, but even if those fall off we're not anticipating stores closed at the same rate, we still have a base now of.

Customers and our value umbrella, which I think what John was talking about is we are positioned with tremendous opportunity to still show, our 20% to 60% off.

And still retail goods.

Advantageously I would say and then still by better with all of the availability of that's out there. So multiple factors going on at all going back to why I would say we are always happy to see a season buying team like we have with such.

Consistency and tenure over the years.

This is what allows you to sleep at night and are you going to take advantage of those opportunities with the vendor community.

Thank you.

Next we'll go to the line of Paul from Citigroup. Please go ahead.

Hey, Thanks, just a little bit more on gross margin curious on freight if you got back all of what you lost in <unk> last year was it even more than that.

And where is the upside coming from within the freight line and I'm also curious can you talk about the pure merch margin excluding freight just considering your average unit costs and average unit retail.

Yeah, so on freight.

So compared to FY 'twenty.

We lost 300 basis points.

And so we've gotten back about two thirds of that we've done it through obviously the rates.

That we've negotiated have have been favorable.

And we had some benefit from our year over year accrual, but but we're also implementing a lot of initiatives to try to be as efficient as we can in our freight.

So some of those initiatives are how we move the merchandise.

From ports to our Dcs from Dcs to stores, So that's where we've seen a lot of benefit as well.

Going forward so.

There is a bit of stickiness in the in the freight costs as U S.

As we've seen this year there was a rail strike. So wages went up on rail salaries truck driver salaries have gone up.

So theres a bit of stickiness in the domestic freight which is the lion's share of our freight rate.

So we don't believe at this point now that we will get back all of the freight, but we'll continue to look at ways to.

Be as efficient as we can on the freight rate going forward and just to remind you.

A lot of the freight benefit that we're seeing this year has been a pull forward of what we expected to see in FY 'twenty five so we're seeing a lion's share of that coming in FY 'twenty four and so for FY 'twenty five again, it's about.

Looking for ways to be more efficient.

With initiatives internally.

Thanks, Jonathan the pier merch margin exit rate.

Mark so the underlying merch margin.

So <unk> was up we did see a bit of headwind in FX rates for Canada and Europe.

But.

We're seeing we're seeing a benefit in the <unk> division.

Yes, Paul and I'll jump in there as well I'll tell you another another place where I think we have.

An advantage on merchandise margin going forward as our in our home business. So our home business as you can tell from these results, which we are very bullish on.

We feel is going to be very configure into the marketplace and much healthier than the marketplace and with that.

Based on the momentum that we've seen and you can see it improving every quarter, we have John and I have talked about it every quarter and then coming out of coming out of this quarter with a nine comp and home goods is just way above the market, but our <unk> home business is very healthy and our other homebuilders.

In the other divisions have have improved as well that is an area, where we think there is specifically margin opportunity because some of our margin is on the mix of departments within T J X and as home.

Now going forward over the next couple of years, we are anticipating that to kind of grow in percent of total for us I think thats going to help our merchandise margin and total T J X. So.

Just FYI, that's another bright spot in terms of merchandise margin directly.

Got it. Thank you good luck guys.

Thanks.

Next we'll go to the line of Adrienne from Barclays. Please go ahead.

Yes, very well.

Nick.

Thanks.

Ernie I guess my question is on.

We're here you've had wholesale rapport and they talk about kind of the spring season, Andi and channel retailer.

Department stores buying down for the first half how do you think about that in terms of debt.

Availability for next year and the continuation of the kind of great buying environment I know it is always great, but it seems like there is a disconnect between their plan right now and maybe what's actually being realized that'd be here wholesaler. Thank you very much.

Sure Adrian.

Ironic that.

The two people sitting here with me we've talked about this yesterday as we were kind of talking about prepping for the call that ironically, when we're always saying there is a I don't know.

All different types of words.

Phenomenal availability I don't know if these plethora.

We havent used that one yet.

Okay.

Yeah.

But then we keep we keep getting pleasantly surprised because the world how do I put this a world that has a lot going on in terms of instability in trends in different retail around domestically and globally just continues to create more spill off on it.

Part of that is a lot of these companies that would like to claim that they are public companies. They cannot back off trying to push the envelope to grow and so for whatever reason I understand how one might one season be able to cut back successfully but over the course of multiple seasons.

