TJX Companies Inc (TJX) 2014 Q4 法說會逐字稿

Welcome to the TJX Companies fourth-quarter fiscal 2014 financial results conference call.

At this time, all participants are in a listen-only mode.

Later, we will conduct a question-and-answer session.

(Operator Instructions)

As a reminder, this conference call is being recorded Wednesday, February 26, 2014.

I would now like to turn the conference call over to Ms. Carol Meyrowitz, Chief Executive Officer of the TJX Companies, Inc.

Please go ahead, ma'am.

Thank you, and good morning everyone.

So, before we begin, Deb has a few comments to make.

Good morning.

The forward-looking statements we make today about the Company's results and plans are subject to risks and uncertainties that could cause the actual results and the implementation of the Company's plans to vary materially.

These risks are discussed in the Company's SEC filings including without limitation the Form 10-K filed April 2, 2013.

Further, these comments and the Q&A that follows are copyrighted today by the TJX Companies.

Any recording, retransmission, reproduction, or other use of the same for profit or otherwise without prior consent of TJX is prohibited and a violation of United States copyright and other laws.

Additionally, while we have approved the publishing of a transcript of this call by a third party, we take no responsibility for inaccuracies that may appear in that transcript.

Please note that the financial results and expectations we discuss today are on a Continuing Operations basis.

Also, we have detailed the impact of foreign exchange on our consolidated results and our international divisions in today's press release and the investor information section of our website, www.TJX.com.

Reconciliations of the non-GAAP measures we discuss today to GAAP measures are included in today's press release or otherwise posted on our website, www.TJX.com in the investor information section.

Thank you.

And now, I'll turn it over to Carol.

Thanks, Deb.

Joining me and Debra on the call are Ernie Herrman and Scott Goldenberg.

2013 was another successful year for TJX, on top of many great years.

Earnings per share increased 15% which was above our plan.

We achieved this growth over last year's robust 24% adjusted EPS growth on a 52-week basis.

Over the last five years, our compound annual adjusted EPS growth was a strong 24%.

Consolidated comp sales increased 3%, in line with our plan and over last year's very strong 7% increase.

Excluding the extra week last year, three of our four divisions delivered the highest annual segment profit margin in their histories.

Our 2013 performance once again demonstrates the power and resiliency of our off-price business model.

With our value mission and enormous flexibility, we drove excellent results in a very competitive retail environment.

Value remains top of mind for today's consumer, and we are convinced that our values will continue to attract US and international customers.

Today, I want to share with you the magnitude of our top and bottom line growth opportunities.

While we are approaching $30 billion in annual sales, we see tremendous global growth potential ahead for TJX.

We are maintaining our 10% to 13% long-term annual EPS growth model, while continuing to invest in our future growth.

As always, we will strive the to surpass our goals, which we have done successfully for the last five years.

We are in an excellent position as we begin a new year and are well on our road to becoming a $40 billion Company and beyond.

Before I continue, I'll turn this call over to Scott to recap the numbers.

Thanks, Carol.

Beginning with our full-year fiscal 2014 results.

Again, consolidated comparable store sales increased 3% on a 52-week comparable basis, on top of four years of comp increases of 4% or higher.

Our full-year comp increase was driven by ticket with traffic being slightly positive.

On an adjusted basis, excluding a third-quarter tax benefit of $0.11 per share, fiscal 2014 diluted earnings per share were $2.83, a 15% increase over the prior year's adjusted EPS of $2.47 which excludes the approximately $0.08 benefit from the 53rd week in fiscal 2013.

Fiscal 2014 represents the fifth consecutive year of double-digit EPS growth.

Foreign currency exchange rates had a $0.01 negative impact on earnings per share, compared with a neutral impact last year.

For the full year, consolidated pretax profit margins was 12.1%, on an adjusted basis, excluding the approximate 20 basis points benefit from the 53rd week in fiscal 2013.

Fiscal 2014 pretax profit margin increased 40 basis points from last year.

Gross profit margin was 28.5%, up 10 basis points over the prior year.

SG&A expense as a percentage of sales was 16.3%, a 10-basis-points improvement from last year, in line with our plan.

For both gross profit and SG&A, I'm comparing against reported 53-week results last year.

So, on an adjusted 52-week comparable basis, the year-over-year improvement was actually a bit better.

Now to recap fourth quarter results.

Consolidated comparable store sales increased 3% over last year's 4% reported increase and a 7% increase in the prior year.

Our fourth-quarter comp was driven by an increase in ticket.

Diluted earnings per share were $0.81, a 9% increase over the prior year's adjusted EPS of $0.74, which excludes the approximately 8% benefit -- $0.08 benefit from the extra week last year.

Foreign currency exchange rates had a $0.01 positive impact on earnings per share compared with a neutral impact last year.

Consolidated pretax profit margins were 12.0%.

Excluding the approximately 60 basis points benefit from the extra week in the fourth quarter of fiscal 2013, this represents a 10-basis-point increase from last year due to SG&A favorability.

Gross profit margin was 27.6%, down 100 basis points versus the prior year.

This was due to a combination of factors.

