Q1 2025 The TJX Companies Inc Earnings Call
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the TJX Company's first quarter fiscal 2025 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 1. As a reminder, this conference call is being recorded on May 22, 2024. I would like to turn the conference call over to Mr. Ernie Herrman, Chief Executive Officer and President of TJX Companies, Inc. Please go ahead, sir.
Ladies and gentlemen, thank you for standing by welcome to the T. J X companies first quarter fiscal 2025 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 May twenty-second 'twenty 'twenty four.
Speaker Change: I would like to turn the conference call over to Mr. Ernie Herrman, Chief Executive Officer, and President of T. G X companies Inc. Please go ahead Sir.
Ernie L. Herrman: Thanks, Courtney. Before we begin, Deb has some opening comments. Thank you, Ernie.
Speaker Change: Thanks, Courtney before we begin Deb has some opening comments. Thank you Ernie and good morning, today's call is being recorded and includes forward looking statements about our results and plans.
Debra McConnell: Thank you, Ernie, and good morning. Today's call is being recorded and includes forward-looking statements about our results and plans. These statements are subject to risks and uncertainties that could cause actual results to vary materially from these statements, including, among others, the factors identified in our filings with the SEC. Please review our press release for a cautionary statement regarding forward-looking statements, as well as the full safe harbor statements included in the investor section of our website, TJX.com. We have also detailed the impact of foreign exchange on our consolidated results and our international divisions in today's press release and in the investor section of TJX.com, along with reconciliations to non-GAAP measures we discussed.
Debra McConnell: Thank you, and now I'll turn it back over to Ernie.
Deb: These statements are subject to risks and uncertainties that could cause the actual results to vary materially from these statements, including among others. The factors identified in our filings with the SEC Please review our press release for a cautionary statement regarding forward looking statements as well as the full.
Deb: Safe Harbor statements included in the investors section of our website T. J X Dot com. We have also detailed the impact of foreign exchange on our consolidated results and our international divisions in today's press release and in the investors section of T. J X Dot com.
Deb: Along with reconciliations to non-GAAP measures we discuss.
Speaker Change: Thank you and now I'll turn it back over to Ernie.
Ernie L. Herrman: Good morning.
Ernie L. Herrman: Joining me and Deb on the call is John. I want to start by thanking all of our global associates for their ongoing commitment to TJX and for delivering great value to our customers. I especially want to recognize the hard work of our Store, Distribution, and Fulfillment Center associates across the company. Now, to our business update and first quarter results. I am very pleased with our first quarter performance. Overall comp store sales were up 3%, which was at the high end of our plan. Again, this quarter, the comp increase was entirely driven by customer transactions.
Speaker Change: Joining me and Deb on the call is John.
Speaker Change: I want to start by thanking all of our global associates for their ongoing commitment to T J maxx and for delivering great value to our customers.
Speaker Change: I, especially want to recognize the hard work of our store distribution and fulfillment center associates across the company.
Ernie L. Herrman: We see this as an excellent indicator of the strength of our business. As to first quarter profitability, both pre-tax profit margin and earnings per share came in well above our plans, which was terrific to see. John will talk about the drivers of this profitable performance in a moment. Our first quarter results are a testament to the sharp execution of our teams, who focused on offering our Sharpers excellent value on every item, every day.
Speaker Change: Now to our business update and first quarter results I am very pleased with our first quarter performance overall comp store sales were up 3%, which was at the high end of our plan.
Speaker Change: Again this quarter the comp increase was entirely driven by customer transactions.
Speaker Change: We see this as an excellent indicator of the strength of our business.
Speaker Change: After first quarter profitability, both pre tax profit margin and earnings per share came in well above our plans, which was terrific to see.
Speaker Change: John will talk to the drivers of this profit outperformance in a moment.
Speaker Change: Our first quarter results are a testament to.
Speaker Change: To the sharp execution of our teams who focused on offering our shopper's excellent value on every item every day.
Ernie L. Herrman: Our results also highlight the benefits of our flexible business model. Throughout the quarter, we flexed our store assortments and leaned into categories that many consumers were looking for. Furthermore, we remain disciplined in managing our buying, inventory, and expenses and remain focused on driving profitability. Looking ahead, our valued leadership in retail gives us great confidence in TJX. The second quarter is off to a good start, and we are excited about the opportunities we see for our business.
Speaker Change: Our results also highlight the benefits of our flexible business model.
Speaker Change: Throughout the quarter, we flexed, our store assortments and leaned into categories that many consumers were looking for.
Speaker Change: Further we remain disciplined in managing our buying inventory and expenses and remain focused on driving profitability.
Speaker Change: Okay.
Speaker Change: Looking ahead, our value leadership in retail it gives us great confidence and T J X.
Speaker Change: The second quarter is off to a good start and we are excited about the opportunities we see for our business.
Ernie L. Herrman: We are very happy with our inventory levels and are in a great position to capitalize on the outstanding buying opportunities that we see in the marketplace. We plan to flow fresh assortments to our stores and online this spring and summer and throughout the year. Longer term, we remain convinced that we are well positioned to grow our global footprint, gain market share in our geographies around the world, and increase the profitability of TJX. Before I continue, I'll turn the call over to John to cover our first quarter results in more detail.
Speaker Change: We are very happy with our inventory levels and are in great position to capitalize on the outstanding buying opportunities that we see in the marketplace.
Speaker Change: We plan to flow fresh assortments to our stores and online this spring and summer and throughout the year.
Speaker Change: Longer term, we remain convinced that we are well positioned to grow our global footprint.
Speaker Change: <unk> market share in our geographies around the world and increase the profitability of T J X.
Before I continue I'll turn the call over to John to cover our first quarter results in more detail.
John Klinger: Thanks, Ernie. I also want to add my gratitude to all of our Global Associates for their continued hard work. Now, I'll share some additional details on the first quarter versus last year. As Ernie mentioned, our consolidated comp was at the high end of our plan and entirely driven by customer transactions. Comps in both our apparel and home categories increased, with home outperforming apparel. The pre-tax profit margin was 11.1%, which was up 80 basis points.
John: Thanks, Ernie I also want to add my gratitude to all of our global associates for their continued hard work.
John: Now I'll share some additional details on the first quarter versus last year as Ernie mentioned, our consolidated comp was at the high end of our plan and entirely driven by customer transactions.
John: Comps in both of our apparel and home categories increased with home outperforming apparel.
John: Pre tax profit margin was 11, 1%.
John Klinger: This was 50 basis points above our plan, primarily due to a larger than expected benefit from lower freight costs, a reserve release, and higher net interest income. Gross margin was up 110 basis points. This was driven by a benefit from lower freight costs and favorable mark-on, partially offset by the timing of capitalized inventory costs and supply chain investment. SG&A increased 20 basis points due to incremental store wage and payroll costs partially offset by the reserve release.
John: It was up 80 basis points. This was 50 basis points above our plan, primarily due to a larger than expected benefit from lower freight costs, a reserve release and higher net interest income.
John: Gross margin was up 110 basis points. This was driven by a benefit from lower freight costs and favorable mark on partially offset by the timing of capitalized inventory cost and supply chain investments.
John: SG&A increased 20 basis points due to incremental store wage and payroll costs, partially offset by the reserve release.
John Klinger: Lastly, we were very pleased that diluted earnings per share were up 22 percent. This was well above our plan due to our pre-tax profitability outperformance and a lower than expected tax rate that benefited first quarter diluted earnings per share by three pennies. Now to our first quarter divisional performance.
John: Net interest income benefited pre tax profit margin by 10 basis points.
John: Lastly, we were very pleased that diluted earnings per share were up 22%. This was well above our plan due to our pre tax profitability outperformance and a lower than expected tax rate that benefited first quarter diluted earnings per share by three pennies.
John: Now to our first quarter divisional performance.
John Klinger: Across all our divisions, our comp increases were entirely driven by customer transactions, which again is such a great indicator of the strength of our value proposition. At Marmax, comp store sales increased 2%, and the segment profit margin was 14.2%, up 20 basis points. Despite some periods of unfavorable weather, both Marmax apparel and home categories saw positive comp store sales, with home outperforming apparel. Furthermore, we were very pleased to see comp sales increases at stores in demographic areas with average household incomes above and below $100,000.
John: Across all our divisions are comp increases were entirely driven by customer transactions, which again is such a great indicator of the strength of our value proposition.
At <unk> comp store sales increased 2% and segment profit margin was 14, 2% up 20 basis points. Despite some periods of unfavorable weather, both <unk> apparel and home categories saw positive comp store sales with home outperforming apparel.
John: Further we were very pleased to see comp sales increases at stores and demographic areas with average household incomes above and below $100000.
John Klinger: At our U.S. e-commerce sites and at Sierra, which we report as part of this division, we were happy with their strong sales performance. HomeGoods comp store sales increased 4%, and the segment profit margin grew significantly to 9.5%. This was a 220 basis point improvement versus last year. HomeGoods and HomeSense offer customers a differentiated shopping experience for home fashion, and buyers source products from around the world to bring customers eclectic selections and affordable ways to upgrade their home decor.
John: At our U S e-commerce sites and at Sierra which we report as part of this division we were happy with their strong sales performance.
John: Homegoods comp store sales increased 4% and segment profit margin grew significantly to nine 5%. This was a 220 basis point improvement versus last year home goods and home center offer customers a differentiated shopping experience for home fashions.
John: Our buyers source products from around the world to bring customers eclectic selections and affordable ways to upgrade their home decor.
John Klinger: Moving to our international divisions, at TJX Canada, comp store sales were up 4% in segment profit margin on a constant currency basis, with 12.4% up 110 basis points. At TJX International, comp store sales increased two percent, and we're up in both Europe and Australia. Segment profit margin on a constant currency basis improved significantly to 3.9%, up 120 basis points. We believe we are performing better than most other major retailers in Canada and Europe.
John: Moving to our international divisions at T. J X, Canada comp store sales were up 4% and segment profit margin on a constant currency basis was 12, 4% up 110 basis points.
John: At <unk> International comp store sales increased 2%.
John: And we're up in both Europe, and Australia segment profit margin on a constant currency basis improved significantly to three 9% up 120 basis points.
John: We believe we are performing better than most other major retailers in Canada and Europe. We are confident we will continue to be a leading shopping destination for value seeking customers in Canada, Europe and Australia.
