Q2 2027 The TJX Companies Inc Earnings Call

August 19, 2026

Speaker #1: Ladies and gentlemen, thank you for standing by. Welcome to the TJX Companies Q2 fiscal 2027 financial results conference call. At this time, all participants are in a listen-only mode.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to The TJX Companies' Q2 fiscal 2027 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 19 August 2026. I would like to turn the conference call over to Mr. Ernie Herrman, Chief Executive Officer and President of The TJX Companies. Please go ahead, sir.

Speaker #1: 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, August 19, 2026.

Speaker #1: I would now like to turn the conference call over to Mr. Ernie Herrman, Chief Executive Officer and President of TJX Companies. Please go ahead, sir.

Speaker #2: Thanks, Courtney. Before we begin, Deb has some opening comments.

Ernie Herrman: Thanks, Courtney. Before we begin, Deb has some opening comments.

Speaker #3: 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 the actual results to vary materially from these statements, including, among others, the factors identified in our filings with the SEC.

Deb 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 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 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 discuss. Thank you, and now I'll turn it back over to Ernie.

Speaker #3: 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.

Speaker #3: 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 discuss.

Speaker #3: Thank you, and now I'll turn it back over to Ernie.

Speaker #2: Good morning. Joining Deb and me on the call is John. I want to begin by thanking our talented associates for their continued dedication to TJX and their commitment to delivering great value and an exciting treasure-hunt shopping experience to our shoppers every day.

Ernie Herrman: Good morning. Joining me and Deb on the call is John. I want to begin by thanking our talented associates for their continued dedication to TJX and their commitment to delivering great value and an exciting treasure hunt shopping experience to our shoppers every day. Now to our Q2 results. Overall comparable sales increased 4%, which was above our plan. Our Q2 comp performance highlights the benefit of our global diversified business. While sales at our Marmaxx division were below our expectations, our three other divisions delivered comp sales increases of 6% to 7%, which drove results that exceeded the high end of our plan. At Marmaxx, we believe we could have executed our store mix better. By that, I mean we could have been sharper on having the right goods in the right stores at the right time.

Speaker #2: Now, to our second quarter results. Overall comparable sales increased 4%, which was above our plan. Our second quarter comp performance highlights the benefit of our global, diversified business.

Speaker #2: While sales at our Marmaxx division were below our expectations, our three other divisions delivered comp sales increases of 6% to 7%, which drove results that exceeded the high end of our plan.

Speaker #2: At Marmacs, we believe we could have executed our store mix better. And by that, I mean we could have been sharper on having the right goods in the right stores at the right time.

Speaker #2: We are convinced that the issues are self-inflicted and within our control, and we have made good progress working through them. We are seeing improvement at Marmaxx to start the third quarter, and are confident that we will see greater improvement by the holiday selling season.

Ernie Herrman: We are convinced that the issues were self-inflicted and within our control, and we have made good progress working through them. We are seeing improvement at Marmaxx to start the Q3 and are confident that we will see greater improvement by the holiday selling season. As to Q2 profitability, I am very pleased that once again, profits were well above our plan. Given this, we are raising our full-year outlook for pre-tax profit margin and earnings per share. John will give some more detail about our Q2 results and guidance in a moment. As we look to the H2 of the year, we are laser-focused on driving the opportunities that we see for the business. Q3 is off to a strong start, and availability of merchandise continues to be outstanding.

Speaker #2: As to second quarter profitability, I am very pleased that, once again, profits were well above our plan. Given this, we are raising our full-year outlook for pre-tax profit margin and earnings per share.

Speaker #2: John will give some more detail about our second quarter results and guidance in a moment. As we look to the second half of the year, we are laser-focused on driving the opportunities that we see for the business.

Speaker #2: The third quarter is off to a strong start, and availability of merchandise continues to be outstanding. We believe we have the right initiatives in place to drive sales and customer traffic to all of our retail banners.

Ernie Herrman: We believe we have the right initiatives in place to drive sales and customer traffic to all of our retail banners, and I am confident we will execute on our plans. Longer term, we continue to see a long runway for growth ahead for TJX. We are excited about the continued potential we see to keep growing sales, to keep expanding our global footprint, and to keep capturing additional market share around the world for many years to come. Now I will turn the call over to John to cover our Q2 results in more detail.

Speaker #2: And I am confident we will execute on our plans. Longer term, we continue to see a long runway for growth ahead for TJX. We are excited about the continued potential we see to keep growing sales, to keep expanding our global footprint, and to keep capturing additional market share around the world for many years to come.

Speaker #2: Now, I'll turn the call over to John to cover our second quarter results in more detail.

Speaker #4: Thanks, Ernie. I also want to add my gratitude to all of our global associates for their continued hard work and commitment to TJX. As I recap our second quarter results, I'm going to speak to everything on an adjusted basis, which excludes the impact from the tariff refunds received as of the end of the second quarter and the related incremental compensation expense accruals.

John Klinger: Thanks, Ernie. I also want to add my gratitude to all of our global associates for their continued hard work and commitment to TJX. As I recap our Q2 results, I am going to speak to everything on an adjusted basis, which excludes the impact from the tariff refunds received as of the end of the Q2 and the related incremental compensation expense accruals. Reconciliations detailing the net impact of these items on our results can be found in today's press release and on the investors section of our website. Now I will show some additional details on the Q2 versus last year. As Ernie mentioned, our Q2 consolidated comp sales increased 4%, which was above our plan. Our Q2 comp was driven by a higher average basket and an increase in customer transactions. Further, our home categories outperformed our apparel categories.

Speaker #4: Reconciliations detailing the net impact of these items on our results can be found in today's press release and on the investor section of our website.

Speaker #4: Now I'll show some additional details on the second quarter versus last year. As Ernie mentioned, our second quarter consolidated comp sales increased 4%, which was above our plan.

Speaker #4: Our second quarter comp was driven by a higher average basket and an increase in customer transactions. Further, our home categories outperformed our apparel categories.

Speaker #4: Adjusted pre-tax profit margin was 11.9%, up 50 basis points versus last year and well above our plan. Adjusted gross margin was 31.4%, up 70 basis points versus last year, and driven by an increase in merchandise margin, mostly due to tariff favorability.

John Klinger: Adjusted pre-tax profit margin was 11.9%, up 50 basis points versus last year and well above our plan. Adjusted gross margin was 31.4%, up 70 basis points versus last year and driven by an increase in merchandise margin, mostly due to tariff favorability. Adjusted SG&A was 19.7%, unfavorable by 20 basis points versus last year and driven by incremental store wage and payroll costs. Net interest income was neutral to pre-tax profit margin versus last year. Adjusted diluted earnings per share were $1.22, up 11% versus last year and well above our plan. Q2 adjusted pre-tax profit margin and adjusted diluted earnings per share significantly exceeded our plan primarily due to operational expense efficiencies, a higher merchandise margin, and expense leverage on better sales, partially offset by contributions to TJX's charitable foundations. Now to our Q2 divisional performance.

Speaker #4: Adjusted SG&A was 19.7%, unfavorable by 20 basis points versus last year, and driven by incremental store wage and payroll costs. Net interest income was neutral to pre-tax profit margin versus last year.

Speaker #4: Adjusted diluted earnings per share were $1.22, up 11% versus last year, and well above our plan. Second-quarter adjusted pre-tax profit margin and adjusted diluted earnings per share significantly exceeded our plan, primarily due to operational expense efficiencies—a higher merchandise margin and expense leverage on better sales, partially offset by contributions to TJX's charitable foundations.

Speaker #4: Now to our second quarter divisional performance. At Marmaxx, comp sales increased 1%, entirely driven by a higher average basket, partially offset by a small decrease in customer transactions.

John Klinger: At Marmaxx, comp sales increased 1% and were entirely driven by a higher average basket, partially offset by a small decrease in customer transactions. While sales were lower than we would have liked, comp sales increased across all region and income demographic bands. Adjusted segment profit was 14.2%, flat versus last year. We delivered another good quarter of sales performance at our Sierra stores as we continue to grow this chain across the US. At our US e-commerce sites, we continued to add new brands to deliver even more freshness for our online shoppers. We are excited about the initiatives we have planned for our TJ Maxx, Marshalls, and Sierra banners this fall and holiday season. Long term, we are confident in the market share opportunities we see for our largest division.

Speaker #4: While sales were lower than we would have liked, comp sales increased across all regions and income demographic bands. Adjusted segment profit was 14.2%, flat versus last year.

Speaker #4: We delivered another good quarter of sales performance at our Sierra stores as we continue to grow this chain across the U.S. At our U.S. e-commerce sites, we continued to add new brands to deliver even more freshness for our online shoppers.

Speaker #4: We are excited about the initiatives we have planned for our T.J. Maxx, Marshalls, and Sierra banners this fall and holiday season. Long term, we are confident in the market share opportunities we see for our largest division.

Speaker #4: HomeGoods delivered an outstanding 7% comp sales increase, primarily driven by higher average basket, and customer transactions were also up. We are very pleased to see strength at both our HomeGoods and HomeSense banners, and across all regions and income demographic bands.

John Klinger: HomeGoods delivered an outstanding 7% comp sales increase, primarily driven by higher average basket and customer transactions were also up. We are very pleased to see strength at both our HomeGoods and HomeSense banners and across all region and income demographic bands. Adjusted segment profit margin was 12.4%, up 240 basis points. Our HomeGoods and HomeSense banners offer customers a highly differentiated mix of home fashions from around the world at compelling values. We are the largest off-price home fashion retailer in the US and believe that we are set up very well to continue to capture an even larger share of the market going forward. At TJX Canada, comp sales were excellent, increasing by 6%. The comp was primarily driven by an increase in customer transactions. Adjusted segment profit margin on a constant currency basis was 16.3%, up 30 basis points.

Speaker #4: Adjusted segment profit margin was 12.4%, up 240 basis points. Our HomeGoods and HomeSense banners offer customers a highly differentiated mix of home fashions from around the world at compelling values.

Speaker #4: We are the largest off-price home fashion retailer in the U.S., and we believe that we are set up very well to continue to capture an even larger share of the market going forward.

Speaker #4: At TJX Canada, comp sales were excellent, increasing by 6%. The comp was primarily driven by an increase in customer transactions. Adjusted segment profit margin, on a constant currency basis, was 16.3%, up 30 basis points.

Speaker #4: We are the leading off-price retailer in Canada and are very pleased with our strong brand awareness and loyal shopper base. We continue to see an opportunity to further grow across Canada with our three retail banners.

John Klinger: We are the leading off-price retailer in Canada and are very pleased with our strong brand awareness and loyal shopper base. We continue to see an opportunity to further grow across Canada with our three retail banners. At TJX International, comp sales increased an outstanding 7%. This comp was also primarily driven by an increase in customer transactions. We were extremely pleased with the strong, consistent sales performance in Europe and excellent sales in Australia. Adjusted segment profit margin on a constant currency basis was 7.3%, up 210 basis points. During the quarter, we opened our second TJ Maxx store in Spain, and again, customer response was extremely positive. We are excited about our growth plans for our international division and have great confidence that we can attract even more shoppers in Europe and Australia over the long term. Moving to inventory.

