Q4 2025 The TJX Companies Inc Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the T. G X companies fourth 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.
Speaker Change: <unk> as a reminder, this conference is being recorded February 26, 2025, I would like to turn the conference over to Mr. Ernie Herrman, Chief Executive Officer, and President of the T. G X companies Inc. Please go ahead Sir.
Speaker Change: Thanks, Courtney before we begin Deb has some opening comments.
Speaker Change: Thank you Ernie and good morning, today's call is being recorded and includes forward looking statements about our results and plans.
Speaker Change: 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 safe Harbor statements included.
Speaker Change: 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, along with reconciliations to non-GAAP measures we discuss.
Speaker Change: Thank you and now I'll turn it back over to earnings.
Speaker Change: Good morning.
Speaker Change: Joining me and Deb on the call is John.
Speaker Change: I want to first take a moment to share our care and concern for everyone affected by the wildfires in California.
Speaker Change: While many of our associates were affected we are grateful that they are all safe.
Speaker Change: We have offered resources to our associates and also made emergency donation to world Central kitchen.
Speaker Change: In the Los Angeles, Los Angeles Regional food back to help provide support for people, who most need it.
Speaker Change: Now to our business update.
Speaker Change: I am very pleased with our outstanding fourth quarter, our sales profitability and earnings per share were all well above our expectations.
Speaker Change: I am, particularly pleased that our overall comp sales growth of 5%.
Speaker Change: It was driven by strong consistent comp increases of 4% or above at each of our divisions.
Speaker Change: Further our comp sales growth across all of our divisions was once again driven by an increase in customer transactions.
Speaker Change: Clearly, our great values gifting assortment and freshness of our mix resonated with our shoppers during the holiday season.
Yes.
Speaker Change: For the full year overall sales surpassed $56 billion.
Speaker Change: And we opened our 5000th store a milestone for our company.
Speaker Change: I want to recognize the excellent execution across our company, which led to our above plan results.
Speaker Change: Full year comp store sales growth of 4% a significant increase in profitability and a double digit increase in our earnings per share were all above our guidance for the year.
Speaker Change: We are confident that we continue to attract new shoppers in every country, we operate in and that there are plenty of opportunities to further grow our customer base going forward.
Speaker Change: I want to thank all of our global associates for their excellent work in 2024.
Speaker Change: I am extremely grateful for their continued dedication and commitment to T J maxx and to our customers every day.
Speaker Change: As we begin 2025, we are excited about the opportunities we see in our business and have many initiatives planned that we believe will further drive sales and traffic to our stores and online.
Speaker Change: Availability of merchandise is fantastic and we believe we are in a great position to execute on our merchandising plans and keep delivering our shoppers outstanding values on great brands and fashions throughout the year.
Speaker Change: I'll speak more about our full year performance and our confidence in our growth opportunities over the long term in a moment.
Speaker Change: But first I.
John: I will turn the call over to John to cover our results in more detail.
John: Thanks, Ernie I also wanted to add my gratitude to all of our global associates for their hard work and commitment to T. J X this year.
John: Moving to our results as a reminder, last year, our fiscal calendar had an extra week in the fourth quarter, Therefore, where applicable we will be referencing adjusted numbers for last year's results, which exclude the impact of that extra week.
John: Now I'll share some additional details on the fourth quarter net sales grew to $16 $4 billion, a 5% increase versus last year's adjusted sales as.
As Ernie mentioned, our fourth quarter consolidated comp sales increased 5%, which was well above our plan and driven by an increase in customer transactions.
John: We were very pleased to see strong comp sales increases in both our overall apparel and home categories pre tax profit margin of 11, 6% was up 70 basis points versus last year's adjusted 10, 9%.
John: Our pre tax profit margin was 70 basis points above the high end of our plan. This was primarily due to a benefit from lower shrink as well as expense leverage on our above planned sales, partially offset by higher incentive compensation accruals.
John: Gross margin was up 100 basis points versus last year's adjusted 29, 5%. This was primarily driven by a benefit from our year end true up of shrink expense and strong mark on.
John: SG&A was 19, 2% up 30 basis points versus last year due to incremental wage and payroll costs.
John: Net interest income was neutral or pre tax profit margin versus last year.
John: All of this led to a diluted earnings per share of $1 23 up 10% versus last year's adjusted $1 12, It also well above our plan.
John: As for our divisional performance in the fourth quarter, we saw strong comp store sales growth at every division all driven by increases in customer transactions, we were particularly pleased with the outstanding sales performance at our international divisions with T. J X, Canada comp with TGF, Canada's comp sales increasing tempur.
<unk> and <unk> international comp sales up 7%.
John: Now to our full year fiscal 'twenty five results.
John: Net sales grew to $56 $4 billion, a 6% increase versus last year's adjusted sales.
John: Solidago comp store sales were up 4% entirely driven by customer transactions pre.
John: Pre tax profit margin of 11, 5% was six was up 60 basis points versus last year's adjusted 10.9% gross margin was 30, 36% up 70 basis points versus last year's adjusted 29, 9%.
John: This increase was driven by strong mark on lower freight costs, and 20 basis points from shrink favorability, partially offset by higher supply chain investments.
John: Regarding shrink we saw favorability across all our divisions I want to take a moment to acknowledge the great great collaboration and tremendous efforts of our associates, who worked extremely hard on our initiatives throughout the year.
John: SG&A was 19, 4% up 10 basis points versus last year is 19, 3%. This was due to incremental store wage and payroll costs net interest income was neutral to the full year pre tax profit margin versus last year.
John: All of this led to a full year earnings per share of $4 26 up 13% versus last year's $3 76.
John: And he will talk about our full year divisional highlights in a moment.
John: Moving to inventory balance sheet inventory was up 8% and inventory on a per store basis was up 1%.
John: We feel great about our inventory levels and the outstanding availability, we're seeing in the marketplace, we are well positioned to flow fresh assortments to our stores and online this spring.