First, almost all of the 60-basis-point benefit from the extra week in fiscal 2013 was in gross margin.

Secondly, merchandise margins decreased this year, primarily as a result of our aggressive pricing and markdowns in the fourth quarter.

Carol will elaborate in just a moment.

SG&A expense as a percentage of sales was 15.6%, an improvement of 40 basis points versus the prior year.

This was due to year-over-year favorability from a combination of items that negatively impacted last year's ratio by about 50 basis points.

At the end of the fourth quarter, consolidated inventories on a per-store basis, including the warehouses and excluding in-transit and e-commerce inventories, were down [7%] (corrected by company after the call) in constant currency.

We begin the new fiscal year in a great inventory position with great flexibility to take advantage of buying opportunities in the marketplace.

Now to some detail on the impact of FX on TJX Canada.

The steep decline in the Canadian dollar had a negative impact on TJX Canada's merchandise margins in the fourth quarter.

Let me explain further.

TJX Canada buys over 50% of its merchandise in US dollars.

While our inventory hedges can help mitigate the impact of currency fluctuations, in fiscal 2014, the Canadian dollar depreciated even more dramatically beyond the hedges that we placed throughout the year.

Effectively, this increased our cost of goods bought in US dollars.

As always, we remain focused on our value gap with the competition and priced our merchandise accordingly.

As a result, we had significant pressure on our merchandise margins which is reflected in the 160-basis-point decline in the adjusted segment margins at TJX Canada in the fourth quarter.

Moving to our financial strength and excellent financial returns.

Our business model continues to generate tremendous amounts of cash and superior financial returns.

In fiscal 2014, our ROIC reached 23%.

This is up from 19% at the end of fiscal 2010, and we believe is one of the highest among major retailers.

We continue reinvesting in our growth and remain strongly committed to returning cash to our shareholders.

We returned $1.9 billion of cash to shareholders in fiscal 2014 through our share repurchase and dividend programs.

Even after increasing the shareholder distribution programs and our investments in the business, we still ended the year with $2.4 billion of cash and short-term investments.

Now, let me turn the call back to Carol, and I will recap our first quarter and full-year fiscal 2015 guidance at the end of the call.

Thanks, Scott.

Before I discuss our global growth potential, I'll share some additional color on the fourth quarter.

I was very happy with our holiday business, with sales in November and December well above our plans.

We made a strategic decision to price our merchandise aggressively in the very promotional selling environment and deliver extreme value.

While this pressured merchandise margins, we are convinced our values helped drive holiday sales and will keep customers coming back to our stores long-term.

While I don't like talking about the weather unless I have to, in January we believe the severe winter weather in most of the US and Canada kept many shoppers home and did dampen sales.

We stuck to our off-price discipline and took aggressive markdowns in January, particularly in apparel, to clear the product.

Although this impacted merchandise margins, it allowed us to begin the new year with extremely clean inventories.

This positions us well to capitalize on environment ripe for TJX.

We see a marketplace absolutely loaded with buying opportunities for branded merchandise and a value-minded customer.

I should also note that in the US regions where weather generally wasn't unusual, including the West Coast and Florida, trends continued to be strong.

And at Marmaxx, our less weather-sensitive categories including home fashions, footwear, jewelry, and accessories had the strongest performance.

We believe all of this bodes well for when weather does improve.

We are ready to ship fresh assortments at exciting prices, and we are well positioned for 2014.

Now, to the magnitude of our US and international growth opportunities.

First, we see huge potential to gain consumer market share.

As we've discussed before, while we have grown our customer base significantly over the last several years, our US consumer penetration levels remain below those of most major department stores which speaks to our opportunity.

We believe Marshalls in Canada will help us grow in that country, and the opportunity to expand our reach in Europe is back.

Throughout 2013, we saw a greater percentage of younger shoppers among our new customers, while continuing to serve our core demographic.

We attract household incomes anywhere from $50,000 up to millions of dollars and will continue to target a very wide customer demographic.

To reach even more consumers, we are leveraging our global marketing capabilities.

During the holiday season, our tri-branding campaigns allowed us to leverage three of our retail brands at the same time in all intensely competitive environments.

Further, we know that people who shop more than one of our chains on average spend considerably more on us.

In 2014, we plan to become even more aggressive with our marketing, with several more weeks of advertising activities than last year including TV, radio, and social media.

We tested some things last year, and we liked how they worked and have more up our sleeves for this year.

To retain the new shoppers our marketing is attracting in our already loyal ones, we plan to keep upgrading the shopping experience in all of our chains.

In 2014, we plan to remodel approximately 250 stores across the Company.

We are also working on a new Marshalls prototype in the US.

Customer Service is an ongoing focus for us, and we are pleased that our customer satisfaction scores increased in 2013.

We still see a lot of opportunity for improvement and to raise the bar on our customer shopping experience.

To keep wowing our shoppers with current fashion and trend-right merchandise, we remained focused on building our brand presence in our store.

We are expanding our global sourcing to get even closer to the source of the product.

Our vendor universe numbers over 16,000 vendors around the world.

Of course, we have exciting in-store initiatives planned for this year, but you'll have to visit our stores and see them for yourself.