And in total with the 21000 vendors, where it always ebbs and flows by vendor, there's just always more and I can't picture in this environment, where the sales projections are so erratic.

That there won't be more and I will go to one other key point, which is the E com business. So the E comm business, we've talked about this before Adrian.

Not just yourself, but the group is that E. Comm has created more spill off while the E. Com. If you look at the volatility in E com trends over the last 12 months.

Some of the especially in apparel.

Therefore cash had been way off from where they are trending because I think the E com business.

As a little bit more fickle so.

No.

I think that's going to actually spelt spill up more than what some of the more traditional brick and mortar vendors might be able to pull back on so I just see it.

Paying at similar levels of.

Tremendous availability, yes, and Ernie talked about the importance, we have with our vendors we add thousands of vendors every year.

So again, we're just becoming more important to the marketplace.

And Thats, a great answer and best of luck for holiday.

Thank you Adrian.

Next we'll go to the line of Matthew from Jpmorgan. Please go ahead.

Great Thanks, and congrats on another nice quarter.

Thanks Max.

So Ernie with the continued strength in apparel and now it's complemented by the acceleration in home is there a way to speak to maybe the scale opportunity to drive market share across the wider demographic reach and then John could you just help elaborate on pre tax margin puts and takes to consider multiyear.

Or maybe relative to the historical model flow through if comps were to remain consistent going forward.

Yes, great Great question, Scott, Let me I'll go to the scale of the model specifically in apparel and then I'll, let John take the other part but the.

Yes, we do look at it that way because also some of the.

Some of the competitors, specifically brick and mortar out there have not done a good job in apparel and we have had a <unk>.

Consistently pretty healthy apparel business that makes us feel like again market share opportunity, which is what you are talking about we have we've already started looking at our apparel plans for the spring season, and identifying which pockets of apparel in which areas and which parts of the country by the way we think have opportunities.

For us too.

Almost take the market share from.

Items and categories that arent being serviced by the competition anymore.

As much as they used to so I don't want to give you the exact categories, but there's a handful of categories by the way, which happened to skew a little younger in our customer audience. So we get a bit of a win win there.

Matt in terms of the categories that we'd go after.

But that is our objective not just in home.

But to continue to exploit.

The apparel opportunity that's out there the other neat thing thats happening is because of.

Department store and specialty store and online business, not being as healthy and apparel some of those key brands.

A more interest in doing more additional skus with us than in the past. So we're getting wider assortments and some of the brands that we've always had.

But we're able to get wider assortments, there, which also helps our treasure hunt and our ability to do more.

More business, there and keep the turns healthy.

So John on the Mat. So just to answer your second part of your question.

I would say well first of all we're very pleased to get back to.

Really we're forecasting to be beyond where we were in FY 'twenty.

Pre tax profit margin again.

With.

Approximately 100 basis points of more freight headwind.

As I said earlier in the call, we've probably gotten back two thirds of our freight.

From from.

Where we were so that really speaks to the performance of our merchandize margin versus FY 'twenty.

But going forward, we are not going to be complacent, we're always going to strive to.

Prove our profitability.

And again the <unk>.

Best way to improve our profitability is with our outside sales.

And controlling our costs so that's.

We're laser focused on that part of it.

Great Best of luck.

Thank you.

Next we will go to the line of Chuck from Gorgon Gordon Haskett. Please go ahead.

Hey, Thanks, very much great quarter I, just wonder if you guys can talk about the cadence of sales in the quarter, particularly in October and the temperatures were a bit higher nationally.

In some pockets actually very warm.

If there is any discernible slowdown.

During this time period, and if you've seen that demand capture.

So far in November as temperatures have normalized.

Yes so.

The cadence of the quarter.

August and September.

We're strong.

The October when the warmer weather did set in and I'll add in there.

The geopolitical events that are also taking place.

We did see our trend.

A little bit of a drop from our August September trend.

When we saw the weather cooled down.

It towards the end of October we saw our sales trends returns so.

And again we're.

Our fourth quarter is off to a strong start as we said in our.

Our Q.

Not only are our earnings release, but also our.

Our prepared remarks this morning so.

Great. Thank you.