John: I'll finish with our liquidity and shareholder distributions for the full year, we generated $6 1 billion in operating cash flow and ended the year with $5 3 billion in cash.
John: In fiscal 'twenty, five we returned $4 $1 billion to shareholders through our buyback and dividend programs now I'll turn it back to Ernie.
Ernie Herrman: Thanks, John.
Ernie Herrman: I will pick it up with some full year divisional highlights I.
Ernie Herrman: I am extremely pleased with the consistency of our sales performance across our divisions each business delivered comp store sales growth of 4% or above and importantly, the sales were entirely driven by an increase in customer transactions.
Ernie Herrman: We believe this highlights the strength of our value proposition.
Ernie Herrman: Our ability to gain market share and the power of our wide customer demographic.
Speaker Change: Edmar Max overall sales for the full year exceeded $34 billion and comp store sales increased 4% more IMAX is apparel and home categories. Both saw comp sales increases.
Speaker Change: Additionally, comp store sales increased across all of <unk> regions and income demographics.
Speaker Change: At Sierra which is reported with <unk>, we were very pleased with their strong performance for the year.
Speaker Change: As to profitability.
Speaker Change: Full year segment profit margin increased to a strong 14, 1%.
Speaker Change: With more than 2500, total TJ maxx and Marshalls stores today, we still see plenty of opportunities to open new stores attract more shoppers and further grow our sales.
Speaker Change: At Homegoods annual sales grew to $9 $4 billion and comp store sales increased 4%.
Speaker Change: During the year, we opened our 1000th store for this division a great milestone.
Speaker Change: We were very pleased to see this division segment profit surpassed $1 billion and see its margin returned to double digit levels at 10, 9%.
Speaker Change: We are by far the largest off price home fashion retailer in the United States and we continue to see plenty of opportunities to capture additional market share with both our home goods and home sense banners.
Speaker Change: Yes.
Speaker Change: At T J X, Canada full year sales increased to $5 2 billion and comp store sales were up 5%.
Speaker Change: It was great to see consistent performance at all three of our Canadian retail banners.
Speaker Change: Which each delivered similar comp store sales increases.
Speaker Change: Segment profit margin on a constant currency basis was 13, 5%.
Speaker Change: As Canada's leading off price apparel and home fashions retailer, we believe our winners Marshalls and home sense banners are all on track for continued successful growth.
Speaker Change: T J X international full year sales exceeded $7 billion and comp store sales increased 4% with strength in both Europe and Australia.
Speaker Change: As to profitability I am very pleased with this division's improvement in 2024.
Speaker Change: Segment profit margin on a constant currency basis was five 8%.
Speaker Change: In Europe, we continue to grow our footprint in our existing countries and announced our plans to open our first stores in Spain in calendar 2026.
Speaker Change: And Australia.
Speaker Change: Comp store sales growth was outstanding and we continue to expand the reach of our TK Maxx banner across the country.
Speaker Change: Long term, we are confident that we have opportunities to capture additional market share in each country that we operate in.
Speaker Change: As the E Commerce overall sales increased and we added new categories and brands to our assortment across our sites to further enhance our online treasure Hunt shopping experience.
Speaker Change: Okay moving on I'd like to highlight the key differentiators of our business that give us great confidence in our continued successful growth around the world for many years to come.
Speaker Change: First is our value leadership in the United States, Canada, Europe and Australia.
Speaker Change: We believe that our relentless focus on value every day.
Speaker Change: Through a combination of brand fashion price and quality will continue to resonate with shoppers.
Speaker Change: Second is our very wide demographic.
Speaker Change: We want to sell everyone and believe our offerings across good better and best brands appeal to shoppers across most income and age demographics.
Speaker Change: Yes.
Speaker Change: Third.
Speaker Change: We believe we have one of the most flexible business models in retail.
Speaker Change: This allows us to buy close to need and adjust our selections as macro trends and consumer preferences change.
Speaker Change: Next is our differentiated treasure hunt shopping experience driven by our rapidly changing assortment.
Speaker Change: Our stores received multiple deliveries a week, a fresh branded merchandise to surprise and excite our customers.
Speaker Change: We believe this can inspire shoppers to visit us more frequently to see whats new.
Speaker Change: Beth is a world class buying organization.
Speaker Change: I believe the depth of experience among our 1300 plus buyers around the world is unmatched and that we have the best vendor relationships in retail.
Speaker Change: <unk> merchant source from an ever changing universe of over 21000 vendors and from more than 100 countries.
Speaker Change: Further we continue to see a significant opportunity to grow our global store base.
Speaker Change: We are increasing our long term store potential to a total of 7000 stores or over 1900 more stores in just our existing and announced geographies.
Speaker Change: This now reflects the long term potential for homegoods to expand to 1800 stores Sierra to expand to 325 stores and our base in Spain to grow to 100 stores.
Speaker Change: In addition to our future store growth opportunities I want to reiterate my excitement for our newly formed joint venture with Grupo <unk> in Mexico, and our recent investment in branch for less in the Middle East.
Speaker Change: We see both of these is a great way to participate in the growth of off price in different areas of the world.
Speaker Change: Lastly, I am so proud of our culture, which I am convinced.
Speaker Change: Is a key component of our success.
Speaker Change: We continue to invest in teaching and training to develop the next generation of T. J X leaders.
Turning to corporate responsibility.
Speaker Change: We are excited about the progress we have made over many years and the work we have underway.
Speaker Change: On our conference calls over the past year I've shared updates on how we support our associates and communities our work to mitigate our impact on the environment and our commitment to operating ethically.
Speaker Change: Today I'd like to share more about some of the remarkable efforts our T. J Maxx foundations and associates made this past year to have an impact on the communities, where we live and work.
Speaker Change: In addition to the support I mentioned earlier for people affected by the California wildfires. In 2024, we also helped with the relief efforts for those affected by Hurricanes in the southeastern United States and flooding in Austria and Poland.
