TJX Companies Inc (TJX) 2015 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the TJX Companies first-quarter FY15 financial results conference call.

(Operator Instructions)

As a reminder, this conference call is being recorded, Tuesday, May 20, 2014.

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

Please go ahead, ma'am.

Thank you, Elan, and before we begin, Deb has a few comments.

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 1, 2014.

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 the 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 in 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.

And joining me and Deb on the call are Ernie Herman and Scott Goldenberg.

Our first-quarter consolidated comp sales increased 1% and earnings per share was $0.64 versus $0.62 last year.

Our EPS results were $0.01 below our expectations, as the negative impact of foreign currency exchange rates was $0.01 more than our guidance assumed.

While sales were not as strong as we would have liked, especially in apparel, we were pleased to see overall business trends improve as the quarter progressed and we are very well positioned as we enter the second quarter.

While we clearly saw dampened consumer demand for apparel in some of our North American regions during the first quarter, having learned from the fourth quarter, I am pleased with the way we managed our inventories.

We were extremely strategic in how we flowed inventories to particular regions and categories.

Expenses were also tightly controlled.

All of this helped mitigate the impact of markdowns overall.

Further, I could not be happier with TJX Europe, which delivered another spectacular quarter.

This bodes very well for our future growth plans in Europe as we expand our international footprint.

We enter the second quarter with lean inventories and we see a marketplace absolutely loaded with buying opportunities for quality branded merchandise.

We are well positioned to take advantage of these opportunities.

We are maintaining our EPS and comp outlook for the remainder of the year and are confident we will achieve our plans for 2014.

Scott will cover guidance later.

On today's call, I'll reiterate the magnitude of the top and bottom line growth opportunities we see for our business.

We remain convinced that TJX will grow to be a $40 billion company and beyond.

But before I continue, I'll turn the call over to Scott to recap the numbers.

Thanks, Carol, and good morning, everyone.

Again, our first quarter consolidated comparable store sales increased 1% and we were pleased to see sales trends pick up as we move through the quarter.

Our first quarter comp was driven by an increase in ticket, while customer traffic was slightly down for the quarter.

We did see improvement as the quarter progressed.

Diluted earnings per share were $0.64 versus $0.62 last year and $0.01 below the low end of our expected range.

The mark-to-market adjustment on our inventory-related hedges had a $0.02 negative impact on earnings per share, which was $0.01 more than we contemplated in our guidance.

As a reminder, we had a $0.01 negative impact from FX last year.

Consolidated pretax profit margin was 11.3% for the quarter, down 50 basis points versus last year due to a decline in gross margins.

Gross profit margin was 27.9%, down 50 basis points versus the prior year.

The decrease was primarily due to lower merchandise margins versus strong improvement last year and expense deleverage on the 1% comp.

In addition, the mark-to-market adjustment I just mentioned also had a negative impact.

SG&A expense as a percentage of sales was unchanged from last year's ratio as expenses were tightly managed.

At the end of the first quarter consolidated inventories on a per-store basis, including the warehouses and excluding in-transit and eCommerce inventories, were down 1% in constant currency.

This was versus substantial decreases in the last couple of years.

We begin the second quarter in a lean inventory position, which enables us to take advantage of the abundant buying opportunities in the marketplace.

In terms of share repurchases, during the first quarter, we bought back $360 million of TJX stock, retiring 6 million shares.

We continue to anticipate buying back $1.6 billion to $1.7 billion of TJX stock this year.

In addition, the Board of Directors approved a 21% increase in the per-share dividend in April, marking the 18th consecutive year of dividend increases.

Now, let me turn the call back to Carol and I will recap our second quarter and full-year FY15 guidance at the end of the call.

Thanks, Scott.

Before moving to our global growth opportunities, I'll share some comments on the first quarter performance by division.

In the US, Marmaxx comps were flat with last year and segment profit margin decreased 60 basis points.

This was primarily due to expense deleverage on the comp as well as 10 basis points of deleverage from our eCommerce businesses and slightly higher utility costs.

We are pleased that Marmaxx held merchandise margins relatively flat on a flat comp.

This is a testament to Marmaxx flowing inventories very strategically, feeding regions and categories where trends were stronger and maintaining lean inventories where business was softer.

Where we believe weather was a factor, there was as much as a 4 point comp spread with less impacted regions.

We also see some execution issues in our junior and dress businesses that we are currently addressing.