Next we will go to the line of broke from Goldman Sachs. Please go ahead.

Good morning, and thank you for taking our question can you elaborate on your outlook for comp growth between traffic versus ticket. As you look forward did you happen to see any shifts in ticket this quarter versus your expectations and how much more opportunity do you see to continue with the pricing strategy that has been successful year to date. Thank you.

Yes, so as far as what we saw in ticket. So again, our sales were driven by transactions as expected we did see a.

A drop in our ticket.

That was offset by partially offset by additional units as we've seen historically.

But again the important thing is driving that top line through transactions. We feel is a very healthy way for us to drive our business and again that ticket drop is due to mix to mix related within categories.

Yes Brooks.

We don't drive I think John starting with touch on them, we don't drive our ticket.

Our average we don't have a top down strategy to drive our average ticket up or down we'd let.

It really starts at the buyer merchandize manager levels when they're saying. These are you know these are the right values and having a good better mix good better best mix and it translates into Hey, These are the right values and it could if there is a hot category like John said and it happens to be a lower ticket, we're going to not not go after that.

Our market share gain is still the priority and driving sales and top line.

In terms of your second part of your question the opportunity on continuing the pricing strategy, yes, we.

We feel like we're in a good place on that I think that will be a consistent opportunity as we look forward.

We kind of monitor as we look as we go into first quarter of next year at this point.

And I would say, we're positioned right, where we would think we would be and.

There's a lot of it is a combination in this environment with so much goods and we're always wary of where other retailers are going to potentially promote.

So again, we're very selective on where we do it but we have been seeing us the ability to continue to retail.

Grab where appropriate.

At the same time actually buy a little bit better and Thats, where we get some of the merchandise margin mark on benefit.

So again feeling good about it but we're always watching it very very.

Balanced I would say in surgically and John Hey, look our customers are telling us that.

Their value perception of us remains strong which again.

Again it is key.

Yes.

We do we do surveys and we get we get data on perception or perception right. Now is actually has improved on their perception of our values relative to others.

Great. Thank.

Thank you for that question.

Next we'll go to the line of Alex from Morgan Stanley. Please go ahead.

Perfect. Congrats on a great quarter, guys I wanted to focus on more Max.

<unk> operating margin has been at about 14% almost all year comparing slightly below that pre COVID-19. So I'm just wondering how do you think about that or are we at peak or are there still headwind turning that segment and how do you think about it from here.

Thanks, a lot.

I mean look we're.

We're very pleased about driving a seven comp entirely through <unk>.

Traffic.

We were we've seen nice nice benefit from.

From the freight.

Look we have we're continuing to see this year I mean, we've had headwinds on.

Supply chain and wage so.

But we feel we feel really good about where the where we are as far as our pre tax profit margin being up 50 basis points versus last year.

Thanks, a lot good luck.

Next we'll go to the line of Michael from Evercore ISI. Please go ahead.

Hey, guys, let me add my congrats on a nice quarter.

Thank you Mike.

Can you help us think about what flow through will look like.

On the SG&A side, as we think about potential for comp upside in the fourth quarter and maybe some thoughts on.

SG&A growth or leverage for next year and I know this year is largely defined by some structural labor labor issues that you've spoken about and then restoring incentive comp, but maybe you could help with some thoughts on the go forward leverage point on SG&A as we kind of transition off of that kind of year. This year into next year, and then I had a follow up.

Yes, so SG&A for the fourth quarter is primarily due to incremental store wage and payroll costs and high and higher incentive accruals.

When we look out next year.

We haven't completed our planning process, we would expect that we would not see the increases that we saw this year.

And again, we're not giving guidance but.

That's what we would expect.

And I would say that as far as the leverage point I would say that thats unchanged from what we've said.

Okay.

And if you look at I guess thinking about Alex's question as you look at where Homegoods margins are today, it's still below 2019 level I know theres a lot of freight impacting that business and you told us thats still behind versus 2009, you expect to get it all back but.

If you take out freight in that business do you still see opportunities to kind of get back to.

Where you were 2019 like you have it more Max or maybe some maybe some thoughts on some of the differences in the structural.

I guess the cost structure for that business as we kind of come out of some of these moving parts.

I mean look the cost structure as we said before.

Is it.

It has a higher freight rate so when we talk about getting back only two thirds of the freight.