Speaker Change: Further we supported more than 2500 nonprofit organizations globally through our T J Maxx foundations.
Speaker Change: Our associates across the blow play an important part in this meaningful work by volunteering running donation campaigns in our stores participating in our associate nominated grants program and more.
Speaker Change: These are just some of the examples of work our teams are doing in our communities and we invite you to visit <unk> dot com to learn more.
Speaker Change: Before I close I want to emphasize that our primary focus remains our value gap versus traditional retailers.
Speaker Change: I am very confident at the key strength and flexibility of our business will allow us to navigate through the current China tariff environment.
Speaker Change: As we have successfully navigated through many other types of retail environments, and our nearly 50 year history.
Speaker Change: In closing, we feel great about our strong performance in 2024.
Speaker Change: We are confident in our plans for the year and as always we will strive to beat them.
Speaker Change: Longer term, we remain laser focused on growing our business and are convinced that we can continue to increase our market share in the United States and internationally.
Speaker Change: When I look at our growth opportunities ahead.
Speaker Change: The global mix of our business.
Speaker Change: Our deep talent base, our wide customer base and the consumers continue to desire for value I am very excited about the future of T J X.
Speaker Change: Now I'll turn the call back to John to cover our full year and first quarter guidance and then we'll open it up for questions John.
John: Thanks, again, Ernie I'll start with our full year fiscal 'twenty six guidance, we're planning overall comp store sales growth of 2% to 3% starting in fiscal 'twenty six our comp store sales will include E Commerce sales, which as a reminder are a small piece of our total business, we do not expect E comm.
Speaker Change: For us to have a material impact in our comp sales growth for.
Speaker Change: For the full year, we expect consolidated sales to be in the range of 58, 1% to $58 $6 billion up 3% to 4%, we expect favorable foreign exchange rates to have a 1% negative I'm sorry, we expect unfavorable foreign exchange rates to have a 1% negative impact to consol.
Speaker Change: <unk> sales growth.
Speaker Change: We're planning full year pre tax profit margin to be in the range of 11, three to 11, 4% down 10 to 20 basis points versus last year's 11, 5%. This guidance assumes a 20 basis point negative impact due to the unfavorable foreign exchange rates and transactional EFS.
Speaker Change: <unk>.
Speaker Change: Moving to our full year gross margin, we expect it to be in the range of 34% to 35%. This would be down 10 to 20 basis points versus last year's 36% due to unfavorable transactional foreign exchange and inventory hedge we're also planning for a slight.
Speaker Change: Improvement in shrink.
Speaker Change: We are expecting full year SG&A to be 19, 3% 10 basis points favorable to last year's 19, 4% driven by a benefit from the annualized <unk> of last year as higher incentive compensation accruals.
Speaker Change: We're planning net interest income of $98 million, which we expect to deliver fiscal 'twenty six pre tax profit margin by 20 basis points. We're currently assuming a full year tax rate of 25, 1% and a weighted average share count of approximately $1, one 3 billion shares.
Speaker Change: As a result of these assumptions, we're expecting full year diluted earnings per share to be in the range of $4 34 to $4 43.
Speaker Change: Up 2% to 4% versus last year's $4.26. This EPS guidance assumes a 3% negative impact to EPS growth due to unfavorable translational and transactional foreign exchange.
Speaker Change: Lastly, our fiscal 'twenty six guidance assumes a small negative impact in the first half of the year from the current China tariffs.
Speaker Change: On merchandise that we were committed to when these tariffs went into place we have a great team we have seen tariffs before and we're confident we can navigate our way through the current China tariff environment on our future buys.
Speaker Change: Moving to first quarter, we expect overall comp store sales to increase 2% to 3% while weather was not favorable to the start of the quarter. We have been pleased with what we've seen recently as weather has normalized.
Speaker Change: We expect consolidated sales to be in the range of 12, 8% to $12 9 billion.
Speaker Change: Pre tax profit margin to be in the range of 10% to 10, 1% down 100 to 110 basis points versus last year's 11, 1%.
Speaker Change: Gross margin to be in the range of 29, 8% to 29, 9%, which would be down 10 to 20 basis points versus last year's 30%. This is primarily due to unfavorable inventory hedges.
Speaker Change: SG&A to be 20% up 80 basis points versus last year's 19, 2%. This was primarily due to incremental store wage and payroll cost and the lapping of a one time benefit last year.
Speaker Change: Net interest income of $27 million, which we expect will deliver our year over year pre tax profit margin by 20 basis points.
Speaker Change: Tax rate of 23, 2% and a weighted average share count of approximately 113 billion shares.
Speaker Change: As a result of these assumptions, we're expecting first quarter diluted earnings per share to be in the range of 87 to 89 versus last year's diluted earnings per share of <unk> 93.
Speaker Change: I wanted to mention that there are several factors, causing our first quarter pre tax profit margin and earnings per share to be planned lower than the remainder of the year. This includes a benefit from lower incentive compensation accruals planned in the last nine months of fiscal 'twenty six.
Speaker Change: The lapping of a benefit from a reserve release in the first quarter of last year and the expected timing of certain expenses.
Speaker Change: Fortunately this first quarter guidance implies that the last nine months of the year, we expect pre tax profit margin to be flat.
Speaker Change: To up 10 basis points and earnings per share to be up 4% to 6% versus last year.
Speaker Change: Moving to our fiscal 'twenty six capital plans, we expect capital expenditures to be in the range of two 1% to $2 2 billion.
Speaker Change: This includes opening new stores Remodels relocations as well as investments in our distribution network and infrastructure to support our growth.
Speaker Change: For new stores, we plan to add about 130, net new stores, which will bring our year end total to over 5200 stores. This would represent a store growth of about 3%.
Speaker Change: In the U S. Our plans call for us to add about 40 net new stores at Mara Max 30 stores at home goods, including nine home sense stores.