Now to our enormous global store growth potential.

At our investor event last October, we raised our long-term store growth estimates to 5,150 stores and remain extremely confident in our potential.

With over 3,200 stores today, we would be 60% more than our current base with just our existing chains in our existing markets alone.

I'll briefly recap our potential beginning in the US.

Long-term, we see Marmaxx growing about 50% to 3,000 stores.

As we discussed at the investor event, this reflects 400 more stores than our earlier estimate.

Marmaxx's excellent new store performance and continued strong results give us great confidence.

In 2013, comps increased 3% over a 6% increase last year.

Marmaxx has averaged 5% comp growth in the last five years.

Segment profit reached 14.6%.

Excluding the extra week last year, this was a divisional record.

Further, we are successfully locating stores closer to one another and co-locating more T.J. Maxx and Marshalls while keeping cannibalization levels where we would expect.

At HomeGoods, our long-term store growth estimate of 825 stores could be conservative.

Some other US home retailers currently operate over 1,000 stores.

HomeGoods' new store performance has also been terrific, and its performance has been outstanding.

HomeGoods posted a 7% comp in 2013 over 7% growth last year, and segment profit reached 12.9%, another divisional record.

Over the last five years, HomeGoods' sales have nearly doubled, and segment profit has been increased eight-fold.

Internationally, at TJX Canada, our long-term estimate of 450 stores represents 30% growth and reflects potential to grow our Marshalls brand to about 100 stores.

In 2013, TJX Canada comps were flat, while segment profit margin declined and was in line with our plan for the year.

We continue to be pleased with Marshalls in Canada where we saw business accelerate as the year progressed.

At TJX Europe, we see vast potential for our Company.

We believe we can grow to 875 stores, more than double our current base, with just our existing chains in our existing European markets alone.

This division delivered outstanding results in 2013, with comps up 6% over 10% growth last year.

Adjusted segment profit margins, excluding foreign currency, reached 7.7%.

This is another divisional record with 500 basis points of improvement in the last two years.

We saw broad-based strength across the different geographies, economic climates, and consumer environment in which we operate.

With TJX Europe firmly on track, we plan to accelerate the pace of openings this year to 40 stores, which is 25% more than last year.

In Germany, we expect to more than double the number of store openings versus last year, and in the UK, we have planned openings in some fabulous locations.

Beyond 2014, I am excited to announce we plan to open our first new stores in Austria in 2015.

We see expansion into Austria as a natural extension of our European business.

We have learned our lessons in Europe, and we are confident that we have the right infrastructure and organization in place to support this next move.

We have been analyzing Austria for a long period of time, and we are confident we know the marketplace and the customer.

I'm very excited about the strength of our European business and our international growth potential.

In 2014, almost 25% of our store growth is planned in Europe, and in 2015, we plan to enter our next new country.

We are one of the few US retailers to have expanded successfully internationally and remain the only major brick-and-mortar, off-price retailer in Europe.

2014 marks our 20th year in the UK, and that experience is not easily replicated.

Beyond brick and mortar, we see e-commerce as another major long-term opportunity for TJX.

I'm very pleased with our e-commerce business in 2013.

We learned a lot and see opportunities to leverage the channel even more.

Customer response to our launch of www.TJMaxx.com last fall was better than expected.

We are delighted to offer consumers the convenience to shop our values 24/7 and see e-commerce as an additional platform to attract new shoppers and drive traffic.

In fact, the majority of www.TJMaxx.com returns are going to our stores.

We see this as a great opportunity to introduce our stores to new customers who have discovered us online.

We are very pleased with our acquisition of Sierra Trading Post.

Beyond the smooth transition during its first year as part of TJX, we are even more excited about the future opportunities we see to leverage knowledge and expertise in both directions.

And, in Europe, while e-commerce is a small piece of their business, we're also pleased with the progress at www.TKMaxx.com.

Longer term, we can eventually see e-commerce working for all of TJX retail brands.

We will continue to take a deliberate approach to online growth, grow smart is our motto.

Now, I want to cover some key points on why we see TJX so strongly positioned to achieve the next level of growth.

First, we see ourselves as leaders in innovation.

We are constantly seeking the right categories, newness, current fashion, and exciting new brands.

We are always testing new seeds, and I'm happy to share with you that later this year we plan to open two new Sierra Trading Post stores.

This will be a value-driven outdoor concept, based on the same off-price model of all of our stores.

We are never complacent.

We continue to invest in our supply chain and distribution network to support our growth.

Our goal is to be even leaner and faster, delivering less inventory to our stores more often.

While we're already very good at this, we believe we can become even better at shipping the right goods to the right stores at the right time.

This is what helps create the treasure hunt experience of shopping in all our stores.

As I've discussed before, we are investing in merchandise systems initiatives that we believe will further enhance our supply chain he precision.

We are being very methodical with this initiative and expect to begin a gradual roll-out next year.

So, in closing, we are very pleased with our performance in 2013.

This marks another year of above-plan results as we continue to demonstrate our ability to drive top and bottom line growth in both strong and weak retail environments.