John Klinger: We are confident we will continue to be a leading shopping destination for value-seeking customers in Canada, Europe, and Australia. Moving to inventory, balance sheet inventory was down 3% versus the first quarter of last year. Inventory on a per-store basis was down 5% and driven by lower inventory at our distribution centers. However, importantly, in-store inventory was in line with last year's levels. We feel great about our inventory levels and are in a great position to take advantage of the outstanding availability we are seeing in the marketplace.
John: Moving to inventory balance sheet balance sheet inventory was down 3% versus the first quarter of last year.
John: Inventory on a per store basis was down 5% and driven by the lower inventory at our distribution centers.
John: Importantly in store inventory was in line with last year's levels, we feel great about our inventory levels and are in a great position to take advantage of the outstanding availability, we are seeing in the marketplace.
John Klinger: As to our capital allocation... We were very pleased to start another year generating strong cash flow, reinvesting in the growth of our business, and returning cash to shareholders through our buyback and dividend programs. Now we'll return it to Ernie.
John: As to our capital allocation.
Speaker Change: We were very pleased to start another year generating strong cash flow reinvesting in the growth of our business and returning cash to shareholders through our buyback and dividend programs now ill turn it back to Ernie.
Ernie L. Herrman: Thanks, John. I'd like to highlight the reasons we have great confidence in the near and long-term growth opportunities for TJX. We have a long track record of success in many kinds of retail and macro environments, and our value proposition has always served us well. Our off-price business model is extremely flexible and resilient, and I believe we are set up for a long runway of exciting growth in our geographies around the world. First is our wide customer demographic reach. We want to sell to everyone.
John: Thanks, John I'd like to highlight the reasons, we have great confidence in the near and long term growth opportunities for T. J X.
Ernie: We have a long track record of success through many kinds of retail and macro environments and our value proposition has always served us well.
Ernie: Our off price business model is extremely flexible and resilient and I believe we are set up for a long runway of exciting growth in our geographies around the world.
Ernie: First is our wide customer demographic reach we want to sell everyone with our flexibility and opportunistic buying we offer expansive assortment of good better and best merchandise for shoppers across a broad range of income and the age groups.
Ernie L. Herrman: With our flexibility and opportunistic buying, we offer expansive assortments of good, better, and best merchandise for shoppers across a broad range of income and age groups. We continue to attract new Gen Z and millennial shoppers to our stores, which we believe bodes well for our future growth. It's really great when we see multiple generations shopping in our stores together. Second, we are convinced that significant market share opportunities remain across the U.S., Canada, and the world. Europe and Australia.
Ernie: We continue to attract new Gen Z and millennial shoppers to our stores, which we believe bodes well for our future growth.
Ernie: It's really great when we see multiple generations shopping our stores together.
Ernie: Second we are convinced that significant market share opportunities remain across the U S Canada.
Ernie: Europe and Australia.
Ernie L. Herrman: Over the long term, we see potential to further expand our store footprint by at least another 1,300-plus stores with our current retail banners in our existing countries alone. Third, with our more than 1,300 global buyers sourcing from a universe of more than 21,000 vendors and from over 100 countries. We are confident that there will be plenty of quality branded merchandise available to us to support our growth plan. Throughout our history, availability of inventory has never been an issue.
Ernie: Over the long term, we see potential to further expand our store footprint by at least another 1300 plus stores with our current retail banners in our existing countries alone.
Ernie: Third with our more than 1300 global buyers sourcing from a universe of more than 21000 vendors and from over 100 countries.
Ernie: We are confident that there will be plenty of quality branded merchandise available to us to support our growth plans.
Ernie: Throughout our history availability of inventory has never been an issue in fact in recent years, we have seen available availability become even better as vendors look for additional ways to grow their businesses.
Ernie L. Herrman: In fact, in recent years, we have seen availability become even better as vendors look for additional ways to grow their businesses. We've opened thousands of new stores, which keeps our store assortment fresh and fuels the differentiated treasure hunt shopping experience for our customers. Our stores receive multiple deliveries each week of fresh, branded merchandise to surprise and excite our customers. With our rapidly changing assortment, shoppers are inspired to visit us frequently to see what's new.
Ernie: We've opened thousands of new vendors, which keeps our store assortment fresh and fuels that differentiated treasure hunt shopping experience for our customers.
Ernie: Our stores received multiple deliveries each week, a fresh branded merchandise to surprise and excite our customers.
Ernie: With our rapidly changing assortment shoppers are inspired to visit as frequently to see whats new.
Ernie L. Herrman: Lastly, and most importantly, are the talented associates who do an exceptional job executing on our initiatives. I truly believe the level of off-price knowledge and expertise within our organization is unmatched. We have a highly differentiated global business, but we have developed specialized talent and teams to support it. We have many leaders across TJX with decades of off-price experience. Additionally, we focus on developing newer associates and the next generation of leaders within our organization.
Ernie: Lastly, and most importantly, our talented associates, who do an exceptional job executing on our initiatives.
Ernie: I truly believe the level of off price knowledge and expertise within our organization is unmatched.
Ernie: We have a highly differentiated global business.
Ernie: We have developed the specialized talent and teams to support it.
Ernie: We have many leaders across T J X with decades of off price experience.
Ernie: Additionally, we focus on developing newer associates and the next generation of leaders within our organization.
Ernie L. Herrman: We take great pride in our TJX University and other training programs. Our very deep bench gives us the ability to rotate talent between divisions and geographies and to deploy teams where needed. All of this strengthens our company as we pursue our goals for growth and is a tremendous advantage for TJX. I am also very proud of our culture, which I believe is another key differentiator and a major component of our success.
Ernie: We take great pride in our T J X University and other training programs.
Ernie: Our very deep bench gives us the ability to rotate talent between divisions and geographies and to deploy teams where needed.
Ernie: All of this strengthens our company as we pursue our goals for growth and has a tremendous advantage for T J X.
Ernie: I am also very proud of our culture, which I believe is another key differentiator and major component of our success.
Ernie L. Herrman: For our corporate responsibility update, I'll share more about our culture, which includes supporting our associates and making TJX a terrific place to work. Our associates bring our business to life, and we strive to foster a workplace where they feel welcome, valued, and engaged. A key priority is helping our associates grow and develop at TJX, which we support both through formal and informal training. Our Associate Resource Groups, or ARGs, and our Inclusion and Diversity Committees have played an important role in creating an inclusive workplace. Within the last year, both the number of ARGs and the number of associates participating in them have continued to grow.
Ernie: For our corporate responsibility update I'll share them on.
Ernie: I'll share more about our culture, which includes supporting our associates and making T. J X a terrific place to work.
Ernie: Our associates bring our business to life, and we strive to foster a workplace, where they feel welcome valued and engaged.
Ernie: A key priority is helping our associates grow and develop at T. J X, which we support both through formal and informal training.
Ernie: Our associated resource groups are args, and our inclusion and diversity committees have played an important role in creating an inclusive workplace.
Ernie: Within the last year, both the number of args and the number of associates participating in them have continued to grow.
Ernie L. Herrman: As always, you can read more about our corporate responsibility work on TJX.com. Summing up, we are very pleased with the overall performance of TJX in the first quarter and that the second quarter is off to a good start. We feel great about our positioning in today's consumer environment and will continue to emphasize our value proposition to consumers through our marketing initiative. In the long term, I am confident that the characteristics of our business set us up extremely well to capitalize on the market share opportunities that we see out there.
Ernie: As always you can read more about our corporate responsibility work on T J X dot com.
Ernie: Summing up we are very pleased with the overall performance of <unk> in the first quarter and that the second quarter is off to a good start.
Ernie: We feel great about our positioning in today's consumer environment, and we'll continue to emphasize our value proposition to consumers through our marketing initiatives.
Ernie: Longer term I am confident that the characteristics of our business set us up extremely well to capitalize on the market share opportunities that we see out there.
Ernie L. Herrman: Lastly, I want to reiterate that we will not be complacent and are committed to looking at ways to further increase the profitability of TJX over the long term. Now I'll turn the call back to John to cover our full year and second quarter guidance, and then we'll open it up for questions.
Ernie: Lastly, I want to reiterate that we will not be complacent and are committed to looking at ways to further increase the profitability of T. J X over the long term.
Ernie: Now I'll turn the call back to John to cover our full year and second quarter guidance and then we'll open it up for questions.
John Klinger: Thanks again Ernie.
John Klinger: I'll start with our full year fiscal 25 guidance. We're now planning consolidated sales to be in the range of $55.5 to $55.9 billion. This is about $200 million lower than our previous guidance due to the impact of foreign exchange.
John: I'll start with our full year fiscal 'twenty five guidance. We're now planning consolidated sales to be in the range of $55 five to 54 up $55 9 billion.
John: This is about $200 million lower than our previous guidance due to the impact of foreign exchange.
John Klinger: We continue to expect overall comp store sales to increase two to three percent. Additionally, we're increasing our pre-tax profit margin guidance to a range of 11 to 11.1 percent. This would be up 10 to 20 basis points versus last year's adjusted 10.9 percent. We continue to expect gross margin to be in the range of 30 to 30.1%, a 10 to 20 basis point increase versus last year's adjusted 29.9%. We expect this increase to be driven by a higher merchandise margin, which includes a small benefit from freight, partially offset by our supply chain investments. We continue to plan shrink to be flat versus last year.
John: We continue to expect overall comp store sales to increase 2% to 3%.
John: We're increasing our pre tax profit margin guidance to a range of 11 to 11, 1%. This would be up 10 to 20 basis points versus last year's adjusted 10, 9%.
John: We continue to expect gross margin to be in the range of 30% to 31% a 10 to 20 basis point increase versus last year's adjusted 29, 9%.
John: We expect this increase to be driven by a higher merchandise margin, which includes a small benefit from freight partially offset by our supply chain investments. We continue to plan to shrink to be flat versus last year.
John Klinger: We continue to expect SG&A to be approximately 19.3% flat to last year's adjusted SG&A. We're planning incremental store wage and payroll costs to be offset by lower incentive compensation costs and a benefit from items that negatively impacted us last year. We're now assuming net interest income of about $156 million, which will have a neutral impact on our year-over-year pre-tax profit margin. Our full year guidance assumes a tax rate of 25.4% and a weighted average share count of approximately 1.14 billion shares.