Speaker Change: Sierra we plan to add about 20 stores in Canada, We plan to add 12 stores and at <unk> International We plan to add 22 net stores in Europe, and six net stores in Australia.
Speaker Change: Lastly.
Speaker Change: We also plan to remodel about 500 stores relocate approximately 40 stores in fiscal 2006.
Speaker Change: As to our fiscal 'twenty six cash distribution plans, we remain committed to returning cash to shareholders as we outlined in today's press release, we expect our board will increase our quarterly dividend by 13% to $42 five per share.
Speaker Change: Additionally, in fiscal 'twenty six we currently expect to buyback, 2% to $2 $5 billion.
Speaker Change: T Jack Stark.
Speaker Change: In closing I want to emphasize that we are in an excellent position, both operationally and financially to take advantage of the opportunities we see to further grow our business, while simultaneously returning significant cash to our shareholders.
Speaker Change: 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.
Speaker Change: Sure.
Speaker Change: Thank you we will now begin the question answer session.
Speaker Change: Star One if you have a question press star two if you need to win.
Paul: Our first question comes from Paul.
Paul: Hey, Thanks, guys.
Speaker Change: Curious if you can talk about what drove the stronger performance in Canada and international if there's anything that changed in the macro that you think worked in your favor it wasn't simply better execution and also curious if you expect those businesses to <unk>.
Paul: Continue to outperform this year.
Paul: Sure Paul.
Paul: Yeah, obviously, we're very pleased with both.
Paul: Europe, and Canada, and common denominator with both of them was the way we flowed first of all you're in a gift giving time period in Q4.
Paul: Typically done well in Q4.
Paul: These two divisions specifically.
Paul: Executed a flow plan in terms of how late they shipped freshness and prior to Christmas that it was extremely beneficial to their pre Christmas. The 10 days before Christmas time period, and this applies to both Europe and to Canada, and then even the post Christmas business in both.
Paul: <unk> was exceptionally strong.
Paul: So I give them a lot of credit on that as well as what they did in addition to going after specific gift categories, which I think was a big improvement in owning those in more depth versus the prior year.
Paul: It was the balance of good better best across the board.
Paul: In Europe and in Cana.
Paul: Canada as well they also both.
Paul: <unk> had healthy home businesses.
Paul: Which helped.
Paul: Help their total because as you know home spikes in Q4, and we have certain categories. There that are great gift giving categories.
Paul: I think there was a bit of a tactical execution.
Paul: Benefit from the way they flowed and then a mix.
Paul: Advantage in both by the way to apply to both of them. Thanks for the question we were very pleased with.
Paul: Both of those divisions.
Paul: Or do you expect them to continue to outperform and then I guess related yes.
Paul: Oh, yes, yes.
Paul: We've seen both of them continuing to.
Paul: Very happy with way they've been performing.
Paul: And they both have really.
Paul: Some seasoned management across those areas that gives me a lot of faith between our.
Paul: Our.
Paul: Or are there they call it merchandising between our planning and allocation.
Paul: Area as well as all our head merchants.
Paul: We have a lot of seasoning, there and people that have gone to some of the new key role starting about two years ago that I think is going to set them up I think for strong execution over the next year.
Paul: Thank you.
Speaker Change: Yes. Thank you Paul Great question.
Speaker Change: Our next question comes from Lorraine Hutchinson.
Lorraine Hutchinson: Thanks, Good morning.
Lorraine Hutchinson: I wanted to ask about I wanted to ask about customer behavior on both ends of the spectrum are you seeing trade down at the higher end and then at the lower end of the assortment how are customers reacting to some of the sharper price value offerings.
Lorraine Hutchinson: Yes, so it's hard for us to really measure.
Lorraine Hutchinson: On that because part of our success and again this was a.
Lorraine Hutchinson: It is extremely pleasing quarter for us to have every division running a four or better.
Lorraine Hutchinson: When you have Canada tenant by the way the other thing to remember is we were up up against a good quarter of the year before in Q4.
Lorraine Hutchinson: So.
Lorraine Hutchinson: So it becomes tough to measure on the good better best so to speak or the demographics on income because we were pretty much.
Lorraine Hutchinson: Performing at every level across every banner that we have.
Lorraine Hutchinson: Go ahead, Steve we did see when we look at our and again this is where stores are.
Lorraine Hutchinson: The store performance in different demographic areas, we saw.
Lorraine Hutchinson: Nice increases in both our below a 100 and above 100 income demographic areas.
Lorraine Hutchinson: And I think Lorraine part of the EBIT walk that happens is with the and you've seen a lot of the write ups. So you have.
Lorraine Hutchinson: I don't know if consumer confidence is down a little and they have store closures and different pockets of retailers across the U S. Canada as well by the way Europe as well and when you have so you can it's the reason it's tough with all that noise because obviously in some of those cases, we're picking up the market share.
Lorraine Hutchinson: Home would be one of the more obvious ones were.
Lorraine Hutchinson: Either business that had a home business is part of it or home only have closed.
Speaker Change: And so there's almost not a demographic issue are there more of a category market share gain which has been more with John and I would see in the divisions as we have gained market share not where it's easier to measure is not by income demographic just across all the income demographic, but in certain categories. We have outpaced.
Thank you please.
Lorraine Hutchinson: Welcome.
Lorraine Hutchinson: Our next question comes from Matthew Boss.
Lorraine Hutchinson: Yes.
Lorraine Hutchinson: Great Thanks, and congrats on another nice quarter.
Lorraine Hutchinson: Thanks, Matt.
Lorraine Hutchinson: So two part question first on the continued strength in transactions across divisions that you saw in the fourth quarter.
Ernie Herrman: Maybe could you elaborate on new customer acquisition trends and just how Ernie would you rate that.