As always, we evaluate and work to improve what we're not happy with and we are confident we will fix these issues.

Our strongest category was total accessories and the jewelry businesses.

Going forward, Marmaxx has some exciting marketing plans in order to drive traffic in the second quarter and the back half.

Home Goods delivered a 3% comp increase on top of 7% growth last year and segment profit margin was up 10 basis points over last year's significant increase.

We are very pleased with Home Goods' ability to continue driving strong performance over strong comparisons.

Now to our International Division.

At TJX Canada, comp sales were down 1% and adjusted segment profit margin decreased 210 basis points.

We believe the severe weather across Canada had a significant negative impact on both customer traffic and demand for spring apparel.

Further, as we expected, the decline in the Canadian dollar pressured our merchandise margins.

We were encouraged to see business trends improve by the end of the quarter.

TJX Europe delivered another outstanding quarter.

Comp sales increased 8% over 4% increase last year and adjusted segment profit margin was up 180 basis points.

We continue to see broad-based strength across the different geographies, economic climates and consumer environments in which we operate, which is very encouraging for our growth prospects in Europe.

We are very excited about our German business, which is delivering terrific performance.

As to eCommerce, we were pleased with the performance of our online businesses overall in the first quarter, which was above our plans.

At tjmaxx.com, we continue to add more categories and open more vendors.

We are investing carefully as we learn more about our online, including the differentiation from brick-and-mortar stores.

Now, to the magnitude of our global growth opportunities.

First, we see huge potential to gain additional US and international customers.

We believe our customer penetration levels in the US remain below those of most department stores and the opportunity to expand our international reach is vast.

We continue to target a very wide customer demographic.

As we work to drive customer traffic, we plan to be even more aggressive with our marketing.

In the second quarter, we have significant increase planned in our overall media impressions in the US and UK.

Our TJX Rewards Loyalty Program is another way we can attract more customers, increase shopping frequency and encourage shopping across our chains.

We are expanding our successful Credit Card Loyalty Program to include a noncredit card choice.

We have seen from our tests, it's a great way to invite even more customers to join our loyalty program and have plans to roll out this new option nationwide in the US in the second quarter.

We know that customers who shop more than one of our retail brands spend considerably more with us on average and we see the loyalty program is a way to better engage with them.

Our customer satisfaction scores across divisions keep going up, yet we still see room for improvement.

We are focused on raising the bar, as always.

We continue to upgrade the shopping experience in our stores.

Across all of our chains, we plan to remodel approximately 250 stores in 2014.

We are also on track with our plans for a new Marshall's prototype.

We see ourselves as leaders in innovation.

We are constantly testing new ideas and seeking the right product categories, current fashion and top brands.

We are excited about our plans to open two new Sierra Trading Post stores this fall.

We really like the outdoor space and see this initiative as a way to offer more categories and brand that are not in our stores today.

Now to our vast store growth opportunities.

With over 3,200 stores today, we see the potential to grow to 5,150 stores long-term.

That would be about 60% more stores in our existing base with just our current chains in our current markets alone.

We have many reasons giving us confidence.

At Marmaxx we see the potential to grow our largest, most profitable division to 3,000 stores long-term.

That represents almost 1,000 more stores than today.

The performance of our new stores remains excellent, which underscores our confidence.

Further, we are successfully co-locating stores closer to one another while keeping cannibalization levels where we would expect.

We believe Home Goods ultimately has the potential to be a chain of 825 stores, which certainly could be conservative.

Home Goods new store performance is also terrific.

There are about 100 markets where we operate a TJ Maxx or a Marshall's without a Home Goods, which speaks to the opportunity.

At TJX Canada, we see the potential to grow to 450 stores long-term, which includes growing Marshall's to 100 stores in Canada.

We believe our 20-plus years of experience and knowledge will continue to serve us well as we further our Canadian expansion.

At TJX Europe we see enormous growth potential for TJX.

Long-term, we believe we can be more -- we can more than double our current store base to 875 stores, purely with our existing chains in our existing countries.

As a reminder, in 2014, we plan to accelerate the pace of our store openings in Europe to 40 stores, which is 25% more than last year.

This includes more than doubling the number of openings in Germany versus the prior year.

To support our growth in Europe, we have added more resources to our real estate group, which is helping us to secure some amazing locations.

We also see vast opportunity to expand beyond our existing countries.

We are working on entering our next European country with plans to open our first few stores in Austria in the first half of 2015.