John: We continue to expect SG&A to be approximately 19, 3% flat to last year's adjusted SG&A.
John: We're planning incremental store wage and payroll costs to be offset by lower incentive compensation costs and a benefit from items that negatively impacted us last year.
John: We're now assuming net interest income of about $156 million, which will have a neutral impact on a year over year pre tax profit margin.
John: Our full year guidance assumes a tax rate of 25, 4% and a weighted average share count of approximately 114 billion shares.
John Klinger: As a result of all these assumptions, we now expect full-year diluted earnings per share to be in the range of $4.03 to $4.09. This would represent an increase of 7% to 9% versus last year's adjusted diluted earnings per share of $3.76. Moving to our second quarter guidance, we're expecting overall comp store sales to be up 2-3%, consolidated sales to be in the range of $13.2-13.3 billion, and pre-tax profit margin to be in the range of 10.4-10.5%, flat to up 10 basis points versus last year.
As a result of all these assumptions, we now expect full year diluted earnings per share to be in the range of $4 three to $4 nine.
John: We would we would represent this this would represent an increase of 7% to 9% versus last year's adjusted diluted earnings per share of $3 76.
John: Moving to our second quarter guidance, we're expecting overall comp store sales to be up 2% to 3% consolidated sales to be in the range of 13, two to $13 3 billion pre.
John: Pre tax profit margin to be in the range of 10, 4% to 10, 5% flat to up 10 basis points versus last year.
John Klinger: Gross Margin is expected to be approximately 29.8%. This would be a decrease of 40 basis points versus last year. This is primarily due to the lapping of a significant freight accrual benefit last year in supply chain investments, partially offset by an increase in merchandise margins. SG&A is expected to be approximately 19.6%, a decrease of 50 basis points versus last year. This is primarily due to a benefit from lapping higher incentive accruals in a reserve related to the write-off of a German COVID program receivable last year, partially offset by incremental store wage and payroll costs.
John: <unk> margin to be approximately 29, 8% this would be a decrease of 40 basis points versus last year.
John: This is primarily due to the lapping of a significant freight accrual benefit last year and supply chain investments, partially offset by an increase in merchandise margin.
John: SG&A to be approximately 19, 6% a decrease of 50 basis points versus last year.
John: This is primarily due to a benefit from lapping higher incentive accruals and a reserve related to the write off of a.
John: A German Covid program receivable last year, partially offset by incremental store wage and payroll costs.
John Klinger: Our second quarter guidance also assumes net interest income of about $42 million, a tax rate of 26.3%, and a weighted average share count of approximately 1.14 billion shares. Based on these assumptions, we're expecting second quarter diluted earnings per share to be in the range of $0.88 to $0.90, up 4% to 6% versus last year's $0.85. Lastly, our implied guidance for the second half of the year assumes that overall comp store sales will be up 2 to 3 percent, pre-tax profit margin will be in the range of 11.3 to 11.5 percent, and earnings per share will be in the range of $2.22 to $2.26.
John: Our second quarter guidance also assumes net interest income of about $42 million a tax rate of 26, 3%.
John: And a weighted average share count of approximately 114 billion shares.
John: Based on these assumptions, we're expecting second quarter diluted earnings per share to be in the range of 88 to 90, <unk> up 4% to 6% versus last year's 85.
John: Lastly, our implied guidance for the second half.
John: The year assumes that overall comp store sales will be up 2% to 3% pretax profit margin will be in the range of 11, 3% to 11, 5% and earnings per share will be in the range of $2 22 to $2.26.
John Klinger: In closing, I want to emphasize that we are in an excellent financial position to continue to invest in the growth of our company while simultaneously returning significant cash to our shareholders. Now, we're happy to take your questions. As a reminder, please limit your questions to one per person so we can answer as many questions as we can. Thanks, and now we'll open it up to questions.
John: In closing I want to emphasize that we are in an excellent financial position to continue to invest in the growth of our company, while simultaneously returning significant cash to our shareholders.
John: Now we are happy to take your questions. As a reminder, please limit your questions to one per person. So we can answer as many questions as we can thanks and now we'll open it up to questions.
Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1, unmute your phone, and record your name clearly. If you need to withdraw your question, press star 2. Again, to ask a question, please press star 1. The first question comes from Matthew Boss from J.P. Morgan.
Speaker Change: Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star one on mute 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.
Speaker Change: Our first question comes from Matthew Boss from J P. Morgan.
Matthew Robert Boss: Great thanks and congrats on another nice quarter.
Matthew Robert Boss: Great Thanks, and congrats on another nice quarter.
Ernie L. Herrman: Thank you, Matt.
Matt: Thanks, Matt Thank you Matt.
Ernie L. Herrman: So, Ernie, could you elaborate on the drivers of the market share gains across both apparel and home that you cited, and just your confidence in the multi-year runway for continued gains? Maybe near-term, have you seen any change in business momentum here in May? And then, John, just speaking of runway, help us to think about merchandise margins over the multi-year, just given the structural changes on the buying front that you've discussed.
Speaker Change: So Ernie could you elaborate on drivers of the market share gains across both apparel and home that you cited and just your confidence in the multiyear runway for continued gains maybe near term have you seen any change in business momentum here in May and then John just speaking of runway, how best to think about merchandise Mart.
Speaker Change: <unk> multi year, just given the structural changes on the buying front that you've discussed.
Ernie L. Herrman: So Matt, let me start. Well, obviously, we don't give category-specific information on which categories were driving the comps, but one thing I can tell you was pretty balanced across the board. It wasn't any one area that was driving our total any more than we planned on it. We did feel a little bit of a weather pattern hit during the quarter, and it was kind of an on and off thing, which you probably read about and heard about from other retailers talking about it.
Speaker Change: So Matt let me start and while obviously, we don't give category specific information on which.
Matt: Categories, where we're driving we're driving the comps, but one thing I can tell you it was pretty balanced across the board. It wasn't one any one area that was driving our total anymore than we planned on it.
Matt: We did feel a little bit of a weather Pat.
Matt: Pattern hit that.
Matt: During the quarter and it was kind of an on and off thing, which you probably read about and heard about from other retailers talking about it so in our case.
Ernie L. Herrman: So in our case, you know, those types of patterns can impact us in areas just like they do anyone else in terms of foot traffic. It tends to impact our apparel areas, but our apparel ended up doing well for the quarter. So whether it was, you know, home apparel, accessories, everything kind of was in line with the way we thought it would have been for the quarter. I think your second part of the question was about, and again, I can't give you specifics on the categories.
Matt: Those type of patterns can impact us in areas just like it does anyone else in terms of foot traffic tends to impact.
Matt: Our apparel areas, but our apparel and ended up held.
Matt: Healthy for the for the quarter so.
Matt: Whether it was.
Matt: Home apparel accessories, everything kind of was in line with the way we thought it would have been for the quarter.
Matt:
The confidence in that I think your second part of the question was about.
Matt: And again I can't give you specifics on the categories. The second part of the question I guess is about what gives us confidence in the future right on how we're going to continue to drive this.
Ernie L. Herrman: The second part of the question, you know, I guess is about what gives us confidence in the future, right? About how we're going to continue to drive this, and am I getting that right, Matt, on the second part? Yeah.
Matt: And am I getting that right Matt.
Ernie L. Herrman: Yeah, yeah. Continued drivers of market share gains and just business momentum. Have you seen any?
Speaker Change: So again, yes it.
Speaker Change: Continued driver continued drivers of market share gain and jet business momentum have you seen have you seen any change.
Ernie L. Herrman: Yeah, I know the momentum is really consistent where it has been the last few months. And I think what gives us a lot of confidence is that we are the only retailer right now that I see that is able to take brands and fashion and quality and put all of that together in this treasure hunt format. Remember, I'm talking about having good, better, best, good, better, best, a range of all income and age groups, whereas all the other retailers, and I know, Matt, we've talked about this before, I really don't know of any other brick and mortar retailer that is creating a treasure hunt of this excitement level and entertainment level because they're trading so broadly as we are. And so that is extremely differentiated in this environment, fortunately for us.
Speaker Change: Yes, no that momentum is really consistent where it's been the last.
Speaker Change: Few months and the I think what gives us a lot of confidence as we are the only retailer right now that I see that is able to take brands.
Speaker Change: And fashion and quality and put all of that together in this treasure Hunt format remember I'm talking about having good better best good better best a range of all income and age groups, whereas all the other retailers and I know, Matt we've talked about this before.
Speaker Change: I really don't know of any other retailer brick and mortar oriented that is creating a treasure hunt of this excitement level and entertainment level, because theyre trading so broadly as we are and so that is extremely differentiated in this environment Fortunately for us.
Ernie L. Herrman: We're able to take advantage of the excess inventories across the e-com businesses as those flex, and some of those, as you know, some of the vertical players as well as the full line players, they've had spill-off of goods that have been a supply of extra inventory for us. As always, we see availability continuing to propel us because we are now becoming more and more important to our vendors, which has, you know, made us important.
Speaker Change: We're able to take advantage of the excess inventories across the E comm business as those flex and some of those as you know some of the vertical players as well as the full line players they've had spill off of goods that has been a supplier of extra inventory for us.
Speaker Change: As always we see availability to continue to propel us because we are now becoming more and more important to our vendors which has.
Speaker Change: We were important.
Ernie L. Herrman: In the middle of COVID, pre-COVID, now we're at a different level, I believe, of importance to our vendors. The neat thing about that is that the vendors have figured out ways to work with us even more consistently than in the past. So your question, by the way, as you can imagine as I go on here, it really encompasses all the reasons why we're so bullish. We have the value leadership, time periods, Mother's Day, Father's Day, Valentine's Day, whereas a handful, I don't know, 10 years ago, maybe we weren't the place on X percent of gifts that people were comfortable with giving.
Speaker Change: In the middle of Covid pre Covid now we're at a different level I believe of importance to our vendors and.
Speaker Change: The neat thing with that is the vendors have figured out ways to work with us.
Speaker Change: Even more consistently done in the past.
Speaker Change: So your question by the way as you can imagine I'm going on here. It just it really encompasses all of the reasons why we're so bullish I mean, we have the value leadership.
Speaker Change: Positioning right now and another thing Thats happened.