Looking ahead, we see tremendous near- and long-term opportunities for TJX.

We begin a new year with very clean inventories and well positioned to capitalize on the numerous buying opportunities we see.

While many of other retailers are now focusing on value, at TJX, value has been our mission since day one.

Although there may be a race among the rest of retail to the lowest price, we will always be about true value which for us is a combination of fashion, brand, quality, and price.

We are delighted to offer customers the ability and convenience to shop us in stores and online.

We are excited about our marketing ideas for 2014 and beyond.

We continue testing new seeds including two new Sierra Trading Post stores this fall.

We are leveraging four large, synergistic divisions as we grow.

Our three divisions other than Marmaxx are approaching or exceeding $3 billion in annual sales, so they are each big businesses in their own right.

We are thrilled with TJX Europe, and we plan to enter our next European country in 2015.

I could not be more excited about our international potential.

TJX Europe is approaching $4 billion in annual sales, and next to Marmaxx, was the second largest divisional contributor to our 2013 earnings growth.

We see Europe as a big part of our future growth.

To support the next level of growth for TJX overall, we continue to reinvest in our business.

Lastly, our management team is laser-focused on near-term execution while setting our sights on our long-term strategic vision.

We see TJX in an excellent position to bring value around the world.

And now, I'll turn it over to Scott to go through our guidance, and then we'll open it up for questions.

Thanks, Carol.

Now to fiscal 2015 guidance, beginning with the full year.

For the full year, we expect earnings per share to be in the range of $3.05 to $3.19, over $2.94 in fiscal 2014.

Again, fiscal 2014 included a tax benefit of $0.11.

Excluding this benefit, fiscal 2015 full-year expected EPS would be 8% to 13% over the prior-year's adjusted $2.83.

Our EPS guidance assumes consolidated sales in the $28.8 billion to $29.2 billion range, a 5% to 6% increase over the prior year.

For comp store sales, we're assuming a 1% to 2% increase, both on a consolidated basis and at the Marmaxx Group.

For the year, we expect pretax profit margins to be 12.0% to 12.3%.

This would be down 10 to up 20 basis points versus 12.1% in fiscal 2014.

We're planning gross profit margins to be 28.4% to 28.7%, which is down 10 to up 20 basis points versus fiscal 2014.

We expect SG&A as a percent of sales to be approximately 16.3%, flat with last year.

Foreign currency exchange rates, assuming current levels, are expected to have a $0.01 negative impact on full-year EPS growth versus a $0.01 positive impact last year.

In fiscal 2015, we plan to continue to balance the use of cash between investing to support our growth and returning cash to shareholders.

Similar to last year, we're planning capital spending of about $975 million.

We are planning investments in store growth and remodels, and we also continue our investments in our distribution network, systems, and home office facilities.

We are planning the stock buyback in the range of $1.6 billion to $1.7 billion, and expect that our Board of Directors will increase our quarterly dividend by 21% on top of the 26% increase last year.

Even with this level of shareholder distribution, we still plan to end fiscal 2015 with $2.3 billion to $2.4 billion in cash, which provides significant financial flexibility.

For modeling purposes, we're planning a tax rate of 37.8%, net interest expense of approximately $35 million, and a weighted average share count of 703 million shares.

Now to Q1 guidance.

We expect earnings per share to be in the range of $0.65 to $0.66, a 5% to 6% increase over last year's $0.62 per share.

There are several items that we have assumed will negatively impact our expected growth rate in the first quarter.

These include the reversal of the mark-to-market adjustment that benefited the fourth quarter, the negative impact of FX on TJX Canada's merchandise margins, and the timing of some expenses.

So, our underlying growth rate without these items would be stronger than the numbers imply.

We're assuming the first quarter consolidated sales in the $6.5 billion to $6.6 billion range.

This is based on comp sales growth in the 1% to 2% range on both a consolidated basis and at the Marmaxx Group.

First-quarter, pretax profit margins are planned in the 11.4% to 11.5% range, down 40 to down 30 basis points versus the prior year.

We're anticipating first-quarter gross profit margin to be in the range of 28.1% to 28.2%, down 30 to down 20 basis points versus the prior year.

We're expecting SG&A as a percent of sales to be in the 16.5% to 16.6% range versus 16.5% last year.

Foreign currency rates, assuming current levels, are expected to have a $0.01 negative impact on EPS this year, compared to a $0.01 negative impact last year.

For modeling purposes, we're anticipating a tax rate of 38.0%, and net interest expense of about $9 million.

We anticipate a weighted average share count of approximately 713 million.

Again, our guidance for the first quarter and the full year assumes that currency exchange rates will remain unchanged from current levels.

I'll wrap up with our store growth plans for fiscal 2015.

On a consolidated basis, we plan to open about 182 stores with about 10 planned closings.

This would result in approximately 172 net new stores for a total of about 3,391 stores planned by year-end.

This represents square footage growth of approximately 5% which would be at the high end of our three-year growth model.

In the US, with the continued strong performance of Marmaxx and HomeGoods, we plan to continue our aggressive expansion of these businesses.