Beyond Austria, we believe our off-price concept can work in any country where consumers love great fashion, brands and quality, all at great values.

TJX Europe is a major part of our future growth plans and I couldn't be more excited about the opportunities for this business.

We are the only brick-and-mortar off-price retailer of significant size in Europe.

We have decades of experience and knowledge that cannot easily be replicated.

Beyond the success of our brick-and-mortar businesses, we see eCommerce as another long-term growth vehicle for TJX.

We view online as another way to attract new customers and drive traffic, both to our websites and stores.

Our eCommerce businesses offer consumers the convenience to shop our values 24 hours a day, 7 days a week.

We remain deliberate in our approach to eCommerce growth.

We plan to keep adding more categories and increasing our assortment on tjmaxx.com, offering consumers even more online choices at amazing values.

In addition, we could not be happier with our acquisition of Sierra Trading Post, both from the standpoint of its online businesses as well as brick-and-mortar growth potential in the outdoor value space for the future.

In closing, we are in an excellent position as we enter the second quarter and remainder of 2014.

We like our lean inventory levels, are in great position to buy into the plentiful opportunities we see in the marketplace.

We are delighted to offer consumers amazing values, both in our stores and online.

We keep raising the bar on fashion, brands, quality and price.

To drive customer traffic, we have many marketing initiatives under way.

We are significantly increasing our marketing impressions in the US and the UK in the second quarter.

We are also very excited about our planned nationwide expansion of our loyalty program.

We keep testing new seeds.

Innovation is our DNA.

We are never complacent.

To support our growth plans, we continue to invest in our supply chain and distribution network.

We expect to begin a gradual rollout of our upgrading merchandise systems in the next couple of years.

We are thrilled with TJX Europe's performance, which is sensational.

I am so excited about our international growth opportunities, including our plans to enter Austria in 2015.

I've said this many times before, but I will say it again.

I truly believe it's under appreciated how much time, energy and talent it takes to establish the infrastructure to build an off-price international business.

Our EPS and comp outlook for the remainder of the year remains the same as our original guidance and we are confident that we will achieve our plans and, as always, we will strive to surpass our goals.

This is a Company that has grown successfully through strong and weak environments, which gives us great confidence.

Over a very long history, we have a consistent track record of steady sales and profit growth.

We are very confident about the future of TJX as we bring our values around the world.

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

Thanks, Carol.

Now to FY15 guidance, beginning with the full year.

We now expect FY15 earnings per share to be in the range of $3.05 to $3.17, over $2.94 in FY14.

We are lowering the high end of the range by $0.02 to reflect our first quarter results and maintaining our outlook for the remainder of the year.

As a reminder, FY14 included a tax benefit of $0.11.

Excluding this benefit, our full-year expected EPS would be 8% to 12% over the prior year's adjusted $2.83.

We continue to expect consolidated comp store sales growth of 1% to 2%.

For the year, we continue to expect pretax profit margins to be 12% to 12.3%.

This would be down 10 basis points to up 20 basis points versus 12.1% in FY14.

This now reflects expected gross margins of 28.3% to 28.6%, which would be down 20 basis points to up 10 basis points versus FY14.

And now -- and we now anticipate SG&A as a percent of sales to be approximately 16.2%, a 10 basis point improvement versus last year.

Foreign currency exchange rates, assuming current levels, are now expected to have a $0.02 negative impact on full-year EPS versus a $0.01 positive impact last year.

Now, to Q2 guidance.

We expect earnings per share to be in the range of $0.70 to $0.74.

This would be a 6% to 12% increase over last year's $0.66 per share and on top of many years of double-digit EPS growth in the second quarter.

We're assuming second-quarter consolidated sales in the $6.8 billion to $6.9 billion range.

This is based on expected comp sales growth in the 2% to 3% range on both a consolidated basis and at the Marmaxx Group.

Second-quarter pretax profit margins are planned to be in the 11.7% to 12.1% range, down 30 basis points to up 10 basis points versus the prior year.

We're anticipating second-quarter gross profit margin to be in the range of 28.5% to 28.8%, down 30% to flat versus the prior year.

We're expecting SG&A as a percent of sales to be 16.6% versus 16.7% last year.

Foreign currency rates, assuming current levels, are expected to have a neutral impact on EPS this year, which is the same as last year.

For modeling purposes, we're anticipating a tax rate of 37.7% and net interest expense of about $9 million.