Speaker Change: As we've become a cooler place to shop. So the other thing, giving us confidence as we are now more gift, giving oriented all year long. So now we're starting to get.
Speaker Change: A greater a can.
Speaker Change: Schumer traffic for coming to us for a gift, giving whether that's at holiday and we've delivered strong fourth quarters, but even in the other time periods mother's day father's day Valentine's day, whereas a handful yeah I don't know 10 years ago, maybe we want to place an X percent of gifts that people were comfortable with giving so sorry for the long winded answer I could.
Ernie L. Herrman: So sorry for the long-winded answer. I could keep going, but I think that's enough to give you the confidence about why I think we're going to continue on a healthy trajectory here. John, did I leave anything for you? No, but I think you should have. Did you?
Keep going but I think that's enough to give you the confidence of why I think we're going to continue on a healthy trajectory here yes.
Speaker Change: John do you have anything for you.
John: No, but I think you had looked at.
John Klinger: What was the question for me, Matt? I think Ernie might have answered it. Runway multi-year with merchandise margins, just given the structural changes that you've made on the buying front. Oh, that's back to me. I just wanted you to know, Matt. John's looking back at me.
Matt: What was what was the question for me, Matt I think I think Ernie you might've answered right.
John: Right.
Speaker Change: Runway multiyear with with merchandise margins just given the structural changes that you've made on the buying front.
Speaker Change: That's back to <unk>.
Speaker Change: I just wanted you to know Matt Johnson looking back at me.
Ernie L. Herrman: So the, wow, oh, say, we just started to touch on that. So our, as you can see from the healthy merchandise margin we just delivered, and we believe there's still an opportunity in our pricing as we go forward to continue to selectively raise our prices as well as what's happened is buy better. It's kind of a 50-50 right now.
Speaker Change: So the.
Speaker Change: Wow. So we just started to touch on that so our buy as you can see from the healthy merchandise margin and we just delivered and we believe there is still a.
Opportunity in our pricing as we go forward.
Speaker Change: To continue to introduce selectively.
Speaker Change: Raise our prices as well as what's happened is by better it's kind of a 50 50 right now we're winning on both fronts in terms of buying better and retailing goods and I have to tell you what one team our marketing teams measure our perception of value with the consumers regularly.
Ernie L. Herrman: We're winning on both fronts in terms of buying better and retailing goods. And I have to tell you what one team, our marketing teams, measure our perception of value with the consumers regularly. And what they would tell you is that our surveys tell us our customer perception of the values that we offer continues to show us as being stronger than the competition, really, overall, in the business. So we're always monitoring that in addition to looking at the true numbers, but our customers perceive our value as extremely strong relative to competition, which I believe gives us, in merchandise margin, to your question, the ability to continue to leverage our pricing and our buying power, always keeping a pulse on that, which our buyers are excellent at monitoring where our retail is versus the competition.
Speaker Change: And.
Speaker Change: And what they would what they would tell you is that our surveys tell us our customer perception on our values that we offer.
Speaker Change: It continues to show us as being stronger than the competition really overall.
Speaker Change: The business. So we're always monitoring that in addition to looking at the true numbers, but our customers perceive our values.
Speaker Change: As a X.
Speaker Change: Extremely strong relative to competition, which I believe gives us in merchandise margin to your question the ability to continue to leverage our pricing and our buying power and always keeping a pulse on that which our buyers are excellent at monitoring where our retail saar versus the competition.
Matthew Robert Boss: Hopefully that answers that.
Speaker Change: Hopefully that answers that.
Ernie L. Herrman: Great color. Best of luck. Thank you.
Great color best of luck.
Operator: Thank you. Thank you. Our next question comes from Lorraine Hutchinson from Bank of America.
Speaker Change: Thank you. Thank you.
Speaker Change: Our next question comes from Lorraine Hutchinson from Bank of America.
Lorraine Corrine Maikis Hutchinson: Thank you. Good morning. My question is around new customer acquisition are you still attracting a younger customer to all of the banners and are you seeing any increased sign of trade down from a higher income demographic.
Speaker Change: Yes.
Lorraine Corrine Maikis Hutchinson: Yeah, Lorraine, so we do continue to attract more new customers that are skewing to a younger age as well, as we've seen for the last number of quarters. And what was, I'm sorry, what was the second part of your question?
Speaker Change: Yes, Lorraine so we do continue to attract.
Speaker Change: Attract.
More new customers that are skewing to a younger age as well.
Speaker Change: As we've seen.
Speaker Change: Last number of quarters.
Speaker Change:
And what was I'm sorry, what was the second part of your question.
Ernie L. Herrman: It's hard for us to see specific customer data because our credit card isn't as penetrated as other retailers. But what we are seeing when we look at our sales by stores that are in different demographics, like we said on the call, we're seeing above and below $100,000. They were both positive. Now, this quarter, it skews a little bit more towards the lower-income customer. But again, it was strong on both sides of that point, that $100,000. Lorraine, I would also jump in.
Speaker Change: Those kinds of trade down or the trade by trade down.
Speaker Change: So again, it's hard for us to.
Speaker Change: See specific customer data because we don't.
Speaker Change: Our credit card isn't as penetrated.
As other retailers, but what we are seeing when we look at our our sales by.
Speaker Change: Stores that are in.
Different demographics.
Speaker Change: Like we said on the call, we're seeing above and below a $100000. They were both positive now this quarter it skewed a little bit more towards the lower income customer.
Speaker Change: But.
Speaker Change: Again, it was strong on both sides of that that that that that point that $100000.
Ernie L. Herrman: Lorraine, I would also jump in on one of the things that we believe is healthy for us, again, as we talked about at the beginning of the way we trade to good, better, best on the age demos where we have been appealing to more younger customers. So I want you to know that we're always keeping a pulse, though, as best we can on measuring, having a balance, I guess you would call it, across age and income.
Lorraine Corrine Maikis Hutchinson: Lorraine I would just also jump in on one of the things that we believe is healthy for US again as we talked about in the beginning of the way we trade to good better best.
Lorraine Corrine Maikis Hutchinson: On the AG.
Lorraine Corrine Maikis Hutchinson: On the age demos, where we have been.
Lorraine Corrine Maikis Hutchinson: Appealing to more younger customers.
Lorraine Corrine Maikis Hutchinson: It what's been great is we also track the age group and the and the income groups like John is saying and we are pretty balanced. So also we have desire to not as much as appeal to younger customers. We don't want a swing of pendulum on any age group, because we want the customer to vote and we try to drive a cross.
Lorraine Corrine Maikis Hutchinson: As many income and age demographics at the same time planting the seeds as you know our emphasis has been younger customers. So want you to know that we're always keeping a pulse though on.
Lorraine Corrine Maikis Hutchinson: As best we can on measuring having a balance I guess, you would call it across age and income.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Yes.
Operator: Our next question comes from Brooke Roach from Goldman Sachs. Good morning, and thank you for taking our question.
Speaker Change: Our next question comes from Brooke Roach from Goldman Sachs.
Brooke Siler Roach: Good morning, and thank you for taking our question can you speak to your outlook for further market share capture and momentum in the home goods segment and the home segment in aggregate as you begin to cycle the step up in sales and profit trends from last year.
Brooke Siler Roach: Can you speak to your outlook for further market share capture and momentum in the home goods segment and the home segment in aggregate? As you begin to cycle the step-up in sales and profit trends from last year, do you think that you can continue the momentum? And where do you see the biggest opportunity for further gains in comp and margin improvement?
Speaker Change: Think that you can continue the momentum and where do you see the biggest opportunity for further gains in comp and margin improvement.
John Klinger: Yeah, I'll start with this question, Brooke. Yeah, so when you look at our comps going forward, let's say on a two-year stack basis, you know, we do have a large fourth quarter. But the one thing to note is that, you know, when we came out of COVID. First of all, you know, we did the if you look at the history, it's been somewhat choppy as we as we've, as we've guided towards more of a normalization.
Speaker Change: Yeah I'll start with this this question Brook.
Speaker Change: Yes, so when you look at our comps going forward, let's say on a two year stack basis.
Speaker Change: We do have a large fourth quarter, but.
Speaker Change: But the one thing that to note is that when we came out of Covid.
John Klinger: But when you look at our comps on a stack versus our last base year, which is FY 20 pre-pre COVID, you'll see that they are very consistent quarter to quarter. The other thing is, you know, we're seeing our sales growth through transaction growth, which is very healthy to, you know, it's a healthy way to grow your top line. So that, again, gives us confidence that we're still appealing to a lot of customers, still picking up a lot of customers that are new to us. So that gives us the confidence to, again, be confident about the 2-3 comp we have going forward for the remainder of the year. Yeah, and I think Brooke, the...
Speaker Change: First of all.
Speaker Change: If you look at the history, it's been somewhat choppy as we are as we've as we've guided towards more of a normalization.
But when you look at our comps on a stack versus our last base year, which is FY 'twenty pre COVID-19 youll see that they are very consistent quarter to quarter.
Speaker Change: The other thing is.
Speaker Change: We're seeing our our sales growth through transaction growth, which is very healthy.
Speaker Change: A healthy way to grow and grow your top line.
Speaker Change: So that again gives us confidence that.
Speaker Change: We're still appealing to a lot of customers still picking up a lot of customers there.
Speaker Change: Our new to us.
Speaker Change: So that gives us the confidence to again.
Speaker Change: Be confident about the two to three comp we have going forward for the remainder of the year.
Ernie L. Herrman: Yeah, I think, Brooke, the industry, as you know, has had a lot of upheaval and inconsistent results. And whether interest rates and the big picture with, you know, the housing slowdown, etc. Reiterating what John said, I think there's this continued market share opportunity, though. And when you look at where our volume was pre-COVID to now, that way, you get rid of all the ups and downs and all the noise that happened in that time period.
Speaker Change: And I think Brook.
Speaker Change: The industry as you know has had a lot of upheaval in inconsistent results.
Speaker Change: And whether interest rates and big picture with it.
Speaker Change: Housing slowdown et cetera.
Speaker Change: Reiterating what John said I think there's this continued market share opportunity, though and when you look at the we look at where our volume was pre COVID-19 right to know that way you get rid of all the ups and downs in all of the noise that happened in that time period and we have.