Speaker #4: At TJX International, comp sales increased an outstanding 7%. This comp was also primarily driven by an increase in customer transactions. We were extremely pleased with the strong, consistent sales performance in Europe and excellent sales in Australia.

Speaker #4: Adjusted segment profit margin on a constant currency basis was 7.3%, up 210 basis points. During the quarter, we opened our second TK Maxx store in Spain and, again, customer response was extremely positive.

Speaker #4: We are excited about our growth plans for our international division and have great confidence that we can attract even more shoppers in Europe and Australia over the long term.

Speaker #4: Moving to inventory. Second quarter balance sheet inventory was up 7%, and inventory on a per-store basis was up 2%. We feel great about our inventory levels and are convinced that we are well positioned to take advantage of the plentiful buying opportunities in the marketplace.

John Klinger: Second quarter balance sheet inventory was up 7%, and inventory on a per store basis was up 2%. We feel great about our inventory levels and are convinced that we are well-positioned to take advantage of the plentiful buying opportunities in the marketplace. As to our capital allocation, we continue to reinvest in the growth of our business while returning $1.3 billion to shareholders through our buyback and dividend programs in the second quarter. Now I'll turn it back to Ernie.

Speaker #4: As to our capital allocation, we continue to reinvest in the growth of our business while returning $1.3 billion to shareholders through our buyback and dividend programs in the second quarter.

Speaker #4: Now, I'll turn it back to Ernie.

Speaker #2: Thanks, John. I'd like to start by highlighting the opportunities we see that give us confidence that we can drive sales and traffic in the second half of the year.

Ernie Herrman: Thanks, John. I would like to start by highlighting the opportunities we see that give us confidence that we can drive sales and traffic in the H2 of the year. First, we are confident that consumers will continue to look for value in the current environment. We believe we have a large and deeply passionate customer base, strong brand perceptions, and an offering that resonates across many age and income brackets. We are convinced that we remain a very attractive option for shoppers who want great brands and fashions at excellent value, and believe they will seek out our retail banners this fall and holiday season. Second, we are excited about the product category initiatives that we have planned. We have become a year-round gifting destination and feel particularly good about our initiatives in this area.

Speaker #2: First, we are confident that consumers will continue to look for value in the current environment. We believe we have a large and deeply passionate customer base, strong brand perceptions, and an offering that resonates across many age and income brackets.

Speaker #2: We are convinced that we remain a very attractive option for shoppers who want great brands in fashion at excellent value, and believe they will seek out our retail banners this fall and holiday season.

Speaker #2: Second, we're excited about the product category initiatives that we have planned. We have become a year-round gifting destination, and feel particularly good about our initiatives in this area.

Speaker #2: This strategy has worked well for us, and we believe it helps us stay top of mind for consumers. All of this gives us confidence that our exciting, ever-changing merchandising mix can inspire our shoppers and encourage more frequent visits to our stores.

Ernie Herrman: This strategy has worked well for us, and we believe it helps us stay top of mind for consumers. All of this gives us confidence that our exciting, ever-changing merchandising mix can inspire our shoppers and encourage more frequent visits to our stores. Third, product availability continues to be off the charts across all categories and from a wide range of brands. Further, there continues to be more availability in the marketplace than we could ever buy. I am convinced that our team of more than 1,400 buyers will bring shoppers the right assortments at the right values. Lastly, we are excited about the marketing we have planned for this fall and holiday season. We will continue to follow consumer viewing habits by employing a variety of channels with a strong emphasis on digital and social media.

Speaker #2: Third, product availability continues to be off the charts across all categories and from a wide range of brands. Further, there continues to be more availability in the marketplace than we could ever buy.

Speaker #2: I am convinced that our team of more than 1,400 buyers will bring shoppers the right assortments at the right values. Lastly, we are excited about the marketing we have planned for this fall and holiday season.

Speaker #2: We will continue to follow consumer viewing habits by employing a variety of channels, with a strong emphasis on digital and social media. Our campaigns will continue to reinforce our value leadership with insightful and entertaining creative content that connects with shoppers across a wide range of age and income shopper demographics.

Ernie Herrman: Our campaigns will continue to reinforce our value leadership with insightful and entertaining creative content that connects with shoppers across a wide range of age and income shopper demographics. We believe that our thoughtful, integrated marketing approach will help us attract new customers and keep us top of mind with our existing shoppers. Beyond this year, I am confident that TJX has significant opportunities to capture additional market share over the long term. I will briefly cover the key characteristics of our business that give us confidence. First is our reputation as a trusted value leader in the United States, Canada, Europe, and Australia. We believe this is a tremendous advantage, and our top priority remains offering great value every day to our customers. Second, we are a global sourcing machine.

Speaker #2: We believe that our thoughtful, integrated marketing approach will help us attract new customers and keep us top of mind with our existing shoppers. Beyond this year, I am confident that TJX has significant opportunities to capture additional market share over the long term.

Speaker #2: I'll briefly cover the key characteristics of our business that give us confidence. First is our reputation as a trusted value leader in the United States, Canada, Europe, and Australia.

Speaker #2: We believe this is a tremendous advantage, and our top priority remains offering great value every day to our customers. Second, we are a global sourcing machine.

Speaker #2: We work with a universe of approximately 21,000 vendors every year to curate an unmatched mix of good, better, best merchandise for our customers. Third, we are convinced that we have some of the strongest vendor relationships in retail.

Ernie Herrman: We work with a universe of approximately 21,000 vendors every year to curate an unmatched mix of good, better, best merchandise for our customers. Third, we are convinced that we have some of the strongest vendor relationships in retail. We have decades-long relationships with many of our vendors, both domestically and internationally. Further, we believe vendors love to work with us, as we are in the market buying consistently throughout the year, we can introduce their brand to new consumers, and we offer them a very attractive way to grow their business. Next, we attract shoppers across a wide range of income and age demographics in the United States, Canada, Europe, and Australia. With our proprietary planning and allocation systems and expertise, we can create a differentiated treasure hunt shopping experience that appeals to a broad range of shoppers across each of our markets.

Speaker #2: We have decades-long relationships with many of our vendors, both domestically and internationally. Further, we believe vendors love to work with us, as we are in the market buying consistently throughout the year, we can introduce their brand to new consumers, and we offer them a very attractive way to grow their business.

Speaker #2: Next, we attract shoppers across a wide range of income and age demographics in the United States, Canada, Europe, and Australia. With our proprietary planning and allocation systems and expertise, we can create a differentiated treasure-hunt shopping experience that appeals to a broad range of shoppers across each of our markets.

Speaker #2: Fifth, many aspects of our business are driven by flexibility, which we see as a key advantage. This includes our buying, our store formats, and our supply chain and systems.

Ernie Herrman: Fifth, many aspects of our business are driven by flexibility, which we see as a key advantage. This includes our buying, our store formats, and our supply chain and systems. Next, we continue to see tremendous opportunity to significantly grow our store base around the world. Today, we are increasing our long-term store growth potential by 500 stores to a total of 7,500 stores, or over 2,200 more stores with just our existing retail banners within our current 10 countries. This now reflects the long-term potential for our TJ Maxx and Marshalls banners to expand an additional 300 stores to a combined 3,300 stores, and for the HomeGoods division to expand an additional 200 stores to 2,000 stores. Further, we are planning to accelerate our store openings to 4% starting next year to take advantage of the growth opportunities we see out there.

Speaker #2: Next, we continue to see tremendous opportunities to significantly grow our store base around the world. Today, we are increasing our long-term store growth potential by 500 stores to a total of 7,500 stores, or over 2,200 more stores.

Speaker #2: With just our existing retail banners within our current 10 countries, this now reflects the long-term potential for our T.J. Maxx and Marshalls banners to expand an additional 300 stores to a combined 3,300 stores and for the HomeGoods division to expand an additional 200 stores to 2,000 stores.

Speaker #2: Further, we are planning to accelerate our store openings to 4% starting next year, to take advantage of the growth opportunities we see out there.

Speaker #2: I want to assure you that we are extremely confident there will be plenty of quality merchandise available to us to support our growth plans.

Ernie Herrman: I want to assure you that we are extremely confident that there will be plenty of quality merchandise available to us to support our growth plans. Last, and most importantly, is our exceptional talent around the world. I truly believe that the depth of our off-price knowledge and expertise, and the longevity of our talent within TJX is unmatched. Talent development has always been a priority, and we remain laser-focused on teaching and training the next generation of TJX leaders. Also, I am very proud of our culture and believe that it will be a tremendous advantage as we continue our growth around the world. I'm convinced that the combination of all these core strengths of our business set us apart from many other major retailers.

Speaker #2: Last, and most importantly, is our exceptional talent around the world. I truly believe that the depth of our off-price knowledge and expertise, and the longevity of our talent within TJX, is unmatched.

Speaker #2: Talent development has always been a priority, and we remain laser-focused on teaching and training the next generation of TJX leaders. Also, I am very proud of our culture and believe that it will be a tremendous advantage as we continue our growth around the world.

Speaker #2: I am convinced that the combination of all these core strengths of our business sets us apart from many other major retailers. Further, I believe these have allowed us to successfully navigate many different kinds of retail and macro environments over our nearly 50 years as a company.

Ernie Herrman: Further, I believe these have allowed us to successfully navigate many different kinds of retail and macro environments over our nearly 50 years as a company, and I am confident they will continue to benefit us. Summing up, we are pleased with the overall performance of TJX in Q2. Again, our above-plan results demonstrate the power and benefits of our global diversified business. I want to reiterate that at Marmaxx, we have seen a sales improvement to start Q3 and are confident we will see greater improvement by the holiday selling season. Q3 is off to a strong start, and we believe we are strongly positioned in today's consumer environment. We are excited about the initiatives we have planned for the remainder of the year.

Speaker #2: And I am confident they will continue to benefit us. Summing up, we are pleased with the overall performance of TJX in the second quarter.

Speaker #2: Again, our above planned results demonstrate the power and benefits of our global, diversified business. I want to reiterate that at Marmax, we have seen a sales improvement to start the third quarter and are confident we will see greater improvement by the holiday selling season.

Speaker #2: The third quarter is off to a strong start, and we believe we are strongly positioned in today's consumer environment. We are excited about the initiatives we have planned for the remainder of the year.

Speaker #2: Importantly, over the near and long term, we plan to continue to play offense in our approach to marketing, merchandising, the in-store shopping experience, global store growth, and our investment in talent.

Ernie Herrman: Importantly, over the near and long term, we plan to continue to play offense in our approach to marketing, merchandising, the in-store shopping experience, global store growth, and our investment in talent. I'm convinced that TJX is set up extremely well to capitalize on the growth opportunities that we see around the world for many years to come. Now, I'll turn the call back to John to cover our guidance, and then we'll open it up for questions.