We anticipate a weighted average share count of approximately 708 million.

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

Now we are happy to take your questions.

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

We appreciate your cooperation with this.

Thanks.

And we will now open it up for questions.

(Operator Instructions)

Oliver Chen.

Congrats on the global success here.

We just had a question on your gross margin guidance going forward.

What does that anticipate for merchandise margins?

And how should we think about how merchandise margins have trended throughout the quarter that just elapsed and what are the strategies for looking at that [line item] going forward?

Thank you.

Okay.

Oliver, thanks.

For Marmaxx in Q2, our merchandise margins are planned flat to slightly up.

Scott, do you want to go over the aggregate?

Just to be clear, do you want more breakout on the first quarter gross profit margin?

I was curious on a month-to-month if it's trended in any way.

That corresponds to how we should think about them going forward.

And then if the juniors business is kind of related to this in terms of the opportunity you see there as well?

So, Oliver, in terms of merchandise, I'm going to go back to Q1 for Marmaxx.

Merchandise margins were fairly flat, which I think is a testament to the way they manage their inventories.

But going forward in Q2, we are planning them flat to slightly up.

So I think we're in pretty good shape.

In terms of juniors, we missed some trends.

The guys are working on it.

We have a couple of execution issues and I feel pretty good that we're going to be fixing them in the near future.

But are you asking -- did I answer your question?

Yes, that's clear.

Thank you.

That's encouraging.

Stephen Grambling.

I guess one quick follow-up to that.

Can you just provide a little bit more color on the puts and takes to the merch margin in the first quarter as it relates to kind of initial markups versus markdowns?

Do you want to break that up?

Sure.

So we were -- on the gross profit margin decrease, it was a combination, as we said, between the merch margin and the deleverage on the one comp.

So we had 10 basis points due to mark-to-market, a portion also due to buying and occupancy deleverage, and then the rest of it was due to merchandise margin miss.

And again, that was a combination of a couple items.

It was due to Canada that we had a miss due to the currency -- the devaluation of the currency compared to the US.

So the mark on it dropped there.

We also had some additional mark-ons at both Canada and Marmaxx as -- due to the performance of sales versus our plan at the low end.

And that was really -- but having said that, as Carol said, Marmaxx still was relatively flat overall.

In addition--

Most of it was driven by markdowns.

Markdowns.

Yes, our markup was pretty healthy.

Great.

That's helpful.

One other follow-up, if I may.

Just as you're talking about entering Austria in the first half of 2015, can you provide a little bit more detail on the investments required to make that happen as it relates to talent, distribution?

And maybe how quickly you think you can ramp there versus other markets?

Thanks.

Pretty leveraged.

Ernie, do you want to comment?

Yes, Stephen, actually I was just over in Europe last week and one of the things we talked about is how it's a pretty seamless entry for us, really.

We get to leverage most of our central buying and planning areas and it's more about talent acquisition in terms of the field and the first few stores that we opened.

So on that front, very little talent needed on top of what we already have.

We think the mix is very similar to Germany.

Very similar.

Unlike selling from the UK to Germany.

So even talent would come from Germany versus pulling people in?

Yes.

Okay.

We didn't need extra people, no.

Thanks so much.

Best of luck.

Thank you.

Omar Saad.

I think a pretty good result, given everything that's going on out there.

Thanks.

I would like to dive in a little bit on the power and flexibility of the model that served the Company so well.

The ability to react and respond.

Can you talk about either big picture or maybe some examples of kind of what's been happening last couple quarters?

What you've learned, areas where you can be more flexible and some areas where maybe it's been a little bit harder?

Especially from the -- extremely cold weather, maybe how could you -- were there places where you could have been a little bit better positioned for that cold weather in terms of the business' ability to be flexible?

Thanks.

Well, you know what, Omar, we learn from every quarter.

And I think we learned from the fourth quarter, which is why Marmaxx merchandise margins were in pretty good shape.

However, if I look back and I said what else could we learn for next year -- which is what we do -- I would probably feed the warmer zones a little bit heavier.

And I would probably, again, pull back a little bit on the Northern regions and switch a little bit in category.

So they made some pretty big moves, but I still think there's some room there -- a spectacular quarter.

But, you know what?

We move on and for the year, I'm not going to use the word weather too many times because we're excited about the year and we believe in the model for the year certainly.

Thanks, Carol.

Daniel Hofkin.