Ernie L. Herrman: And we have averaged very healthy comps, which I think bodes well for the future. Obviously, the industry, you can see it out there, the furniture business in the industry, has been rather soft across the board everywhere. But what we're happy about, the reason we don't take a hit as hard as others, is we're able to flex.
Speaker Change: We have average very healthy comps, which I think bodes well for the future obviously the industry.
Speaker Change: You can see it out there the furniture business and the industry that has been rather soft across the board everywhere.
Speaker Change: But what we're happy the reason, we don't take a hit as hard as others as we're able to flex. This is where our flexible business model comes into place and whether it's in home goods or in home sense.
Ernie L. Herrman: This is where our flexible business model comes into place. And whether it's in home goods or in home scents, we're able to flex the categories to where the action is more and where the demand is higher. As well as, the other thing we've been doing there is going after consumables, things where they're driving repeat traffic in home goods. So that's another place we think we'll continue to, and I won't get into those specific categories, but it's another place I think we're going to continue to gain market share. Great, thanks so much. Thank you. Our next question comes from Ike Borchow from Wells Fargo. Hey, good morning, everyone. I guess I wanted to talk about home goods.
Speaker Change: <unk> to flex the categories to where the action is more on the demand is more happening.
Speaker Change: As well as the other thing we've been doing there is.
Speaker Change: Going after consumables things, where there are driving repeat traffic.
Speaker Change: And our home goods.
Speaker Change: So that's another place we think we will continue to and I won't get into those specific categories, but some of that place I think we're going to continue to gain market share.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thank you.
Operator: Our next question comes from Ike Borchow from Wells Fargo.
Speaker Change: Our next question comes from Ike <unk> from Wells Fargo.
Ike <unk>: Hey, good morning, everyone I guess I wanted to talk about the Homegoods business I assume youre not going to give us specifics on the outlook on either a comparable margin, but I guess.
Speaker Change: If all kind of frame it at a high level question. How are you thinking about the business as you balance the <unk>.
Speaker Change: All of the recoveries margin.
Speaker Change: Against what seems like it's becoming a little bit more competitive are tougher in the furnishing the furniture space just as you kind of like look out to the rest of the year. If you wanted to give specifics on guidance, but also okay.
Ike Borchow: It's very nice of you, Mike.
[laughter], that's very nice of you.
Speaker Change: [laughter]. Thank you.
Speaker Change: Yeah.
John Klinger: I think we're confident in home goods as we are in our other divisions. You know, Ernie talked about the replenishment business that we've increased in our home, both in home and in Marmax and Home and Home Goods, that gives the customer a reason to come to home goods that's outside of maybe, you know, decor and big ticket items. And when they're in the store, you know, a lot of times they will find things else, things other than electronics, you know, that they can put in their cart. So, giving customers more reasons to shop at all of our stores is a key to us driving that top line, I think.
Speaker Change: I think we're confident in Homegoods as we are in our other divisions.
Speaker Change: Ernie talked about the.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Replenishment business that we have.
Speaker Change: Increased in our home.
Speaker Change: But both in home and more IMAX and at home and home goods.
Speaker Change: That gives the customer a reason to come to home goods.
Speaker Change: That's outside of maybe the core in big ticket items and when they're in the store and a lot of times they will find things.
Speaker Change: Things.
That they can put in there in their cart.
Speaker Change: So.
Speaker Change: Giving the customers more reasons to shop, all of our stores is a key to us driving that top line.
Ernie L. Herrman: Yeah, and I think, um... And we're fashion and utilitarian driven, and with the impulse nature of home goods, I'm just not concerned about where we're going to be as we move forward over the next nine months. Thank you. Our next question comes from Paul Lejuez from Citigroup.
Speaker Change: Yeah, and I think.
Speaker Change: Even given what's going on in the environment.
Speaker Change: You can see these ups and downs, where they don't go picture perfect, but you remember not long ago. I think it was three quarters ago. We were we were talking about making incremental improvement and.
Speaker Change: We've exceeded it at times and then we come in now a little bit more kind of in line with where we might have thought were better and we're not not exceeding at the moment, but we always have faith that the model is so different than everybody else and where fashion and utilitarian driven and the impulse nature of home goods.
I'm, just not concerned about where we're going to be as we move forward over the next nine months.
Speaker Change: Thanks, guys.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Paul <unk> from Citigroup.
Operator: Hey, thanks guys.
Speaker Change: Hey, Thanks, guys.
Paul Lawrence Lejuez: Talking about the competition for deals and whether you've seen any changes within the good better and best opportunity.
Speaker Change: And maybe where youre seeing better deals than I am used within that good better best.
Speaker Change: And second just curious how you'd characterize the promotional landscape playing playing in now.
Paul Lawrence Lejuez: Sure, Paul. So on the on the competition for deals, you're talking about kind of at the market vendor level, could be other vendors, other retail stores competing with us? Is that correct? Yeah, they're all. Kevin, look at me, huh?
Paul: Sure Paul so on the on the on the competition for deals.
Speaker Change: Youre talking about kind of at the at the market vendor level can be other vendors other retailers competing with us.
Speaker Change: Is that correct.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Yes.
Ernie L. Herrman: Yeah, yeah. Ironically, of course, this competition. The only thing that's happened is, first of all, our buyers are extremely well-trained. And I don't know if I say this enough. Part of their training is to be easy to deal with and be courteous and respectful, yet be demanding on price to get the right value, which is what they do. Now you take that training and where they are with the fact that the market, as you know, has consolidated a bit in terms of the number of brick and mortar stores. And we have continued to grow our brick and mortar stores.
Speaker Change: Yeah, Yeah Ironically.
Speaker Change: Of course, there is competition. The only thing that's happened is first of all our buyers that are extremely well trained and I don't I don't know if I say, that's enough or buy a part of their training has to be easy to deal with and be courteous and respectful yet be demanding on price to get to the right value, which is what they do.
Speaker Change: No.
Speaker Change:
Speaker Change: Now you take that training and where they are with the fact that the market has as you know has consolidated a bit in terms of all the amount of brick and mortar stores.
Ernie L. Herrman: So more and more vendors have even more reasons to want to sell to us versus others because their goods in our store now hang with the best. They are even more assorted than ever before.
And we have continued to grow our brick and mortar stores, so more and more vendors. They have even more reasons to want to sell us versus others because their goods in our store now hang with the best they hang even more assorted than ever before.
Speaker Change: They're part of it a very eclectic mix, even more so than ever before they are dealing with a buying team that's very straightforward.
Ernie L. Herrman: They're part of a very eclectic mix, even more so than ever before. They're dealing with a buying team that's very straightforward and a company that has cash and will be paying. So the competition is there, like competition has always been there. But I would say, like I said earlier in the call, we're more important today to the vendors. And probably, the vendor relationships are even better than they've ever been due to that. I'm sure you can always find an exception here or there because we deal with thousands of vendors. But overall, the relationships are just fantastic.
Speaker Change: A company that has cash and we'll be paying so.
Speaker Change: The competition is there like competition has always been there, but I would say like I said earlier on the call. We're more important today to the vendors and probably the vendor relationships or even better than they've ever been due to that I'm sure. You can always find an exception here or there because we sell thousands we deal with thousands of vendors, but overall the relation.
Speaker Change: Ships are.
Speaker Change: Just fantastic.
Ernie L. Herrman: And so in our competition, some vendors want to split up goods. And no matter who they are, they're going to allocate goods to certain retailers. Most, I would say, want to deal with us because it's the best thing for them to know where the goods are going and they're getting spread out dramatically. The promotional environment that you're asking about, I would say, is, to me, very similar to what I don't see any noticeable difference. The only thing is, you've probably read...
Speaker Change: And so our competition.
Speaker Change: Some vendors want to split up goods.
Speaker Change: And no matter, who they are they're going to allocate goods to certain retailers most.
Speaker Change: I would say want to deal with us because they it's it's the best thing for them to know where the goods are going out there getting spread out dramatically.
Speaker Change: The promotional environment that you're asking about I would say is to me very similar to what I don't I don't see any noticeable difference the only thing as you've probably read.
Ernie L. Herrman: There's more word in the media, more just descriptions of pricing being adjusted, more than necessarily promotions. And we've taken a look at that. In most of those situations, and retail is talking about it, it tends to not be in the categories that we're dealing with, where our emphasis is. So I think that's a form of, and many retailers have been soft on traffic and transactions. It tends to not be with the vendors of the categories that we actually do business in. And just to add to what Ernie was saying, you know, in the...
Speaker Change: Theres more worried in the media.
Speaker Change: More just.
Speaker Change: Describing of pricing being adjusted more than necessarily promotions and we've taken a look at that and most of those situations and the retail is talking about it tends to not be in the categories that we're dealing with where our emphasis is and.
And so I.
Speaker Change: I think that is a form of IFF and many retailers have been soft on traffic and transactions I think we're going to see more my prediction would be we're going to see more of that talk about lowering prices on certain commodity items for them to try to get customers back Fortunately for us at.
Speaker Change: It tends to not be in the event with the vendors of the categories that we are.
John Klinger: And just to add to what Ernie was saying, in promotional environments, the fact that we buy so close to need, our buyers are often able to react to those promotional times in price-to-goods competitively.
Speaker Change: Actually do business in.
Speaker Change: And just to add onto what Ernie was saying.
Ernie: In promotional environment. The fact that we buy so close to need.
Ernie: Our buyers often times are able to react to those promotional times in price the goods competitively.
Speaker Change: Thank you that's helpful. Good luck.
Speaker Change: Thank you.
Operator: Our next question comes from Michael Bonetti from Evercore.
Speaker Change: Our next question comes from Michael Binetti from Evercore.
Michael Binetti: Hey, guys congrats on a nice quarter. Thanks for taking my questions here.
Michael Bonetti: I guess, John, I know you guide on pre-tax margin, but the implied EBIT margin you expect for the year is up about 10 to 20 basis points. That's, you know, a little better than it was 90 days ago, less than 10. So it's moving up, but you said a few times you need a 4, 4% comp to lever the business. You've held the 2 to 3 here, but the margins keep getting better.
Speaker Change: <unk>.
John: I guess, John I know you guide on pre tax margin, but the implied EBIT margin you expect for the year is up about 10 to 20 basis points.
Speaker Change: A little better than it was 90 days ago last 10.