Homegoods is going to be a little bit more impacted on the freight line.

But again, it's similar the headwinds are similar where we talk about store wage and payroll costs.

And supply chain investments so.

Look we're really pleased with the improvements we've made to Homegoods bottom line throughout the year and looking out we were focused on continuing to drive that bottom line.

Okay excellent. Thanks, a lot and good luck with the holiday.

Next we will go to the line of Dana from Telsey Advisory Group. Please go ahead.

Hi, good morning, everyone and congratulations on the nice results as we continue to hear about department stores ordering spring down even in some instances down high single digits. How do you see your merchandising opportunity to take on better brands going forward and do you see this reduction in orders from us.

Wholesale accounts as a market share tailwind for you to gain share. Thank you.

Yes, Dana us yeah that was.

A classic us right in the sweet spot of our merchant question right there.

<unk> I would say, yes, yes, and yes the.

The reduction and they're ordering just it's a little.

Similar to what we spoke about earlier, where we're becoming.

A little more important to most of the brands.

And I think.

With a lot of them talking about cutting back.

I think theyre going to look to us as a way to kind of even off that that up and down rollercoaster ride, which they don't want it typically see in their business.

So we are buying a lot of different ways and.

Our teams right now and many of those pockets of business are in talks with some of these vendors to figure out how to do what's a mutually beneficial as we actually said in the script, what's been really neat to see ever since it was it was true prior to Covid, but I think even more so post COVID-19 that our buyers are great.

At figuring out a mutually beneficial way to work with a vendor and the vendors love our buyers for that reason, because we figure out opportunities better or good for them and good for us and that's what this is a classic case, where this is happening to many pockets of business around it we think it better positions us and it also were a lot.

To kind of more tailor it to.

The brands that we think work to balance off our good better best which I think is also what you are touching on their indirectly.

So again, thank you for the thank.

Thank you.

Do you see new category opportunities to Ernie.

Yes, I think well.

Probably a couple new or more of expanding ones that have been not nearly as big as they could have been.

What we see probably more yes, we always see new ones, but Dana what we're seeing now is we've had some again, we don't talk publicly we don't want to announce to competition. What are really helped driving our comps because obviously they are very healthy, but what we're seeing is there's a few categories that have been so good we are just looking.

Now in terms of moving even more staff into them.

How do you even explode them to a much larger degree.

And Thats how were on it so I would say that as more of what's going on right now, it's a little bit you're talking about but it's more about these big families of business that we are really driving increases with we think we can do even more.

By making sure we have the right buying team there that can get mark to market coverage and by the way again I mentioned earlier on the call. Our planning teams are essential when we explode a category in a department. They are the ones that help the store and the stores get it all set up appropriately. They are the ones that really help the stores and the <unk>.

Buyers get the goods to the stores in the right manner to to actually drive those sales so.

So we have two or three categories at a high level I am thinking of that are going to see.

Huge huge impact for us for next year again, once we're already doing by nearly not up to the degree we can drive.

Thank you.

Thank you Nick.

We will go to the line of Simeon from BMO capital markets. Please go ahead.

Thanks, Hey, good morning, everyone.

I was just wanted to clarify a prior point if I could the Homegoods E comm costs that you called out where those cost to close the business in more one time or were they an impact from losing the volume.

You had suggested it was the former but I wanted to confirm that.

So excluding those costs wasn't homegoods margin is already up pretty nicely worthy about pre pandemic. So I just wanted to check on that and if that is the case any reason the home goods margins Shouldnt maintain this underlying expansion.

Yes, so the costs associated with that or mainly cost to shut the business down.

And moving forward, we would expect next year that this would be slightly accretive I mean don't forget the homegoods dotcom was not a big portion of our overall business. So.

But yes with the piece that it is it would be accretive.

Great. Okay. Thanks, and then.

Any any color on where the customer traffic is coming from in your general views on.

It's hard to do but segmenting the traffic growth between new and returning customers yes.

Yes, Brian very broad in fact, we talked about those are one of the things that we're very bullish about is how broadly and diversified our traffic is from income and age groups.

And it is very balanced.

Where it is but obviously, we've had a greater percent of younger customers.

Growing over the last.

All three to five years, I guess you'd say.