I guess a little bit of follow-up in thinking about the fourth quarter and then into the first quarter.

Maybe just if you could kind of help us better understand the Company's strategy during, let's say, a period when the sales are a little bit light.

I think a lot of us are so used to the Company -- you're very nimble.

You're able to react late in the season.

What in terms of just the way you run the business, let's say, results in a situation where you find that you're taking some greater markdowns, given how lean you run the business and how kind of late you make buying decisions relative to full price?

Thanks very much.

So obviously our home business was spectacular, as you saw in Home Goods.

In Europe, that was pretty consistent in terms of whether the business was great.

I'll reiterate, every quarter we reevaluate.

And we have certain businesses that are extremely strong and we're feeding into them.

Our inventory position is spectacular right now.

We have more open to buy than we had a year ago.

We are actually turning faster in Marmaxx than we did a year ago.

And as we go through the quarter and as we transition for each quarter, especially first and fourth quarter, we're going to take into consideration all of the patterns that we have seen and do some tweaking with that.

And that's usually how we get better each quarter.

So is it fair to say that, to some degree, because you want to have the sales floor very fresh, that if you find that for whatever reason the product isn't quite selling the way you expected for weather or other reasons, that you just choose to basically move it out right then as opposed to holding it in the store?

Well what we do is we look at every single category.

And we would feed certain categories harder in the north that are less weather -- we call it weather-proofing.

And then we would feed the southern zones, or the warmer climates, a little bit heavier.

And that's the tweaking we would do.

And, Daniel, if I could just jump in.

The other thing is we did keep it, as Carol mentioned earlier, we kept inventories lean even in the places where we would get -- or categories we would get hit by the weather.

And so really, the liability in terms of any major lumps in the inventories don't create.

That's one reason the merchandise margins held in there pretty well.

Even with the category where the weather was hitting it, we were lean.

So the liability wasn't major.

And that's the flexibility.

I think when you first talked -- when you talked about fourth-quarter into first-quarter, that's kind of how we run it all the time.

And then we chase.

So we generally don't -- we chase the trends so we don't have to own a huge liability really in any category.

I mean, honestly, we could have pushed inventories in Marmaxx and had higher sales, but we probably would have had more markdowns.

We would have had more markdowns, right.

And you're making -- you're always balancing that.

Having said that, specifically there are definitely areas that we could put more inventory into that would drive sales and areas that we don't need to feed.

And those are the tweaks we would make.

Which we do ongoing all the time.

Right.

Every quarter.

All right.

Well, thanks, guys.

I appreciate that.

Brian Tunick.

Hi, good morning.

This is [Beedum Bornye] filling in for Brian.

Thanks for taking our question.

We wanted to ask about Europe.

Comps have been clearing very strong now for 10 quarters in a row.

So we were wondering who you think you're gaining share from in Europe?

And how your marketing initiatives compare to the ones in US?

And now from a real estate perspective, you clearly have pretty ambitious store opening plans -- actually both in the US and Europe.

But I guess it's easier for us to see here where you may be getting these larger boxes that further downsizing at some department stores and maybe even consolidation among office suppliers retailers.

So wanted to see if real estate dynamics are similar in Europe as well and maybe if there are any retailers that you want to or look to [co-locate] with in Europe.

Thanks.

Okay.

Well, first of all, we believe in Europe.

We're taking a bit of share from everyone.

We see everyone as our competition.

Off-price is very new to Europe, not the UK, because we've been there for a long time.

But in Germany, it is very new and people are very, very excited about it.

In terms of the real estate, Ernie and the team have put on quite a few additional people that are seeking sites.

Which is why we're able to increase our count in Germany and, obviously, go into Austria, and we'll see how that goes.

But it's a matter of manning it and continuing to build and leverage the infrastructure that we had that took us 20 years to build.

Thank you.

Michael Baker.

I wanted to ask you if there's anything we should think about in terms of market share?

JCPenney did better this quarter in a quarter where your comps didn't do as well.

Sounds to me as if it's a lot of weather.

Just wondering if you think some of the JCPenney doing a little bit better has any impact?

And I guess really, after you answer that, just explain to us how you understand that.

What specifically you look at to get an indication as to how a situation like that might be impacting you guys?

Thanks.

Michael, we do a pretty deep analytical study on stores that are next to our stores, stores that are within a mile away, three miles away, five miles away.

And quite frankly, we didn't see the impact when Penney's comps were substantially down and we're really not seeing an impact going the other way.