Our plans call for us to net 75 new stores at Marmaxx and 35 new stores at HomeGoods.

As Carol mentioned, we also plan to open two new Sierra Trading Post stores.

Internationally at TJX Canada, we plan to add 20 new stores including 10 Marshalls stores.

At TJX Europe as Carol mentioned, we expect to increase our pace of openings by approximately 25% and add 40 new stores this year.

Now, we are happy to take your questions.

To keep this call on schedule, we are going to continue to ask you to please limit your questions to one per person.

We appreciate your cooperation with this.

Thanks, and we'll now open it up for questions.

Our first question today is from Omar Saad.

Thanks.

Good morning.

Congrats on a great year.

Question about the quarter.

It was kind of an insane quarter with all the weather that you talked about, and it was a shortened holiday period.

Can you talk about either from a high level, or maybe anecdotally, how -- some anecdotes around how you were able to leverage the flexibility that you have in your buying organization and your inventory flows to really deal with the quarter -- to deal with all the volatility that was going on through the quarter.

It would be helpful to have a better understanding of how you were able to manage through it so well.

First of all, we actually -- we ended our Q3 very lean, and our plan was to increase fresh flow a little bit higher than a year ago between November and December.

And basically, what we did is we made a decision that by year-end we wanted to end very lean, which I absolutely love our inventory position.

So, as we started to get into November, December which sales were good, we did clear out of cold weather goods pretty quickly.

And then, we took pretty aggressive markdowns in January so that we would end the year nice and clean, and that was mostly on the apparel categories.

Does that answer your question?

Do you have cold weather product in the store --?

Do you still have cold weather product in the store given the lingering cold weather.

No, no, we're completely clean.

We had very little cold weather even in January.

We were pretty cleaned out by December.

Got you.

Thanks.

Most of the markdowns were really on non-cold weather apparel was predominantly where we took our markdowns.

Our next question is from Richard Jaffe.

Hi.

Thanks very much.

Hi, Richard.

A good quarter despite some of the challenges.

Just curious about your thoughts regarding the Internet growth as a marketing and relationship-building tool, and obviously, what appears to be effective selling tool as well?

You commented briefly on it, and it's been a while -- wondering if your outlook for it has changed, and if you could share that with us?

So, I'm going to sort of repeat what I said because it really is so small to us, and it's a building process and we are very, very pleased.

We did beat our sales plan.

But, having said that, we're getting close to a $30 billion Company without e-commerce.

So, that is just going to be something we're going to keep building.

We've learned.

We have some interesting plans, and our intention long-term is to have all our brands have -- be able to sell to the customer online and in stores.

What we're particularly pleased about is the fact that most customers are returning -- their returns are going back into the stores.

What we need to understand is new customers, are we gaining new customers.

We have a lot of information.

But, we're very pleased with the launch.

And, we did make sure that we really satisfied the customer during the holiday period also.

So, we didn't really have any glitch in terms of getting it directly to the customer quickly, and that's really what we strive for, our first back-half out with T.J. Maxx.

I got it.

Thank you.

Our next question is from Roxanne Meyer.

Great.

Thanks.

Let me add my congratulations on a terrific end to the year.

Thank you.

In terms of your international expansion plans going into Austria, you've told us that as you've expanded into new markets, you've really needed to localize the product.

And, you've obviously pulled in some of your seasoned managers from the US to go over to Europe, and I'm just wondering how you're going to be approaching new markets from here?

And, what kinds of further infrastructure investments or distribution investments you'll need to make?

Right now, we've been looking at a few places, obviously, and we think that this is particularly interesting.

It's eight million people, very high demographic, and very similar to our German mix.

So, we really don't see any increase dramatically in infrastructure.

We'll put a slight amount into systems, and that's really about it.

We'll have some other opportunities in the future, too, to leverage that way.

Roxanne, I'll just jump in a little bit here also.

We -- as Carol said, our infrastructure -- and we've talked about this a couple of times I think over the last year or two.

We're in pretty good shape in terms of our merchandise and planning areas.

Over, there, we call it our merchandising area.

So, as we look at this as an extension of Germany, it's really allowing us to not even distract the organization with any big type of initiative or a new type of business.

So, it will be a pretty seamless transition into the few stores into Austria.

Thanks so much.

Great to hear.

I think the other thing that we should stress is that Ernie and his team have been looking at this country a few years out, so they really got the lay of the land and that was very important.

We have a team, and the infrastructure is absolutely there.

Yes, as opposed to just jumping at this, we did not -- to Carol's point.

We've been talking about this for a while.

This was not a new -- we're new in announcing it, but we've looked at this for quite a while.

We're really excited about Europe.

Great.

Well, thanks so much and best of luck.

Our next question is from Michael Baker.

Hi.

Thanks.

So, I wanted to ask about some of the department store competition, and they seem to be getting sharper in price?

And, I know generally bigger picture, how do you compete with that.

Is that you having an impact on your business now?

And maybe, part of that question is JC Penney.

And, you're asked all the time, and you say it doesn't have an impact.

But, if you look at 2012, JC Penney gave up about $4 billion in sales.