Speaker #2: I am convinced that TJX is extremely well set up to capitalize on the growth opportunities that we see around the world for many years to come.

Speaker #2: Now, I'll turn the call back to John to cover our guidance, and then we'll open it up for questions.

Speaker #1: Thanks again, Ernie. As a recap, our guidance for the remainder of the year—I’m going to speak to everything on an adjusted basis, which excludes the benefit from tariff refunds that we received in the second quarter and expect to receive in the third quarter.

John Klinger: Thanks again, Ernie. As I recap our guidance for the remainder of the year, I am going to speak to everything on an adjusted basis, which excludes the benefit from tariff refunds that we received in Q2 and expect to receive in Q3. Our adjusted guidance also excludes incremental compensation expense accruals related to the tariff refunds for Q2, Q3, and Q4. Again, reconciliations can be found on the investor section of our website tjx.com. Starting with Q3, we are planning overall comp sales to be up 2% to 3%, consolidated sales to be in the range of $15.6 billion to $15.8 billion, up 3% to 5% versus last year. Adjusted pre-tax profit margin to be in the range of 12.3% to 12.4%, down 30 to 40 basis points versus last year's 12.7%.

Speaker #1: Our adjusted guidance also excludes incremental compensation expense accruals related to the tariff refunds for the second, third, and fourth quarters. Again, reconciliations can be found on the Investor section of our website.

Speaker #1: Starting with the third quarter, we are planning overall comp sales to be up 2 to 3%. Consolidated sales are expected to be in the range of $15.6 to $15.8 billion, up 3 to 5% versus last year.

Speaker #1: Adjusted pre-tax profit margin to be in the range of 12.3% to 12.4%, down 30 to 40 basis points versus last year's 12.7%. Adjusted gross margin to be in the range of 32.1% to 32.2%, which would be down 40 to 50 basis points versus last year's 32.6%.

John Klinger: Adjusted gross margin to be in the range of 32.1% to 32.2%, which would be down 40 to 50 basis points versus last year's 32.6%. This would be primarily driven by higher fuel costs. Adjusted SG&A to be 20%, 10 basis points favorable versus last year's 20.1%. We are assuming net interest income of $28 million, which we expect will be neutral to our Q3 pre-tax profit margin versus last year. This assumes that we will pay off the $1 billion note maturing in September. Our Q3 guidance assumes a tax rate of 24.6% and a weighted average share count of approximately 1.11 billion shares. As a result of these assumptions, we are expecting Q3 adjusted diluted earnings per share to be in the range of $1.30 to $1.32, up 2% to 3% versus last year's $1.28.

Speaker #1: This would be primarily driven by higher fuel costs. Adjusted SG&A to be 20%, 10 basis points favorable versus last year's 20.1%. We're assuming net interest income of $28 million, which we expect will be neutral to our third quarter pre-tax profit margin versus last year.

Speaker #1: This assumes that we will pay off the $1 billion note maturing in September. Our third quarter guidance assumes a tax rate of 24.6% and a weighted average share count of approximately 1.11 billion shares.

Speaker #1: As a result of these assumptions, we're expecting third-quarter adjusted diluted earnings per share to be in the range of $1.30 to $1.32, up 2% to 3% versus last year's $1.28.

Speaker #1: Moving to the full year, we continue to expect overall comp sales growth of 3% to 4%. We expect full year consolidated sales to be in the range of $63.4 billion to $63.8 billion, up 5% to 6% versus last year.

John Klinger: Moving to the full year, we continue to expect overall comp sales growth of 3% to 4%. We expect full-year consolidated sales to be in the range of $63.4 billion to $63.8 billion, up 5% to 6% versus last year. We are increasing our full-year adjusted pre-tax profit margin guidance to be in the range of 12% to 12.1%, up 30 to 40 basis points versus last year's adjusted 11.7%. We now expect full-year adjusted gross margin to be in the range of 31.2% to 31.3%, up 20 to 30 basis points versus last year's adjusted 31%. We now expect full-year adjusted SG&A to be 19.5%, flat versus last year's adjusted 19.5%. We are assuming net interest income of about $131 million, which we expect to be neutral to our full-year pre-tax profit margin versus last year.

Speaker #1: We are increasing our full-year adjusted pre-tax profit margin guidance to be in the range of 12% to 12.1%, up 30 to 40 basis points versus last year's adjusted 11.7%.

Speaker #1: We now expect full-year adjusted gross margin to be in the range of 31.2% to 31.3%, up 20 to 30 basis points versus last year's adjusted 31%.

Speaker #1: We now expect full-year adjusted SG&A to be 19.5%, flat versus last year's adjusted 19.5%. We're assuming net interest income of about $131 million, which we expect to be neutral to our full-year pre-tax profit margin versus last year.

Speaker #1: Our full-year guidance also assumes a tax rate of 24.6% and a weighted average share count of approximately 1.12 billion shares. As a result of these assumptions, we're increasing our full-year adjusted diluted earnings per share to be in the range of $5.15 to $5.20, up 9% to 10% versus last year's adjusted $4.73.

John Klinger: Our full-year guidance also assumes a tax rate of 24.6% and weighted average share count of approximately 1.12 billion shares. As a result of these assumptions, we are increasing our full-year adjusted diluted earnings per share to be in the range of $5.15 to $5.20, up 9% to 10% versus last year's adjusted $4.73. Lastly, our implied guidance for Q4 assumes no further tax refunds and excludes the incremental expense accruals related to the Q3 and Q4 tariff refunds. For Q4, we are expecting overall comp sales to be up 2% to 3%, adjusted pre-tax profit margin to be in the range of 11.9% to 12%, down 20 to 30 basis points versus last year's adjusted 12.2%, and adjusted diluted earnings per share to be in the range of $1.44 to $1.47, up 1% to 3% versus last year's $1.43.

Speaker #1: Lastly, our implied guidance for the fourth quarter assumes no further tax refunds and excludes the incremental expense accruals related to the third- and fourth-quarter tariff refunds.

Speaker #1: For the fourth quarter, we are expecting overall comp sales to be up 2% to 3%, and adjusted pre-tax profit margin to be in the range of 11.9% to 12%, down 20 to 30 basis points versus last year's adjusted 12.2%.

Speaker #1: Adjusted diluted earnings per share are expected to be in the range of $1.44 to $1.47, up 1% to 3% versus last year's $1.43. In closing, I want to reiterate that we are excited about the growth in market share opportunities we see in the near and long term.

John Klinger: In closing, I want to reiterate that we are excited about the growth and market share opportunities we see in the near and long term. We are in an excellent position to continue to invest in the growth of TJX, while simultaneously returning significant cash to our shareholders. Thank you, and now we are happy to take your questions.

Speaker #1: We are in an excellent position to continue to invest in the growth of TJX, while simultaneously returning significant cash to our shareholders. Thank you, and now we're happy to take your questions.

Speaker #2: Thank you. Our first question comes from Matthew Boss. Your line is open.

Operator: Thank you. Our first question comes from Matthew Boss. Your line is open.

Speaker #3: Great, thanks. So, two questions. Ernie, first, could you speak to the progression of same-store sales at Marmaxx during the second quarter, and elaborate on the sales improvement that you cited in August at Marmaxx, and the drivers of the strong start to the third quarter?

Matthew Boss: Great. Thanks. Two questions. Ernie, first, could you speak to the progression of same-store sales at Marmaxx during Q2 and elaborate on the sales improvement that you cited in August at Marmaxx and drivers of the strong start to Q3? John, could you talk to the recent new store performance metrics that you have seen and the opportunity you see today to raise your store target?

Speaker #3: And then, John, could you talk to the recent new store performance metrics that you've seen, and just the opportunity you see today to raise your store target?

Speaker #1: Sure.

John Klinger: Sure.

Ernie Herrman: Yeah. Okay, Matt. I think John, you want to take that?

Speaker #4: Okay, Matt. I think John, you want to cover the quarter, and then I'll take over.

John Klinger: I mean, I will start with the

Ernie Herrman: The quarter, then I will take over.

Speaker #1: So, across the board, we came out stronger in May, and then we saw consistent sales in June and July, pretty much across the board.

John Klinger: Across the board, we came out stronger in May, then we saw consistent sales in June and July, pretty much across the board.

Speaker #4: And then, Matt, on I think you're referring to talking about the strong start to the quarter and what we're seeing there. Yeah, across all of the across all of the businesses and we mentioned that one of the strengths that you see here and obviously there's a concern about the MarMax comp that we had as well.

Ernie Herrman: Matt, on, I think you are referring to talking about the strong start to the quarter and what we are seeing there. Across all of the businesses, and we mentioned, one of the strengths that you see here, and obviously there is a concern about the Marmaxx comp that we had as well, but I think what we exemplified here in this quarter is the ability to be consistent by having all of our other businesses outperform, and significantly. From Canada to Europe to HomeGoods, then Marmaxx underperforming due to some execution issues. I would tell you all of them, I like the way we are trending with all of them starting off this Q3 in August. Marmaxx, we are seeing improvement from where we were trending before. Then I am really looking for Marmaxx as we move ahead, to see more significant improvement as we get to Q4.

Speaker #4: But I think in this quarter, it's the ability to be consistent by having all of our other businesses outperform, and significantly—from Canada to Europe to HomeGoods—and then MarMax underperforming due to some execution issues.

Speaker #4: I would tell you, all of them, I like the way we're trending with all of them starting off this Q3 in August. MarMaxx—we're seeing improvement from where we were trending before.

Speaker #4: And then I'm really looking for MarMax, as we move ahead, to see more significant improvement as we get into the fourth quarter. But I think you're asking about overall strong start across the board.

Ernie Herrman: I think you are asking about overall strong start across the board.

Speaker #1: And then to answer your second question, we look at this obviously very frequently—our store potential—and we have been seeing for a bit of time that we had some opportunity in MarMaxx and HomeGoods to continue to grow our store base.

John Klinger: To answer your second question, we look at this, obviously, very frequently, our store potential. We have been seeing for a bit of time that we had some opportunity in Marmaxx and HomeGoods to continue to grow our store base. We took the opportunity this quarter to increase Marmaxx by 300 stores, HomeGoods by 200 stores. Again, for Marmaxx, we are seeing opportunities in rural markets where we see department stores are closing. We are seeing the opportunity as the store, as we have experienced strong comp growth for so many quarters, that we are seeing the ability to put stores closer together than we thought before. The small format store that allows us to expand in a lot of densely populated urban areas as well.

Speaker #1: So, we took the opportunity this quarter to increase MarMaxx by 300 stores and HomeGoods by 200 stores. And again, for MarMaxx, we're seeing opportunities in rural markets where we see department stores are closing.

Speaker #1: We're seeing the opportunity as the store, as we've experienced strong comp growth for so many quarters, that we're seeing the ability to put stores closer together.

Speaker #1: Then, we thought before, and then the small format store that allows us to expand in a lot of densely populated urban areas as well.