But we do a deep dive and we analyze it.

Okay.

That's helpful.

One more quick one.

Sounds like you said your outlook for the balance of the year isn't changed, but you're now looking at 2% to 3% comps in the second quarter.

Is that what you would have been planning all along?

Or does that -- a reflection of maybe you lost some weather business in the first quarter but think that comes back into the second quarter?

It's a little bit of pent-up demand.

Ernie and I feel there are a couple of areas that we can execute a little bit better.

And our marketing impressions are up 35% in Marmaxx and we're really excited about some of the things that we're doing in our loyalty program in Marmaxx.

And you (inaudible - multiple speakers) impressions to be up, or that was a shift when you saw the business meter?

No, that was in our original plan.

Okay.

Thank you.

That's also part of our analyzing Q1 into Q2, the weather patterns, all of that.

That's where we felt we wanted to put our dollars.

Okay.

Thank you.

Roxanne Meyer.

Just looking at 1Q, I know this is probably difficult to parse out, but you mentioned a 4% comp differential in weather-impacted regions versus none.

I'm just wondering if in total you can describe what -- how much weather was an impact overall to your 1Q shortfall at Marmaxx versus the impact of dresses in juniors underperforming?

And how do you feel about the inventory, specifically, in the dresses and juniors category and how long maybe it could take to right size that inventory?

Thank you.

Well, as I said before, probably we would certainly be at the high end of our range looking at the numbers.

I mean, you can't come up with an exact specific number.

But it's pretty clear to us when we look at the different regions and areas that it was probably about 4 points in Marmaxx.

It was actually more than that in Home Goods.

So it did hit us.

In terms of both categories, dresses and juniors are improving.

I think we're going to see a substantial improvement in the second quarter and we're working on it.

I can't give you specific numbers.

And I don't usually do that, but we're working on it.

And usually as a Company, we fix things pretty quickly.

Great.

Thank you.

Roxanne, I would also jump in that the weather analysis that Carol is talking about, if you ever did dollar it out to figure out the impact, that would be far greater than the junior dress business execution -- impact.

Yes, impact.

And I think you had asked that in your question.

I did.

Great.

Thank you very much.

Howard Tubin.

Can you give any update you can give us on stores opening within the last one or two years -- new store productivity kind of by chain -- how does that look?

Actually, the productivity of our new stores is sensational, to say the least.

It just continues to be incredibly strong.

We're getting better and better at our sites there.

Brand-new stores and their performance is incredible, both Marmaxx, Home Goods -- actually every chain, Europe.

Canada.

Very happy with new store performance.

That's great.

Thanks.

Jeff Stein.

Good morning, Carol.

I would like to delve into your loyalty program a little bit.

Can you talk about the number of members you have currently, the average spend, and how you intend to kind of get the word out that you don't have to be a credit card holder to join the program?

So you're asking me for some things I'm not going to give you.

But what I will tell you is we tested the soft loyalty program in several markets last year and we saw a substantial increase in the number of visits.

And we are rolling that out across the country starting, really, today through June.

So we're pretty excited about it.

And there are a lot of special fun things like stores opening early for that customer, giving them e-mail information on things that are coming into the store.

We have several little trigger points that we have been testing over the last year.

So this is very, very exciting to us.

So we'll see what happens when it rolls out.

Can you talk at all about the average spend of a loyalty customer versus non-loyalty?

I don't go -- our loyal customers spend a great deal more.

But more importantly, the visits are substantially up.

Got it.

Okay, great.

Thank you.

Marni Shapiro.

Hey, guys.

Congrats.

Great job in a miserable first quarter weather.

Thanks.

If you could give me just a quick update on -- you talked about Home and Home Goods, but any update on it.

Was it as strong as the Marmaxx Group?

And then some of the smaller departments within Marmaxx tend to pick up where the peril is weak, whether it's beauty or fitness or footwear.

Could you just talk about some of those offsets other than accessories, which I think you touched on?

Yes.

So, Marni, I don't usually do a deep dive into our categories for competitive reasons.

But Home was in Marmaxx -- was pretty strong.

Big Furniture, we had some issues with some of our big ticket items.

But generally, Home across the board was certainly stronger than apparel.

I will tell you that women's apparel has increased dramatically coming into May.

So we're pretty pleased with that.

But across the board, the categories were pretty similar in most divisions.

Fantastic.