Ernie Herrman: Breadth of your product assortment and value proposition into the spring and maybe with that just near term could you maybe elaborate on the more recent trends you've seen in the business or is it fair to say that you haven't really seen any change in underlying business momentum if we parse through the impact of weather.
Ernie Herrman: Okay, Yes, Matt great.
Speaker Change: Great questions, Yes, I was waiting for you to throw in the part about the weather.
Ernie Herrman: [laughter].
Speaker Change: So John do you want to talk to the transactions and then I'll talk to the breadth of product, yes. So in the <unk>.
So we've seen again, we continue to see strong transaction growth and we are seeing us attracting more customers to our stores.
Speaker Change: And when we look at the age demographic.
Speaker Change: <unk> tend to skew a little bit more towards that 18 to 34 age range is what we've seen consistently so we're quite pleased to see the sales growth based on again more customers.
Speaker Change: Coming to our stores.
Speaker Change: Which ties in I think Matt what the other part of your question the breath of product because obviously, we're conscious about continually expanding our while our vendor base our category of items base.
Speaker Change: Probably homegoods is one of the I would say it would be the epitome of that in terms of how we are always.
Speaker Change: Turning new vendors and new categories, we do it in every division.
Speaker Change: They just jump out where it's a little more obvious when you walk the store because youll find items in categories that are now expanded versus a week before and a very dramatic fashion. So I would say our breadth of product as we go into spring is I would say kicked up a notch from even last year again thats part of our success this past fourth quarter and in the last couple.
Speaker Change: <unk> of years is to continually try to bring in new vendors and new product categories, while not.
Speaker Change: Alienating customers, our cat category purchases on the other side of it whichever one reason, we're always talking I'm always talking about trying to sell as many people as possible that was in our script. That's why we always talk to you about I know we've talked many times about it. So our breadth of are we line up our plans for spring and <unk>.
Speaker Change: Every wide product breadth vendor breath.
Speaker Change: Having said that when you start to get other than other than the weather issue, which you know.
John: John mentioned.
John: When the weather was in the areas, where it was normal weather. We were pleased with how we were performing it's just.
John: We have those pockets of weather that hit us on those spots, but again, we're feeling very good about.
John: The normal weather pattern in areas, where we will head.
John: The future. So I don't know if I did I answer that about the product breadth.
John: Yes, you did you did.
John: Kicked up a notch relative to a year ago, yes have a direct quote on that Thats very good [laughter]. Thank you best of luck. Thank you Matt.
Speaker Change: Our next question comes from Brooke Roach.
John: Yeah.
Speaker Change: Good morning, and thank you for taking our question I was hoping we could elaborate on your <unk> your expectations for continued expansion and merchandise margins can you contextualize, what you're embedding in your outlook for merch margin expansion as you contemplate mark on versus tariffs and then John on gross margins can.
John: You speak a little bit more about your expectations for shrink for the year. Thank you.
John: So let me so brook are start off with.
John: Our approach on the Mark on our merchandise margin.
John: Touch on tariffs briefly in there and then John can pick up on the.
On the actual components financial components.
John:
John: We would talk about this to really try to keep it crystal clear on our approach. How this works first of all on the tariff situation, it's been a little gray, there's a short term.
John: Keep in mind that.
John: The direct imports for China for us sort of an extremely small percentage of our business and so although there could be like in the short term a little bit of a.
John: Perhaps a little bit about costs associated there over the medium and long term that really doesn't become the issue because of the way we approach our buying.
John: So to give you an example.
John: The I guess, the silver lining is with consumer confidence down and a bit of a rocky environment out there.
John: And the way our buyers operate which is the buyers go out and they really assess at the retail level, while we can retail product and then they work it backwards to what the cost should be and they really don't.
John: Their strategy is not to factor in tariffs or any other costs that actually can play into the picture here.
John: The way they approach is they're going to look at what's the out the door retail on the line item and we need the gap in retail between us and thereof that door, that's going to provide the amazing value for our consumer and from there. They work on the caustic in PE and it's really not up to them to have to worry about.
John: What the vendor is getting caught up with in terms of terror for inflation or other cost because remember we've been to the movie before recently a few years ago with this extreme inflation and we navigated right through that just as we will on this it's just it's a different headline it's just the same approach so weather.
John: There's tariffs no tariffs are buyers really their focus is on buying the goods determining the cost based off the retail we can put the goods out at so because of the environment, we're in where Theres a lot of I think.
John: Consumer confidence stores closing et cetera.
John: I'm thinking there's more availability out there over the next six months, even more than there has been which is going to create.
John: More.
John: Buying opportunities for our teams so back to your margin that that at a high level I think.
John: Plays into our ability to look at margin opportunities I'll give you. Another thing is we mentioned this briefly is the wide demographic.
John: I've talked about a couple of times that also plays into our ability to be more flexible. So if our buyers of merchants do see something in one vendor or one.
John: Good better best range, they can always.
John: To be more flexible in terms of the way they handle the market. They can move from a good eye on to a better item, if that's where the better bias and I think we have that advantage versus most of our competition.
John: Doesn't have that flexibility.
John: So again great question.
Speaker Change: I'm excited about this I am excited about the sales and margin opportunity in this environment. Because this is pretty much textbook sits.
Speaker Change: Situation coming up here right and then Brooks to answer your question on the shrink.
Speaker Change: We're very pleased with.
Speaker Change: Where our shrink rates came in this year.
Speaker Change: We are we still have our shrink committee, we're still staying very focused on this.
Speaker Change: So we do have a small improvement baked into our plan this year and it's really centered around the utilization of the initiatives that.
Speaker Change: That from last year, but we're also at this point analyzing data on the shrink results and we will use that data to lean into some of the things that that worked last year. So we're doing a number of things again.
Speaker Change: Overarching strategy is to.
Speaker Change: Is to continue to maintain a great shopping environment for the customers a safe shopping environment.
Speaker Change: For our associates and customers as well.