Speaker Change: But you said a few times you need a four 4% comps and lever the business you've held the two to three here, but the margins keeping that or any reason to think you are having some successes in moving the leverage point down into this comp range, the new normal for a while.
Michael Bonetti: Any reason to think you're having some successes in moving the leverage point down into this comp range if this is the new normal for a while? And then, I'm curious. California has had some very big changes fairly recently in the hourly wages on the restaurant side. I assume your teams there are thinking about that and how it will ripple out to your hiring and retention and, hopefully, comps. Any thoughts you have in the early days on the changes in California?
Speaker Change: And then I'm curious, California has had some very big changes recently in the hourly wages will have on the restaurant side.
Speaker Change: I assume your teams they are thinking about that and how will radiate out to your hiring and retention and hopefully comps any any thoughts you have early days on the changes in California.
John Klinger: Yes, so I'll start with the 2 to 3, the fact that we're levering on a 2 to 3. So, you know, our leverage point continues to be flat to up 10 basis points on a 3 to 4 comp with no outsized expenses. What you're seeing in our guidance is that, you know, we had a number of one-time items last year that are benefiting us. So, we had incentive accruals, a German reserve, German reserve accrual that we wrote off, and on a full year basis, there was HomeGoods.com that we shut down last year.
Yes, so I'll start with the two to three of the fact that we're levering on a two to three.
Speaker Change: So.
Speaker Change: Our leverage point continues to be.
Speaker Change: Flat to up 10 basis points on a three to four comp with no outsized expenses.
Speaker Change: Are you seeing.
Speaker Change: In our guidance is that we had a number of onetime items last year that are benefiting us. So we had.
Speaker Change: Incentive accruals.
Speaker Change: A German reserve relief.
Speaker Change: Our German reserve accrual that we wrote off.
Speaker Change: And on a full year basis, Theres Homegoods dot com that we shut last year. So when you when you look at that.
John Klinger: So, when you look at that, you know, that gives us the ability to leverage the business. Now, one of the other things, and if you look at our, let's say, our Q1 versus our guidance that we had, you know, one of the areas that we did, you know, outperform was in freight. So, our freight was; we were more efficient in how we were moving our goods in the first quarter. So, we benefited there. And then, of course, the mark-on was also favorable in the first quarter.
Speaker Change: That gives us the ability to.
Speaker Change: To leverage the business now.
Speaker Change: One of the other things and if you look at our our let's say our Q1 versus our guidance that we had.
Speaker Change: One of the areas that we did.
Speaker Change: Outperform was in freight.
Speaker Change: So our freight was we were more efficient on how we were moving our goods in the first quarter. So we benefited there and then of course the Mark on was also.
Speaker Change: Favorable in the first quarter. So both of those things also support our ability to.
John Klinger: So, both of those things also support our ability to leverage on a comp that's lower than that 3 to 4. Oh, and then there's the wage. Sorry.
Speaker Change: Leverage.
Speaker Change: On a comp that's lower than that three to four.
Speaker Change: Uh huh.
John Klinger: Your wage in California, you know, we see wages going up, you know, in different geographies. And one of the things that, you know, we've talked about is that, you know, we're not looking to do a across-the-board wage increase. Rather, in our plans, we have funds available to be able to adjust on a market-by-market basis where we need to. So we track very closely our attrition rates, our ability to hire, and where we see the need, we have the ability to increase wages pointedly, which we have as part of our guidance.
Speaker Change: Oh, and then wage sorry.
Speaker Change: Wage in California.
Speaker Change: We see wages going up.
Speaker Change: And different geographies and one of the things that we've talked about is that.
Speaker Change: We're not looking to do across the board wage increase what rather.
Speaker Change: Our plans we have.
Speaker Change: Funds available to be able to adjust on a market by market basis, where we where we need to so we we track very closely our attrition rates our ability to hire.
And where we see the need we have the ability to increase wages pointedly, which we have as part of our guidance.
Michael Bonetti: Okay, thanks for the thoughts, guys.
Speaker Change: Okay. Thanks for the thoughts guys.
Operator: Our next question comes from Adrienne Yih from Barclays.
Speaker Change: Our next question comes from Adrian <unk> from Barclays.
Speaker Change: Great. Thank you very much.
Speaker Change: This is a follow on in on something you said earlier.
Adrienne Eugenia Yih: So, last year you had some strategic pricing very specific to particular categories you were looking at. It sounds like the environment is maybe not, you know, meaningfully more promotional, but we've seen a definite uptick in April and May and then the Target announcement yesterday about sharpening those price points. So, I guess my question is, how do you think about taking-how do you think about your pricing strategy in light of kind of new information and sort of the dynamic environment? And then, for John, my question for you is, can you continue to run sort of a negative low to mid-single digit per store inventory and drive a positive comp? Thank you.
So last year, you had some contingent pricing very specific to a particular category. If you were looking at.
It sounds like the environment is maybe not meaningfully more promotional but we have seen definitely uptake in April and May and then the target announcement yesterday about sharpening price points.
Speaker Change: So I guess my question is how do you think about.
Speaker Change: Taking how do you think about your pricing strategy in light of new information.
Speaker Change: <unk> environment and then for John My question for you is can you continue to run sort of negative low to mid single digit per store inventory and drive a positive comp. Thank you.
Speaker Change: Mhm.
Ernie L. Herrman: All right, Adrienne. So, on the first one, here's the crux of the most important thing to always remember is, and you mentioned the right word, which is a dynamic environment in terms of pricing, which is, I think, how you said it, which is spot on about what can happen here. And our buyers comp shop weekly for what the out-the-door retail is on the exact SKUs or the like SKUs that we carry to ensure that we always maintain a gap between our out-the-door retail and any retailer's retail.
Speaker Change: Alright, Adrian so yeah on the first one shares the crux of the most important thing to always remember is and you mentioned the right word which is a dynamic environment in terms of the pricing, which is I think how you said it which is spot on for what can happen here and our buyers comp shop weekly.
Speaker Change: What the what the out the door retail is on the exact skus or the like Skus that we carry to ensure that we always maintain a gap between our out the door retail and any retailers our retail in fact, I think we've talked about this before we will.
Speaker Change: B under sold so that's the first thing to always know is that as a foundational.
Ernie L. Herrman: In fact, I think we've talked about this before, we will not be undersold. So that's the first thing to always know is that is a foundational key point that all our merchants live off of. We will not be undersold by any retailer. Sometimes we could be at the same price if it's another off-price retailer or another format. Nobody is ever below us knowingly, and then we adjust if that is the case.
Uh huh.
Speaker Change: The key point that all our merchants live off of we will not be undersold by any retailer, sometimes we could be at the same price. If it's if it's another off price retailer or another format.
Speaker Change: Nobody has ever below us knowingly and then we adjust if that was the case then we always look at our gap between the out the door.
Ernie L. Herrman: Then we always look at our gap between the out-of-the-door and what we're selling for, and this is embedded in the way our merchants are trained and the way they operate all the time. So we would react if there were categories that that started to happen, and we would react quickly to those. I still believe from the categories I know that the retailers are talking about adjusting, it would not be in the categories for the most part that we're in.
Speaker Change: But we're selling for and this is this is embedded in the way our merchants are trained and the way. They operate all the time. So we would react if they were a categories that that started to happen and we would react quickly to those.
Speaker Change: I still believe from what the categories I know that the retailers are talking about adjusting it would not be in the categories for the most part that we're in so I believe we're going to be fine.
Ernie L. Herrman: So I believe we're going to be fine in terms of overall, I would say in all of our families of business. However, if we run into problems or a specific excuse, we will adjust. Which is different than when we talk promotions, sometimes those sale promotions at department stores or percentage off on a website, an e-com player, those are really never a concern because we're always below those out-the-door promotional prices. So, even though there might be more of that activity...
Speaker Change: In terms of.
Speaker Change: Overall, I would say in all of our families of business. However, if we run into run into items are specific excuse we will adjust.
Speaker Change: I don't see the nut, which is different than when we talk promotion, sometimes that sale promotions at department stores or percentage off on our website on E Com player.
Speaker Change: Those are really never a concern because we're always below those out those out the door promotional prices, so even though there might be more of that activity.
Ernie L. Herrman: It doesn't take away from our value difference. And at the same time, we measure, just so you know, we measure statistically our turns by area to make sure we are spinning in the stores appropriately, which would be a sign if we weren't the value equation, as well as the survey, which I talked about in the beginning. So again, we take this all extremely seriously. But right now, you know, no signs of impact, but we'll adjust.
Speaker Change: It doesn't take away from our value difference and at the same time, we measure we measure statistically our turns.
Speaker Change: By area to make sure we are spending.
Speaker Change: And the stores appropriately, which would be a sign of if we werent the value equation as well as the survey, which I've talked about in the beginning so again, we take this all extremely seriously but right now.
Speaker Change: No signs of impact, but we'll adjust if there ever were.
Speaker Change: Thank you that's very helpful. Yeah, so the inventory.
John Klinger: Yeah. So, the inventory. So, you know, as we said in our release, on an average per store basis, inventories are down 5%. However, store inventories are in line with last year, and that's an important point to note. You know, when you look at our inventory, as far as our distribution center inventory, in FY22, excuse me, FY23, our inventory levels were higher than what we wanted as the logistics networks sped up, and the outsized comps from FY20, you know, we were coming down from the outsized comps in FY22.
Speaker Change: So.
Speaker Change: As we said in our release on an average per store basis inventories are down 5%. However.
Speaker Change: Store inventories are in line with last year and that's the important point to note.
Speaker Change: When you look at our inventory.
Speaker Change: As far as our distribution center inventory.
Speaker Change: In FY 'twenty two.
Q3, FY2023 our inventory levels were higher than we wanted.
Speaker Change: As.
Speaker Change: As logistics networks sped up and the outsized comps from FY 'twenty, where we were coming down from the outsized comps in FY 'twenty two so in FY 'twenty four we packed away our FY2023 we packed away a lot of.
John Klinger: So, in FY24, we packed away, or FY23, we packed away a lot of inventory that we started that we bled through in FY24. So, in the first quarter, you have that inventory that we packed away that was much higher than we would normally want to carry and pack away in the first quarter. So, when you back out that pack away difference, our inventories are in line in total on an average per store basis with last year. So, it's just really the timing of the pack away from the previous year.