In 2013, it will be about $1 billion in sales, and your comps did decelerate in 2013 versus 2012.

Is that just coincidence?

Or, are you gaining less share from department stores, and JC Penney in particular?

Thanks.

Look, we look at Penney's.

We look at everyone.

We really don't see that dramatically affecting our business at all.

In terms of the distance between us and being able to offer value, we don't see any issues there.

There are more goods available.

You have to understand, first of all, we do business with over 16,000 vendors.

We are global.

We have the advantage of a European fashion, domestic fashion, brands all over the world.

That is very different than what is typical.

So, again, we don't really see Penney's -- we didn't see it a year ago or two years ago.

We just need to keep executing well.

The fourth quarter, we definitely did get a little bit hurt by weather, but we are positioned extremely well for 2014.

We will strive to beat our plan again.

Great.

Thank you.

Our next question today is from Jeffrey Stein.

Good morning, Carol.

Question on your strategy in the fourth quarter to be more promotional.

I'm wondering, A, was it reactive or proactive?

And, B, given the fact that it looks like the industry is probably going to come out of the fourth quarter with higher than normal inventories, what is your thinking strategically for the first quarter and first half of the year in terms of how you'll price?

Are you going to again be more promotional, do you believe?

Thanks for asking that question.

Because we were very strategic in setting ourselves up for Q1.

We have a lot more open to buy than we had a year ago, and the market is absolutely flush.

We saw it that way.

We knew that we wanted to end nice and clean and be very up-to-date on our fashion in going forward.

So, we did ship a little bit more freshness in November and December than we did a year ago, and that -- we paid a little bit more for that.

But, I think it was the right thing to do.

But, we also felt the right thing was to do to end very, very clean at the end of the quarter, and I mean, Ernie, you want to -- the market is -- again, Ernie's out there with his hammer every morning with the buyers.

We have just -- we could feel it all year long from going back into the first half, the amount of availability was -- there's always goods.

It had just built a little bit more than even in the past.

So, we were, as Carol said, going into the fourth quarter, we were strategic and staying more liquid and open to buy, and the good thing with this model of business is when you do get hit with weather -- we get hit like anybody else.

But, in the short term, but we're able to take advantage of opportunities in the market.

And so, the challenge of course is to maintain that open to buy, given all the goods that are out there.

So, our jobs right now are to keep all of the divisions from buying too much too soon because there's that much of availability out there.

Was the decision driven by what you saw in terms of the availability of open to buy?

Or, was it a reaction to what you saw from competitors in terms of what you did to get your --?

It was a combination, Jeff.

It's a combination.

In terms of the pricing.

Right.

Yes.

We hit pricing.

But, again, we did -- we pushed some areas in December a little bit harder than we did the year before, strategically.

And, those areas, when the weather hit us a little bit in January, we got more aggressive because we didn't want to be sitting with it.

So, it's a combination, and we said, let's be really lean because there's tons of great deals out there.

That was really a combination.

Thank you.

Our next question is from Kimberly Greenberger.

Great.

Thanks so much.

I'm hoping you can talk about the rollout in Europe, and I know that there were a number of different strategies that you all employed for the rollout you're just beginning to do relative to the 2008, 2009 experience.

I'm hoping you can just sort of peel back the onion a little bit and talk to us about the sort of prep work you've done so that we can look forward to, I think, enhanced sales and margin growth in that region over time.

Kimberly, first of all, I said it a lot that we have learned a lot, and we certainly took our hits several years ago and you can see the progress.

Again, we're planning Europe quite a bit up next year.

Again, because we feel that the infrastructure, and we feel that everything is in place to do business.

Now, we have increased the number of stores, but having said that, we're not going crazy by any means.

Ernie, you can comment on the real estate.

I think we're in great position there, also.

Kimberly, I just got actually back from Europe 1.5 weeks ago, and one of the things we talked about over there was the real estate that we're going after and making -- and showing that we're going after quality sites and not forcing the issue of the number of real estate sites.

Really going after the quality site, which in the past -- in 2008, 2009 -- I don't know if we did as good a job back then.

Secondly, the other thing we're doing a much better job on is we have the people in place.

That is really the driver of any of these expansions with the number of stores.

As long as we have the buying and merchandise planning areas intact, and they've all been on their jobs a lot longer than they were back then.

We're really able to really do a much better job in replenishing and shipping all of those stores.

In addition, in order to ensure that our real estate that we are choosing and going after is more strategic, we have staffed up aggressively over the last two years in terms of our real estate -- I guess, deal makers you'd call it as well as our real estate market analysis.

So, that whole team now has -- I don't know the exact number, but we've gone up in size quite significantly.

We're much more analytical when we open our stores over there.

So, all of those factors I think really make us feel very comfortable in ramping up over there.

Also, Kimberly, the fact that our second largest volume store is in Germany isn't too shabby either.

We see opportunities for some pretty big volume stores in the high streets.

We're talking second largest store in the corporation.

In the corporation, right.

Wow.

Terrific.

Thanks so much, Carol.

Our next question is from Daniel Hofkin.

Good morning.

Congrats on a well-managed quarter against an interesting environment.