Speaker Change: Okay great.
Speaker Change: Great. Thanks, so much.
Speaker Change: Our next question comes from Michael Binetti.
Michael Binetti: Hey, guys congrats on an awesome quarter.
Speaker Change: Thanks, Mike.
Speaker Change: Can I ask you this a lot but flow through for the year on a two to three comp is 10 basis points.
Speaker Change: We exclude the currency I'm guessing that with lots of oil.
Speaker Change: The lingering contribution from some of the snapback COVID-19 areas like freight and shrink.
Speaker Change: Even even your market a little bit for tariff. This year is 4% still the long term leverage point is there anything changing there.
Speaker Change: And then I just wanted I'm, just curious on real estate availability in the U S.
Speaker Change: When we see some real real estate.
Speaker Change: Brokers recently, there's a new development is almost nothing so there's a lot of competition for boxes from the retailers may go bankrupt.
Speaker Change: I'm curious if you see any tightness and the availability of real estate in the U S.
Speaker Change: Either if we're getting your box again or.
Speaker Change: Any reason to think that there could be some rent inflation in years ahead, if those dynamics.
Speaker Change: Yes.
Speaker Change: So on the flow through yes.
Speaker Change: The model still stands where.
Speaker Change: On a three to four comp with no outsized expense increases we would expect to be flat to up 10 basis points.
Speaker Change: But again, that's that's an over arching model, if we see years, where we have an opportunity to.
Speaker Change: To do better than that we certainly will bake that into our plans.
Speaker Change: As far as the real estate availability.
Speaker Change: So we do see a lot of availability going forward.
Speaker Change: As we've talked about in the past.
Speaker Change: We do see an opportunity to expand into some more rural areas where.
Speaker Change: The department store of the area closes and we can fill that void in that in those areas also you're still seeing large box closures.
Speaker Change: We have the opportunity to either go into a new area or to relocate a store to a better shopping area. So again, we still see opportunities.
Speaker Change: And that's kind of reflected in the <unk>.
Speaker Change: The.
Speaker Change: The increase to our sales or our store potential.
Speaker Change: Thanks, a lot guys I appreciate it.
Speaker Change: Thanks.
Speaker Change: Our next question comes from Chuck Grom.
Speaker Change: Okay.
Speaker Change: Great quarter.
Speaker Change: Can you talk about the 5% comp in the context of category performance across apparel home.
Speaker Change: Footwear accessories and gift thing and then when we look ahead to 2026, how youre planning those businesses across those categories and then for John on the shrink rate improvement can you just remind us where your shrink accrual levels actually are today relative to 2019. So we can get a sense for how much is left to continue to improve on that front.
Speaker Change: Thanks.
Speaker Change: Yes, Chuck obviously I can't give specifics on some of these categories, but directionally I can talk to.
Speaker Change: Well, we work with that strong comp.
Speaker Change: We were up in.
Speaker Change: In apparel and home but.
Speaker Change: I would say the the home in some of our accessories business as well.
Speaker Change: We're better stronger than apparel.
Speaker Change: And that would be a similar way that we're looking for those businesses to perform.
Speaker Change: In FY 'twenty six.
Speaker Change: If you start getting into some of the.
Speaker Change: Smaller category Cory Breakouts that information, we just don't give those specifics out there, but directionally obviously when you run a five you have to have pretty decent apparel business also otherwise you can't offset it because it's still a significant percentage of our business.
Speaker Change: Business I continue to be even more bullish on is our home business in total.
Speaker Change: As you know, it's kind of a third plus of T J X.
Speaker Change: And if you look at the home domestically here in the United States and you look at how home goods.
Speaker Change: <unk> performed versus the industry.
Speaker Change: I think thats, a great sign and if some of the other.
Speaker Change: New housing starts.
Speaker Change: Interest rates change to be more favorable.
Speaker Change: I look at how our teams there are performing now and things that could even be more potential upside for us. So that's why we're very bullish on home, we're the only ones that do it the way we.
Speaker Change: We do it and that team specifically, what's neat on the way our home business has done which not many people think about this.
Speaker Change: There's been there's been discussion on.
Speaker Change: Tariffs with China et cetera.
Speaker Change: We actually our priority on our home business do goods out of Europe, because that is a differentiator for us and it creates a an umbrella of fashion and brand and quality that.
Speaker Change: Other home retailers don't do so one reason it has performed extremely well in Q4, and our home business and Europe piece of differentiation I think is going to help.
Speaker Change: Tell us going forward and by the way Europe, and some of our other accessories cat.
Speaker Change: Categories that I was talking about where we performed.
Speaker Change: Better than the store.
Speaker Change: I think we utilize it there also as a as an offensive sales driver and of course customers love that piece of our mix.
Speaker Change: So that is a highlight I can talk about and we have that plan to be big going forward. John Yes. So Chuck on your question about the shrink rate, we don't we don't publicly disclose our shrink rate but.
Speaker Change: But going forward, we still think we have some opportunity to continue to improve our shrink rates.
Speaker Change: Yes.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Alex Stanton.
Speaker Change: Thanks. This is Trevor on for Alex My question is on segment margins you close the margin gap between Homegoods in my remarks quite a bit in the back half of 2024. So with this recent move lower in ocean freight rates and Homegoods higher exposure there. It seems like the setup to close that gap, even further in 2025 years.
Speaker Change: Favorable.
Speaker Change: There anything structural keeping homegoods from running at or closer tomorrow Max levels over the long term and then any color you can provide around the moving pieces of margin in both segments in 2025 would be helpful. Thank you.
Speaker Change: I can.
Speaker Change: <unk>.
Speaker Change: I mean, if you look at one of the major moves was obviously the home goods Dot com.
Speaker Change: <unk> I mean that was something that was significant.
Speaker Change: But ernie.
Speaker Change: We can Alex Directionally keep moving and closing.
Speaker Change: Closing the gap.