But a recent we're very happy with how broad the customer traffic draw.

We believe we're attracting newer customers to our business, yes, generally which I think you were just.

Asking about as well so very also a great barometer.

That we're reflecting the younger demos, but imbalance, it's grown but its all very balanced by age group and income demographics.

Perfect. Thanks, a lot guys best of luck for the rest of the year and happy holidays to theater payments Dime, you and thank you.

And for the final question of the day, we will go to the line of Ed from Piper Sandler. Please go ahead hey.

Thanks for taking the question. It seems like you guys had been expanding square footage in categories like beauty. It seems like that's getting some traction would love to just kind of think broadly about the opportunity there.

If you've been kind of making some of those explosions as you've called them within the category.

And kind of what the relationship has been like with those vendors given that that hasn't historically been an area of focus for off price. Thanks.

Ed.

You guys are.

Forward, good merchant questions and observations today.

Very good.

Yes.

That's a good example, you can visibly see it obviously right.

And.

What happens in a situation like that is we do show, it's not typical off price, but as you know if you walk that area, we're showing very strong values and eclectic mix and one that's changing its classic treasure Hunt.

And we have a few of those type of businesses around the store, that's one that you'll probably walked in and seen some new fixtures et cetera, and so.

You are touching on the type of business.

Business, where we really go after it those vendor relationships are great. We are buying teams.

In the beauty area that have really worked well with the market and they're always looking for new items <unk> skus <unk> categories within that whole family of business.

We need to do more.

I won't talk about a couple of others, because we are aware of others.

Within the store that.

We can explode as well and go after very aggressively.

So I hope that answers your question, though.

We have a lot. This is how we look this is how we look where theres demand and where we can really take market share and offer tremendous value and brands.

And.

That is one of them.

Thanks, so much.

Okay.

Thank you.

Okay.

And that was our final question for today.

Okay.

Ivy. Thank you. Thank you all for joining us today.

And we look forward to updating you again on our fourth quarter earnings call in February.

Everybody take care bye. Thank you.

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

[music].

Ladies and gentlemen, thank you for standing by and welcome to the T. J X companies third 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 as of today.

November 15th 2023, I would now like to turn the conference over to Mr. Ernie Herrman, Chief Executive Officer, and President of the Tea Jacks companies incorporated. Please go ahead Sir.

Thanks Ivy.

Before we begin Deb has some opening comments.

Thank you Ernie and good morning, the forward looking statements, we make today about 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 <unk> companies, Inc. Any recording retransmission reproduction or other use of the same for profit or otherwise without prior consent of T. J X is prohibited and a violation of United States copyright and other laws. Additionally, while we have approved the publishing of a.

Script 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 in the investors section of our website T. J X dot com reconciliations of other non-GAAP measure.

So 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.

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

I want to start by recognizing our global associates for their continued hard work and dedication to T. J X again, I want to give special recognition to our store distribution and fulfillment center associates for their commitment to our company.

Now to our business update and third quarter results.

I am extremely pleased with our third quarter performance of sales profitability and earnings per share all exceeded our expectations.

Our 6% overall comp sales increase was entirely driven by customer traffic, which was up at all of our divisions.

<unk>, our largest division continued its strong momentum by once again delivering terrific increases in both comp sales and customer traffic.

In the third quarter, our apparel sales remained very strong and sales for overall home were outstanding accelerating sequentially versus the second quarter, particularly at Homegoods.

We also saw comp sales and traffic increases at our Canadian and international divisions.

<unk> overall merchandize margin remains very healthy.

Our excellent third quarter results are a testament to the strong execution of our teams across the company and their continued focus on growing both our top and bottom lines.

With our above plan results in the third quarter, we are raising our full year outlook for comp sales and earnings per share.

John will talk to this in a moment.

The fourth quarter is off to a strong start and we continue to see outstanding availability of merchandise across a wide range of brands in the marketplace.

This gives us great confidence that we can keep flowing a fresh assortment to our stores and online throughout the holiday season and beyond.

Longer term I am convinced that the flexibility of our business model, our wide demographic reach and our differentiated treasure Hunt shopping experience will continue to serve us well and allow us to keep growing successfully in the United States and internationally.