Speaker #1: And so, we've been seeing the opportunities to increase our store growth potential in the annual growth from what we were saying before—a unit 3% growth to 4% growth—based on the availability that we're seeing pretty much across the board.

John Klinger: We have been seeing the opportunities to increase our store growth potential, and the annual growth from what we were saying before, a unit 3% growth to 4% growth based on the availability that we are seeing pretty much across the board. When we look at where we see the opportunities, we see it across every single brand that we have.

Speaker #1: And so, when we look at where we see the opportunities, we see it across every single brand that we have.

Speaker #4: Yeah, so to John's point, Matt, we're seeing that additional 1% store growth across the board also. That's not just one division or two divisions driving that.

Ernie Herrman: Yeah. So to John's point, Matt, we are seeing that additional 1% store growth across the board also. That is not just a one division or two division driving that. The other thing I think the teams have done a good job is getting more flexible in our approach to the smaller format. What John is talking about is our teams, whether it is planning an allocation that ships the goods to the stores, and our real estate division, which designs and constructs the stores, finds the locations. We are getting more flexible based on population density, et cetera, in some of these locations, as John mentioned.

Speaker #4: The other thing I think the teams have done a good job with is getting more flexible in our approach to the smaller formats. What John's talking about is our teams—whether it's planning and allocation that shifts the goods to the stores, or our real estate division which designs and constructs the stores, finds the locations—we're getting more flexible based on population density, etc.

Speaker #4: And some of these locations, as John mentioned, which I think is also opening up opportunity.

John Klinger: Yeah.

Ernie Herrman: Which I think is also opening up opportunity.

Speaker #1: Right. And then, just to—I know you asked this and I didn't—our new stores, for a long, long time, we've been exceeding our expectations on our new store openings for quite a while.

John Klinger: Right. Then, I know you asked this and I didn't answer it, the performance of our new stores, for a long time, we've been exceeding our expectations on our new store openings for quite a while.

Speaker #1: And so, we see no concerns there, either.

John Klinger: So we see no concerns there either.

Speaker #3: That's great color. Best of luck.

Matthew Boss: That's a great color. Best of luck.

Speaker #1: Thanks.

Ernie Herrman: Thank you.

Speaker #4: Thank you.

Speaker #2: Our next question comes from Lorraine Hutchinson. Your line is open.

Operator: Our next question comes from Lorraine Hutchinson. Your line is open.

Speaker #5: Thank you. Good morning. I just wanted to give a little more insight on—thanks. I was hoping to get a little more insight on what went wrong at MarMax.

Lorraine Hutchinson: Thank you. Good morning.

Ernie Herrman: Good morning, Lorraine.

Lorraine Hutchinson: Thanks. I was hoping to get a little more insight on what went wrong at Marmaxx, the steps you've taken to fix it.

Speaker #5: The steps you've taken to fix it, and then how quickly do you think you'll be back to a more normal 2% to 3% comp cadence at Marmaxx specifically?

Ernie Herrman: Yep.

Lorraine Hutchinson: How quickly do you think you'll be back to a more normal 2% to 3% comp cadence at Marmaxx specifically?

Speaker #4: Yep. Yeah, great question, Lorraine. Obviously, this is one that we thought would be important to discuss on the call, which is why we had it in the script as well.

Ernie Herrman: Yep. Yeah, great question, Lorraine. Obviously, this is one that we thought would be important to discuss on the call, which is why we had it in the script as well. Without giving specifics to the families of business, which you know we can never do that, if you go back, you've covered us for a while, even a number of years ago, we had execution issues. We didn't give the areas specifically because of competitive reasons. However, what we can say is we've identified, it was pretty obvious to which areas they are in, where we did not have, I would say, the right mix, merchandise mix in TJ Maxx and in Marshalls, and it was really entirely. It's self-inflicted and within our control.

Speaker #4: We're well, without giving specifics as to the families of business—which, you know, we can never do that—if you go back, you've covered us for a while.

Speaker #4: Even a number of years ago, we had execution issues. We didn't give the areas specifically because of competitive reasons. However, what we can say is we've identified—it was pretty obvious to which areas they are in—where we did not have, I would say, the right merchandise mix in TJ Maxx and in Marshalls.

Speaker #4: And it was really entirely self-inflicted and within our control, to the point that I've been involved and all teams have been involved in those areas, which involved the merchants, buyers, merchandise managers, GMMs, senior merchants—our planning and allocation teams were involved.

Ernie Herrman: To the point that I've been involved, and all teams have been involved in those areas, which involved the merchants, buyers, merchandise managers, GMMs, senior merchants. Our planning and allocation teams were involved in identifying the execution issues. All the way from buyers and planning, all the way up to me. Everyone's involved. We've identified them, and I think we're well on our way to fixing the issues. I think you know from our past that when we focus on a missed execution issue, we are able to fix it pretty readily. I would say, and you started to hint at that in your question, what type of timing gets us back to the two to three. I would say we're seeing a trend improvement already in August versus in Q2.

Speaker #4: And identifying means all the way from buyers and planning all the way up to me. Everyone's involved. We've identified them, and I think we're well on our way to fixing the issues.

Speaker #4: I think you know from our past that when we focus on missed execution issues, we are able to fix them pretty readily. I would say, when you— and you started to hint at that in your question, what type of timing gets us back to the two to three, I would say we’re seeing a trend improvement already in August versus in Q2.

Speaker #4: I am most confident we'll be seeing what you're talking about by Q4, and I think a transition toward that over the next couple of months.

Ernie Herrman: I am most confident we will be seeing what you are talking about by Q4, and I think a transition toward that over the next couple of months. I hate to lock myself down on an exact number right now, but we are feeling really good about it. Again, everyone is involved. We know exactly where we fell down. I would tell you, it had nothing to do with, if there is any question on, did this have to do with any competition out there of any sorts, it had nothing to do with that. We have actually gone out and measured where our stores are versus direct off-price competitors, and our comps are actually pretty much identical to wherever direct off-price competitors are near us versus away from us. Our stores are comping identically. Which, by the way, the good and the bad of that is it tells us it is our own execution.

Speaker #4: I hate to lock myself in on an exact number right now, but we're feeling really good about it. Again, everyone is involved. We know exactly where we fell down.

Speaker #4: And I would tell you we had nothing to do with—if there’s any question on, did this have to do with any competition out there of any sorts?

Speaker #4: It had nothing to do with that. We've measured—we've actually gone out and measured where our stores are versus direct off-price competitors. And our comps are actually pretty much identical whether direct off-price competitors are near us or away from us.

Ernie Herrman: We have actually gone out and measured where our stores are versus direct off-price competitors, and our comps are actually pretty much identical to wherever direct off-price competitors are near us versus away from us. Our stores are comping identically. Which, by the way, the good and the bad of that is it tells us it is our own execution.

Speaker #4: Our stores are comping identically. Which, by the way, the good and the bad of that is it tells us it's our own execution.

Speaker #4: So, I guess in the past, I always talk to the teams. It's really always up to us, generally, when we've had a tough business.

Ernie Herrman: I guess, in the past, I always talk to the teams, it is really always up to us, generally, when we have had a tough business. I go back to, on a much larger scale, John and I talk about this always. When you go back to Europe a number of years ago, as you know, we did not have strong execution there. In fact, we put in an objective of sales and getting to a more profitable bottom line. That took a little longer than this will take, by far. But that was something, we identified execution issues there, and we fixed it on a large scale, total business situation. Hopefully, that answers your question, but obviously, a very pertinent question. Thanks, Ernie.

Speaker #4: So I go back to, on a much larger scale—John and I talk about this always—when you go back to Europe a number of years ago, as you know, we did not have strong execution there.

Speaker #4: In fact, we put in an objective of sales and getting to a more profitable bottom line that took a little longer than this will take, by far.

Speaker #4: But that was something where we identified execution issues. And we fixed it on a large-scale, total business situation. So hopefully, that answers your question.

Speaker #4: But obviously, very pertinent question.

Speaker #5: Thanks, Ernie.

Lorraine Hutchinson: Thanks, Ernie.

Speaker #2: Our next question comes from Paul Luez.

Operator: Our next question comes from Paul Lejuez.

Paul Lejuez: Hey, thanks, guys. Just a clarification. I think you said May started stronger, and then June, July was similar. Curious if June, July were both positive, and if quarter to date is positive. Then on the small decline in transactions that you referenced, Ernie, on the Marmaxx side, curious if that was traffic driven or conversion, and if there is anything that might be a little off from a price point perspective that might be impacting your conversion, maybe going a little bit too high. Curious if you could talk about that dynamic.

Speaker #6: Hey, thanks, guys. Just a clarification: I think you said May started stronger, and then June and July were similar. Curious if June and July were both positive, and if quarter-to-date is positive. And then, on the small decline in transactions that you referenced, Ernie, on the Marmaxx side, curious if that was traffic-driven or conversion.

Speaker #6: And if there’s anything that might be a little off from a price point perspective that might be impacting your conversion—maybe even a little bit too high.

Speaker #6: Curious if you could talk about that dynamic.

Speaker #1: Yeah, so just to clarify—and I believe you’re specifically asking about Marmax. Marmax started the quarter slightly stronger in May. June and July were consistent. All three months were positive comps.

Ernie Herrman: Yeah. Just to clarify, I believe you are specifically asking about Marmaxx. Marmaxx started the quarter slightly stronger in May. June and July were consistent. All three months were positive comps. The decline in transactions, from what we can see, had nothing to do with conversion, and more to do in the cases of where we did not have. It was not a like item where retails went up and the value was not good. We have comp shopped aggressively. Our values are really the best around. Nobody is underselling us. What it is, without giving specifics, it is more about what we did not have in the mix. What that does is you do not necessarily capture that sale. It was not really an execution on what we had in the mix. That would apply to really all of those handful of areas that I spoke about earlier.

Speaker #1: Yep.

Speaker #4: The decline in transactions from what we can see had nothing to do with conversion. And more to do in cases of where we didn't have we had it wasn't a like item where retails went up and the value wasn't good.

Speaker #4: We have comp shopped aggressively. Our values are really the best around. Nobody is underselling us. And what it is—without giving specifics—it's more about what we didn't have in the mix.

Speaker #4: And so what that does is, you don't necessarily capture that sale. And it wasn't really an execution on what we had in the mix.

Speaker #4: So, and that would apply to really all of those handful of areas that I spoke about earlier. And so that's when you're just not—you're not selling the customer when she's in.

Ernie Herrman: That is when you are not selling the customer when she is in. I guess you could say, if we had it, would we have converted on the visit a little higher? Hard to measure that. We know, again, what the problem was there.

Speaker #4: I guess you could say, if we had it, would we have converted on the visit a little higher? Hard to measure that. But we know, again, what the problem was there.

Speaker #1: Yeah.

Paul Lejuez: Yeah. Ernie, do you think not having that was more of a traffic issue, that customers knew that the product was not there, right?

Speaker #6: Well, Ernie, you did not have— that was more of a traffic issue, that customers knew that the product wasn't there. Right?