Speaker Change: Towards that we where we start that we bled through in FY 'twenty for so in the first quarter you have that pack away inventory. That's that was much higher than we would normally want to carry in pack away in.
Speaker Change: The first quarter. So when you back out that pack away difference.
Speaker Change: Our inventories are in line in total on an average per store basis with last year. So it's just really the timing of the pack away from the previous year.
Adrienne Eugenia Yih: Excellent. Thank you very much. Best of luck. Thank you. Our next question comes from Jay Sole from UBS. Great. Thank you so much. Ernie, I heard you mention the prepared remarks.
Excellent. Thank you very much best of luck.
Thank you.
Operator: Our next question comes from Jay Sole.
Speaker Change: Okay.
Speaker Change: Our next question comes from Jay sole from UBS.
Speaker Change: Great. Thank you so much.
Jay Daniel Sole: I heard you mentioned in the prepared remarks that you see a lot of store growth potential just in your existing banners in existing countries. I was just wondering if that was sort of a commitment then maybe there is even potential to grow outside of your existing countries. I'm. Just wondering if theres anything any new developments over the last 90 days that you see in terms of T. J has the potential to grow beyond maybe where you are today.
Jay Daniel Sole: So Jay, first of all, great question. Unfortunately, this is one of those things we just don't talk externally about it until we're at a point where we think we could announce it. We're always looking, by the way, and I think what you're getting at is other markets. Correct. Yeah. Potentially, Yeah. And we're always looking, you know, but at this point, we can't really say which was typically our posture when we were asked this.
Speaker Change: So Jay first of all great question.
Uh huh.
Speaker Change: Unfortunately this is one of those things we we just we don't talk externally about it until we're at a point, where we think we could announce we're always looking by the way and I think what youre getting at is other markets correct.
Speaker Change: Yes, potentially yes and.
Speaker Change: We're always looking.
Speaker Change: But at this point, we can't really say, which has typically.
And our posture when we're asked this and we're confident in our store plans.
Ernie L. Herrman: And we're confident in our store plans or store growth plans that we have in our existing markets. You know, we still see the ability to grow our store base in the U.S. and Canada and in Europe also. And, you know, particularly on the continent, you know, particularly in Germany, we still see opportunities to grow our store base. Got it. And maybe can you give us an update then on Home Sense and Sierra, how those performed in the quarter? Thank you.
Speaker Change: Our growth plans that we have in our existing markets.
Speaker Change: We still see ability to grow our store base in the U S and Canada and in Europe.
Speaker Change: Also in the.
Speaker Change: Particularly in the continent, particularly in Germany, we still see opportunity to grow our store base.
Speaker Change: Got it and maybe can you give us an update then on home center.
Speaker Change: Sierra how those performed in the quarter. Thank you.
Ernie L. Herrman: We're pleased with how they did. We don't break them out, but we're pleased with how they performed.
Speaker Change: We're pleased with how we don't break them out, but we're pleased with how they performed.
Speaker Change: Great. Thank you so much.
Speaker Change: Welcome.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: We have one more question.
Operator: Our next question comes from Aneesha Sherman from Bern. Thank you.
Speaker Change: Our next question comes from Alicia Sherman from Bernstein.
Aneesha Sherman: This question is a follow-up on the comments on international. International has been growing slightly in the mix the last two years, but the margins remain pretty low, with 4% this quarter. I know a couple of years ago you had talked about high single digits as being the kind of long-term target for margins. Is that still the case, or has that view evolved?
Alicia Sherman: Thank you.
Alicia Sherman: Question is a follow up on the comments on international International has been growing slightly in the next the last two years, but the margins remain pretty low was 4% this quarter.
Alicia Sherman: I know a couple of years ago, you talked about high single digits as being the kind of long term target for margin.
Alicia Sherman: That's still the case or has that has that view evolved and then a quick follow up John on the gross margin comments you made earlier, you talked about freight becoming more efficient.
John Klinger: And then a quick follow-up, John, on the gross margin comments you made earlier. You talked about freight becoming more efficient, which sounds different from kind of recapturing the headwinds that you've had the last two years. You also talked about Mark on. So would you say it's fair that you think there's going to be a structural improvement in gross margins beyond the kind of recapture of headwinds for the last two years? Is the business actually becoming more efficient?
John Klinger: Thank you.
Speaker Change: It sounds different from kind of recapturing the headwinds that you've had the last two years and you also talked about mark on so would you say, it's fair that you think there's going to be a structural improvement in gross margins beyond the kind of recapture of headwinds for the last few years is that the business is actually becoming more efficient. Thank you okay.
John Klinger: Well, I'll start with that question there. Yeah, the freight itself. So, you know, when the freight rate was going against us, we dropped 300 basis points, and last year, we clawed back 200. And in my comments then, we said that, you know, going forward, it's about... So we don't see... We see stickiness in the freight where, you know, driver salaries. There was a train strike that caused, you know, higher wages, higher benefits.
Well I'll start with that question there yes.
Speaker Change: The freight itself so.
Speaker Change: When the freight rate was going against US, we dropped 300 basis points and we last year, we claw back 200.
Speaker Change: And in my comments, then we said that going forward it's about.
Speaker Change: So we don't see we see a stickiness and the freight where driver salaries. There was a train strike that.
John Klinger: So those kind of increases to the cost structure of freight are sticky, and we don't see that those are necessarily going to go away. For the first quarter, we were able to shift some of our inbound product a little bit more towards intermodal versus truck, which is more cost effective. So that's kind of what we're looking to do going forward, which is to try to be as efficient as possible, both inbound and outbound, in how we move the goods.
Speaker Change: Caused higher wages higher benefits so those those kind of increases to the <unk> the cost structure.
Speaker Change: Freight are sticky and we don't see that those are necessarily going to go away.
Speaker Change: For the first quarter, we were able to shift.
Speaker Change: Some of our inbound product a little bit more towards the intermodal.
Speaker Change: <unk> truck, which is which is more cost effective. So that's kind of what we're looking to do going forward, which is try to be as efficient as possible.
Speaker Change: With inbound and outbound of how we we.
Speaker Change: The goods.
John Klinger: So, and as far as the international segment is concerned, yes, we are still very confident in our ability to, you know, approach, you know, the 8% that we've said. And we are, you know, that division is working very hard on that as well.
Speaker Change: So and as far as the International segment, Yes, we are still very confident in our ability to.
Speaker Change: Approach the 8% that we've said.
Speaker Change: And we are that division is working very hard on that as well.
John Klinger: Yeah, Aneesha, I think you had pointed out that the first quarter was a four, but that's...
Speaker Change: Yes, Nishu I think you had pointed out that the first quarter was a four yes, but that's yes.
Speaker Change: Yes, and that was up from last year. So we continue to to just.
John Klinger: Right. Traditionally, that first quarter internationally is always a low quarter. And its first half is also low, but you can see it's incrementally up from a year ago.
Speaker Change: So you're right traditionally that first quarter.
Speaker Change: Internationally is always a low quarter.
Speaker Change: This first half is low and then so but you can see it's incrementally up from a year ago. So directionally, we're heading in the right play.
John Klinger: So, directionally, we're heading in the right direction as we look out for the back half. Got it. Thank you. You're welcome. Our next question comes from Laura Champine from Loop Capital.
Speaker Change: Place as we look out for the back half.
Speaker Change: Got it thank you.
Speaker Change: Welcome.
Speaker Change: Our next question comes from Laura Champine from loop capital.
Laura Champine: Thanks for taking our question we thought the execution was so strong that you might comp better than 2% and more Max in this quarter. So I'm wondering if you could comment on what you think the macro backdrop is that you face now and whether or not you actually do see any pressure.
Laura Champine: Pressure on market share from the Chinese discounters, like <unk> <unk> and Sheehan.
Operator: Yeah, I'll start with this one. So, you know, in MARMAX, we did round down to a two-competition. But when we look at the business itself, the departments that aren't weather-dependent performed much better, and the regions that didn't experience as much unfavorable weather also performed better. So, you know, that tells us that, you know, where we saw the regions in the departments that were strong, it tells us that, okay, that's that's leaning more towards weather. We're very confident in our comps for MARMACS going forward, and the teams that we do, we do, John's team.
Speaker Change #101: Yes, I'll start.
Speaker Change #102: With this one so.
Speaker Change #103: In <unk>, we did round down to a two comp.
Speaker Change #103: But when we look at the business itself.
Speaker Change #103: The departments that arent weather dependent performed much better.
Speaker Change #104: And the regions.
Speaker Change #104: That didn't experience as much unfavorable weather also performed better so that.
Speaker Change #104: That tells us that.
Speaker Change #104: Where we saw the regions and the departments that were strong and it tells us that okay.
That's leaning more towards weather.
Speaker Change #105: Got it.
Speaker Change #105: Very confident on our comps for <unk> going forward.
John Klinger: And the teams there, we do, John's team does a bit of analysis to kind of, right, look at control groups as such to figure that out. So yeah, it feels like the weather did hit us and resulted in us rounding down to the two, right?
And the teams there we do we do to John's team does a bit of analysis to kind of right to look at yes control groups as such to figure that out. So yes. It feels like weather that hit us and resulted in us rounding down to right.
Ernie L. Herrman: Yeah. Laura, on the question about some of those online players you were talking about, we feel just as similar, they're so commodity driven and so not the brands that we would pick for The Good, Better, Best type of branded mix that we would go after. We see very little issue with them taking market share from us. I can see that their business model could overlap with some other brick-and-mortar guys or some other online guys for sure, but we just don't see that as bumping up against our customer base or end users.
Laura Champine: Laura on the question about some of those online players you were talking about we feel just as a similar so commodity driven and so not the brands that we would carry very much not the.
Laura Champine: The good better best type of branded mix that we would go after we see very little.
Laura Champine: Issue with them taking market share from us.
Laura Champine: I could see that their business model could overlap with some other brick and mortar guys or some other online guys for sure.
Laura Champine: But we just don't see that as is.
Laura Champine: Bumping up with our customer base our end use.
Speaker Change #106: Got it thank you.
Speaker Change #106: Welcome.
Laura Champine: Got it. Thank you. Our next question comes from Dana Telsey from the Telsey Group. Hi, good afternoon. As you think about the pace of remodeling...
Operator: Our next question comes from Dana Telsey from the Telsey Group. Hi, good afternoon.