Okay before I continue I'll turn the call over to John to cover our third 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'll start with some additional details on the third 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 saw continued momentum with our apparel comp sales, which includes accessories with the <unk>.

Digital with a mid single digit increase.

Overall home comp sales accelerated and we're up high single digits.

<unk> net sales grew to $13 $3 billion, a 9% increase versus the third quarter of fiscal 'twenty three.

The third quarter consolidated pre tax margin of 12% was up 80 basis points versus last year.

Our pre tax profit margin came in above our plan, primarily due to expense leverage on our stronger than expected sales and a benefit of approximately 40 basis points from the timing of expenses.

As we stated in our press release. This morning, we expect this benefit from the timing of expenses will reverse out in the fourth quarter.

Third quarter pre tax profit margin was negatively impacted by approximately 30 basis points of cost from the closing of our Homegoods online business, which was not contemplated in our previous guidance.

All the costs associated with the closing of our home goods E. Commerce business are reflected in our Q3 results and there are no further write downs expected going forward.

Third quarter gross margin was up 200 basis points versus last year. This increase was driven by a higher merchandise margin due to the significant benefit from lower freight costs.

Gross margin also benefit benefited from expense leverage on the 6% comp sales increase.

Supply chain investments and our year over year shrink accrual were headwinds to gross margin in the third quarter.

Third quarter, SG&A increased 140 basis points, primarily due to incremental store wage and payroll costs higher incentive accruals due to above plan results in approximately 30 basis points of cost related to the closing of our home goods online business.

Net interest income benefited pre tax profit margin by 30 basis points versus last year.

Lastly, we were very pleased that diluted earnings per share of $1. <unk> were also above our expectations and up 20% versus last year's adjusted 86 cents.

This includes an approximately three penny negative impact due to the closing of our home goods online business, which was not contemplated in our previous guidance. This also includes approximately three pennies of unplanned benefit from the timing of expenses that we expect will reverse out in the fourth quarter.

Moving to our third quarter divisional performance.

At <unk> third quarter comp store sales increased a very strong 7% entirely driven by customer traffic <unk> apparel and home categories. Both saw significant comp sales increases.

Further comp sales increases were very consistent across low mid and high income demographic areas and was strong across all regions.

<unk> third quarter segment profit margin was 14% up 15 up 50 basis points versus last year.

This was driven by a benefit from lower freight costs as well as expense leverage on strong sales, partially offset by incremental store wage and payroll costs and higher incentive accruals.

We are convinced that T J maxx, and Marshalls will continue to be gift, giving destination. This holiday season.

Long term, we remain confident in our ability to capture additional market share in the U S.

At home goods third quarter comp store sales accelerated to an outstanding 9% increase entirely driven by customer traffic.

Comp performance was very strong across each region in the U S and across stores and different income demographic areas. We were very pleased to see Homegoods third quarter segment profit margin returned to double digits, increasing 140 basis points to 10, 3%.

This increase was due to a benefit from lower freight costs and expense leverage on stronger sales, partially offset by costs related to closing our home goods online business.

With more than 900 stores today, we continue to see a significant opportunity open up more home goods and home sense stores around the country.

We're excited about our market share opportunities and bringing our eclectic home assortment and great values to even more shoppers.

At <unk>, Canada comp store sales growth was 3% and was also driven by an increase in customer traffic.

Segment profit margin on a constant currency basis was 17% up 120 basis points.

We have a very loyal shopper base in Canada and are convinced that we can capture additional market share through all three of our Canadian banners.

At <unk> International comp store sales were up 1% and customer traffic was up.

Comp sales and traffic increase both in both Europe, and Australia and Europe, We were pleased with our performance given the high inflation impacting customer discretionary spend and the unseasonably warm weather.

Segment profit margin for T Jacks international on a constant currency basis was five 3% down 140 basis points. We are confident that we can that we can keep growing our footprint across our existing European countries, and Australia and improve the overall profitability.

Of this division.

As to E. Commerce overall, it's a very small percentage of our business remains complementary to our very successful brick and mortar business as to Homegoods dot com online business.

When we looked at our long term projections, we did not see a path to profitability over the long term like we do for our other banners in terms of our other E. Commerce sites, we were very pleased with their sales trends in the third quarter.

Today season.

I'll finish with our liquidity and shareholder distributions for.