Ernie Herrman: No. Because again, our traffic is driven off of every day. A lot of our traffic is word of mouth, is just constant traffic, right? We have a regular frequency of traffic. We do not do institutional price and item advertising. People know that we are a treasure hunt operate, right? We are a treasure hunt. So they know we are going to sometimes have things or not have things. The issue is if we do not have some of these things that are kind of impulse driven, they are in the store, and maybe they would have picked it up anyway. They do not necessarily know we are going to have. That is where we lost some. Then we did lose some on categories that were more basic. Again, I cannot give you what they are for competitive reasons, where we did not have the appropriate mix.

Speaker #4: No, no, no, no. Because again, our traffic is driven off of—every day, a lot of our traffic is word of mouth. It's just constant traffic, right?

Speaker #4: We have a regular frequency of traffic. We don't do institutional price and item advertising, so—and people know that we're a treasure hunt operator, right?

Speaker #4: We're a treasure hunt, so they know we're going to sometimes have things or not have things. The issue is, if we don't have some of these things that are kind of impulse-driven, they're in the store and maybe they would have picked it up anyway.

Speaker #4: They don't necessarily know we're going to have. That's where we lost some. Then we did lose some on categories that were more basic. Again, I can't give you what they are.

Speaker #4: For competitive reasons, where we didn't have the appropriate mix. I don't think the customer knew we didn't have it, but they probably came in and weren't able to buy it.

Ernie Herrman: I don't think the customer knew we didn't have it, but they probably came in and weren't able to buy it. I mean, our transactions

Speaker #4: So yeah.

Speaker #1: I mean, we quote our transactions through the register. No, it's not football.

John Klinger: We quote our transactions through the register.

Ernie Herrman: Right.

John Klinger: It's not footfall.

Speaker #4: We don't have people counters.

Ernie Herrman: We don't have people counters.

Speaker #1: Yeah.

John Klinger: Yeah.

Speaker #4: Yeah.

Ernie Herrman: Yeah.

Speaker #6: Got it. Okay. Thank you.

Paul Lejuez: Got it. Okay. Thank you.

Ernie Herrman: You are on, Paul, definitely the right. I would be asking the same question.

Speaker #4: You're on, Paul. Definitely the right— I would be asking the same question.

Speaker #6: Thank you. Good luck.

Paul Lejuez: Thank you. Good luck.

Speaker #4: Thank you.

Ernie Herrman: Thank you.

Speaker #2: Our next question comes from Brooke Roach. Your line is open. Good morning, and thank you for taking our question. Ernie, a moment ago you spoke to execution issues as more of a factor of what you didn't have in the mix than what you did.

Operator: Our next question comes from Brooke Roach. Your line is open.

Brooke Roach: Good morning, and thank you for taking our question. Ernie, a moment ago, you spoke to execution issues as more of a factor of what you did not have in the mix than what you did.

Speaker #2: Your buyers typically have a very strong knowledge of knowing exactly what the customer wants and what categories and items are trending. What do you think led to this misstep in their knowledge of the pulse of the customer?

Ernie Herrman: Yep.

Brooke Roach: Your buyers typically have a very strong knowledge in knowing exactly what the customer wants and what categories and items are trending. What do you think led to this misstep on their knowledge of the pulse of the customer? What changes are you implementing in buying and allocation to be a little bit more consistent as you move into that important holiday season?

Speaker #2: And what changes are you implementing in buying and allocation to be a little bit more consistent as you move into that important holiday season?

Speaker #4: Yeah. So we have—again, I can't give you the exact thing—we've instituted two more systematic changes in planning. I can't tell you what they are.

Ernie Herrman: Yeah. Again, I cannot give you the exact We have instituted 2 more systematic changes, in planning. I cannot tell you what they are, but planning is putting in something that will help monitor the situation so that it does not happen to that degree. Again, remember, we are a bit of an art form secret sauce situation where things are not so rigid. Merchants are making their best calls at the time. Sometimes I like everyone to realize, Marmaxx has quarter after quarter of really strong business, and the last time maybe that we had something like this might have been about 8 years ago. So I want to be careful on overreacting to what was definitely a lack of execution in a handful of areas.

Speaker #4: But planning is putting in something that will help monitor the situation so that it doesn't happen to that degree. Again, remember, we're a bit of an art form, secret sauce situation, where things aren't so rigid. Merchants are making their best calls at the time.

Speaker #4: And sometimes I like everyone to realize Marmax has quarter after quarter of really strong business. And the last time maybe that we had something like this might have been about eight years ago.

Speaker #4: So I want to be careful not to overreact to what was definitely a lack of execution in a handful of areas, because this is something that can happen in a business that’s a bit of an art form.

Ernie Herrman: Because this is something that can happen in a business that is a bit of an art form, and you look for certainly closeouts in certain areas. We plan a little bit ahead, and sometimes we do not put in place the right plans and the right combination of executing to those plans. So there is a lot of moving parts. It is rare, but it can happen. So we put some basically systematic processes in place, some of it really involved from the planning side, ironically, which is supposed to help the buyers on this. I think that is really going to help mitigate this going forward. As well as, by the way, as I think I mentioned earlier, we had everyone involved on these discussions about these areas, from buyers to MMs to GMMs to the President of Marmaxx, the head merchants in Marmaxx, myself, the Senior Executive Vice President also.

Speaker #4: And you look for certain closeouts in certain areas. And we plan a little bit ahead. And sometimes we don't put in place the right plans and the right combination of executing to those plans.

Speaker #4: So, there's a lot of moving parts. It's rare, but it can happen. So, we put some basically systematic processes in place—some of it really is involved from the planning side, ironically, which is supposed to help the buyers.

Speaker #4: On this. And I think that's really going to help mitigate this going forward. As well as, by the way—as I think I mentioned earlier—we had everyone involved in these discussions about these areas, from buyers to MMs to GMMs, to the president of Marmaxx, the head merchants in Marmaxx, myself, the senior executive vice president. Also, I mean, everyone has been involved.

Ernie Herrman: As well as, by the way, as I think I mentioned earlier, we had everyone involved on these discussions about these areas, from buyers to MMs to GMMs to the President of Marmaxx, the head merchants in Marmaxx, myself, the Senior Executive Vice President also.

Ernie Herrman: Everyone has been involved, the heads of planning, et cetera, to get it institutionalized. Good question, Brooke, but I think we have it all kind of circled.

Speaker #4: The heads of planning, etc., to get it institutionalized. So, good question, Brooke. But I think we have it all kind of circled.

Speaker #2: Great. Thanks, Ernie.

Brooke Roach: Great. Thanks, Ernie.

Speaker #4: Welcome.

Ernie Herrman: Welcome.

Speaker #2: Our next question comes from Alex Stratton. Your line is open.

Operator: Our next question comes from Alex Stratton. Your line is open.

Operator: Our next question comes from Alex Straton. Your line is open.

Speaker #6: Perfect. Maybe I'll move on to another division here and talk about HomeGoods. Could you maybe unpack that really strong comp result by traffic or ticket, as well as the categories, and whether you think it's sustainable for that business to continue doing high single-digit comps into the back half?

Alex Stratton: Perfect. Maybe I will move on to another division here and then talk about HomeGoods. Could you maybe unpack that really strong comp result by traffic or ticket as well as the categories and whether you think it is sustainable for that business to continue doing high similar comps into the back half? Similarly, just on this division as well, it has been delivering great substantial underlying margin expansion. Can you talk about what is driving that improvement and if there is any structural constraints as you think about that business potentially becoming a mid-teens margin segment over time? Thanks a lot.

Alex Straton: Perfect. Maybe I will move on to another division here and then talk about HomeGoods. Could you maybe unpack that really strong comp result by traffic or ticket as well as the categories and whether you think it is sustainable for that business to continue doing high similar comps into the back half? Similarly, just on this division as well, it has been delivering great substantial underlying margin expansion. Can you talk about what is driving that improvement and if there is any structural constraints as you think about that business potentially becoming a mid-teens margin segment over time? Thanks a lot.

Speaker #6: And similarly, just on this division as well—it's been delivering great, substantial underlying margin expansion. Can you talk about what's driving that improvement and if there are any structural constraints, if you think about that business potentially becoming a mid-teens margin segment over time?

Speaker #6: Thanks a lot.

Ernie Herrman: That is a very good question, Alex, across the entire HomeGoods business. I like it. First of all, that team has been executing, as you said there when you asked the question, consistently for a while now, and somewhat bucking the trend in the industry, right? I think they have been succeeding really over the last number of years at creating a level of excitement and impulse treasure hunt shopping across anything from domestics categories, which are really second to none in value that we deliver. You could go to our kitchen department with gadgets to kitchen linens to towels, sheets, giftware, gourmet food from Europe to seasonal decor, wall decor. Everything is hitting on all cylinders. We have talked about this before. Their consumable business, items that get replenished, you probably can guess what those categories are.

Speaker #4: That's very good. Question, Alex, across the entire HomeGoods business—I like it. First of all, that team has been executing, as you said there when you asked the question, consistently for a while now.

Speaker #4: And somewhat bucking the trend in the industry, right? I think they have been succeeding really over the last number of years at creating a level of excitement and impulse treasure hunt shopping across anything from domestics categories, which are really second to none in value that we deliver.

Speaker #4: Anywhere from—you could go to our kitchen department with gadgets, to kitchen linens, to towels, sheets, giftware, gourmet food from Europe, to seasonal décor, wall décor—everything is hitting on all cylinders.

Speaker #4: And we've talked about this before—their consumable business: items that get replenished. You can probably guess what those categories are. This team has put in place something that I think is continuing to drive additional steady traffic, because people are now aware not only of all the impulse that everyone for years has written about in HomeGoods.

Ernie Herrman: This team has put in place something that I think is continuing to drive additional steady traffic because people are now aware not only all the impulse that everyone for years has written about in HomeGoods, they are getting day in, day out consumable staple product that they need to replenish on a regular basis. These teams have done an amazing job at that. I think the store execution also in terms of ease of shopping, our store teams there have done an amazing job on the presentation within HomeGoods. It is such an easy store to shop in what in some cases is difficult categories to shop. I think our store execution there is different. I think our home merchants across the corporation, I know you are asking about HomeGoods.

Speaker #4: They're getting a day-in, day-out consumable staple product that they need to replenish on a regular basis. These teams have done an amazing job at that.

Speaker #4: I think the store execution, also in terms of ease of shopping—our store teams there have done an amazing job on the presentation. Within HomeGoods, it's such an easy store to shop.

Speaker #4: In what, in some cases, are difficult categories to shop. And I think our store execution there is different. And I think our home merchants across the corporation—I know you're asking about HomeGoods.

Speaker #4: Our Home business across the corporation, which again is over a third of our business—over 35%, give or take now—is healthy across the board.