Speaker Change #107: Our next question comes from Dana Telsey from Telsey group.
Dana Lauren Telsey: Hi, Good afternoon, as you think about the pace of Remodels, Hi, I think you mentioned 450 Remodels this year on the <unk>.
Dana Lauren Telsey: Last call how are they going what are you seeing any any details on any of the.
Dana Lauren Telsey: Any of the banners and how the performance is different and then also on shrink are you still looking at shrink being flat this year any changes to what youre seeing in shrink. Thank you.
Dana Lauren Telsey: Yeah, on the remodels, again, you know, remodels are more about making sure that our stores maintain an excellent fit and finish. And, and, and so when we do the remodels, what we see is that stores that are much older are able to compete, or I should say compete as well as, say, a store that's 10 years old. And so it's about maintaining the base and making sure that you don't get into a situation where now you're starting, your sales start to falter, and you have to start to really invest in them and catch up.
Speaker Change #109: Yeah on the Remodels again.
Speaker Change #110: Remodels are more about making sure that our stores maintain.
Speaker Change #109: No.
Speaker Change #109: Excellent.
Speaker Change #109: Fit and finish.
Speaker Change #109: And so when we do the Remodels.
Speaker Change #109: What we see is that stores that are much older are able to compete or I should say cop.
Speaker Change #109: As good as let's say a store thats 10 years old.
Dana Lauren Telsey: So for us, it's about maintaining and making sure that when the customer comes in, it's a pleasant shopping experience, no matter what store they come into. Now, in the remodels, we always try to make sure that we're putting fixtures in that make it easier for the customers to shop. When you look at our remodels as far as the beauty department is concerned, it's better lighting, it's a cleaner look, and all those things we think do add to the top line.
Speaker Change #109: So it's about maintaining the base and making sure that you don't get into a situation where now you start your sales start to falter and you have to start to really invest in them and catch up so for us, it's about maintaining and making sure that when the customer comes in that it's a pleasant shopping experience no matter what store they come into.
Speaker Change #109: Now on the Remodels, we always try to make sure that we're putting fixtures in that make it easier for customers to shop.
Speaker Change #109: When you look at our Remodels as far as the beauty Department, it's better lighting.
It's a cleaner look and all those things, we think do add to the topline.
Dana Lauren Telsey: As far as shrink goes, you know, we're still highly focused on shrink. As I said in my comments, we're planning shrink to be flat year over year. But we still have a high focus on making sure that we balance protecting the goods with making sure that customers can shop easily and be able to buy the goods, while also maintaining safety in our stores. So one of the things that we've added, we started to do last year, late in the year, were body cameras on our LP associates. And, you know, when somebody comes in, it's sort of like a de-escalation where, you know, people are less likely to do something when they're being videotaped.
Speaker Change #109: As far as shrink goes.
Speaker Change #109: We're still highly focused on shrink.
Speaker Change #109: I said in my my my comments, where we're planning shrink to be flat year over year.
Speaker Change #109: But we still have a high focus on making sure that we balance <unk>.
Speaker Change #109: Protecting the goods with making sure that the customers can shop easily and get and be able to buy the goods.
Speaker Change #109: While also maintaining safety in our stores.
Speaker Change #109: So one of the things that we've added.
Speaker Change #109: We started to do last year late towards the year, where body cameras on our LP associates.
Speaker Change #109: And.
Speaker Change #109: When somebody comes in it's sort of it's almost like a de escalation where.
Speaker Change #109: People are less likely to do something when they're when they're being videotaped so.
Speaker Change #109: We definitely feel that that's playing a role also.
John Klinger: So we definitely feel that that's playing a role. During the end of the year, when we look at our shrink results, we're able to then set our plans for the following year and see what worked, and what didn't, and so it's about continuing to lean into the strategies that worked last year. But again, we count our inventory at the end of the year, and that's when we would be in a position to give guidance.
Speaker Change #109: During the end of the year when we look at our shrink results. We're able to then set our plans for the following year and seeing what worked what what did it and so it's about continuing to lean into the strategies that worked last year.
Speaker Change #109: But again, we count our inventory at the end of the year end and that's when we would be in a position to give guidance.
Speaker Change #109: Yeah.
Speaker Change #111: Thank you.
Speaker Change #112: Our final question of the day comes from Marni Shapiro from retail tracker.
Operator: Tracker. Hey guys, love closing out the call. Congratulations on a nice quarter. The stores look great. Can we just talk about your shopper for just a little bit? It's been a couple of years now.
Marni Shapiro: Hey, guys Love closing out the call congratulations on the nice quarter the stores look great.
Marni Shapiro: Can we just talk about you.
Can we talk about your shop or just a little bit it's been a couple of years now you've been talking about getting the younger shopper and they've been coming in.
Marni Shapiro: You've been talking about getting the younger shoppers in. They've been coming in. Traffic has been up. I guess a couple of things.
Marni Shapiro: Traffic has been up I guess, a couple of things. It does is younger shopper open credit cards is it something that is that you guys are pushing them to do.
Marni Shapiro: Does this younger shopper open credit cards? Is it something that you guys are pushing them to do? And are you finding that they shop across different brands? Are you marketing to them to shop across different brands? Arguably, a shopper that shops both TJX or TJ Maxx and home goods is going to be a more loyal shopper to the company in total. Can you just talk a little bit about what that younger shopper looks like internally for you guys?
Marni Shapiro: And are you finding that they shop across the different brands and are you marketing to them to shop across the different brands, because arguably a shopper that shops, both T J X or T. J Maxx and home goods is going to be a more loyal shopper to the company. In total can you just talk a little bit about what that younger shopper looks like internally.
Marni Shapiro: Yes.
Ernie L. Herrman: Yeah, so Marni, let me start, and John will jump in as well. He's very, also we're both kind of involved in all of the opening credit cards and loyalty. You're touching on the whole loyalty, cross shopping thing. And by the way, you're spot on; when you do get the customer, you build loyalty if they open a TJX rewards account. Even a younger customer, ideally, we'd like them to open the credit card, and then they will cross shop more. John, right?
Speaker Change #114: Yeah, So Marty let me start and John will jump in as well. He is very policy. We're both kind of involved in all of the.
Speaker Change #115: Opening credit card and loyalty youre touching on a whole loyalty.
Speaker Change #116: Shopping and by the way you're spot on when you do get the customer that you build loyalty if they open it T J X.
Speaker Change #115: Rewards.
Speaker Change #117: <unk> customer ideally wed like them to open their credit card and then they cross shop.
Speaker Change #115: Sure.
John Klinger: Yeah, but again, the credit card is not as penetrated as it is with a lot of our competitors. So, you know, so So, you know, a lot of the information that we get on the customers comes from customer surveys, and we do get credit card information that is, you know, available to us that we partner with organizations that pull that information together. And that's where we get the large majority of the comments that we make as far as, you know, being able to attract these younger shoppers. So that has been a pretty much a steady increase over the last handful of years, attracting a larger percent of our new customers in the lower age demographic.
John David Kernan: John Bright.
Speaker Change #119: But again the credit card.
Speaker Change #119: Not as penetrated as it is with a lot of our competitors. So.
Speaker Change #119: So.
Speaker Change #119: A lot of our read that we get on the customers comes from customer surveys and we do.
Speaker Change #119: We do get we do get credit card information that is.
Speaker Change #119: Available to us that we partner with organizations that pull that information together and that's where we're getting the large majority of the comments that we make as far as.
Speaker Change #119: Being able to that we're attracting these younger shoppers so.
Speaker Change #119: That has been a pretty.
Speaker Change #119: Pretty much a steady increase over the last handful of years, attracting a larger.
Speaker Change #119: Percent of our new customers in the lower <unk> in the younger age demographic. So we are we are looking at.
John Klinger: So we are looking at, you know, a large data pool when we're making those comments. That's beyond just our credit cards.
Speaker Change #119: Large data pool, when we're when we're making those comments.
That's beyond just our credit card.
Marni Shapiro: And are they? Do you see the data that they are already? https://www.youtube.com or the link in the description below.
And.
Speaker Change #120: Are they do you see the data that they are already.
Speaker Change #121: Cross shopping the departments and I guess, what are you guys doing on the marketing side to really push that because it feels like a real opportunity as these people come into your brand. It's different for somebody like me, who is all that has been shopping there forever versus somebody who is new who came in with mom and maybe is now buying their first house or by their new apartment.
Ernie L. Herrman: So we tried to use our digital marketing is really aimed at trying to go after when we get emails. Okay, we are able to drive the other brands with the customer. We have also done things in store as well. But I think the measuring of it is where John and I would say it's, we can't measure a lot of this as well as we would like to.
Speaker Change #122: So we tried to use our digital marketing is really aimed at trying to go after when we get emails.
Speaker Change #122: We are able to.
Speaker Change #122: Drive.
Speaker Change #122: Drive the other brands with the customer we have also done things in store as well.
Speaker Change #123: I think the measuring of it is where I think John and I would say, it's we can't measure a lot of this as well as we would like.
John Klinger: Well, best of luck for the next quarter. Thanks, guys. Thank you.
Speaker Change #124: Understood well best of luck for the next quarter. Thanks, guys.
Ernie L. Herrman: Thank you, Marni. Yeah, thanks, Marni. Alright, in closing, I want to emphasize that we are really in an excellent financial position to continue to invest in the growth of our company, Osama Tennessee returning significant cash to our shareholders. Now, we will thank you for joining us today, and we look forward to updating you again on our second quarter earnings call in August.
Speaker Change #125: Thank you Marni yeah. Thanks Marty.
Speaker Change #126: Alright in closing I want to emphasize that we are really in an excellent financial position to continue to invest in the growth of our company.
Speaker Change #126: While simultaneously returning significant cash to our shareholders.
Speaker Change #126: Now.
Speaker Change #126:
Speaker Change #126: We will thank you for joining us today, and we look forward to updating you again on our second quarter earnings call in August.
Speaker Change #126: Thank you everybody.
Operator: Ladies and gentlemen, that concludes your conference call for today. You may all disconnect. Thank you for participating.
Speaker Change #127: Ladies and gentlemen that concludes your conference call for today you may all disconnect. Thank you for participating.
Speaker Change #126: Okay.
Speaker Change #126: Yeah.