Thank you, guys.

Best of luck for the second quarter.

Thanks.

Bob Drbul.

Just had a question on the -- in the movement around increasing marketing impressions in the US and the UK.

Can you give us just an example over the last few quarters when you were able to make those investments?

And where you sort of significantly outperformed the quarter and the confidence level that you have in sort of a change in the trend on traffic around these investments?

Well it's hard to measure very specifically, but I think it's usually a combination of how you market and the number of impressions.

So we have a group of things going on, which you'll see from TV, social media, Facebook, which we have millions and millions of people.

And it's really a combination.

So we're pretty excited about our plans.

But I think a big piece to this is going to be the loyalty piece of it also.

Got it.

You can't measure--

Are you seeing--

-- specific impression equals this.

Okay.

And then just on the store expansion plans, are you seeing increased competition for real estate that's impacting your plans at all?

There's always competition for real estate.

But we're not having any issues in filling the number of stores we need at the appropriate ROI.

And we think that there will probably be some opportunity going forward.

There are some specific chains that are certainly not in business and are planning on closing quite a few stores.

Really no different.

So I think that's going to be an opportunity for us.

No different than in the past.

Yes.

Okay.

Thank you very much.

And just to mention, we're really in a good place in terms of where we're positioned on new store opening targets going forward.

So we're feeling very good about where we look going forward.

Yes.

We're filling our open-to-buy very appropriately.

(laughter)

We are.

And Ernie has a complete open-to-buy in Europe if it's beyond the 40 stores.

Laura Champine.

Carol, you mentioned stepping up your marketing this quarter.

When was that decision made?

And what drove that decision?

Is this an expectation that people will want more apparel now that the weather is more normal?

Or am I reading too much into it?

No.

We laid it out.

It was a strategy that we laid out at the end of the year.

Again, we learned from the fourth quarter.

We look at each quarter and what it can be.

We try to mitigate what we think of the negative impacts.

We try to take advantage of what we think are positives.

And we felt that this was a very good strategy.

Great.

Thank you.

Mark Montagna.

Question about inventory.

You've been reducing some of the levels per store.

Are we at the point where you've gotten halfway down to where your target is?

Or is there more to go?

And then within juniors, Carol, do you expect the merchandise to be at your level of expectations by back-to-school?

Oh, I would hope so.

I'm answering that question right away.

Okay.

As far as our inventory levels, we're certainly -- halfway is not -- we're not going to be halfway leaner.

But what we are going to do is continue to deliver the stores more frequently, more freshness, which allows you to have leaner inventories.

So there are two things.

We still have some room there, but in addition, we have some opportunity to feed the stores individually what's driving their individual sales.

And that's what all this investment in systems is all about for the future.

And we're doing some different foundational things that are going to allow us to expand internationally a little bit better than we are today.

So we're really setting things up and investing for the future.

That will give us an opportunity to hopefully move a little bit faster.

Okay.

When I said halfway, I meant is it fair to say that the majority of your per-store inventory reductions are in the past and there's a little bit less more to go?

There's less more to go, but I think there could be some sales opportunity.

Okay.

Perfect.

Thank you.

Patrick McKeever.

Just wondering if you could give us a little additional color on tjmaxx.com -- just how it's ramping since the launch in the fall and if anything there has surprised you, either positively or negatively?

Just also wondering if you're still as bullish on that opportunity as you were in the fall and what the plans might be for perhaps a marshalls.com or to extend it into other concepts?

Thanks.

Well think what we're learning is we're increasing our SKUs.

We're increasing our categories.

We're very pleased with the business, certainly since the launch.

We have in our plans to continue the investment.

And we're very pleased with it.

We want to, again, make sure that we're differentiating, because we want to build this thing the right way and we keep learning.

And I think once we cycle a year, we'll have a lot more information on newness in customer, what's bringing us back into brick-and-mortar.

We are seeing most of returns coming back to the stores, which is terrific, but we'll have a lot more analytics to it.

But our goal right now is just build tjmaxx.com as big as we can get it.

And then just a question on what was said earlier on the weather impact at Marmaxx.

Did you say it was about 4 points of same-store sales?

Versus the -- yes -- just in the group of stores that we felt was impacted by weather.

Right, okay.

So it's 4 point --

(inaudible -multiple speakers) it would have been closer to the high end of guidance.

Okay, okay.

Thanks for that.

John Kiernan.

Hi.

This is Jerry Gray out for John.