Ernie Herrman: Our home business across the corporation, which again, is over a third of our business, over 35%, give or take now, is healthy across the board. I think that is because HomeGoods and a lot of the home merchants collaborate in a strong way. What that has created is an even stronger diversity of mix throughout our home business in HomeGoods and across the rest of the divisions in TJX. So I think we have way more opportunity as we move ahead. By the way, admittedly helped by, I think, the execution of competition in home around the board in every country, and specifically in the United States. Competition there is just not, I would say, up to par and does not give you the fashion utilitarian approach of goods that we deliver in HomeGoods.

Speaker #4: And I think that's because HomeGoods and a lot of the home merchants collaborate in a strong way. And what that has created is an even stronger diversity of mix throughout our home business in HomeGoods and across the rest of the divisions in TJX.

Speaker #4: So I think, yeah, I think we have way more opportunity as we move ahead. By the way, admittedly helped by, I think, the execution of competition in-home.

Speaker #4: Around the board, in every country and specifically in the United States, competition there is just not, I would say, up to par and does not give you the fashion utilitarian approach of goods that we deliver in HomeGoods.

Speaker #4: So, as you can imagine—and you mentioned the margin—I know John will probably speak to that briefly. But also, part of the team is driving top line and margin expansion at a rate that is helping to move the needle within TJX.

Ernie Herrman: As you can imagine, you mentioned the margin. I know John will probably talk to that briefly, but also part of the team, they are driving top line and margin expansion at a rate that is helping to move the needle within TJX. I know you are asking about HomeGoods, I just also have to mention, Canada and Europe are also. Sometimes they do not get in a lot of air time, and I am only bringing it up because you are bringing up one of the other divisions. Those divisions in Canada specifically, is getting close to the size of HomeGoods. Those divisions, profit increases and sales increases. Europe as well, all those teams are executing at a very high level and taking market share in their geographies, as is HomeGoods here domestically. John, I do not know if you have.

Speaker #4: And I know you're asking about HomeGoods. I just also have to mention Canada has Canada and Europe are also sometimes they don't get in a lot of airtime.

Speaker #4: And I'm only bringing it up because you're bringing up one of the other divisions. Those divisions in Canada specifically are getting close to the size of HomeGoods.

Speaker #4: And those divisions’ profit increases and sales increases in Europe as well are continuing. All those teams are executing at a very high level.

Speaker #4: And taking market share in their geographies, as is HomeGoods here domestically. John, I don't know if you have—

Speaker #3: Yeah, just to expand a little bit on what Ernie was talking about there as far as HomeGoods, the biggest driver that Ernie mentioned was, again, the top-line growth.

John Klinger: Yeah, just to expand a little bit on what Ernie was talking about there as far as HomeGoods. The biggest driver that Ernie mentioned was, again, the top-line growth. A 7 comp is certainly going to expand margin. We also had nice operational efficiencies that we saw in the division. Then, of course, the largest item, which is the merchandise margin improvement mainly driven by lower tariff costs.

Speaker #3: I mean, we with 7% comp is certainly going to expand margin. We also had nice operational efficiencies that we saw in the division. And then, of course, the largest item, which is the merchandise margin improvement, mainly driven by lower tariff costs.

Speaker #6: Perfect. Thanks so much. Good luck.

Alex Stratton: Perfect. Thanks so much. Good luck.

Alex Straton: Perfect. Thanks so much. Good luck.

Speaker #4: Thank you.

Ernie Herrman: Thank you.

John Klinger: Thank you.

Speaker #2: Our next question comes from Michael Benetti. Your line is open.

Operator: Our next question comes from Michael Binetti. Your line is open.

Speaker #5: Hey, guys. Thanks for taking our questions. Let me ask a quick one on the gross margin. I think with the strong start to the year before today, there's some potential for maybe upside to the gross margins that you guys were thinking about in the back half.

Michael Binetti: Hey, guys. Thanks for taking our question.

John Klinger: Thank you.

Michael Binetti: Let me ask a quick one on the gross margin. I think, with the strong start to the year before today, there was some potential for maybe upside to the gross margins that you guys were thinking about in the H2. I think you are more or less keeping the H2 the same today for gross margin, maybe 10 basis points lower at the low end or something small like that. Can you maybe just walk us through the changes to the H2 gross margin plan that net out to holding it flat? Maybe it is a boring question, but you added some freight in, and I would assume maybe there are some Marmaxx markdowns. It seems like maybe there was potential for some new positives that we should be considering.

Speaker #5: I think you're more or less keeping the second half the same today. For gross margin, maybe 10 basis points lower at the low end, or something small like that.

Speaker #5: But can you maybe just walk us through the changes to the second-half gross margin plan that net out to holding it flat? And maybe it's a boring question, but you added some freight.

Speaker #5: And I would assume maybe there's some Marmax markdowns. It seems like maybe there was potential for some new positives that we should be considering.

Speaker #3: Yeah. So, Michael, if I'm comparing the first half to the second half, the biggest piece is going to be the fuel and the freight rates that we're seeing.

John Klinger: Michael, if I am comparing the H1 to the H2, the biggest piece is going to be in the freight rates that we are seeing. In the H1, we had favorability on our freight mark to market of our hedges that we had out there. Again, we have to mark to market those at every quarter. The H2, we are seeing higher fuel rates comparatively speaking. Freight rates also, due to what the trucking companies are seeing, they are seeing less driver availability, which is driving up price. That is due to either younger kids that are not going into truck driving or a combination of that and some of the things that we have seen as far as foreign drivers leaving the country, and some of the pressure that we have seen there.

Speaker #3: So in the first half, we had favorability on our freight accruals that we had excuse me, the freight mark to market of our hedges that we had out there.

Speaker #3: And again, we have to mark to market those at every quarter. So in the back half, we're seeing higher fuel rates, comparatively speaking. Freight rates are also up due to what we're seeing with the trucking companies—they're seeing less driver availability, which is driving up price.

Speaker #3: And so, that's due to either younger kids that aren't going into truck driving, or a combination of that and some of the things that we've seen as far as foreign drivers leaving the country, and some of the pressure that we've seen there.

Speaker #3: Certainly, the first half having a 5 comp in the first half versus guiding to a 2 to 3 in the back half is a piece of it.

John Klinger: Certainly, the H1 having a 5 comp in the H1, versus guiding to a 2 to 3 in the back half is a piece of it. Then merchandise margin favorability in the H1 that we saw. When you look at the institution of the IEPA tariffs last year, there were goods that were placed before the tariffs were put in place, so we did not have an opportunity to negotiate those tariffs. We are anniversarying that. The exact opposite happened this year, where we had goods that had negotiated a tariff out, and then the tariff was eliminated before the goods were landed. Those are the three main things that differentiate the H1 from the H2.

Speaker #3: And then merchandise margin favorability in the first half that we saw. So, when you look at the institution of the IEPA tariffs last year, there were goods that were placed before the tariffs were put in place.

Speaker #3: So, we didn't have an opportunity to negotiate those tariffs. So, we're anniversarying that. And the exact opposite happened this year, where we had goods that had negotiated a tariff out.

Speaker #3: And then the tariff was eliminated before the goods were landed. So, those are the three main things that differentiate the first half from the second half.

Michael Binetti: Okay.

Speaker #3: Does that.

John Klinger: Does that answer your question?

Speaker #5: Okay. And then maybe.

Speaker #3: Does that answer your question?

Speaker #5: Yeah, I guess I think so. Was there any new positives versus where we were 90 days ago, as you think about the back half?

Michael Binetti: Yeah, I think so. Was there any new positives versus where we were 90 days ago, as you think about the H2? I know you're doing H1 and H2.

Speaker #5: I know you're doing front half and back half.

Speaker #3: I mean, our front half and back half is, again, very similar to what we had guided to—underlying guided to at the second quarter—which is why the five-penny beat, we flowed the five pennies on the full year.

John Klinger: Our H1 and H2 is very similar to what we had guided to underlying, guided to at the Q2, which is why the 5 penny beat, we flowed the 5 pennies on the full year. So obviously, there's puts and takes, but for the most part, we're consistent.

Speaker #3: So, obviously, there are puts and takes, but for the most part, we're consistent.

Speaker #5: Okay. And then, if I could sneak one more in on profitability, since you made me think about this here. I was pretty pleasantly surprised to see MarMaxx able to hold the segment margin at the one comp.

Michael Binetti: Okay. If I could sneak one more in on profitability, since you made me think about this here. I was pretty pleasantly surprised to see Marmaxx able to hold the segment margin at the 1 comp. Can you just let us know for our models, is there any shifts or any transitory benefits we should be mindful of in the H2?

Speaker #5: Is there—you just let us know for our models—is there any shifts or any transitory benefits we should be mindful of in the second half?

Speaker #3: No, nothing there. Again, we called this out in our prepared remarks. We did experience lower tariff costs in the second quarter. So I'd say that what we put out there as far as our guidance is what we believe in, and we're going to work hard to beat that guidance during the quarter.

John Klinger: No. Nothing there.

Michael Binetti: Okay.

John Klinger: Again, we called this out in our prepared remarks. We did experience lower tariff costs in Q2. I would say that what we put out there as far as our guidance is what we believe in, and we are going to work hard to beat that guidance during the quarter.

Speaker #5: Okay, guys, great to hear about the improvement in August. Thank you very, very much.

Michael Binetti: Okay, guys. Great to hear about the improvement in August. Thank you very, very much.

Speaker #3: Thanks.

John Klinger: Thanks.

Speaker #4: Thank you.

Ernie Herrman: Thank you.

Speaker #2: Our next question comes from Jay Sole. Your line is open.

Operator: Our next question comes from Jay Sole. Your line is open.

Speaker #5: Great, thank you. Ernie, I want to ask you about the 7,500 long-term store target. Can you tell us about Sierra and also HomeSense, and maybe a little bit about Europe as well—how those fit into the plan?

Jay Sole: Great. Thank you. Ernie, I want to ask you about the 7,500 long-term store target.

Ernie Herrman: Yeah.

Jay Sole: Can you just tell us about Sierra, and also HomeSense, and maybe a little bit about Europe as well, how those fit into the plan. Then I think you very specifically called out within your existing countries. Why not sort of talk about maybe new potential countries that the company might be going to over time? Thank you.

Speaker #5: And then, I think you very specifically called out, within your existing countries, why not sort of talk about maybe new potential countries that the company might be going to over time?

Speaker #5: Thank you.

Speaker #4: Very good, Jay. Yeah. Well, first of all, let me talk to the last thing first, which is, we typically—well, I would say we're always looking at new countries.

Ernie Herrman: Well, first of all, let me talk to the last thing first, which is we typically, well, I would say we're always looking at new countries, for potential, as we did with And it's not always the same structural deal, right? As you know, we went into Mexico in our JV, and then our investment in Brands For Less in Spain, which John talked to, is doing really well. I think, by the way, part of our new store upping is, we're pretty bullish on new Spain openings down the road, realizing that the customer base is reacting even stronger than we anticipated there.

Speaker #4: For potential, as we did with—and it's not always the same structural deal, right? But as you know, we went into Mexico, and our JV, and then our investment in Brands For Less.