Speaker Change: Our expectations are that it would.
Speaker Change: Ever necessarily get there because you have some categories that are innately higher margin in EMR Max.
Speaker Change: Versus our home business on the flip side I think our home business.
Speaker Change: The way we are tracking is probably one of the most profitable businesses in the country or the world at the margins we're at.
Speaker Change: If we if we didn't own T J maxx, and Marshalls, we'd probably be saying Wow look how high this is.
Speaker Change: But we do we have the higher bar to your point, So we think.
Speaker Change: We think part of that is the nature of some of the.
Speaker Change: Some of the.
Speaker Change: Apparel close out businesses that are in EMR Max.
Speaker Change: Very profitable.
Speaker Change: Margins, but our goal is to obviously to keep pushing the needle there.
Speaker Change: Trying to close the gap between the two so I mean, it's a good callout.
Speaker Change: It's hard for us to kind of look and be that.
Speaker Change: Firmer specific in the future on it but good call out.
Speaker Change: Thanks, I'll pass it on.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Adrian Day.
Speaker Change: Great. Thank you very much can you hear me.
Speaker Change: Yes, yes.
Speaker Change: Okay great.
Speaker Change: It's music to my ear.
Speaker Change: Setting up to be textbook off price environment.
Mike: So with that Mike.
My focus is really on kind of a long term store growth that you talked about kind of incremental 1900, that's paid.
Mike: No <unk> hundred 1700 each.
Speaker Change: Divisions at monarch.
Speaker Change: Going into the kind of next 800 stores how are you selecting location.
Speaker Change: Frenchie between T J X and more match.
Speaker Change: And is there an opportunity even in the U S to do smaller footprint stores beyond that the follow up would be the App show and brands for less.
Speaker Change: Both joint ventures, I remember, you doing trade secret and buying that outright.
Speaker Change: Revenue sharing model, there and what's the plan for better days. Thank you.
Adrienne: Hey, Adrienne so.
Speaker Change:
Speaker Change: Let me talk to.
Speaker Change: John and I will both jumping here so.
Speaker Change: The smaller first of all when it comes to the stores, we take every deal separately and John's involved here as well so when we look at potential sites. We're opportunistic we're opportunistic we look at what other brands, we have see in which vicinity, we measure potential transfer of sales.
Speaker Change: However to your point, what we're seeing is some smaller markets and smaller footprint store, which I think you brought up when you were asking a question we do see that so.
Speaker Change: So a good call, we do see that as an opportunity.
Speaker Change: Because there are other areas in the country, where we can put in a smaller format store, which won't create too much transfer and as you know we've had stores, we have a store or a group of stores, where you have all five brands down the street here <unk> and they all work extremely profitably.
Speaker Change: As you know we've put in home centers near Homegoods.
Speaker Change: With minimal minimal transfer sales in some cases have actually increased our sales so.
Speaker Change: We're bullish on being able to add those stores in different areas.
Speaker Change: Something like Oh.
Speaker Change: Sierra or home goods, we were probably again as we grow in Homegoods, we were pretty conservative in our.
Speaker Change: 500 number which was the more recent number and so the teams have looked at different different locations different demographics population density.
Speaker Change: And I feel it's very realistic to go the other 300 stores, which is a bigger probably the biggest change that you're seeing incrementally right and we added we added <unk>.
Speaker Change: Spain as well.
Speaker Change: To the to the store opportunity list.
Speaker Change: Just to talk about your question about branch for less than <unk>, So branch for lessors and investment. Okay. So that's not that's not a joint venture Akzo is a joint venture.
Speaker Change: And I'd say, it's early days to be talking about the long term opportunities other than to say that we are very optimistic about what.
Speaker Change: With that promote a brand can do down in Mexico in the long term.
Speaker Change: Fantastic best of luck.
Speaker Change: Thank you thanks Adrian.
Speaker Change: Our next question comes from Marni Shapiro.
Marni Shapiro: Hey, guys congrats on a great year and congrats on being part of what I thought was one of the best social media trends during the holiday season.
Marni Shapiro: Thank you Marni I'm glad you enjoy the social media was.
Speaker Change: Very very beneficial even though again, we werent behind a lot of it. So I know you weren't but it was stunning and then I was actively seeking it out when the algorithm Watson feeding it to me on a regular basis.
Marni Shapiro: It was brilliant.
Marni Shapiro: Two quick ones one big one one smaller just can you repeat because you walked through them pretty quickly the store openings for.
Marni Shapiro: Fiscal year 'twenty six across the globe.
Marni Shapiro: Yes, certainly.
Marni Shapiro: Yes.
Marni Shapiro: No.
Marni Shapiro: So we've got.
Marni Shapiro: A total of 130 net new stores.
The plan calls for 40, net new stores and Mara Max 30 stores and home goods, which includes night at home sense at Sierra were adding 20 stores in Canada, we were adding 12 stores in Europe were adding 22 net new stores.
And.
Marni Shapiro: Australia, six net store openings perfect and.
Marni Shapiro: And then this is kind of a bigger picture question, but I'm curious what your thoughts are here, there's been a lot of consolidation on the brand side. Some companies that have taken the IP. It's.
Marni Shapiro: Just a lot of branches into one big company.
Marni Shapiro: So on that side, just kind of the bulk of the business and I'm curious are the bookings to the business I'm curious if this is benefiting you guys as a company because you can match their size and then Conversely on the flip side is you have so many of these much much smaller brands that are really popping up.
Marni Shapiro: Doing well, making some noise is your team having success breaking into these smaller brands as well because.
Obviously, it's hard to know, which one of those smaller brands is going to be the next big thing. So developing those relationships early I'm curious if you could talk about that in the market.
Marni Shapiro: Absolutely Marni.
Marni Shapiro: Well first of all both.
Marni Shapiro: Both of those situations are priorities for us and the teams the buyers and merchandise managers.