I just have a question about the assumptions that are built into your SG&A guidance.

It seems like you have some increased marketing dollars and then some investments in the real estate team and accelerating store growth in Europe.

And I was just wondering if you could give us some more details on what's driving the leverage in your assumptions?

Thank you.

Sure.

So all the above was built into the plans and all those were built into the original plans.

So just to reiterate what Carol said today, our plans for the back half of the year and the second quarter were what we gave or reflected in our February guidance.

But in terms of the SG&A, again, no major changes.

It's -- there's some leverage due to anniversarying some spend in our technology investments.

Some of that is due to our data center move, which is almost complete.

So that's some of the benefit in the rest of the year.

And also we have -- we had expenses last year in the back half of the year related to some of our home office moves, again, which were anniversarying and are built into some of the favorability that were -- that are implied in our guidance for the rest of the year.

David Mann.

In terms of what you're seeing in the channel, in terms of merchandise availability, can you talk a little bit about the pricing you're seeing of goods?

Any material change there one way or the other?

Yes, David, the market, also, as Carol mentioned earlier, is really loaded.

And across most categories and across most sectors, whether it's more moderate goods or the better brands, and with that, there is often times, especially given the weather situation, many vendors and manufacturers experiencing the ramifications of that weather.

So we're seeing some better pricing than we have seen in the past.

Our objective is to always maintain strong relationships with our vendors.

So amidst all the better pricing, we want to have a consistent approach that is a partnership with our vendor community.

But the pricing has definitely gotten sharper over the last, I would say, 60 days.

And I would also tell you, David, that I think we're even opening more -- some additional, very unique vendors.

So it's pretty exciting out there.

And then generally speaking, when you see a period like this where it might see some incremental improvement in pricing to you, is your intention to bank that or potentially -- you think you're going to need to use that to be more aggressive in pricing to the customer?

I think it's up to each buyer.

And what they do is really balance their mix.

So we may buy some things that are like zero margin and then, where we think it's appropriate, we put them out.

There might be a mix that has high margin.

But as I said, we're generally planning our margins slightly up in our big-box and we feel we will achieve that with outrageous values.

Great.

Thank you.

Good luck.

Bridget Weishaar.

In the past, you've discussed that differentiating between the brands is key to placing stores close together.

Can you discuss how you're going about doing this and how you would like to define the brands within the increased marketing messaging?

Yes, Bridget, we don't talk about how we differentiate.

But specifically, the brands have separate marketing, marketing agencies, teams.

The way we brand is very different.

And we differentiate in many, many ways.

And we look at that every day.

The buyer that buys for TJ Maxx and Marshall's is the same buyer.

So they have the ability to differentiate and they know exactly how to ship to a store to make it look different.

So that's been since day one.

We physically -- and you're in the US, if you look at even the way our Home Goods stores are fixtured physically from where our Marmaxx stores in the home areas are fixtured, we take a different propose.

We make sure that in Marshall's and TJ Maxx, physically they look different inside, in addition to what Carol had mentioned.

So on all fronts, whether it's marketing or the physical plan -- or certainly the merchandise mix, we have plans in place for differentiation.

However, the one thing they do do is leverage together.

It's great because they can see it and say I want to put this here.

I want to put this there.

So they really all know what's going on with each other and they are able to leverage it.

Thank you.

And our final question is from Sandra Barker.

Yes, just to clarify on traffic, was it back to positive by the end of the quarter?

You said it improved.

And then just more broadly on the competitive environment, obviously it's hard to tease out how much was weather.

But as you see -- it's already been talked about that Penny is recovering, but some department stores did better -- and then Rack also, Nordstrom Rack, had a very strong comp.

Obviously they are somewhat differently located geographically.

But could you just take about the competitive environment more broadly?

So two questions -- traffic and weather.

Yes, we'll start with the competitive environment.

We have that all the time.

And as weather hit a lot of people, most people got aggressive.

I think they will continue to.

I think there is a promotional environment.

But I think our business model, in itself, is absolutely terrific and provides very well in all environments.

And we will take full advantage of it.

Not going to specifically talk about traffic each month, but it will improve.

It did improve.

And we were slightly down with our ticket up for the quarter.

And I'm showing no further questions at this time.

I want to thank everyone and we look forward to reporting on our second quarter.

Thank you.

And thanks, Elan.

Thank you.

And this does conclude today's conference.

You may disconnect at this time.