Just had a bit of a question on the traffic versus ticket dynamic.

You indicated again in the fourth quarter that it was primarily, if not all, ticket.

Just wondering how that kind of squares with what was a more promotional environment?

What drove the ticket increase?

Was it higher initial price or mix-related?

Just what was that dynamic?

And then, going forward, would you expect more of a balance between traffic and ticket?

Or, would you expect sort of more ticket once again?

So, first of all, in terms of traffic -- first and fourth quarter were our least -- in terms of traffic, second and third, where weather did affect us, without a doubt, when we got into January.

So, that was a little disappointing.

November and December, we were pretty pleased.

Our mix -- the average ticket was driven by our mix.

We really went after gift-giving.

I'm not going to go into the details of certain categories, but we went into some categories that we thought would be really a wow to the customer.

Our average ticket was really driven by the mix.

We felt our values were absolutely terrific.

We have a lot of plans next year to drive traffic, and we feel very good about it.

We had a lot of tests going on this year.

So, we feel pretty good about going forward.

All in all, we were very pleased, but there's no doubt that Q2 and Q3 last year, our traffic was up, and where we did get a little bit hurt by weather in the first and the fourth quarter, we were -- we did see a bit of a hit.

Fair enough.

And, I guess just one other regarding the e-comm, would you say that the vendor sign-ups -- how has that trended?

I know early on you said you were seeing better than expected sign-ups by vendors to participate in www.TJMAXX.com.

Has that continued?

I would say to you, slowly but surely, people are feeling more comfortable because we've really set up the site so that we are very, very vendor-friendly.

We are capturing more vendors every day, and that's going to continue to build.

Thanks very much.

Our next question is from Howard Tubin.

Oh, thanks a lot.

Can you maybe just comment on inventory.

You've done a great job, and obviously, you're entering spring very clean.

Should we expect inventory to kind of per-store to sink down throughout the spring season?

We're planning it slightly down.

But, we're still planning our inventories down, yes.

But, having said that, again, our goal is to try to deliver more frequently to the stores, and we're going to continue on that path.

Less, more frequently.

Got it.

Thanks.

We're very happy with our turns.

Our next question is from Brian Tunick.

Thanks.

I'll add my congrats as well, Carol and team.

I guess maybe, Carol, if you could just talk a little about HomeGoods?

Just sort of what you thought the weather impact was for them in Q4 to generate that comp?

And, is there any change in your outlook?

I know some other retailers have posted some softer numbers in the home side of the business recently.

And then, Scott, if you could just give us either the sales or comp or segment margins in your 2014 guidance -- that would be fantastic.

Thanks very much.

Honestly, I'm thrilled with HomeGoods, and I was pretty happy.

They have more stores obviously in the Northeast and in the cooler climates so they got hit a little bit more.

Having said that, we're very happy with their performance.

They also were aggressive in cleaning out so they'd be fresh for spring.

But, we love HomeGoods, and we continue to see tremendous growth there.

Nothing unusual going on there.

And so, I'll give you the full year.

I assume you wanted the full-year guidance.

Yes, that would be helpful.

So, starting with -- again, I'm going to do this for the foreign divisions excluding FX.

First with Marmaxx, we have planned a 1% to 2% comp against last year's 3%.

The segment margins at a low 14.4% to 14.8% against last year's 14.6%, down 20 to up 20 at the high.

And, sales $18.6 billion to $18.8 billion.

Now to HomeGoods.

1% to 2% comp against last year's strong 7%.

12.6% to 12.9%, again, at 30 to -- again, 30 to flat at the high.

$3.2 billion in sales.

TJX Canada, 0% to 2% comp, 12.7% to 13.1%, against last year's 13.6%, down 90 to minus 50 at the high at $2.9 billion to $3 billion in sales.

Europe, 3% to 4% against last year's 6% with 8.3% to 8.7% against last year's 7.8% and a 50 to 90-basis-point increase.

And again, the total number on the TJX consolidated 1% to 2% against a 3% this year, and excluding FX, 0 to 30 basis points on the high.

Very helpful.

Thank you.

Our next question is from Oliver Chen.

Hi, team, congratulations on a wonderful year and finish.

Regarding your earlier comments on the new store prototype, could you just share with us where you're headed there?

And, if it should impact how we think about new store productivity and square footage?

And, you also brought up in your prepared remarks how you're becoming closer to source of the product.

I was curious about the strategy there, and how it may benefit you on a near- and long-term basis?

Okay.

When you're talking to the prototype, are you talking about Marshalls?

Or, you're talking about STP?

Marshalls.

Okay.

So, we had a new prototype that we rolled out pretty aggressively in T.J. Maxx, and Marshalls -- we've learned certain things that we need to do in Marshalls that we learned through the T.J Maxx prototype.

But, we want to upgrade, and that's what we're working on.

We think it's time.

And, some of the things will benefit just making it more customer-friendly, easier to shop, a lot of things that we've learned over time and also through customer surveys.

And so, that's what we're working on and continuing to differentiate the two chains so it's exciting to be able to walk into both.

Differentiation is very, very important which allows us, again, to put our stores closer together.