Marni Shapiro: Even a top to top management with some of the brands that have consolidated under one house, even though they want to keep as many brands as possible because they know brands are important for them. So that they don't lose their business to the private label retailers per se, they're good at wanting to consolidate that way, whereas.
Marni Shapiro: Always.
Marni Shapiro: Trying to nurture those relationships and they know that we're probably the best outlet to have goods and an eclectic mix non visible manner.
Marni Shapiro: So.
Marni Shapiro: Those relationships are actually extremely desired on both sides of the equation.
Marni Shapiro: For all of those obvious reasons, what youre talking about and the second one is the more interesting because.
Marni Shapiro: We salivate over that because we like a lot of new niches, but we call them a little niche brands that keep popping up year after year, which is really what generates our.
Marni Shapiro: When we give you that 'twenty 1000 vendor list it's actually.
It's not a stagnant less meaning we have vendors a couple thousand that fall off every year and then we're adding a couple of thousand new every year.
Marni Shapiro: And because we want all of these new vendors typically.
Speaker Change: Oh, My Gosh 90, plus percent of them are anxious to have us in their back pocket because they know.
Marni Shapiro: They are relying on a say a specialty store business and they know they're going to have X amount of leftover inventory and they need to have a hub for even though theyre not big to your point Marni yeah. So.
Marni Shapiro: Our buyers are trained on we want we want to look at all desirable product, whether it's with a little vendor or a big vendor and that's what makes our treasure Hunt shopping experience more exciting we don't want narrow vendor now a big vendor.
Marni Shapiro: Assortments we want.
Marni Shapiro: Tech mixes.
Marni Shapiro: So that's why.
Marni Shapiro: Love Your question in that we are.
Marni Shapiro: We see that as more and more happening to your point, we often spot these little niche vendors online because they'll start some of them just stuff.
Marni Shapiro: Strangely enough about our store.
Marni Shapiro: Great that's fantastic I'll, let leave it to somebody else. Thanks, guys.
Alright, Thank you Bonnie thanks.
Speaker Change: Our next question comes from Laura Champine.
Laura Champine: Thanks for taking my question a follow up on the Q1 guide just trying to get to the underlying profitability how much I think you mentioned the timing of expenses.
Laura Champine: I'm not sure what you said there, but if I look at the timing of the expenses and the reversal of the reserve release, a year ago, what would kind of apples to apples pre.
Laura Champine: Pre tax profit margin be.
Laura Champine: So I mean, the way to look at it as that.
Laura Champine: And these are these are pretty equal we had we had a one time item, which is we had a cares act benefit last year that benefited us so we're up against that year over year.
Laura Champine: Interest is negatively impacting us by 20 basis points as we said in the in the call.
Laura Champine: Got a timing of hedge inventory hedged. So we had a benefit in Q4 that reversed in Q1.
Laura Champine: And then wage and payroll so I mean that that kind of.
Laura Champine: Explains why we have 100 basis points of <unk>.
Laura Champine: Deleverage.
Laura Champine: Okay.
Speaker Change: Can you quantify the wage and payroll piece or talk to us about inflation youre seeing year on year just on that one line.
Speaker Change: No we don't get into the details of our specific wage but again we.
Speaker Change: We see.
Speaker Change: Legislative.
Speaker Change: Increases come pretty much every January.
Speaker Change: Understood.
Speaker Change: Then small one so the TK maxx business, adding 22 stores pretty significant step up any markets to call out or better real estate.
Speaker Change: <unk>, what's driving that.
Speaker Change: Yes, so the opportunities in Europe are largely in Germany, Although we do have opportunities in Austria, and the Netherlands, Poland and the UK, but.
Speaker Change: In Ireland, as well, but but but the but the large majority of them.
Speaker Change: The opportunity is in the U K or excuse me in Germany.
Speaker Change: Got it thank you.
Speaker Change: Our final question of the day comes from Mark All swagger.
Mark Alswager: Good morning. Thank you I don't think I heard this but how are you thinking about AUR in 2026.
Speaker Change: And.
Speaker Change: The strong mark on performance, what's driving that how should we think about the further opportunity on markdown.
Speaker Change: I went through the AUR.
Speaker Change: Well again, we don't.
Speaker Change: I think when we talk about the opportunity it's a combination of.
Speaker Change: What the.
Speaker Change: There are a number of things that go into the benefit that we see in our gross profit whether it comes from a higher.
Speaker Change: Higher price or a better buy so we havent been parsing that out.
Speaker Change: Yeah, and then mark on the <unk>.
Speaker Change: I think you were asking about the mark on as we look forward on on the buying so the way. We're looking at is again this environment, which as you can see we have.
Speaker Change: Made healthy progress in the last couple of years on that front I.
Speaker Change: I feel I feel as though.
Speaker Change: Some of those situations slow up a little bit obviously I think the environment right. Now however is a bit of as I said earlier it is textbook.
Speaker Change: With more availability I think heading.
Speaker Change: So almost every one of the divisions that we have because of the environment and I believe a consumer confidence slowdown as well as you have again a lot of public companies are aggressive on cutting merchandise in advance.
Speaker Change: Because they have to.
Speaker Change: Grow their earnings so no reason to believe that.
Speaker Change: Our buyers arent going to have additional opportunities too.
Speaker Change: Bit by bit get more merchandise margin.
Speaker Change: As we move forward here the environment just kind of.
Speaker Change: Set up for that Fortunately.
Speaker Change: So although challenging environment overall, but those tend to work pretty well for T. J Maxx.
Speaker Change: Great. Thank you best of luck.
Mark Alswager: Thank you Mark and.
Speaker Change: Thank you all for joining US today, we look forward to outstanding you again on our first quarter earnings call, which will be in May.
Mark Alswager: Thank you.
Mark Alswager: Ladies and gentlemen that concludes your conference call for today you may all disconnect. Thank you for participating.
Mark Alswager: Yeah.
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