Speaker #4: And Spain, which John talked to, is doing really well. And I think, by the way, part of our new store upping is we're pretty bullish on new Spain openings down the road, realizing that the customer base is reacting even stronger than we anticipated there.

Speaker #3: It's not part of our.

Jay Sole: Not part of our-

Ernie Herrman: That is not part of our. No, not even part of our numbers.

Speaker #4: That's not part of our—no, it's not even part of our numbers.

Speaker #3: It's a potential opportunity in the future.

Jay Sole: Potential opportunity in the future.

Speaker #4: Yep, yep. The other ones you're asking about are—Sierra is disproportionate, that adds disproportionately into the growth, right? It's a higher growth rate than the 4% by far.

Ernie Herrman: Yep. The other ones you are asking about is Sierra is disproportionate. That adds disproportionately into the growth, right? It is a higher growth rate.

Jay Sole: Yes

Ernie Herrman: than the 4%, by far. And so is HomeSense. So, those are both well above 4% growth because they are both doing well. We are always looking at new market potential, just so you know, because we have shown, as witnessed by Australia also, any new market we have gone into, if we have brought the TJX secret sauce and TJX tenured associates to lead it, we have done very well. Again, I cannot say enough about what we are showing internationally. I am glad you are asking about this. What we are showing internationally is the ability, I think we are better than ever at showing that we can grow our model wherever there is a market internationally. So as much as I cannot tell you what the next country is, you can be assured that we are looking. Yeah.

Speaker #4: And so is HomeSense. So those are both well above 4% growth because they're both doing well. And we are always looking at new market potential, just so you know, because we have shown, as witnessed by Australia, also any new market we've gone into, if we've brought the TJX secret sauce and TJX tenured associates to lead it, we have done very well.

Speaker #4: So again, I can't say enough about what we're showing internationally. I'm glad you're asking about this. What we're showing internationally is the ability—I think we're better than ever at showing that we can grow our model wherever there's a market internationally.

Speaker #4: So, as much as I can't tell you what the next country is, you can be assured that we're looking.

Speaker #3: Yeah.

Speaker #5: Got it. Okay, thank you so much.

Jay Sole: Got it. Okay. Thank you so much.

Speaker #4: Yeah. Thank you.

Ernie Herrman: Yeah. Thank you.

Speaker #2: Our next question comes from Marnie Shapiro. Your line is open.

Operator: Our next question comes from Marni Shapiro. Your line is open.

Speaker #6: Hey, guys.

Marni Shapiro: Hey, guys.

Speaker #4: Hi, Marnie.

Ernie Herrman: Hi, Marni.

Marni Shapiro: I am curious, can we talk a little bit about some of the other categories at Marmaxx? I know you do not want to get into too many details. You talked about missing things that were not there. Are those fashion things that were not there or is it, you mentioned impulse items. How is beauty doing? Things like that to me feel like more impulse. I think you talked about at HomeGoods across the board, things are doing well and things like staples that people need to replenish. I remember being on the store tour and talking about how

Speaker #6: I'm curious, could we talk a little bit about some of the other categories at MarMax? I know you don't want to get into too many details.

Speaker #6: You talked about missing things that weren't there. Are those fashion things that weren't there, or you mentioned impulse items. How is beauty doing?

Speaker #6: Things like that, to me, feel more impulse. And I think you talked about at HomeGoods, across the board, things are doing well.

Speaker #6: And things like staples that people need to replenish. And I remember being on the store tour and talking about how people were buying their dinner at HomeGoods to make that night. So are consumables still doing well?

Ernie Herrman: Yep

Marni Shapiro: people were buying their dinner at HomeGoods to make that night. Are consumables still doing well? Can you just talk a little bit about the kind of non-apparel categories and non-traditional home categories?

Speaker #6: Can you just talk a little bit about the kinds of non-apparel categories and non-traditional home categories?

Ernie Herrman: Non-apparel. Okay. Marni, obviously, I cannot give you in Marmaxx the ones. I cannot tell you whether it was fashion or it is a bit of a mix. I cannot get too specific on which family or categories there we fell down, only because of competitive environment we are in.

Speaker #4: Non-apparel. Okay. So but Marnie, I cannot obviously, I can't give you in MarMax, the ones I can't tell you whether it was fashion, right?

Speaker #4: It's a bit of a mix, and I can't get too specific on which family or categories there. We fell down only because of the competitive environment we're in, and giving that information externally.

Marni Shapiro: Fair

Ernie Herrman: and giving that information externally. I can tell you it wasn't any one dimensional. It was a combination of different things in Marmaxx. At the same time, as witnessed by the fact in Marmaxx that we ran a 1 and not a -3, we had a lot of categories that were performing well. So, we had a handful of areas that when they get hit, it pulls you down from what could be a 2 or a 3 down to a 1, is what happens. Because in Marmaxx, as you know, and clearly the Street thinks this, the differences between a 1 and a 3 is just a very, that's kind of what we're talking about here, not a -3 to a +4.

Speaker #4: I can tell you it wasn't any one-dimensional. It was a combination of different things in Marmaxx. And then, at the same time, as witnessed by the fact in Marmaxx that we ran a 1 and not a minus 3, we had a lot of categories that were performing well.

Speaker #4: So we had a handful of areas that, when they get hit, it pulls you down from what could be a two or three down to a one, is what happens. Because in MarMax, as you know, and clearly the street thinks this, the differences between a one and a three is just a very—that's kind of what we're talking about here, not a minus three to a plus four or so. It can be a pretty—you can have an excuse in a handful and it throws you off, where you're just missing the two comp by a little bit.

Ernie Herrman: it can be a pretty You can have execution in a handful, and it throws you off where you're just missing the 2 comp by a little bit. In HomeGoods, across the board, I probably shouldn't just emphasize the replenishment, as you call them, categories, because it's not just the consumables, it's across the board. A lot of the decorative and even some of the higher ticket areas are doing really, really well. I'm talking from lighting to wall categories to, without giving anything away, I think they're just executing almost every mix at a very high level. Again, I think what the merchants are doing in HomeGoods and planning in the stores and executing distribution, they have all cylinders clicking, marketing, they're giving the customer an experience. It's difficult to find that experience in any other retailer.

Speaker #4: And in HomeGoods, across the board, I probably shouldn't just emphasize the replenishment, as you call them, categories, because it's really not just the consumables.

Speaker #4: It's across the board. A lot of the decorative, and even some of the higher-ticket, areas are doing really, really well. And I'm talking from lighting to wall categories to—without giving anything away—I think they're just executing almost every mix at a very high level.

Speaker #4: And again, I think what the merchants are doing in HomeGoods and planning and the stores and executing distribution, they have all cylinders clicking marketing, is they're giving the customer an experience they really it's difficult to find that experience in any other retailer.

Speaker #4: It's a different type of treasure hunt, and some of the goods, as you know, are very unique—only HomeGoods has them. It's a different type of manner, whereas if you go to apparel, across the board—apparel that we would have, whether it's at T.J. Maxx or Marshalls, or Sierra—that apparel, fortunately, is in other places where we have better value on it.

Ernie Herrman: It's a different type of treasure hunt, and some of the goods, as you know, are very unique that only HomeGoods has, in a different type of manner. Whereas you go to apparel across the board, apparel that we would have in, whether it's a TJ Maxx or a Marshalls or a Sierra, that apparel, fortunately, is in other places where better value on it. I think in HomeGoods, you have some just unique product categories that creates a whole other reason to shop them. That's the innovation that I think I don't think anybody else in the home industry, and I'm not just talking the United States. I'm talking Europe, Canada. As you know, in Canada, we over-index. That's one of our largest market share geographies in the corporation.

Speaker #4: I think in HomeGoods, you have some just unique product categories that create a whole other reason to shop them. So, and that's the innovation that I think—I don't think anybody else in the home industry—and I'm not just talking the United States, I'm talking Europe, Canada. As you know, in Canada, we over-index.

Speaker #4: That's one of our largest market share geographies in the corporation. And now that you've had closures with The Bay, etc., we just continue, and the Canadian merchants are doing an amazing job in HomeSense.

Ernie Herrman: Now that you've had closures with The Bay, et cetera, the Canadian merchants are doing an amazing job in HomeSense, and in Winners and in Marshalls in Canada. I think we don't talk about Canada a lot, but they just continue to gain major market share there as well.

Speaker #4: And Winners and in Marshalls in Canada. And I think we don't talk about Canada a lot, but they just continue to gain major market share there as well.

Marni Shapiro: Yes.

Speaker #4: Similar to what HomeGoods is doing here, Canada is doing there.

Ernie Herrman: Similar to what HomeGoods is doing here, Canada's doing there.

Speaker #6: I have one follow-up on HomeGoods. Your back-to-college set was unbelievable—I mean, it stopped me in my tracks. Unbelievable. I'm just curious if you saw a pickup in traffic and in trends at HomeGoods when that set?

Marni Shapiro: Can I ask one follow-up on HomeGoods?

Ernie Herrman: Sure.

Marni Shapiro: Your back to college set was unbelievable. I mean, stop me in my tracks, unbelievable. I am just curious if you saw a pickup in traffic and in trends at HomeGoods when that set.

Speaker #4: Yes, they've been very pleased. I don't have the specifics in front of me, but I know the team has talked about their "Back to Campus," as they call it.

Ernie Herrman: Yes. They have been very pleased. I do not have the specifics in front of me, but I know the team has talked about their back to campus, is what they call it. The set and the results have been very healthy. Yep. I think to your point, the timing was perfect. It looked, I think, better than ever. I am glad you noticed it.

Speaker #4: The set and the results have been very healthy. Yep. And I think, to your point, the timing was perfect. And it looked, I think, better than ever.

Speaker #4: I'm glad you noticed it.

Speaker #6: It was stunning—took my breath away. Congrats to that team. Thank you, Ernie.

Marni Shapiro: It was stunning.

Ernie Herrman: Yeah.

Marni Shapiro: Took my breath away.

Ernie Herrman: Yeah.

Marni Shapiro: Took my breath away.

Ernie Herrman: Yep.

Marni Shapiro: Congrats to that team.

Ernie Herrman: Yeah.

Marni Shapiro: Thank you, Ernie.

Ernie Herrman: Yeah. No, congrats. Thank you. By the way, Marni, they will appreciate that comment on that.

Speaker #4: Yeah. No, congrats. Thank you. And by the way, Marnie, they'll appreciate that comment on that.

Speaker #6: Fantastic. Thanks,

Marni Shapiro: Yeah.

Ernie Herrman: Yep.

Marni Shapiro: Thanks, guys.

Speaker #4: Thank you, Marnie.

Ernie Herrman: Thank you, Marni.

John Klinger: Thanks, Marni.

Speaker #2: Our next question comes from Ike Burrachow. Your line is open.

Operator: Our next question comes from Ike Boruchow. Your line is open.