So, we are seeing when we put a Maxx next to a Marshalls, it's really becoming a Mecca -- and, certainly a HomeGoods.

We're actually putting a HomeGoods right near my house because I needed to have a HomeGoods, a Maxx, and a Marshalls within a mile distance of shopping.

We're pretty excited about that.

We're always going to upgrade our stores.

It's just part of our process, and that's why we're around the 250 mark versus being a little bit more aggressive on our remodels because we're starting a new prototype.

Got it.

Thanks.

And, on the sourcing side, you spoke to some driving more efficiencies?

That's really about building the talent and our team to be all around the world.

We've increased our buying offices all over.

We have more people in New York, more people in California.

We have more people in Europe.

We have people in India.

We have people in Australia.

We continue to build that so that we're constantly opening new vendors and more excitement, and that includes some of the smaller guys that are very hard for typically a department store to find.

And, they're little nichey vendors that make our mix very eclectic and very unique, and that's part of the treasure hunt.

So, we find that very exciting.

Thank you.

Best regards.

Our next question is from Lorraine Hutchinson.

Hi.

Good morning.

This is Heather Balsky on for Lorraine.

I just had a quick question regarding the competition.

I guess as other off-pricers are opening more in some of your core markets and you continue to expand in your existing markets, how does the competition sort of impact your sales?

Is there any cannibalization?

Or, do you benefit from having those competitors in your marketplace?

We actually like it because it does create more traffic.

It becomes sort of a Mecca.

So, we do like it.

Thank you.

And, just a follow-up, in had terms of the testing of the Sierra brand and opening new stores.

I know it's early on, but do you have any insight into how big that business possibly could be?

Could it be a [fifth] brand for the Company in the US?

I have no idea.

We're very excited about this -- the whole outdoor, the whole space -- we're very excited about.

And, we think of it kind of like HomeGoods in the active and outdoor space.

So, we're excited about it.

But, I couldn't tell you.

I mean, we're just starting to open our stores, and look, like anything else -- we hope it's going to be a big chain in the future.

Thank you very much.

Our next question is from Robert Drbul.

Hi, good morning.

I guess a question that I have is when you look at what drove sort of the business holiday and throughout 2013 from a category perspective, and you look at the years on top of the comp increases that you've driven, what categories do you think will lead you in 2014?

Or, what categories are you most excited about in driving the business?

I'm sorry, Robert, we don't talk about the categories.

We do have competition out there that looks at us periodically.

Okay.

And then --.

We have a you few things up our sleeves.

I'm sure you do.

Going to have to shop our stores.

I do.

(laughter) Trust me.

And, when you look at the home category in general, when you talked about the home fashion did well at Marmaxx.

Was there any difference between what worked in the Marmaxx stores versus what was working in the HomeGoods stores?

Well, the mix is very different.

They go after it in a very different way.

The categories -- there are categories that were strong throughout.

There were some unique things that Marmaxx did that certainly HomeGoods didn't do, and there were certainly unique things that HomeGoods did that Marmaxx didn't do.

So, they're really two different operations.

They just leverage each other on the total buying, but they differentiate.

Okay.

Thank you very much.

Our last question today comes from Mark Montagna.

Hi.

Just a quick housekeeping question and then actually a real question.

Europe -- Scott, what did you say the revenues were expected to be for Europe?

And then, what is the comp leverage hurdle that you need to leverage gross margin occupancy and then SG&A?

And then, the more real question is the Sierra stores, how are they going to differ than the outlet stores that Sierra has at this point?

Let me ask you -- I'll answer the Sierra.

We're creating a brand-new prototype so it is going to look very different from the Sierra stores today.

We're really -- if you think of it like -- again, the idea of a HomeGoods feel in the outdoor space, but it's going to have some very unique things.

It's pretty -- it's going to be pretty interesting.

It's going to have a real unique look.

Value, value, value, I can't say it enough.

In every category, that's what we're going after.

When you say --.

And, you wanted the Europe sales for next year?

Yes.

He wanted everything.

(laughter)

I'll repeat it again.

Comps of 3% to 4%, again, against this year's 6% comp.

Segment margins, again, this is excluding FX, 8.3% to 8.7% against last year's 7.8%.

A 50 to 90-basis-points improvement and sales in US dollars of $4.1 billion to $4.2 billion.

In terms of -- I'll give it to you in terms of -- the way we look at it because a lot of our expenses and margin increases are built into the model for -- if we beat our comp by 1 comp going into next year, then we'd expect to have about a 20-basis-point improvement.

And, on the full year, we would have approximately $0.08 more if we beat by a full 1 comp.

And, hopefully, we'll strive for that at least.

I'm sure you will.

Carol, just a follow-up question.

When you were talking about the outdoor space, do you include things like basketball -- more athletic things?

Because on the Sierra website, you can see things that I wouldn't have really considered outdoor.

Are you considering all sporting goods as outdoor?

Yes, it will be an expansive assortment.

It will be an exciting store.

Sounds good.

All right.

Well, I thank you, everyone, and we look forward to reporting Q1.

Thank you.

This does conclude today's conference.

You may disconnect at this time.