Speaker #5: Hey, Ernie. I guess I was going to ask—my first question: how are you doing? On the freight side, I think you mentioned this to Michael already, but has the freight expectation in the back half changed versus three months ago, or is this kind of what you thought it would be?

Ike Boruchow: Hey, Ernie. I guess I was going to ask.

Ernie Herrman: Hi

Ike Boruchow: I guess my first question, how are you doing? On the freight side, I think you mentioned this to Michael already. Has the freight expectation in the back half changed versus three months ago, or is this kind of what you thought it would be? Then the follow-up to that is, not so much August and back to school, but for the Q4, there are more and more red flags around Super El Niño weather impacts to the quarter. You guys have kind of done really well in those past couple times we have had these Super El Niños, going back to the model. Just curious if it is starting to affect the way that you are planning product, planning merchandise mix. Just kind of curious how you are starting to think about the holiday, even though I know it is early. Thanks.

Speaker #5: And then the follow-up to that is, not so much August and back to school, but for the fourth quarter, there are more and more red flags around Super El Niño weather impacts to the quarter.

Speaker #5: You guys have kind of done really well in those past couple of times we've had these Super El Niños, going back to the model.

Speaker #5: Just curious if it’s starting to affect the way that you’re planning product, planning merchandise mix. Just kind of curious how you’re starting to think about the holiday, even though I know it’s early.

Speaker #5: Thanks.

Speaker #4: Yep. I'll let John.

Ernie Herrman: Yep. I will let John.

John Klinger: I'll start with the freight question.

Speaker #3: I'll start with a great question. Yeah. I mean, it is in line with what we were expecting. I mean, obviously, the at the beginning of the year, we the first quarter, when we marked to market the fuel hedges, we knew that that was taking a lot of benefit that so that when the actual when we got to the later the next three quarters, it was going to be a negative impact.

Ernie Herrman: Yep.

John Klinger: Yeah, it is in line with what we were expecting. Obviously, at the beginning of the year, the Q1, when we marked to market the fuel hedges, we knew that that was taking a lot of benefit, so that when we got to the next three quarters, it was going to be a negative impact. It was all expected.

Speaker #3: So, yeah, it was all expected.

Speaker #4: Yeah, and on the weather thing, what we do is try not to get too specific on the weather. But the liquidity—and I think you said this before—we've tended to, no pun intended, weather the storm on these things pretty well, right?

Ernie Herrman: Yeah. Ike, on the weather thing, what we do is we try not to get too specific on the weather, but the liquidity, and I think you said this before, we've tended to, no pun intended, weather the storm on these things pretty well, right? Because we keep our liquidity, and our shipping out of our warehouses is something we control a little better than traditional retailers. Our goods don't have to necessarily go straight to the lanes and go to the stores if we think there's going to be an unusual weather pattern in a certain region. This is a benefit of our model, where we stage goods in our warehouses versus goods at most brick and mortar retailers come into the warehouse and have to go out.

Speaker #4: Because we keep our liquidity and our shipping out of our warehouses is something we control a little better than traditional retailers. Our goods don’t necessarily go straight to the lanes and go to the stores.

Speaker #4: If we think there’s going to be an unusual weather pattern in a certain region, this is a benefit of our model, where we stage goods in our warehouses. Versus goods at most brick-and-mortar retailers, which come into the warehouse and have to go out.

Speaker #4: We have racks where we can manipulate, and our planning organization is really good at reacting to any wild swings in weather or natural disasters, or any of those red flags.

Ernie Herrman: We have racks where we can manipulate, and our planning organization is really good at reacting to any wild swings in weather or natural disasters or any of those red flags. I think that's what you're talking about. So, yeah, I think for now, they just stay aware, and as we get closer in, we can maneuver. Again, we are set up to maneuver better than most brick and mortar.

Speaker #4: I think that's what you're talking about. So yeah, I think for now, they're just they just stay aware and as you get as we get closer in, we can maneuver.

Speaker #4: Again, we are set up to maneuver better than most brick-and-mortar retailers.

Speaker #5: Got it. Thanks, guys.

Ike Boruchow: Got it. Thanks, guys.

Speaker #4: Thank you.

Ernie Herrman: Thank you.

Operator: The final question of the day comes from Aneesha Sherman. Your line is open.

Speaker #2: The final question of the day comes from Anisha Sherman. Your line is open.

Speaker #1: Okay, thank you so much. Hi, Ernie and John. So, you've seen positive ticket growth all through most of last year and year-to-date this year.

Aneesha Sherman: Okay. Thank you so much. Hi, Ernie and John.

Ernie Herrman: Hi, Anisha.

Ernie Herrman: Hi, Aneesha.

Aneesha Sherman: You've seen positive ticket growth all through most of last year and year to date this year. You have a stronger mix of better items, premium brands than you had a few years ago. Do you see more runway on this growth in ticket and AUR, especially in the current consumer environment? Then a quick follow-up, Ernie, on your comment on marketing, playing offense on marketing. You've been really active on digital and social media marketing now for the last couple of years. Is there anything meaningfully different in terms of your type of marketing or your budget as percent of sales that's changing this year? Thank you.

Speaker #1: You have a stronger mix of better items and premium brands than you had a few years ago. Do you see more runway for growth in ticket and AUR, especially in the current consumer environment?

Speaker #1: And then a quick follow-up, Ernie, on your comment about marketing—playing offense on marketing. You've been really active in digital and social media marketing now for the last couple of years.

Speaker #1: Is there anything meaningfully different in terms of your type of marketing or your budget as a percent of sales that's changing this year? Thank you.

Speaker #4: Okay, Anisha. Yeah, well, on your first question there, which was...

Ernie Herrman: Okay, Anisha. Well, on your first question there, which was-

Ernie Herrman: Okay, Aneesha. Well, on your first question there, which was-

Aneesha Sherman: AUR and ticket.

Speaker #1: AUR and ticket.

Speaker #4: Yeah. Yes, we've seen increases. I would tell you, in this environment, to what you said, I think we're going to moderate there. And I think we might be up a few, is the way it's been kind of tracking, but I don't see a long-term trend there heading that way.

Ernie Herrman: Yes, we've seen increases. I would tell you in this environment, to what you said, I think we're going to moderate there. I think we might be up a few, is the way it's been kind of tracking, but I don't see a long-term trend there heading that way. It's probably going to moderate a little bit, and that's our best guess. The only reason, I would tell you, I think we've talked about this before. It's bottom-up in our organization, so we don't dictate ticket from top-down. If certain exciting categories or vendor deals come down in some of the better vendors, that can throw us for a little surprise in a good way, where we have some crazy deals from better vendors that can have our ticket go up short term.

Speaker #4: It's probably going to moderate a little bit. And that's our best guess. The only reason then I would tell you I think we've talked about this before it's bottom up in our organization.

Speaker #4: So we don't dictate ticket from the top down. And so if certain exciting categories or vendor deals come in from some of the better vendors, that can throw us for a little surprise—in a good way.

Speaker #4: Where we have some crazy deals from better vendors that can have our ticket go up short term. And then you have category mixes, and that's what I think we've talked about in the past—is the mix of certain categories within the whole store is what sometimes has made our mix go up.

Ernie Herrman: Then you have category mixes, and that's what I think we've talked about in the past, is the mix of certain categories within the whole store is what sometimes has made our mix go up. It's not like for like items or categories where the retail has changed. It's the mix within the store has changed to more higher average retail categories. So I think our escalation ticket will probably moderate, and that's just an educated guess over the next six months.

Speaker #4: It's not like-for-like items or categories where the retail has changed. It's that the mix within the store has changed to more higher average retail categories.

Speaker #4: So I think our escalation ticket will probably moderate, and that's just an educated guess, over the next six months.

John Klinger: Then your question on advertising spend. We plan very consistently year-over-year. Then in the year, if we're having a strong year, oftentimes we'll commit a little more dollars to the advertising to push that message, continue to feed the fire.

Speaker #3: And then, your question on advertising spend. So, we plan very consistently year over year, and then in the year, if we're having a strong year, oftentimes we'll commit a little more dollars to advertising to push that message—continue to feed the fire.

Ernie Herrman: Anisha, though, so you have an idea about which is current is, in the H1 of the year, we had 1.1 billion video views across Facebook, Instagram, TikTok, Pinterest, YouTube, that wouldn't have looked that way in the last couple of years. Shows you how aggressive. By the way, we had over 300 million in HomeGoods, so 1.4 billion video views across those venues of Facebook, Instagram, Pinterest, and YouTube. That's just in the H1, which is where our customers are. The neat thing about it is the TJX brands see video completion rates on TikTok and YouTube that are significantly above the industry benchmarks, which that's really demonstrating that our content is really highly engaging to the customer. So they're staying on watching the content through most of the video, which is not always the case with a lot of competition out there.

Ernie Herrman: Aneesha, though, so you have an idea about which is current is, in the H1 of the year, we had 1.1 billion video views across Facebook, Instagram, TikTok, Pinterest, YouTube, that wouldn't have looked that way in the last couple of years. Shows you how aggressive. By the way, we had over 300 million in HomeGoods, so 1.4 billion video views across those venues of Facebook, Instagram, Pinterest, and YouTube. That's just in the H1, which is where our customers are. The neat thing about it is the TJX brands see video completion rates on TikTok and YouTube that are significantly above the industry benchmarks, which that's really demonstrating that our content is really highly engaging to the customer. So they're staying on watching the content through most of the video, which is not always the case with a lot of competition out there.

Speaker #4: Anisha, though, so you have an idea about where this currently is—in the first half of the year, we had 1.1 billion paid video views across Facebook, Instagram, TikTok, Pinterest, and YouTube.

Speaker #4: Which shows you that it wouldn't have looked that way in the last couple of years. Shows you how aggressive. By the way, we had over $300 million in HomeGoods.

Speaker #4: So, 1.4 billion video views across those venues of Facebook, Instagram, Pinterest, and YouTube—and that's just in the first half. Which is where our customers are.

Speaker #4: And the neat thing about it is, we see the TJX brand see video completion rates on TikTok and YouTube that are significantly above the industry benchmarks.

Speaker #4: That really demonstrates that our content is highly engaging to the customer. They're staying on and watching the content through most of the video, which is not always the case with a lot of the competition out there.

Speaker #4: They'll show it as a view, but they don't necessarily watch the entire thing like our customers are watching.

Ernie Herrman: They will show it as a view, but they do not necessarily watch the entire thing like our customers are watching.

Speaker #1: That's really good color. Thank you.

Aneesha Sherman: That is really good color. Thank you.

Speaker #4: You're welcome. Thanks for the question. I think that was our last question. Thank you all for joining us today. We look forward to updating you again on our third quarter earnings call in November.

Ernie Herrman: You are welcome. Thanks for the question. I think that was our last question. Thank you all for joining us today. We look forward to updating you again on our Q3 earnings call in November. Thank you, everybody.

Speaker #4: Thank you, everybody.

Operator: Ladies and gentlemen, that concludes your conference call for today. You may all disconnect. Thank you for participating.